If Not Liberalism, And If Not Socialism ...

Chapter 6 (Part 4 of 4) of the book

The Discovery of First Principles, Volume 3

Edward J. Dodson

Principles Applied

Throughout this volume, I have attempted to explore in some detail how the programs associated with social democracy began during the early nineteenth century, expanded incrementally over the next century, then accelerated after the Second World War. Many internal and external factors combined, particularly in the United States, to intensify the role of government in social and economic matters previously regarded by proponents of minimal governmental interference in the realm of property as unwarranted and a dangerous infringement of individual rights. We have experienced the grudging advance of the welfare state ever since, supported and thwarted on a policy by policy basis by individuals who profess to hold either conservative or liberal principles. Mostly the political struggle has been one over who holds power over the division of the spoils. Both the libertarian and the democratic socialist perspectives have emerged from the wilderness to achieve influence at the margin. However, in almost every one of the social democracies centrist policies have dominated the legislative agenda during times of relative stability. More extreme views rise to the surface during times of uncertainty and struggle.

At and beyond the fringe of the dominant political parties are the countless grass roots, citizen based groups whose members tend not to identify strongly with the mainstream political parties. Here is where many of those who also belong to alternative political movements and parties such as the Libertarians, Ultra-Nationalists, Greens or Fundamentalists are to be found. Thus far, the programs advanced by these groups have not been sufficiently attractive to mount a sustained competitive challenge in the electoral arena. There is no consensus arising to replace the set of public policies that comprise the agenda of liberalism. And so, we find ourselves troubled by seemingly unsolvable social, economic, environmental, health, educational and political problems with our elected representatives immersed in posturing to preserve their political longevity rather than engaged synergistically to promote and protect the rights of constituents to access what Mortimer Adler identified as the goods necessary for a decent human existence. Economic systems are viewed as zero sum games, with a loser for every winner. For those of us on the fringe who have come to hold transnational values, we believe that our socio political arrangements and institutions must live up to much higher standards of participatory democracy, must inherently protect human rights, must achieve equality of opportunity, and must maximize individual liberty. The realization of our ideals demands that we unite to advance institutional changes that will harmoniously pull us in the above directions. This brings us, then, to a beginning.

We have for guidance a broad base of philosophical, socio-political and economic writings. On many but not all questions of their day, Paine and George applied their principles. They were wise enough to admit that the future would raise many issues they could not foresee and trusted in democratic processes to allow an educated citizenry to decide wisely. They were optimistic that democracy would, in fact, provide the environment necessary for an educated citizenry to arise. In the social democracies, revenue obtained from taxation (and borrowing) came increasingly to support the creation of public (i.e., government-operated) schools, including colleges and universities. The increased subsidization of schooling that occurred following the end of the Second World War greatly expanded the number of people able to attend and graduate from college, enter the sciences as a profession and achieve a level of personal well-being far higher than anything their parents or grandparents could have imagined. I am among the millions in the United States who have benefited from these opportunities. That and a life-long thirst for knowledge, for truth, and for understanding eventually brought me to this place in my thinking.

What follows is my attempt to apply the principles of cooperative individualism to which Paine and George generally ascribed, but did not comprehensively articulate. These two great thinkers are not, however, the ultimate test of these principles; they must stand or fall against the harsh judgment of historical evidence, reason and our own intuitive and nurtured moral sense of right and wrong.

The Nation-State as a Divisive Factor

One of the greatest hurdles our societies have to overcome is the lingering potency of nationalism to diminish our ability to function as global citizens. In many societies today the problem is exacerbated by ethnocentric territorialism and by intolerance toward groups of individuals who do not share the same culture, religion, race or language. Even within the world's social democracies, economic stagnation and an acceptance of scarcity provide a convenient source of strength to all of the worst forms of bigotry and human rights violations. Tribalism has become stronger as a counter to centuries of progress in the spread of transnational values.

A successful campaign to purge nationalism from human relations requires a sustained effort, with education and activism focused on the subordination of claims to the sovereignty of groups or nation states to transnational (i.e., universal) standards of behavior consistent with the securing of human rights. The forging of a global movement to counter nationalistic tendencies is, as yet, in its infancy. At a personal level, one's attachment to one's own society as something separate and apart from other societies is a bond not easily set aside. How many of us are truly ready, for example, to denounce the exclusivity inherent in the concept of nation state citizenship in favor of rights based on global citizenship? In response to this question, we ought to debate the practical considerations associated with establishing a second level of citizenship based on transnational values. Wholesale adoption of this reform would protect the liberty to travel and live wherever one may wish - subject only to restrictions based on health and safety considerations. Within the United States and most other federated republics, this dual level of citizenship has existed for a considerable period of time. And, to an extent we seldom express, dual citizenship has been responsible for a high level of mobility for generations of immigrants and their descendants. In the United States, for example, New York City has been an important point of entry for many generations of immigrants, whose children have subsequently moved to another region of the country. One important result has been the creation of a small number of societies unique in history that encourage common values in an environment of pluralism. To be sure, the process has been painful and not altogether successful. What must be said, however, is that an emphasis on individual rights as a central building block of government has assisted many individuals to overcome the bias and prejudice to which many minorities are subjected.

History and our contemporary experience demonstrate the very strong correlation between freedom to migrate and the degree to which a society is concerned with justice. Societies from which large numbers of individuals wish to but are prevented from leaving will always be found to have oppressive socio political arrangements and institutions. Privilege for the few is the characteristic readily apparent to the outsider. As I note above, the only legitimate reasons for restricting the movement of individuals from one part of the globe to another involve the health and safety of others. A person infected with a highly contagious or communicable disease would jeopardize the health of others and should be quarantined in some fashion. A person who has committed a criminal license against others must not only pay a proper debt to society but must demonstrate rehabilitation before an unwary populace in another part of the world is exposed to such an individual. Absent these health and behavior related issues, citizenship must protect our human right of equal access to the earth, the exercise of which is inherent in the right to migrate.

