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This 2014 excerpt of Common Dreams, Apr 14, is by Eric Zuesse.
A study, to appear in the Fall 2014 issue of the academic journal Perspectives on Politics, answers the question: “Who governs? Who really rules?” in the US.
Americans do enjoy regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But the first-ever comprehensive scientific study of the subject shows that the preferences of the average American have a minuscule, near-zero, statistically non-significant impact upon public policy.
The authors — Martin Gilens and Benjamin I. Page — in their article titled “Testing Theories of American Politics” note the data available are probably under-representing the actual extent of control of the U.S. by the super-rich.
The clear finding is that the U.S. is not a democracy at all, not part democracy / part oligarchy, but only an oligarchy.
The U.S., in other words, is basically similar to Russia or most other dubious “electoral” “democratic” countries.
Ed. Notes: Good to have more studies to go with the work of others such as G. William Domhoff on who owns America, which offers a deeper look into how policy gets made. But is any of this new? The US Constitution replaced the US Articles of Confederation as a favor to rich insiders. What could ever change this situation?
People must feel worthy of justice. And they must not worry so much about their political rights — we can vote, right? so? — as their economic rights. They should demand a fair share of the common wealth. That will show they have worth as individuals and help them feel real self-esteem.
Things will get better when enough people share the same vision of a better world and demand that government let — or help make — it happen. The key part is the vision, making it visible to a critical mass. That’s why it’s important for you to articulate a Citizen’s Dividend for everyone.
We, the people of this land, recognize natural moral law as the proper foundation for governance. By unanimous consent, we thereby establish this constitution to provide the structure of governance that will best implement justice, preserve our liberty, and protect our natural rights.
Article I: The structure of governance
1. The transition. Upon the designated date of the adoption of this constitution by individuals, the existing governance powers in the old territorial realm shall be transferred to those seceding individuals who join the libertarian federation (the new realm) by their written signature either on paper or in electronic form. The lands held by these individuals shall also secede into the federation. A percentage of land value held by the old realm government shall be transferred to the new realm in proportion to the seceding population. The same percentage of the government debt shall also be transferred to the governance of the new realm. As new persons secede from the old to the new realm, in stages the corresponding land value and debt shall be transferred to the new realm, with the land value and debt set to that which existed at the date of first secession.
2. Electoral districts. Prior to the date of the secession, the old realm shall establish neighborhood electoral districts, each with a population of approximately one thousand persons. In locations where there is already an established governance structure such as a homeowners’ association, that organization may serve as the neighborhood district.
3. Councils. Each neighborhood district shall elect, from their residents, a council of seven persons plus one alternate council member. The neighborhood council is designated “level one.” A local group of 20 to 30 councils shall form a level-two council, and each level-one council shall elect one of its members as its representative to the level-two council. The elected level-2 representative shall be replaced by a new representative from the level-one council. A group of 20 to 30 level-two councils shall similarly form a level-three council. This process shall continue to the broadest and highest council, level-H, which shall be designated as the parliament or congress. Each council shall elect a chair or president.
A neighborhood council member may be recalled by a petition of one tenth of the members which elected the representative, followed by a vote for recall. A member of a council of level two or higher may be recalled by a vote of the majority of the council that elected that person.
4. Secession. Any member of the federation may secede as a person and may also withdraw land that is owned by that member in fee-simple title or other title forms that are easily separable from other real estate. However, the seceding person must pay his proportional share of any debts held by all councils for which he is a member, and is also liable for any personal debts owned to others in the federation.
Article II: The public finances
1. Prohibited taxes. In accord with the equal self-ownership of all persons, no tax shall be imposed on personhood, interest income, exchanges of property, value added, capital gains, wages, produced goods, or on profits and dividends from enterprise. However, a council may charge payments using the method of demand revelation, as described in III C.
2. Land-value and rent. A board of professional real-estate appraisers shall be appointed for each level-two council. Each council level shall appoint one such assessor for each board. The assessors and their hired assistants shall estimate the land value or land rent for each plot of land within the level-two district at least annually. The assessment values shall be a public record. Any land title holder may appeal the assessment to an appeals board selected by the level-two council, and if not satisfied, to a jury randomly selected from all level-two residents.
Each level-two council shall appoint a treasurer who shall collect and account for the public finances. Each month, the treasurer shall bill each land title holder for at least 80 percent of the assessed land rent, as the community rent that properly belongs to the people. Payments more than two months late shall be subject to a penalty of ten percent annually above the price-inflation rate. Payments not received within year shall result in a lien on the property and, after two years of non-payment, the sale of the property so that the owed funds are recovered. The level-two or higher-level councils may enact rules for the postponement of the community rent payment for cash-poor elderly title holders.
3. Pollution and congestion. Each council shall, in coordination with other councils of the same or other level, levy charges on pollution and other environmental destruction. Each council shall similarly levy charges on traffic and parking congestion just high enough to prevent congestion.
4. User fees. Each council may charge user fees for services that are voluntarily agreed upon by the residents, such as for the collection of trash and garbage, but the councils may not prohibit competitive services, and the councils may not impose charges for similar services provided by private substitutes.
Article III: Legislation
1. Implementation of natural moral law. The councils may not impose any restriction or cost on any adult action that does not coercively harm others. “Harm” is defined as an invasion, and not an offense due merely to the beliefs and values of those affected. The councils shall enact or adopt legislation that prohibits acts which coercively harm others, including threats of such acts. The council may also enact liability rules for acts which are penalized after the fact.
