On Our Current Economy in the Face of a Manipulated Electorate
THIS ESSAY IS A WORK IN PROGRESS WITH QUITE A BIT OF EDITING STILL REQUIRED
As a libertarian I believe laws should be few but strictly enforced. On the other hand I acknowledge that if with the collusion of government, oligarchic groups have managed to divert a major portion of the nation’s economic wealth away from the majority, something must be done to rectify it. The radically growing gulf between the extremely wealthy and the rest of us presents just such a situation.
Those who have most abused the system in terms of (putting it nicely) “diversion of wealth” would have us say: “OK, let’s put all that behind us and get on with our lives”, which would, of course, mean that government ought to do nothing to correct their successful “intervention”: kind of like a rapist who has concluded his business telling police investigators not to interfere in personal relationships (it happens too often and if the rapist is powerful enough, it succeeds). Our situation is even worse since impunity leads to continuing economic rape of the same victims (i.e., us).
Just because the weight of improper activity is unfathomably vast does not imply that the guilty should be exempt from consequences to the continuing detriment of everyone else as was the case with the recent financial industry bailouts. There, the guilty managed to shift the blame to those poor who had purchased homes with government assistance and who, before the spike in interest rates, were dutifully paying their mortgages. And why the spike? Because of government and speculative competition for credit which, through the beloved laws of supply and demand, destroyed its normal economic flow. After all, creativity in the development of illusory financial instruments ought not to be punished and wars have to be paid for, but not, heaven forbid, through taxes. Thus the poor bear the brunt of fighting our wars and the blame for the ensuing financial crises that result from incredible mismanagement, reckless speculation and pyramid schemes. But hey, they’re powerless, what can they do? Easy to manipulate too, just wave patriotism at them and yell “fire” or “terrorists”.
Because the violations have been and continue to be so massive that they have become institutionalized we’re faced with a seemingly unresolvable dilemma: the violators as a class, through their long term violations (extremely serious since the end of the Civil War and the rise of the Robber Barons) now control the vast majority of the world’s wealth and most aspects of government so that enforcement through traditional methods is effectively blocked. Should we therefore just give up? Perhaps. Many do. After all, their propaganda and misdirection campaign is relentless and effective and if they were wiser thieves, perhaps that would be the best solution; not a libertarian solution, true (libertarians frown on impunity), but a pragmatic solution. But unfortunately they are not wise thieves and the situation is getting much worse. An analogy:
Legal tender is the economy’s blood and if it does not freely and properly circulate, the economy becomes anemic (the state the world is in today). And if a disproportionate portion of the wealth is concentrated in an organ or a limb through, for example, the improper use of a tourniquet, then that body part becomes first ineffective, then infected, then the affected area atrophies (where we’re at now) and eventually, as the effects of its demise cascade, the body dies.
During the seventeenth century James Harrington, a British economic philosopher, developed a theory concerning the interrelationship between economic and governmental functionality. He observed that for a governmental system to function efficiently, it must be controlled by those who control the economy, thus if one person controls a majority of the economy, only an absolute monarchy will function well, if a limited group control the majority of the economy, only an oligarchy will function well, and only if ownership of the majority of the economy is broadly distributed will democracy function at all.
Liberty is not a democratic concept and even less a “republican” concept in the Madisonian sense (which really involves a form of aristocracy selected by a broader oligarchy disguised as a democracy). Liberty is the concept in which sovereignty flows from the individual to other institutions so that that no social entity enjoys sovereignty except to the extent that the individual has voluntarily surrendered it. Consequently, no governmental entity can delegate to another governmental institution more power than was originally surrendered by the individual. The residue of sovereignty retained by the individual is what we call liberty and from it flow our freedoms. Since no one gave them to us, they cannot be properly limited and certainly ought not to be stolen. Thus, the will of the majority has at best an extremely limited authority from a libertarian perspective and, in Harrington’s sense, liberty, as a basis for government, can only function where the economy is even more broadly shared than in a democratic system.
That is not what we have at all.
So who is to fix it and how? A violent popular revolution as envisioned by Marx? One like the French Revolution? I certainly hope not, but I’ve analyzed modern trends involving the Venezuelan situation, where the majority comprised of the desperately poor, abused for more than a century, seized political power and are using it to attain equality, which in their terms, unfortunately, means that everyone will be equally poor rather than equally wealthy. That is a real danger all over the world, an economic disease which does not improve by ignoring it. The statistics, neutral albeit ugly, bear that out and ignoring them won’t cure the disease.
Democrats are bad but unfortunately Republicans are worse and we libertarians are politically inept. The Tea Party is illogical and inarticulate but very loud. So where do we go from here. Did we learn nothing from how quickly the Soviet Union collapsed? Didn’t we understand how quickly we can become a banana republic?
The only thing saving our economy right now is the “legend of the dollar” and the faith the world has in it but should that fail, our economy would utterly collapse. The Euro almost accomplished that recently but the economic crisis actually saved our bacon, — but not for long.
What solutions if any do I perceive? Well, one would be to arrest the manipulators and monopolists still around and then, through a process known as disgorgement, require them, their descendants and assignees to return their loot plus interest and punitive damage fines. Of course, that would result in massive economic disruption and the legal delays would be amazing but most importantly, in light of the rampant corruption we are forced to suffer, that process’s prospects for success are practically nonexistent. The other alternative is to return to the tax policies of the Eisenhower years adjusted for inflation so that they applied to only the top 20% of the citizenry coupled with comparable estate tax rates and start a gradual, non-litigious recovery. Not as just or fair as the former but with at least a prospect for effectiveness. Neither is palatable from a libertarian perspective but one that at least has a chance to work. Unpleasant medicine to be sure, but all too well earned.
I would also eliminate taxation for the rest of the population as I believe that a more accurate modern monetary theory makes clear that taxation is an inefficient means of financing government, a task that could more fairly, effectively and efficiently be effected through controlled increase in the money supply based on objectively verifiable standards such as gross domestic product, with the increase used to finance government instead of to make short term loans to banks. Once a reasonable balance in wealth distribution were attained, one far from equal as that is not the goal, but reasonable (like the 50 to 1 ratio during the Eisenhower years), all taxation could be eliminated and we could proceed to a fair, secure, equitable and promising brave new world.
I know I sound a bit melodramatic and perhaps even paranoid but even were that true (which I don’t believe it is, I’m helping train brilliant young minds to seek and implement the workable answers that have escaped us) it wouldn’t mean I was wrong. Again, an analogy: If we have an early treatable form of cancer but we lie to the world’s best doctor about our symptoms and ignore the results of the tests and exams, it’s no wonder we get more and more ill and eventually die. I and others, like Paul Krugman, a recent Nobel laureate in economics, clearly see this. Hopefully many others will soon forget the slogans and propaganda and, looking at the facts, will come to more realistic conclusions. Not necessarily mine, but some that will work or will at least be measured to see if they are working, and if they’re not, then that they’ll be replaced.
One of the things I’ve learned in life is that problems usually have more than one answer; we just need one that works rather than one that masks the symptoms until we die.
 © Guillermo Calvo Mahé; Manizales, 2010; all rights reserved