Within the receiving societies, the presence of tensions or fears that new immigrants will compete for available employment opportunities or drive down wages or add to crime or the cost of government are warnings that a difference exists between these societies in degree only. A society whose socio political arrangements and institutions are consistent with human rights -- that secures equality of opportunity and maximizes individual liberty -- will welcome immigrants as valued new producers and contributors.

As a long term objective, we must continually work for a new form of global governance. In order to overcome the intense ethnic (often tribal) conflicts over territory, these groups must be encouraged to accept territorial settlements reached under conditions of binding arbitration. Deep animosities and rivalries will not disappear quickly. Many groups continue to think of themselves as a people separate and distinct from others, sharing a history of external domination and oppression that drives a deeply rooted need for cultural independence and territorial sovereignty. Here, expediency is warranted in order to promote peaceful intercourse between peoples based on voluntary association. A global fund could be created (perhaps from rents collected from the leasing of the ocean floor for exploitation of minerals, or the auctioning of licenses to commercial fishing enterprises) to provide some level of compensation to those required to relocate and abandon their legitimate individual property, or dispose of their property under conditions that do not lend themselves to a market-driven transaction.

Another element in the struggle to purge nationalism from our existence is to encourage large nation states to divide into much smaller states, so that no one state within a global federation is dominant in terms of population, natural resources or infrastructure. For those of us living in very large countries, this would present an opportunity to debate a more efficient construction of regional states, each eventually becoming a member state in the global community.


History and experience have also demonstrated that participatory government, particularly when structured as decentrally as possible, is inherently more likely to yield a higher degree of equality of opportunity and liberty than any other form. Yet, even within the social democracies there exists a considerable degree of frustration over the role played by government at all levels. Citizens generally feel left out of the process and unable to influence the actions taken by quasi permanent bureaucracies, particularly at levels beyond their immediate community. Too often, only a small percentage of those eligible to vote in elections make the effort (unless required by law to do so), and an even smaller number are active in community affairs. To be sure, we have a right to expect those employed in public service or elected to hold public office to make sure the public sector fulfills its responsibilities. Unfortunately, time and experience have proven that existing socio-political arrangements interfere with this objective. What is needed to more fully realize the promise of social democracy is to take the debate over solutions to a sustained, higher level that focuses not simply or primarily on short run, remedial measures, but looks at the fundamental construction of our socio political arrangements and institutions.

Discussion of government today most often focuses on issues. We ask how government can mitigate the social and economic problems that plague our societies. The interest of those in government is to maintain this focus and to discourage measures designed to alter the structure within which government functions. Those individuals within government who advance proposals for systemic reform or restructuring are too often viewed (by their colleagues) not as citizens to be praised but as whistle blowers or trouble makers. To be fair, this conflict between those who bring to any job a high level of motivation and principle based behavior and those who do not is not limited to government. Those who are comfortable in their circumstance or who benefit by the status quo will often strenuously resist even obviously necessary changes. Their power to do so, individually and collectively, may be great or small. Many times only a severe shock to the system opens a window of opportunity for those who desire to effect structural improvements.

Putting aside for the moment the structural changes needed in the private sector, there are very specific changes that will materially improve the quality of governance at all levels. The first objective should be to expand the degree of citizen participation in the governing process. In communities throughout much of the world, where authoritarian regimes are not an obstacle, citizens do come together in civic and neighborhood associations or as members of political parties. A much smaller number are active in volunteer, environmental or other public interest groups. For the great majority of citizens, however, even the fundamental civic responsibility of voting for elected officials is ignored. For reasons that include apathy, disgust, a sense of isolation and the challenge of simply earning a living, many citizens do not participate. Before this situation can be reversed, we must recognize what the obstacles are and take action to remove them.

Voter Registration and Voting

In the elections occurring in many countries the unfortunate reality is that a majority of a minority of citizens determine who is elected. In the United States, for example, far less than half of the eligible citizens bother to register to vote in most districts. Registering requires the citizen to be proactive rather than reactive. Now that computerized systems of voter registration can be economically maintained, other methods of securing citizen participation should be pursued. A registration form could automatically be sent to anyone who is in the data base but did not vote in the previous election or has otherwise lost eligibility. Registration by telephone or by internet connection should be considered, with each citizen assigned a security number to gain access to the system and to vote. This would improve considerably the involvement of people who work outside of the communities in which they reside or who cannot conveniently visit a voting location. Computerized voting stations could be installed in numerous locations so that citizens could vote wherever they might be regardless of where they actually reside. These enhancements to the process are certain to increase involvement and participation.

Political Parties and Primary Elections

Our systems of law have evolved as powerful means of distributing privilege; and, to the extent this design of law is effective, liberty and equality of opportunity are thwarted. Even under the best of circumstances, where law is constructed consistent with just principles, there would still be disagreement over the degree to which government versus private initiative should be relied upon to advance public policy. The practical need to influence public opinion suggests that political parties will be resorted to for a long time to come. At issue is whether the general citizenry, who have no day to day involvement in party affairs, should continue to be recruited to select the party candidates for office by virtue of their party registration and voting in -- what in the United States are called -- primary elections. If, in fact, our political parties are to be organizations of individuals joined together to advance a philosophically driven policy agenda, allowing otherwise uninvolved citizens to determine a party's candidates dilutes the purpose of the party. Political parties ought to be democratically structured, but only those individuals who have contributed either their time, energy or financial resources should be considered members of the party and eligible to select candidates for office. The requirements for party membership should be left to the party members to determine. Excessively stringent requirements would, of course, virtually assure the party a place in permanent obscurity. The right of the citizen to vote for candidates standing for public office is appropriately limited to the general election, where all party candidates and their programs are weighed one against the other. Under this type of system the candidates are far more appropriately the representatives of their parties and what they stand for can be more consistently relied upon as the agenda they will pursue and support if elected.