Residents may form clubs, including territorial organizations, within which the members may enact restrictions and dues, provided that any club member may exit the organization.
2. Majority rule. The councils shall enact legislation by majority rule. A council may also submit legislation to be put to a vote of the residents.
3. Demand revelation. Decisions on the provision of collective goods may be determined by the method of demand revelation. Each member is assigned a cost to be paid if the decision is to provide the good. Each member may enter, on a web site or on paper, the most that the member is willing to pay. Those who do not state any value shall be assumed to have stated a value equal to one’s cost. If the total values exceed the total cost, the collective good is provided. Any member whose stated value changes the outcome, relative to having stated a value equal to one’s cost, shall compensate the community with a payment equal to the net loss of all the others.
4. Adults. The standard age of adulthood shall be set at 18 years of age, which includes voting and the ability to enter into contracts and buy any products. A council may set a younger age for limited purposes, such as driving vehicles. When a minor becomes an adult, he shall sign in agreement with this constitution if he seeks to be a voting resident.
5. Jurisdiction. Legislation enacted by a council shall supercede any conflicting legislation enacted by a lower-level council within its jurisdiction.
Article IV: The judiciary
1. Trial by jury. All those charged with crimes punishable by prison, or by fines of value greater than one fifth of an ounce of gold, shall have the right to a trial by randomly selected jury of at least nine persons residing within one’s level-two council. Unanimous agreement shall be required for convictions punished by prison.
2. Law suits. All law suits under common law or civil law shall be transferrable, so that a person suing may sell the law suit to another party who will prosecute it. The default practice shall be for the loser of a law suit to pay the legal costs of the winner, unless a council overrides this with legislation.
3. Courts. The level-H council (parliament or congress) shall establish a supreme court with nine members, and each council above level-one shall appoint judges and establish courts of law. Private courts and arbitration shall also be permitted. The level-one neighborhood councils may establish courts as they wish.
Article V: Amendments
This constitution may be amended by a 3/4 vote of the level-H council together with a vote in favor by 3/4 of the level H-1 (the level below H) councils by their majority votes. However, Article II paragraph 1 and Article III paragraph 1 may not be repealed or substantially altered.
This 2014 excerpt of National Public Radio, Apr 20, is by Bob Marshall.
More than 54,000 wells were planted in and off the Louisiana coast — part of the 300,000 wells in the state. They’re connected by thousands of miles of pipelines, all vulnerable to leaks.
And leak they do. Louisiana admits to at least 300,000 barrels spilled on its land and in its waters each year, 20 percent of the nation’s total. But those figures come from a system that depends largely on oil companies to self-report.
Under the Clean Water Act, when a company spills any amount of oil in the water, it must file a report with the National Response Center run by the Coast Guard. But many smaller spills were not making that list.
Gulf Restoration Network has personnel who can spot spills from the air and file complete reports. SouthWings, a group of volunteer pilots, helps get those spotters aloft. SkyTruth finds the spills on satellite photographs, then applies a formula used by spill experts to translate the size of the oil sheen into gallons of oil in the water; its estimates typically are 10 times larger than what had been reported.
In an average year, the NRC receives 10,000 reports of spills in the Gulf. That is a continuous, business-as-usual practice.
Ed. Notes: Polluters know what will stop them even if we don’t and that’s repeal of free, government-granted liability limits. Get rid of that freebie, make management buy insurance plus put their own butts on the line, and you’d see them become good neighbors. Of course, if oil companies had to pay the “rental” value of oil rather than keep it — close to what Norway does — and pay to the community, that would show who is really boss and help keep business in line. Further, you could use the raised revenue to cut counter-productive taxes, such as those on wages, sales, and homes. Most voters would love that, and thus love this system of stewardship all the more. More at progress.org.
This 2014 excerpt of Iranian, Apr 14, is by M. Kimya Hedayat-ZadehLife.
In a symbolic and unprecedented move, Ayatollah Abdol-Hamid Masoumi-Tehrani, a prominent Muslim cleric in Iran, has gifted to the Baha’is of the world an illuminated work of calligraphy of a paragraph from the writings of Baha’u’llah, the Prophet-founder of the Baha’i Faith.
This move comes in the wake of several recent statements by religious scholars in the Muslim world who have set out alternative interpretations of the teachings of Islam in which tolerance of every religion is, in fact, upheld by the holy Qur’an.
Ayatollah Tehrani states on his website (see translation of statement) that he prepared the calligraphy of the verse as a “symbolic action to serve as a reminder of the importance of valuing human beings, of peaceful coexistence, of cooperation and mutual support, and of avoidance hatred, enmity, and blind religious prejudice.”
The intricate artwork must have taken several months to painstakingly prepare by hand. Ayatollah Tehrani’s other artworks include the illumination of the Qur’an, the Torah, the Psalms, the New Testament, and the Book of Ezra. His illumination of the Psalms is currently being held in the United States Library of Congress.
On previous occasions, Ayatollah Tehrani has with great courage publicly voiced concern about the ongoing and severe persecution of religious minorities, including the Baha’is in Iran. Since the Islamic Revolution in 1979, hundreds of Baha’is have been killed and thousands have been imprisoned. There are currently 115 Baha’is being held in prison solely on the basis of their religious beliefs. Baha’is in Iran are denied access to higher education, obstructed from earning a livelihood, prevented from burying their dead in accordance with their own burial rites and subjected to the demolition and desecration and expropriation of their cemeteries.
Ed. Notes: People like this cleric are the ones who deserve support from the foreign policy of superpowers. That would improve communication between different cultures. Perhaps then the dialog could move from religion to science, and science could progress to include geonomics.
This 2014 excerpt of TruthDig, Apr 13, is by Ellen Brown of Web of Debt.
Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it.
Being sued are sixteen of the world’s largest banks – including the three largest US banks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UK banks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks.
The swap is an ongoing bet on interest rates. The borrower owes both the interest on its variable rate loan and what it must pay out on this separate swap deal. Interest rate swaps are now a $426 trillion business. That’s trillion with a “t” – about seven times the gross domestic product of all the countries in the world combined.
While banks are still collecting fixed rates of 3 to 6 percent, they are now paying public entities as little as a tenth of one percent on the outstanding bonds – an outcome which amounts to a second bailout for banks.
In 2008 and 2009, during the height of the financial crisis, the cost of the swaps that municipalities had taken out jumped in price at the same time that their borrowing costs went up, which was exactly the opposite of how the swaps were supposed to work, and it was chiefly due to manipulation. Nearly every major bank conspired to rig bids and drive up the fixed rates state and local governments pay on their derivative contracts.
Unlike most banks, big ones make most of their money not from ordinary commercial loans but from interest rate swaps. In the fall of 2008, the Federal Reserve dropped the prime rate (the rate at which banks borrow from each other) nearly to zero. This was a giant windfall for the major derivative banks; it lowered what they had to pay their big buyers of swaps.
Fraud is grounds for rescission (terminating the contract) without paying penalties, potentially saving taxpayers enormous sums in fees for swap deals that are crippling cities, universities, and other public entities. Fraud is also grounds for punitive damages, something an outraged jury might be inclined to impose.
Ed. Notes: We really should not let so much money be collected into one place, tempting banksters, in the first place. The most fundamental way to prevent this concentration is to quit buying land from individuals, which often requires a mortgage from a bank, and to start renting land from one’s community, and paying rent is something even the poorest can usually afford without having to borrow. Since most debt is debt for land, that would instantly reduce the enormous flow of funds to banks.
Further, once residents start getting an extra income — a share of those rents for land (and resources and EM spectrum, etc) — then they won’t need much in the way of government services. Government could be streamlined and would no longer have much need to borrow. Public debt is the other huge source of income to banks.
Without fat mortgages, and without indebted governments, big banks would be left with nothing of interest to anyone to swap. Plus, citizens would be getting dividends. That’s how you solve problems: view the bigger picture then apply geonomics.
This 2014 excerpt of the Weekly Wastebasket, Apr 11, is by Taxpayers for Common Sense.
Taxpayers that don’t need subsidies — through direct spending or via tax loopholes — include the oil and gas industry. Extraction of fossil fuel has been subsidized for a hundred years (literally) and it is one of the most profitable businesses in the world (literally). We found that the three largest U.S.-based oil and gas companies had an average U.S. tax rate of 26.2 percent for 2008-2012. If you subtract the billions the companies are allowed to defer each year (thanks to these special tax provisions), it drops to around 20 percent. And, to be sure, oil and gas companies are not the only ones picking from the menu of various tax breaks to lower their rate below the statutory rate of 35 percent.
The same holds true for individual taxpayers. Special tax deductions that have been in effect for decades benefit a small slice of taxpayers, but cost everyone. Even popular ones like the mortgage interest deduction, which costs roughly $75 billion a year, have no effect on homeownership rates in this country and are basically offset by the increase in home prices it causes. Like the oil and gas industry, some of the wealthiest individual taxpayers can avoid paying higher rates by also utilizing special tax provisions that aren’t available to everyone.
Congress could lower overall tax rates – something everyone wants to do – by cutting out the whole thicket of special credits and deductions that distort both the tax system and business decisions. So why don’t they just do it already?
Ed. Notes: It would not surprise me if the author over-estimated how much tax the oil corporations actually pay, especially when you subtract the payments they get from the US Government for storing oil underground (pump it out, pump it back in), for doing “research”, and for the “services” performed by their subsidiaries, such as uranium miners and processors. You could also subtract the fines not levied for pollution emitted by their trains and ships and gas stations and the fines not collected for their failure to pay over even the tiny royalties that they are charged (Norway charges nearly 80%, not 10% or 12%). This list could probably go on.
Most ironic, most of the value of oil is “rent”, or, its value in the ground, before it’s even extracted. Since oil in the ground is not the product of anyone’s labor or capital, and since its value is created by the demand for it by all of us, oil “rent” is actually our common wealth. It is one of the few things that really should be taxed or levied in some other way (auction or deed fee, etc), with the raised revenue going to the citizenry, a la Alaska’s oil dividend.
If you’re going to have a federal income tax, you should make it as simple as possible, since complexity is the enemy of equity. Have one same rate for everybody. Have absolutely zero loopholes. And spend it all on war. If you want to pay less tax, then shrink the so-called “defense” budget. Make everybody pay, even the poor. They’ll be able to afford paying 10% of an $8,000 income — $800 — since their Citizen’s Dividend would be more like $12,000. After paying $800, they’d still have $19,200 per year to live on. Not bad. And $12k to replace mortgage interest deduction; not bad for the middle class. And $12k to replace billion-dollar oil subsides … well, too bad, “oiligarchy”, but fair is fair.