Terms of Office

Should individuals be permitted to succeed themselves in office and, if so, how many times? This is the fundamental issue to be resolved. On the side of providing for unlimited terms of office is the right of citizens to select whomever they wish to represent their interests. Against this position is the advantage of incumbency in elections and the concentration of political power into the hands of a relatively small number of entrenched individuals. Tocqueville observed that one of the main safeguards of American democracy was the frequency of elections, implying that frequent elections inherently limit the consolidation of power. Experience suggests that when frequency of elections is combined with unlimited potential for re election, representative government is diminished in no small part by the amount of time and financial resources devoted to campaigning. What, then, are the options to be considered for a cleansing of this process and broadening of the Democracy? In the complexity of our modern world, serving as an elected official requires an individual's undivided attention; and, there is a rather long learning curve before one becomes adequately informed on legislation under consideration. Under these circumstances, a term of office of less than four years makes little sense. Beyond the local and municipal levels of government, we ought to consider setting terms in the legislature at six years, but limit individuals to two successive terms in office. A twelve year period within which to affect the direction of governmental programs is long enough to encourage continuity while reducing the amount of energy and financial resources devoted to gaining elected office. When combined with changes in how candidates are selected, the actual election campaign period can be shortened to no more than a few months. The public can protect itself from serious misrepresentation by the recall process, the particular aspects of which might be structured as described below.

Electing Representatives By Lottery

At the far end of our options is the prospect of electing our representatives by lottery from the eligible citizenry. Citizens would be selected at random to serve for a stated term or until 51% of registered voters proactively withdrew their support. The lottery system requires that elected offices be treated more like civil service positions. The minimum requirements for offices requiring specialized skills would be established by a nominating committee (and reviewed periodically for appropriateness to current conditions). For legislative positions the requirements might include meeting a minimum score on an examination that tests for competency in language use and an understanding of the governmental process. Successful reliance on such a system requires that our schools effectively prepare individuals for citizenship, something that is sorely lacking at present.

The Chief Executive

Critics of the U.S. political system point to the disturbing fact that the President is frequently unable to implement the programs and policies designed by the Executive branch because the Congress is controlled by the opposition party. Under the constitutional model that evolved for Britain and has been adopted by many other countries, a Prime Minister heads the government as the appointed leader of the majority party (or, coalition of parties). Hypothetically, one individual might serve as prime minister for decades. Common to all social democracies, however, is the experience that entrenched power is frequently subject to corruption, and that only a separation of powers provides adequate checks and balances. In the United States, the Executive branch of government is not empowered to enact legislation (although the initiation of legislative ideas is considered part of the President's leadership role); rather, Executive agencies have been created to (ostensibly) assure the fair and proper implementation of legislative directives. The pros and cons of the two systems (and variations thereof) ought to be examined and debated. Common to each system, however, is the question of limited tenure in office for a President or Prime Minister. The fact that a people feels dependent on any one or few individuals for leadership is, I suggest, an admission of enormous failure to prepare citizens for the responsibilities of participatory governance.

The Courts and the Constitution

A school of legal scholars in the United States, generally described as conservative, have argued that the Courts must (under the State or Federal constitutions) apply a narrow, strict constructionist criteria to their determinations of legislative constitutionality. There is, however, an unresolved degree of ambiguity associated with the implied powers language in the Federal constitution. In response, conservatives suggest the Courts must refer to the framers' original intent for guidance. The problem, of course, is that the Constitution as a framework of government arose out of compromise. Philosophical and moral principles, espoused by at least some of the framers as essential to the securing of liberty and of equality of opportunity, were subverted by the collective strength of interest groups. Other countries with written constitutions may have a similar problem; or, conversely, the language of the constitution is strong on principle, but the protection of the rights guaranteed under the constitution is weak and inconsistent. Britain and many other countries function without a formal constitution, and are instead governed by legislative will subjected to the pressures of public opinion and checked by traditional values. Our first task, therefore, is to establish by education and persuasive discussion a consensus acceptance of the principles against which any constitution of government (written or informal) ought to be measured for its degree of justice. A written statement of principles ought to be prepared, from which a committee could be formed to draft a transnational Constitution for distribution, subsequent discussion and possible adoption as a result of political action.


Corporations and Social Responsibility

The function of government ought to be two fold: (i) to protect and advance the health and safety of all citizens; and (ii) to prevent the institutionalization of privilege, the formation of monopolies, or contrived shortages and/or price fixing among producers. High on the list of issues to be addressed is determining what laws and regulations ought to govern the activities of businesses, particularly those that adopt the corporate form of ownership. We continue to struggle with the body of law that governs the formation, treatment and dissolution of corporations. In return for the privileges granted under corporate charters, what obligations (if any) ought to be imposed on the corporate owners and executives to act in a manner consistent with appropriate societal norms?

Manufacturing businesses that have become multinational are de facto global citizens with little or no inherent commitment to the societies in which they happen to be incorporated and/or domiciled. The transfer of productive facilities from one region or country to another is far easier today than ever before. Even the less developed countries have adequate infrastructure to accommodate the needs of most industries. Corporate executives naturally and appropriately stay alert to locational opportunities where profit margins can be maximized because of much lower labor costs, lax environmental regulations, subsidized land and energy costs and low taxes. For individual societies and corporations and even for the labor force in a given country the short run results appear to be mutually beneficial. People find employment where there was none. Governments receive additional revenue. At least some people experience greater prosperity. As has frequently been the case, however, the heavy subsidies granted leave most citizens of the host country with serious problems to correct where environmental quality and public health and safety are concerned. When natural resources are fully exploited, when workers begin to organize and begin to negotiate for higher wages and better working conditions, or when governments begin to enforce environmental regulations, the multinational corporation simply closes down and moves on. Our health and our long-term survival is dependent upon our wise use of what nature provides. Laws are needed to protect our liberty - including our birthright of equal access to the earth - and government is just the extent to which such laws are effectively enforced.