This 2014 excerpt of MSNBC, May 5, is by Jane C. Timm.
Nevada Democratic Rep. Steven Horsford is trying to oust the pro-Bundy militia from his district, citing constituents who are bothered by the presence of the self-appointed militia.
The group has been camping near Cliven Bundy’s land to defend the embattled rancher in his battle with federal land managers. Bundy – who says he doesn’t recognize the federal government – owes more than $1 million in fees for letting his cattle graze on federal lands for the last two decades. The Bureau of Land Management stopped trying to seize Bundy’s cattle last month, after a face-off with the militia.
Many thought when the face-off was done the militia—who came from all-over the country—would depart, but they have not.
Rep. Steven Horsford is calling on the senator, governor, and others who made Cliven Bundy out to be a patriot to stand with the residents.
Republicans have struggled to reconcile their support for Bundy’s states-right’s views with his racist rants.
Ed. Notes: As usual, both sides are partially right. People should pay for land, they should not just use it without compensating anyone, but they shouldn’t necessarily pay to the federal government but instead to their community, perhaps the county or state. And the government that receives payment shouldn’t necessarily keep the rents but instead disburse them to residents. Doing that would compensate those excluded from the (ranch) land and would give the owner a legitimate title to “hers” ranch.
This 2014 excerpt of The Atlantic, Apr 9, is by Uri Friedman.
In the Swedish city of Gothenburg, the governing coalition has proposed a year-long trial that would divide some municipal workers into a test and control group at the same pay rate, with the test group working six-hour days and the control group working the traditional eight.
They hope to get the staff members taking fewer sick days and feeling better mentally and physically after they’ve worked shorter days.
In Sweden, towns have abandoned the approach in the past when it proved costly and detrimental to workers’ health (it turns out working non-stop for six hours isn’t great for you, either).
The bottom line is that productivity — driven by technology and well-functioning markets — drives wealth far more than hours worked. And very few jobs in developed economies nowadays are classic assembly-line positions, where working 20 percent longer will mechanically produce 20 percent more widgets.
At least 40 years of studies suggest that people work harder if you limit their time to complete a certain task. In some cases, working too hard can actually reduce output. Long working hours are also associated with ill health, which means lost labor in the long term, as well as higher medical costs for employers and government.
Ed. Notes: Since we humans are political animals, we seek a solution that is a mandate: “thou shalt” or “thou shalt not”. We, as a majority, do not seek an organic solution whereby you don’t boss people around but instead create a context for things to work out for the better — sort of like child-proofing a home so a baby can’t stick its finger into any electrical outlets. In this case, to create an ideal length of time for working (during a day, week, month, year, or career), you wouldn’t set a limit. Instead, you would pay everyone a share of the common wealth, the worth of Earth in the region, the annual rental value of sites and resources and EM spectrum. Getting this extra income (from the money that people spend for the nature they use), a resident would not be so desperate to work more than they want; instead, they could work as long or as short as they like.
They could also work with whomever they like, so government would not have to enforce integration. Plus, they’d have the leverage to negotiate higher wages, so government could forget about minimum wages. And they could demand safer conditions, so government could forget about its bureaucracy of inspectors. Further, they could win a say in management, so corporations would evolve into co-operatives naturally, organically.
You can expect this cascade of benefits when you redesign the whole system rather than just address each symptom. But you’d have to have a whole world view, rather than just be a political animal. And that’s hard for us humans.
“Modern Monetary Theory,” a doctrine about fiat money, has captured the attention of some reformers and progressives. This doctrine – a set of propositions contrary to logic and evidence – purports to explain why the US and other economies are ailing, but is beset by contradictions with the historic facts and within the doctrine.
For example, The New Inquiry on 11 April 2014 featured an article by Rebecca Rojer on “The World According to Modern Monetary Theory.” The author regards it as a revelation of MMT that the “rules of money are not immutable laws of nature.” Since the science of economics explains the effects of incentives and decisions, evidently these money “rules” are the outcomes of private and governmental decisions, and since the effects are not immutable laws, people can arbitrarily create whatever outcomes they wish. That would indeed be wonderful, to just print money are thereby eliminate unemployment, depressions, and poverty, all without creating price inflation, because the rules of money creation are not immutable, so we can have whatever outcome we wish!
Science is based on logic and evidence rather than “revelations.” It is possible that there have been revelations, but these create religion rather than science, since if an experience or experiment cannot be duplicated, the revelations are not sufficient for scientific warrants. Various religions have had different revelations, and the members do not believe the revelations of the others.
The author provides an example of the MMT doctrine. Suppose there is an island that has minerals. The owner of the mines hires workers and pays them with fiat money, like the paper and bank-account money we have today, i.e. money created out of nothing. But the owner also imposes a tax on the wages of the miners. So evidently this mine owner is a government, and we are not dealing with private enterprise, but a coercive socialist state. The miners work enough to both pay the wage tax and be able to survive.
But a premise of this MMT island example is that prior to the mining, the people were able to hunt and farm without working too hard. So why would anyone work in the mines? The historical explanation is the “enclosures” movement, in which land that was held by small-scale farmers or by villages was forcibly taken by the aristocracy or by the state or by foreign invaders. This is not a money story, but a land-grab story. Another way to get forced labor, other than chattel slavery, is to require the payment of taxes in money, which forces subsistence farmers to work on plantations at least long enough to pay the taxes. That is more a tax story than a money story, since if the government insists on being paid in coconuts, and a farmer does not grow coconuts, he must work on the coconut plantation, get paid in coconuts, and then pay the tax. Therefore the forced labor is based on the government’s restrictions on alternative employment opportunities.
MMT is correct in stating that one way that the government gets people to accept its fiat money is what economists call the “fiscal theory of money,” that the government reinforces its money as a medium of exchange by requiring the use of that money for paying taxes. However, if the government currency is being hyper-inflated, taxpayers would keep their savings in, say, gold, or a stable foreign currency, and then convert it to the fiat money only when a tax payment is due. The fiscal effect only works if the government is not creating too much inflation.
Therefore MMT is incorrect as stating, as a “core building block,” that forcing people to pay taxes with fiat money “gives it its value.” That was not the case, for example, in Zimbabwe, which suffered hyperinflation. One “immutable” economic law of money is that the creation of money, beyond what is needed for transactions, results in price inflation, and the payment of taxes becomes tied to that inflation, via the nominal rise of prices and wages, rather than preventing inflation.
A related fallacy of MMT is that “sovereigns” in general create money by “spending it into existence.” That can indeed happen, as for example in the Zimbabwe hyperinflation, but in the US and most countries today, government spending comes from taxes and borrowing, not money creation. The central bank, such as the Federal Reserve, does not create money by spending it for goods, but rather by buying bonds and then increasing the banks’ reserves or funds to pay for the bonds.
Since the “core” proposition of MMT, that price inflation can be controlled by government’s taxing and spending, is incorrect, the whole superstructure of the MMT doctrine built on it collapses. Actually, MMT does accept the proposition that monetary inflation creates price inflation, but that true proposition contradicts the core MMT premise that tax-paying gives money its value.
A worse MMT fallacy is that the taxes paid to the government destroys money. MMT tells us that governments create money when they spend, and then the money disappears when taxes are paid. But a tax no more destroys money than the dollars used to buy bread. The seller of bread now has the money, and the government now has the dollars paid in taxes, and they then spend that money.
There have been various theories and doctrines on money and banking in the history of economic thought, and in my judgment, the explanations that best fit the facts are a combination of the monetarist and the Austrian schools of thought. The monetarist core is the equation MV=PT, which explains that the quantity of money (M) multiplied by its annual velocity or turnover (V) equals the price level (P) multiplied by the amount of transactions (T) measured in money. Thus high price inflation, a rise in P, is usually caused by monetary inflation, an on-going increase in M.
The Austrian school explains how excessive monetary inflation not only cause price inflation, but distorts relative prices, such as when house purchase prices rise faster than rentals. Austrian theory shows how governmental central planning fails because the knowledge to do so well is always lacking, and that applies to money as well. Hence the Austrians propose free-market money and banking, so that the market sets interest rates and the money supply.
Indeed the Fed failed to prevent the Great Depression of the 1930s and the Great Recession of 2008, and its policies generated high inflation during the 1970s and the cheap credit that has fueled land-value bubbles. MMT cannot do any better, because, as the Austrian theory explains, the optimal money supply is not only not known, but not knowable. The pure free market provides the optimal money supply just as it provides the optimal amount of bread and the optimal amount of shoes.
Here are nine more 2014 excerpts from: (1) Vox, Apr 8, by Matthew Yglesias; (2) Business Week, Apr 10, by Peter Coy; (3) Common Dreams, Apr 16, by Mark Weisbrot; (4) Wall Street Journal, Apr 21, by Daniel Shuchman; (5) New Republic, Apr 22, by Robert Solow; (6) Time, Apr 23, by Rana Foroohar; (7) Forbes, Apr 29, by Tim Worstall; (8) Huffington Post, May 1, by Ryan Grim; and (9) Salon, May 1, by Jesse Myerson.
The Short Guide to Capital in the 21st Century
Much of modern-day wealth appears to take the form of urban land (Silicon Valley houses are much more expensive than houses in the Houston suburbs, not because the houses are bigger but because the land is more expensive), control over oil and other fossil fuel resources, and the value associated with various patents, copyrights, trademarks, and other forms of intellectual property. Land and resources differ from traditional capital in that even a very high rate of taxation on them won’t cause the land to go away or the oil to vanish. Intellectual property is deliberately created by the government. Stiff land taxes, and major intellectual property reform could achieve many of Piketty’s goals without disincentivizing saving and wealth creation.
An Immodest Proposal: A Global Tax on the Superrich
The top hundredth of 1 percent of U.S. taxpayers—that’s 16,000 people—have a combined net worth of $6 trillion. That’s as much as the bottom two-thirds of the population.
Owners of assets such as empty lots might be more likely to put them to good use if capital [actually, land] were taxed.
He proposes a global tax on capital—by which he means real assets such as land, natural resources, houses, office buildings, factories, machines, software, and patents, as well as pieces of paper, such as stocks and bonds, that represent a financial interest in those assets.
The proceeds in Piketty’s view should not fund an expansion of government: “The state’s great leap forward has already taken place: there will be no second leap—not like the first one, in any event,” he writes.
Piketty in Washington: How to Reverse the Increasing Concentration of Wealth
In the U.S. we pay $380 billion per year for drugs whose price is composed of something like 80 or 90 percent monopoly rents.