Under circumstances where there are more jobs searching for workers than workers searching for jobs, business owners compete for the skilled workers and managers needed to efficiently produce goods and provide high quality services. Only when communities and societies harness this energy by fully adopted the rent as revenue policy will everyone benefit by the freedom to move production activities in order to take advantage of greater efficiencies. Under existing circumstances, where industries transfer production activities to take advantage of low labor costs and few controls over production processes, the longer run result is a concentration of purchasing power among owners and executive management teams accompanied by an increase in structural unemployment in the locations from which they departed. Practices that benefit individual businesses in the short run eventually destroy the high wage economic environment that allows businesses to grow and prosper over the long haul.

Government's failure to adopt win win policies in the regulation of production and commerce is traced to one major reason: in virtually every society, tax laws relating to property and income impose heavy costs on production, trade and consumption while favoring speculation and hoarding of locations, natural resource-laden lands, the broadcast spectrum and other finite natural opportunities. A selling price (i.e., a capitalization of the annual rental value, often with a speculative premium) for control over these forms of assets arises because so much of the rental value is not collected by society. This problem involves a failure of government at all levels and today benefits most those corporations that function as agrarian, industrial and/or urban landlords -- those controlling extremely valuable land in urban centers as well as tens of thousands, even millions, of acres of forest, mining, agricultural or grazing lands without market-determined compensation to society for the inherent monopoly privilege enjoyed.

Industrial democracy, characterized by cooperatives and employee stock ownership programs, mitigates the problems of land monopoly by allowing workers to participate in the distribution of income derived from both capital goods and land ownership. Societal stability could be enhanced by more cooperative ownership of businesses, lessening the pressure on executives to pursue short term profit maximization demanded by disinterested stockholders. Industrial democracy would also check the power of executives to compensate themselves in multiples hundreds of times greater than other employees. This approach to more responsible corporate behavior is far more desirable than relying on government to adopt intrusive, regulatory or social legislation. Employee ownership is most practical in smaller to mid-size businesses, where the amount of financial reserves to be raised is within the capacity of employees to provide. In societies where rent is the primary source of public revenue, the potential to provide each citizen with an annual dividend payment is very real. This dividend could become the basis for a pool of financial reserves to be invested in cooperative enterprise.

Global competition and the revolution in computer and communications technology have greatly challenged traditional corporate hierarchies and decision making processes. More than ever before, companies large and small must attract highly talented and motivated individuals able to adapt to constant change. Highly educated individuals have much greater expectations not only in terms of compensation for their services but in terms of stimulation, challenge and satisfaction. Manufacturing industries have historically created many repetitive jobs and a much smaller number of stimulating career opportunities. Assisted by computer robotics and other technological advances, the output of goods from manufacturing and processing operations has rapidly expanded as a multiple of the direct labor component. To the extent that tedious, dangerous and mind numbing jobs are shifted to machines, this is a development to be applauded and encouraged. The dilemma, as discussed above, is that under current conditions hundreds of millions of workers are faced with few alternative employment choices. Replaced by machines or left unemployed by the relocation of their jobs elsewhere, they become dependent on social welfare programs for a subsistence level existence or move into lower paying jobs in the service sector. The more fortunate are able to acquire new, more marketable skills and redirect their career into an area where the demand for workers still exceeds the supply of qualified applicants.

The decline in purchasing power resulting from the departure of a company representing a large portion of a region's employment base can literally destroy communities. The citizens and leaders of smaller communities, in particular, must learn how to diversify and eliminate dependence on just a few sources of employment. The balance is found when the community protects itself from the downside of the global economy while creating the appropriate socio political climate in which businesses can operate profitably and without subsidy or monopolistic privilege.

Business Assets and Revenue as Sources of Government Revenue

As I have attempted to show, the study of political economy reveals that when government places taxes on production or on commerce the net result is a reduction in those activities, accompanied by determined efforts at avoidance. Wherever taxes levied become even moderately confiscatory, producers (or, more often, wholesalers and middlemen) will engage in commerce outside government oversight and control. Around the globe today the so-called "underground economy" - even for goods that are not otherwise illegal -- is enormous. The reason is that taxes add to the cost of production, and to the cost of doing business. The record-keeping and processing, the hiring of accountants and legal counsel who specialize in understanding and finding loopholes in tax codes burdens commerce. Producers will attempt to pass on the added costs to their customers, and many external factors will determine whether or not this can be done. Among the variables are the level of demand, the availability of less costly substitutes and the purchasing power of potential customers. What customers are willing to pay for most goods today is determined by a globally determined equilibrium between supply and demand. Thus, if taxes must be absorbed by the producer, profit margins will fall or disappear unless the producer is somehow able to otherwise reduce the costs of production. This may involve substituting new capital equipment for labor, imposing higher productivity objectives on labor; or, if these strategies are ineffective, relocating or shutting down altogether.

The ideal tax policy toward business is clear. Production and commerce ought to be encouraged, while at the same time pushing that business to maximize its use of the locations and natural resource-laden lands under its control (subject to appropriate regulation for protection of the natural environment). As discussed above, this means that the taxes paid to government ought to equate to the annual rental value of such locations and natural resource-laden lands held. There are other sources of "rent" that must be taxed as well. The broadcast spectrum is also a finite natural resource, and control over frequencies should be subject to periodic leasing under an auction system. Private access to the publicly-held lands made available for exploitation of minerals, timber, harvesting of animals or the grazing of cattle also ought to be awarded by competitive bidding. If the need for government revenue exceeds the combined total rental value of all locations and natural resource-laden lands, any additional taxes ought to create the most level playing field possible. Existing taxes on businesses tend to penalize success and reward failure. The greater the expenses a business records and the lower its declared profit, the lower are the taxes levied. The key tax reduction strategy for a business is to maximize as much as possible such non-cash expenses as depreciation of buildings or equipment. Corporations have the challenge of wanting to maximize the reporting of profits to shareholders while minimizing the reporting of profits to taxing authorities. A more efficient approach, I suggest, is to levy taxes at a low rate against gross revenue. In doing so, the impact on businesses with heavy expenses will be greater and on those with lower expenses smaller. Businesses will then be encouraged by the tax system to maintain tight controls over expenses. Firms would no longer receive tax advantages as a result of their borrowing and would, therefore, borrow only on the basis of sound business reasons. A firm's physical assets (including plant and equipment) would no longer be taxed, nor would depreciation taken as an expense play a role in the calculation of taxable income. From the standpoint of the public interest, no longer would an army of government auditors be paid to assure compliance with tax laws. At some point in the future, this gross revenue tax could gradually be reduced to zero as the amount of rent collected is sufficient to meet our need for public goods and services - and then begin to provide enough revenue to distribute as a citizens dividend.

Individual Assets and Community/Societal Revenue Needs

The same principles of just taxation and economic efficiency apply to the individual as to companies. The moral sense philosophical principles integral to cooperative individualism also serve as the basis for our rights to property. Our birthright as human beings is the right of equal access to the earth. Deeds that grant control over nature and forms of licenses that restrict equal access create unnatural property -- privileges that are inherently monopolistic. Our natural right to property comes, on the other hand, from what we produce by applying our labor our capital goods to nature and by engaging in commerce. Justice demands that government protect our right to use and/or dispose of our property as we choose (so long as in doing so we do not infringe on the rights of others). Taxation of natural property or of income derived from the use of property is a form of confiscation. Justice demands, however, that the individual compensate all others in society for the privilege of monopolizing access to any location and natural resource.

Let us suppose that all individuals and all other groups who control nature are contributing the full rental value attached to these privileges -- that holders are competing under the auction function of the market for deeds and licenses. Let us suppose further that, by consensus and in accord with democratic principles, a majority of citizens agree that additional public goods ought to be provided and revenue raised to produce such goods. What should be the guiding principle for the confiscation of natural property from individuals? Here is where ability to pay ought to be given strong consideration. One approach is to institute a graduated tax that exempts all individuals who earn below a certain level, say, the median income in any given year. Above that income, a graduated rate would be applied that increases up to a maximum on very high marginal incomes. To provide a basis for discussion, I offer the following example of how this would work in the United States: (a) incomes below $50,000 would be exempt; (b) a 5% tax would be assessed on incomes greater than $50,000 up to $100,000; (c) a 10% tax would be assessed on incomes greater than $100,000 up to $200,000; (d) a 15% tax would be assessed on incomes greater than $200,000 up to $400,000; (e) a 20% tax would be assessed on incomes greater than $400,000 up to $1 million; and (f) a 25% tax would be assessed on incomes greater than $1 million. There would be no exemptions or deductions. To be sure, there is confiscation associated with this supplemental means of raising public revenue; however, the depth of confiscation is moderate and would not materially impact the individual's well-being. In time, this confiscatory form of taxation on incomes could be scaled back as the societal rent fund expanded to the point where agreed-upon public services were fully funded and a surplus permitted a pro rata distribution to each citizen as a dividend. In the interim, this structure would operate to partially remedy the deep injustice that has resulted in such a high concentration of wealth and income in every society.

Protecting the Environment

We have excelled in the exploitation of the earth's resources to achieve immediate gratification and secure our short term survival. What many of us now realize is that our behavior has been (and continues to be) damaging in the extreme to the operation of the earth as an ecosystem. To continue on as we have is little short of suicidal behavior. Pollution and over fishing threaten to destroy the food chain in the oceans and fresh water seas. Heavy use of herbicides and pesticides poison the land and inland waterways with toxic chemicals that are consumed by animals and enter our own food supply. Subsurface and strip mining operations pour even more chemicals into groundwater supplies. The burning of fossil fuels turns our air into poisonous vapor. The by product of energy generated by nuclear reactors is a vast storehouse of radioactive waste for which no safe means of storage has yet been found.

If we have any reason for optimism it is that a wide range of nongovernmental groups are focusing time and resources on these problems. On the other side of the equation, despite a quarter century of activism and the passage of sweeping regulations the effort to make our activities environmentally sensitive continues to be thwarted by individuals, businesses and even governments acting to protect short term profits, privilege and political power. Clearly, the struggle to heal and preserve our ecosystem requires mobilization of the global citizenry on a scale never before achieved. Steps are being taken in this direction and considerable examples of progress can be pointed to within many societies as well as a new appreciation of the need for global cooperation. At issue, then, is how to more effectively shift the balance of power in favor of our long term survival.

Once again, an understanding of the economics of taxation and how societies raise revenue for public goods and services will direct us to press for a dramatic overhaul in the existing structure. Doing so will yield material benefits to the health of our ecosystem because nature will be efficiently exploited and nothing will be considered waste. Societies are faced with the choice of whether those who control access to nature are to be permitted to build personal fortunes by continuing to privately appropriate rent, or recognize such access as a privilege for which society as a whole is to be legitimately compensated. When the tax base equates to the annual rental value of locations, natural resource-laden lands, and other natural monopolies, the cost of regulations imposed on producers for protection of the environment will merely lower the amount a potential user will be willing to pay for access. If the cost of cleaning up the environment is left to society, after the fact, the amount of rent users will pay for access unencumbered by regulations will be higher, but government will then have the higher revenue to use for remedial efforts. The basis for public policy, then, ought to be whether certain levels of pollution control are best handled by individual land owners (or lessees of publicly-held land) or by government. For example, regulations requiring extensive refining of fossil fuel or conversion into natural gas is the type of public policy that will drive down the annual rental value of fossil fuel bearing lands. Yet, the benefit to us and our planet as a whole is much cleaner air.