The “too-big-to-fail subsidies” are 20 percent of after-tax corporate profits in the euro zone.
We have 40 percent of corporate profits going to financial sector, and “intellectual property” capturing a growing share of returns at the same time that technology is increasingly making much of consumption available at zero marginal cost.
Poverty, unemployment, and unequal opportunity are major challenges for capitalist societies.
Societies need markets and private property to have a functioning economy.
He says that his solutions provide a “less violent and more efficient response to the eternal problem of private capital and its return.” Instead of Austen and Balzac, the professor ought to read “Animal Farm” and “Darkness at Noon.”
The very highest income class consists to a substantial extent of top executives of large corporations, with very rich compensation packages. (A disproportionate number of these, but by no means all of them, come from the financial services industry.) With or without stock options, these large pay packages get converted to wealth and future income from wealth. But the fact remains that much of the increased income (and wealth) inequality in the United States is driven by the rise of these supermanagers.
Executive pay at the very top is usually determined in a cozy way by boards of directors and compensation committees made up of people very like the executives they are paying.
Top management compensation, at least some of it, does not really belong in the category of labor income, but represents instead a sort of adjunct to capital, and should be treated in part as a way of sharing in income from capital. It is clear that the class of supermanagers belongs socially and politically with the rentiers, not with the larger body of salaried and independent professionals and middle managers.
Why This Bestseller Is Freaking Out the Super-Wealthy
The rich take a greater and greater share of the world’s economic pie. That’s because the gains on capital (meaning, investments) outpace growth of GDP. Result: people with lots of investments take a bigger chunk of the world’s wealth, relative to everyone else, with every passing year. The only time that really changes is when the rich lose a bundle (as they often do in times of global conflict) or growth gets jump started via rebuilding (as it sometimes does after wars).
Piketty credits his work to the fact that he didn’t forge his economic career in the States, because he was put off by the profession’s obsession with unrealistic mathematical models. “The truth is that economics should never have sought to divorce itself from the other social sciences and can only advance in conjunction with them,” he argues.
We can only hope that the politicians crafting today’s economic programs will take this book to heart.
Piketty’s Wealth Tax Would Require A Constitutional Amendment In The US
Piketty’s proposed wealth tax to solve the ills of unconstrained inequality would actually require a constitutional amendment for it to be legal.
We’d get much the same result in a reduction of societal inequality in wealth if we were to impose a proper land value tax and do some tinkering with patents and copyrights.
And given that we need to go and do some tinkering with patents and copyrights (the current system just isn’t fit for duty) and that a land value tax is an excellent idea in its own right, that’s probably the course we should take.
Why It Took Until Now For An Economist To Expose The Flaw In Capitalism
Cold War self-censorship prevented mainstream economists from diagnosing adequately the fundamental flaw in capitalism, Thomas Piketty said.
Returns on capital grow faster than the regular economy, meaning that without some policy intervention, the rich get richer, and richer, and richer.
“The existence of a counter model was one of the reasons that a number of reforms or policies were accepted,” he said, arguing that those in capitalist countries fared better thanks to the threat of communism.
Everyone is reading Piketty wrong — including Piketty!
Want to really shut down the chief engine generating inequality? Forget the author’s solution and do this instead.
The left response to this conundrum (including Piketty’s) is to try to grow g (growth of the economy) through more egalitarian taxation and stimulus and whatnot. But this concedes way too much, when we can actually solve the conundrum. The bulk of society doesn’t need to be devoted to accommodating the tiny number of people who capture r (rate of return) and ride capitalism’s natural flow, merrily, merrily, merrily. It is not necessary for everybody to keep bending over backward to grow the economy, just in order to help one another survive. There is a way out of this conflict, a way of generating equality as naturally as capitalism generates inequality.
Make sure the people who capture r is: everybody. If the stream of wealth flows to everyone, then the pressure’s off g to keep pace with r. We can just let r exceed g and focus on more meaningful things like availing ourselves of our inalienable right to the pursuit of happiness.
Rent and real estate value can flow to everyone by taxing (especially urban) land value, perhaps to ply a sovereign wealth fund with investment cash.
By liberalizing the intellectual property regime (i.e. stopping handing out all these monopolies), and moving to a Creative Commons structure, we can make sure that our society’s ideas and artworks aren’t just a source of cash for pharmaceutical companies, media conglomerates, and litigious vultures.
Ed. Notes: Funny how one can know so much and so little at the same time. Piketty suggested that taxing great wealth could make it possible to cut other taxes, such as the property tax on land and buildings. De-taxing buildings would be beneficial but you de-tax land, then you just let buyers, speculators, and assessors pump up the price of land. That only benefits sellers, flippers, and lenders, which widens the gap between rich and poor, the problem Piketty set out to solve.
Piketty and his reviewers talked about astronomical CEO pay but all failed to note it’s from corporate welfare — it’s not market success so much as lobbying success.
And even the best commentators left out a crucial key: disbursing the raised revenue to the populace in general. A tax might lower the highest incomes and fattest fortunes but a tax by itself does not put the money into the pockets of the rest of society. We need to have Citizen’s Dividend to do that.
Veteran lawmaker Tengku Razaleigh Hamzah said the country has fallen victim to the machinations of politicians habitually lining their own pockets and colluding with businessmen who were uncompetitive without preferential treatment.