Learning and Citizenship

One important legacy of the nineteenth century reform initiatives whether democratic, utilitarian, progressive, Fabian socialist, communitarian or statist has been an almost universal reliance on education to raise living standards. Millions of people have been lifted out of generational poverty as a result. After a period of limited success with religious and philanthropic experiments in education, society after society created systems of publicly funded and administered education. In the United States this system is decentrally structured and supported by broad based taxes (collected in large part at the local level from owners of real estate).

The motivations to establish universal education were both humanitarian and utilitarian. Industrial landlordism could expand only so far using unskilled labor; technical and managerial positions required individuals who possessed not merely basic literacy but sound foundations in the mechanical and administrative arts. German reforms of the mid to late nineteenth century sought to produce an educated populace for its bureaucratic, militaristic and industrializing State. Britain was struggling with an increasingly rigid class division between the propertied and the unpropertied and ended up with the distinctly two tiered educational system that continues today. A real concern of many nineteenth century Americans (meaning those of Anglo European heritage) was that the millions of immigrants arriving from southern, central and eastern Eurasia would jeopardize the existing value system by introducing different social, cultural and political norms. Providing publicly-funded and administered education was a means of Americanizing new arrivals and bringing them into the mainstream. A system of land grant colleges established during the century provided additional opportunities for individuals who settled far from the urban centers to gain a liberal education in the Western classics and in agricultural practice. An explosion in both public and private funds made available over the last forty five years for scholarships and financial assistance has opened the doors to a college or university education for tens of millions of U.S. citizens and foreign visitors. Similar and even more aggressive programs were implemented in many of the other social democracies, the former Soviet bloc nations and even in nations governed by overtly despotic regimes. The need to control what information people acquired had to be balanced against the needs of regimes for competent persons in all sorts of technical and administrative positions.

Despite the remarkable achievements of the educational systems as a group, the need for reform has become apparent even to their staunchest defenders. In the United States, far too many young people leave our secondary schools ill equipped for the responsibilities of citizenship. Millions more do not even complete a full twelve years of formal childhood schooling. For a variety of reasons, far too many of our schools are unable to meet the individual needs of youngsters. Schools are not very good at responding to the needs of children who do not mature emotionally, intellectually or physically according to the norm established based on chronological ages. Moreover, the stresses of daily life experienced by many students materially affects their ability to learn. Although this is understood today more than ever before, the responsiveness from government and the educational establishment has been insufficient and has improved the quality of education only marginally. Millions of children leave our schools as functional illiterates, their ability to function as productive members of society severely impaired. To a considerable extent, teachers face an almost impossible task.

One of the reforms frequently discussed today is that of providing choice, meaning that parents and youngsters ought to have many more options in the selection of an educational opportunity than have traditionally been available. For the most part, choice has historically involved the one public school within walking distance or to which bus service was provided, or paying tuition to attend a parochial or other private school. Access to privately operated schools has been largely restricted to youngsters whose families could afford the expense of high tuition and, in many cases, full time boarding. At the same time, all owners of real estate contribute via the tax system to the cost of public education. Moving to a voucher system, under which each child is supported by some amount of public scholarship based on the income of parents or guardians, while allowing parents to select the school would create a far more competitive educational environment and stimulate the design of programs directed to the needs of individual children rather than to the needs and priorities of administrative bodies.

As we examine the opportunities to reform our educational systems, we ought also to consider a gradual plan to phase out publicly operated schools altogether. Schools operated according to community standards do not necessary meet the needs of all households living in a particular community. Moving to privatization opens the door to greater choice; however, there are also real concerns over the creation of a system of for profit schools that are also owned by disinterested shareholders whose primary interest is in profit maximization. A much better approach to privatization is the professional association. Teachers who share the same educational philosophy should be encouraged to come together (much the same way as attorneys or physicians do) to form a school. These professionals would then hire administrators to help implement policies the teacher/owners decide upon. In our publicly operated and parochial schools, as well as the overwhelming majority of privately operated schools, the individuals most directly involved in the process of education are employees who have nominal input into the development of curriculum, selection of new staff or the establishment of standards.

At the college and university level many of the same problems exist. Professors are rewarded not on the basis of their effectiveness as classroom instructors but for their status as researchers or scholars. How is it possible that students attending prestigious universities in the United States can complete their undergraduate requirements without ever encountering an actual full-time professor in the classroom? Undergraduate education, arguably the place where our best instructors are needed, is too often left in the hands of graduate students or part time faculty, some of whom speak English as a second language and are not able to communicate effectively in the first language of their students. I have not performed the research to ascertain the extent to which this still occurs in the United States; a number of states have adopted legislation that requires institutions of higher education to more effectively monitor the language skills of instructors. The institution of tenure has also isolated professors from the rigors of competitive pressures existing in most other societal arenas. Here, again, the more appropriate structure for colleges and universities is to have the professors associated as equal partners, each required to perform at a high level, and that high level determined in large part by their ability to attract and retain paying students. As was once written by a remarkable teacher, the difference between an educator and an educationist is that the former hangs out a shingle and students come voluntarily, while the latter is assigned to teach courses to students required to attend.