Profits are made through outright corruption, poor regulation, and the transfer of public assets through privatisation at bargain prices.
The former finance minister, or Ku Li as he is popularly known, cited cases such as the RM2.5 billion bailout of Bank Bumiputera in 1985 plus an additional RM1 billion aid payout to the bank six years later, and also the RM2 billion rescue of Konsortium Perkapalan Berhad in 1997.
Tengku Razaleigh, author of “Rich Malaysia, Poor Malaysians”, said, “In all, more than a half trillion ringgit has been spent rent-seeking and patronage system. This amount could have been used more productively to fund a national pension programme for Malaysians.”
The outspoken Gua Musang MP added that this change must be supported by a revamped education system that puts a premium on logical and critical thinking over rote memorisation.
Ed. Notes: The title of his book is very similar to a refrain in America’s Appalachia, the nation’s poorest region, where people in one state say, “Why are we poor and West Virginia so rich?” The answer, as usual, is that the masses don’t get their fair share of the common wealth — the worth of Earth and of government-granted privileges — but the insiders capture that wealth for themselves. Nothing will change until people recognize that all the spending for land and resources is our common wealth and should be directed into our public treasuries to be disbursed as dividends — and a critical mass demands that this happen! Meanwhile, the corruption in places like Malaysia acts like a ravenous parasite that prevents the nation from growing a sizable middle class.
This 2014 excerpt of the American Heart Association, Apr 3, is by Bridgette McNeill.
The risk of stroke may be much higher in people with insomnia compared to those who don’t have trouble sleeping.
The risk also seems to be far greater when insomnia occurs as a young adult compared to those who are older.
Diabetes also appeared to increase the risk of stroke in insomniacs.
The mechanism linking insomnia to stroke is not fully understood, but evidence shows that insomnia may alter cardiovascular health via systematic inflammation, impaired glucose tolerance, increased blood pressure or sympathetic hyperactivity. Some behavioral factors (e.g., physical activity, diet, alcohol use and smoking) and psychological factors like stress might affect the observed relationship.
It’s unclear if the findings also apply to people in other nations [beyond Taiwan], but studies in other countries have also pointed to a relationship between insomnia and stroke.
Ed. Notes: What makes it hard to sleep on a regular basis? Worry. Usually financial worry. Without enough money, it’s hard to take care of oneself, never mind those one loves. So even health issues get back to economics. Economic injustice worsens our other problems. Economic justice — or geonomics — can make it easier to solve them. Imagine how different your life would be if getting a fair share of the common wealth while not having to pay taxes!
The Unnatural End of American Social Reproduction
This 2014 excerpt of Law School Tuition Bubble, Apr 03, is by Matt Leichter.
The cog in the generational lifecycle is the Georgist land cycle. Because the supply of land (especially urban locations) is fixed, its value is inevitably whipsawed by speculation. The more people buy land at the peak of the land cycle and lose out, the more land ends up in the hands of the wealthy (banks), who can afford to wait to sell the land when prices rise again. Everyone else must suffer.
If after several of these cycles, people lack the purchasing power to buy out the previous generation, they cease to reproduce and existing landowners hoard land for longer, exacerbating the disruption of the generational lifecycle.
Without reform it could take many years for the negative feedback from the land cycle to stop disrupting social reproduction.
Ed. Notes: Actually, we should not fear high land prices but welcome and share them; as they go up, so would our share. With a heftier share, we could wean ourselves from government “services”. With a slimmer government, we could repeal taxes, especially the counterproductive ones that shrink their base (which we could do any time, anyway).
Elections are supposed to achieve social peace by providing a government that represents the people. But voting has not brought peace to Ukraine. Many people distrust the honesty of the elections, and many in Ukraine have disagreed with the policies of the government, both when policy favored association with Europe and when it favored association with Russia. The fact that many voters in the Crimea and eastern Ukraine favor union with Russia, or else independence, shows that many there do not feel well represented.
The coming election in Ukraine will not solve the governance problem, because it is just a continuation of the same system that some are rebelling against. Ukraine needs a new structure of government and democracy. The solution is to shift political power from the central government to the people as individuals. When a citizen of Ukraine holds power equal to that of all others, he will have nothing to rebel against.
Individual sovereignty can best be represented by a neighborhood council. The neighborhood should have a small population, such as a thousand residents. That is small enough for the people to personally know the candidates and for someone to be elected with little cost. The government of Ukraine can begin the decentralization by establishing neighborhood or village election districts. If the neighborhood population is a mixture of ethnic Ukrainians and Russians, and the people wish to have a council that is aligned with one of these groups, or other interests, then the residents may regroup their districts and have councils that best represent their individual interests. This is the level-one level of governance.
In the Russian language, “Soviet” means “council”. The Soviet Union was supposed to be a union of elected councils, and there was indeed a structure of bottom-up multi-level soviets, but in practice, the Communist Party ruled top-down. Ukraine should resurrect the old Soviet system, which actually derives from the 19th-century anarchist concept of associations of voluntary communities. The Bolshevik slogan was, “All power to the soviets!”, but instead they perpetuated the dictatorship of the proletariat, usurped by the party oligarchs.
The power of the neighborhoods has to be constrained by a constitution that recognizes and enforces natural rights. In most countries, constitutions that proclaimed liberty have failed to be implemented, mainly because the structure of mass voting facilitates plutocracy, with policies that transfer wealth from workers to the moneyed and landed interests, resulting in poverty that gets remedied by trickle-down government welfare.