Where Individual and Societal Responsibilities Collide

We are constantly reminded by the reporting of the news just how frequently individuals commit criminal acts against others. Social scientists continue to debate the extent to which these outbursts are a function of neglect or mistreatment during the individual's early years when nurturing by biological parents and by others operate to instill values and guide behavior. At birth, the rights of the individual - who is essentially helpless -- are the proper subject of protection by society. Therefore, the system of law and socio-political arrangements created out to establish minimum standards for nurturing. Where the biological parents fail to meet this standard, government has the responsibility and should be given the authority to intervene. In legalistic terms, a child is by nature an incompetent party requiring parental and societal nurturing until such time as competency is demonstrated. At that point, what had amounted to a trustee responsibility held by society is diminished. Competency entitles the individual to full benefits of citizenship (i.e., freedom of action subject to the constraints of just law). The exercise of citizenship is the exercise of liberty; actions that infringe on the liberty of others are by definition licenses. What has been most difficult for societies to resolve is to distinguish between liberty and license and to structure law accordingly. Of almost equal difficulty has been the question of how to deal with incompetencies voluntarily (or nearly so) brought on by the actions of an individual who was at one time fully competent.

As societies, we have yet to come to terms with the two major causes of voluntary incompetency: alcohol and substance abuse. The minimum level of societal involvement ought to center on the impact the behavior of these individuals has on others. An individual under the influence of alcohol or drugs is far more likely to act in ways that result in the exercise of criminal licenses from failure to provide appropriate nurturing to dependent children, physical and mental abuse of a spouse, and assault or worse against others. While addiction to alcohol and drugs is certainly an illness, the issue facing society is how to balance treatment of the individual with the responsibility to protect citizens from criminal license. Does society have the responsibility (and should government be given enough authority) to act proactively when the risk of criminal license is high? Or, must society wait until someone actually commits a criminal act as justification for isolating that individual from others? We already make these decisions every day, but the dynamics of our socio political arrangements, our institutions and our enforcement agencies provide neither liberty nor security. When society does a better job of protecting the rights of our incompetent members and in creating a socio political environment that secures equality of opportunity, we will experience fewer and fewer cases of criminal behavior occurring because of an individual's financial desperation. Anti societal attitudes will diminish when community is strengthened and the sense of belonging nurtured. At the same time, enforcement of just laws acts as a break on the individual whose actions exceed the bounds of liberty regardless of cause.

The issue receiving more public attention and debate than almost any other is what, if any, rights are possessed by the unborn child. Is the life growing within the womb of a woman by nature part of that woman until the child is actually born? Or, is the biological parent merely a host, who by virtue of pregnancy, acquires nurturing responsibilities to a human life in the process of formation? Modern technology has added a dimension of complexity by replicating the physical environment within which human life can successfully develop. The biological mother is, in fact, no longer absolutely essential after around the sixth month of development. Extremists on one side of the debate take the position that life begins when a sperm enters an egg and a zygote is formed; extremists at the opposite end argue that life begins only after the fetus leaves the womb as a result of the natural birthing process.

To satisfy the moral principles espoused by the first group, a woman must primarily be considered a biological host and only secondarily as a mother. This distinction is crucial, in that if the first circumstance becomes the basis for law, then the decision of the woman to continue nurturing beyond delivery of the child must be voluntary. Society would have the primary responsibility for nurturing once birth has occurred. In the second instance, the decision of whether or not to accept the condition of pregnancy and the superior right and responsibility of nurturing would rest with the woman, as biological mother. In either event, society retains both the obligation and authority to intervene on behalf of the child; however, the responsibility to do so is immediate and primary when the woman is required, as biological host, to subordinate control of her body to the rights of the growing child.

From the perspective of forming appropriate public policy, the most important responsibility of society is to instill sound moral values in young adults, who, as a group demonstrate a strong desire to experience sexual fulfillment but who do not yet possess the emotional maturity and economic means to provide positive nurturing to children. What must be said, however, is that this responsibility must accommodate a diversity of sentiment on the subject of sexual activity. Some individuals believe strongly that sexual activity outside the marital relationship is morally unacceptable. Others see sexuality as merely one aspect of our humanity that has no attachment to gender or formalized relationships. Here, again, the interest of society is in the health and safety of citizens, and all schools (and specifically those receiving any form of public subsidy) ought to be required to provide education on the diseases that can result from certain patterns of sexual activity and what measures need to be taken for prevention. When schools are formed by educators with similar philosophies in mind, schools will advertise to parents that they attempt to instill particular values in the students, and parents will have the opportunity to choose which sexual curriculum and value system they wish their children to be exposed to. Safeguards, in the form of minimum standards, are appropriate and must be guided by the principle of protecting the most vulnerable of our citizens from physical or mental mistreatment.

Protecting Our Purchasing Power
By Making Money and Credit a Private Affair

One of the most consistent ways governments have historically affected the purchasing power of individuals is by the imposition of taxes. As has already been discussed, when revenue is raised by taxing individual labor or the wealth we produce with our labor and use of capital goods, these policies represent attacks on natural property. Where socio political arrangements allow for adequate debate on public policy choices and require something greater than a simple majority before implementing taxes on assets, matters of greater public good may generate a consensus to impose taxation beyond primary sources of revenue (i.e., the annual rental value of locations and other forms of license). The second means by which governments transfer purchasing power from individuals to themselves is by requiring the use of a central bank's paper currency as legal tender and, further, by the self creation of credit. This occurs when the central bank prints currency in exchange for government bonds. Government pays its employees with this new currency and spends the remainder into circulation - without having to provide public goods or services in exchange.

Whether government is in the hands of a monarchy, an oligarchy, a representative body or a bureaucratic state, one consistent behavior is the propensity to spend more than is received in revenue. Sitting governments have always willingly spent to build monuments to themselves with funds taken from private individuals and entities. And, all too often the public is required to pay for adventuristic wars or colonialism, to the enrichment of the few at the expense of the many. We also know from experience that socio political power and the accumulation of personal fortunes feed off each other, with the result that those who benefit most by government spending manage to shift the cost onto others by the mechanism of government borrowing at interest.