But with the bottom-up system of genuine soviets, the government would much better represent the people, and constitutional rights would be more strongly protected. As the level-one councils elect level-two regional councils, and these elect the supreme soviet or national parliament, the structure would prevent the usurpation of power from the top. The president would be elected by the parliament and easily dismissed if the people are dissatisfied. Any council member could be recalled by the council that elected him.
Decentralized government gets hampered by centralized tax collection, such as an income tax or value-added tax imposed from the central government. Decentralized governance is suitable to decentralized public finance, and the source of public revenue best suited to local power is the tapping of the area’s land rent or land value. Taxing wealth and investment invites capital to flee, hide, or else it shrinks from the burden. But land cannot hide, and it does not run away, nor does land shrink when taxed. Revenue from land-value taxation can be applied by the level-two councils, with revenues sent to both the level-one and level-three governments.
Ukraine needs two things: better governance and strong economic growth. The replacement of the current complex of market-hampering taxes by taxes on land value and pollution would give the economy such a comparative advantage that investment would pour in, wages would rise, the government would be able to pay off its debts, and the economic misery that fuels much of the unrest would be replaced by an economic joy that would eliminate the economic motivation to join Russia.
With small-group voting, the residents of eastern Ukraine would have their own local Russian-speaking councils, and probably ethnic Russian level-two councils representing some 25 thousand persons. The constitution of Ukraine should devolve most government services to the level-two councils, including local security, education, and public works. The ethnic Russians would no longer feel alienated from the government, and the government of Russia would find it difficult to control the local governments, because the council members would come from the people.
As to the situation of takeovers of government buildings in eastern Ukraine, the national government should surround them with walls of troops while establishing new centers of administration in other guarded buildings. But a lasting solution needs to replace the current government with councils that people feel represents them. The one good thing about the old Soviet Union, the bottom-up multi-level system of soviets, was the element that was most discarded without any debate. Ukraine: bring back the soviets, only this time, make it “all power to the people” as individuals and their chosen councils.
This 2014 excerpt of ThinkProgress, Mar 31, is by Alan Pyke.
Almost half a million college graduates are working minimum-wage jobs.
There were 260,000 Americans with bachelor’s degrees earning the federal minimum wage of $7.25 an hour or less in 2013. Another 200,000 associate’s degree holders also worked for that wage.
These figures are sure to understate the total number of people with higher education degrees who are working minimum wage jobs because data does not factor in state minimum wage laws that are higher than the federal floor. That means that likely thousands of workers in the 21 states with higher minimum pay rates are likely also degree-holders.
Ed. Notes: You hear that education will solve poverty. While it is true that the right education, as in engineering, will qualify you for a decently paying job, watch out; once a horde of people qualify for that job, how long do you think it’d still pay a decent wage? Besides, you must have noticed that people are better educated now than in the past — the literacy rate is quite high — yet has poverty disappeared? Nope. You need a more basic solution than just higher skills if you want to rid society of humbling poverty.
What solution is more basic? Concretely, it’s efficient land use. Why? Well, look in your city — where you have the most poverty there you will see the most vacant lots. Look at where commerce thrives; there you will see the most intense use of land.
So, how do you get landowners to use their locations efficiently? You don’t let them keep the rent, you make them pay it by charging them the annual rental value of their site while de-taxing their buildings. To pay these land dues, owners put and keep their parcels at highest and best use. Developing land and staffing new stores and offices all require not just capital (investment) but also, obviously, labor (employees).
Not only do workers get a slice of the pie, but the demand for labor also raises wages, so that slice grows.
Of course, the better educated will earn more than others when the employment rate hovers near 100%, but education itself can not create full employment; it takes public recovery of rents, driving efficient land use, to do that.
about the money we spend on the nature we use. It flows torrentially yet invisibly, often submerged in the price of housing, food, fuel, and everything else. Flowing from the many to the few, natural rent distorts prices and rewards unjust and unsustainable choices. Redirected via dues and dividends to flow from each to all, “rent” payments would level the playing field and empower neighbors to shrink their workweek and expand their horizons. Modeled on nature’s feedback loops, earlier proposals to redirect rent found favor with Paine, Tolstoy, and Einstein. Wherever tried, to the degree tried, redirecting rent worked. One of today’s versions, the green tax shift, spreads out of Europe. Another, the Property Tax Shift, activists can win at the local level, building a world that works right for everyone.
suitable for framing by Green Parties. When Greens began in Germany two decades ago, they defined themselves as neither left nor right but in front. Geonomics fits that description. The Green Parties have their Four Pillars; geonomists have four ways to apply them:
Ecological Wisdom. Want people to use the eco-system wisely? Charge them Rent and, to end corporate license, add surcharges. To minimize these costs, people will use less Earth.
Nonviolence. Want people to settle disputes nonviolently? Set a good example; don’t levy taxes, which rely on the threat of incarceration, to take people’s money. Try quid pro quo fees and dues.
Social Responsibility. Want people to be responsible for their actions? Don’t make basic choices for them by subsidizing services, addicting them to a caretaker state. Let people spend shares of social surplus.
Grassroots Democracy. Better have grassroots prosperity. Remember, political power follows economic. Pay people a Citizens Dividend; to keep it, they’ll show up at the polls, public hearings, and conventions.
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part and parcel of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
an answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.
one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old log-gers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.