A considerable part of the problem in the United States can be traced to legislative and administrative laws that went far beyond the powers granted to the Federal government under the Constitution. Although the Constitution permits the government to borrow money, the original definition of money as gold and silver coinage has been subverted by the issuance of Federal Reserve notes as legal tender for all government debts. Not since the early years of the Bank of Amsterdam in the sixteenth century has any society experienced the enormous benefits of sound money and honest banking. Within a few decades after its creation, the Bank of Amsterdam's directors discovered the short run ability to issue bank notes not backed by gold or silver coinage held on deposit. This is what is meant by fractional reserve banking. Every banking system subsequently established has followed the Bank of Amsterdam down this fraudulent path, producing frequent and often catastrophic panics. Today, when the United States government desires to borrow currency from private investors, the Treasury Department offers government securities for sale which, in effect, are claims against future tax revenue (and, more frequently, against the revenue raised by the issuance of even more securities). The Federal Reserve Banks are under no obligation to hold as reserves gold or silver or any other commodities - or contractual claims to such commodities -- to which the redemption of Federal Reserve Notes ought to be tied. The Board of Governors of the central bank attempts to make use of its authority to control the supply of currency and how much currency banks must hold in reserve to keep the purchasing power of currency relatively stable. What is also interesting is that if the Federal government's need for revenue is sufficiently high, the funds borrowed by commercial banks from the Federal Reserve might very well be reinvested in the securities issued by the Treasury Department.

Under the existing structure, the stability of the world's financial system is dependent upon public confidence. Increasingly, this also includes confidence by foreign investors that U.S. government securities represent a safe harbor for their financial reserves. As the national debt of the U.S. government continues to escalate year after year, the amount of revenue that must be raised from taxation just to service this debt is staggering. As of early in 2004, the U.S. government debt stood at over $7 trillion and climbing. Assuming an average annual cost of funds of just 3 percent, the amount of tax revenue required annually to service this debt comes to $210 billion. Before the government is able to spend one dollar on programs that actually maintain or improve the nation's physical, social or intellectual infrastructure, each household must be taxed nearly $2,000 on average. Inasmuch as almost 16 percent of all households receive incomes insufficient to pay Federal income taxes, the average tax payment required of the remaining 79 million households is nearly $2,700. As Federal government borrowing increases, the rate of interest tends to increase, raising the above figures accordingly. In no country today is there any serious consideration given to retirement of national debt, and economists generally seem to be either silent on the seriousness of this problem or argue that the debt is not a real drain on economies so long as the debt is not increasing as a percentage of gross domestic product. Perhaps. We will, of course, discover in due course whether this assertion holds true over the short run, the medium run or the long run (the long run taking us out to the time when most current taxpayers have died and the problem is handed to the next generation).

We must introduce measures to reign in the ability of government to spend without having to gain direct permission from the electorate. The first step is to prohibit by constitutional amendment government's self creation of credit. The revenue for all current expenditures must come from taxation. Physical infrastructure, such as highways, mass transit, bridges, public facilities, ought to be financed by fully amortizing bonds issued for periods tied to the anticipated life of the improvements constructed. The annual budget would then include taxes levied sufficient to cover all interest and principle payments.

Getting the Central Banks out of the business of issuing currency can be accomplished by the creation of a competitive system of banks of deposit. These banks would have no lending powers; rather, they would take in currency and purchase precious metals and other commodities, establishing for members an account balance against which purchases from other members would be recorded electronically. Over time, a network of these banks would link producers and consumers together in a system that automatically debits and credits member accounts when transactions between members occur. Losses for bad debts would become a thing of the past. Eventually, vendors could condition contracts with government agencies on their membership in the system. The banks of deposit would earn fees charged to each member for the management services provided. Many existing commercial banks would become members as well out of self interest. With a global system established, Gresham's Law is made to work in reverse: good money will drive out bad, as market participants opt to exchange goods and services only with other bank of deposit members. Over time, the central bank currency will circulate at increasingly deep discounts - unless they, too, reorganize as banks of deposit. For transactions of relatively small amounts, national mints could be contracted by the banks of deposit to produce gold and silver coins of a standard metallic content.


I have finally come to the end of this very long and detailed analysis of our history and our socio-political arrangements and institutions. To the best of my ability, I have provided the reader with the tools of analysis I have found useful in my own search for understanding. For me, the challenge now is to do whatever I can to assure the torch of cooperative individualism remains lighted and passed on to as many others as possible. My hope, of course, is that you will find reason to join me on this journey. There is much to do and, perhaps, a not very wide window of opportunity for action. While many thoughtful people have come to accept the appropriateness of a transnational system of values as the basis for law, we are experiencing a strong counter-movement embracing moral relativism. Whereas we had reason to hope that with the collapse of Soviet state-socialism the world's resources would be redirected to the improvement of our well-being, ancient and modern hatreds have been unleashed. The words of Eric Hoffer, written in 1977, continue to have the ring of truth:

A disconcerting aspect of our time is that we do not know what is happening to us. Rapid, drastic change means the intrusion of the future into the present with the result that the present has become as unpredictable as the future. We do not know whether the present crisis is an ending or a beginning; whether we are descending or ascending.

Increasingly we are being separated from our past. We are a different people living in a different country, and we know that we shall become more different as time passes. There is a vague fear that even if we manage to solve all our problems we shall be less than what we have been. We shall merely survive.[114]

Throughout the world there is this conflict between those who hold to the basic equality of all persons and those who hold to the sovereignty (and superiority) of their own specific sub-group. At the same time, the human attack on the earth's life-supporting systems seems to be accelerating. A great worry for me is that we are running out of time. This dilemma did not occur to Paine or George in their time. As George looked over his completed manuscript of Progress and Poverty, he added a powerful footnote:

The truth that I have tried to make clear will not find easy acceptance. If that could be, it would have been accepted long ago. If that could be, it would never have been obscured. But it will find friends - those who will toil for it; suffer for it; if need be, die for it. This is the power of Truth.[115]

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