Saturday, October 05, 2013

How to fix the debt:

Step One: Balanced Budget Amendment

The wording I propose is very simple. With the addition in red:

The Congress shall have Power... To borrow Money on the credit of the United States in a time of War as declared by Congress.
I personally don't see any reason why Congress needs the "flexibility" provided by the opportunity to borrow outside the circumstances of a life-and-death struggle... that is, War. Note that the adoption of this amendment amounts to a declaration of bankruptcy. Without the authority to roll over the debt day by day, the Treasury become incapable of managing the debt within months, possibly weeks, maybe even days or hours. This leads us to

Step Two: Organize US government debt holders for a massive class action suit. The representatives of debt holders would be empowered to renegotiate the debt.

Step Three: Seek an appropriate mediator of the renegotiation. If most of the debt were held by US citizens, the the Supreme Court would be an appropriate venue... but a lot of the debt is held internationally. I don't know how much. Possibly a special tribunal appointed by the United Nations would work.

Step Four: Establishment of a realistic schedule of repayment.

The fact of the matter is that the government can't actually repay the current debt. Instead, it relies on others to repay it for them. They get the money to pay back the debts by borrowing from other lenders. They then pay back those lenders by borrowing from someone else. I'm guessing the reason that the "debt ceiling" has been in the news so much over the past decade is that, during a bad economy, it becomes difficult to find the next borrower to pay back the previous one.

This is the government equivalent of shifting credit card debt around from one card to another, and back again. It only works until the card issuers pull the plug. What I am suggesting is the government equivalent of debt consolidation.

Let new bonds be issued, with repayment lengths as long as 50, 100, even 200 years, if necessary. Let some of the principal be written down. Restructure the entire debt into a form that can be gradually paid off without having to shuffle it around. With the amendment from Step One in place, there's no other option.

Saturday, September 28, 2013

The Anarchist Underpinnings of The State

For most people, it seems, The State "just is". While a lot of thought seems to have gone into the question of what the purpose of the state is, whether or not it is a desirable institution, I've not read a whole lot about the question of why The State exists in the first place, outside old assertions that it was originally brought about by a deity. In the following paragraphs, I hope to describe how The State is favored by market forces in the same fashion as productive enterprise, and in so doing advise caution when contemplating Anarchist Utopia.

Most analyses of market processes I have read contrast market action with violent action. It is presented as a choice: wealth acquisition by production and exchange OR by theft. But not everybody makes the same decision in that contrast: there will always be those who steal, and so people must have some means to defend themselves and their property. Even in this matter, there are many choices to make: to defend oneself and one's own property, to act in concert with others, to hire help, to rely upon the State. The ability to do violence, wither initial, defensive, or retaliatory, thus shapes the decisions market actors the same as the availability of capital, prices, and so on.

Let us suppose a situation of Anarchy, in which there is no State, but rather all relations are either voluntary or violent. What are the market incentives to various forms of violence?

First off, the distribution of violent capabilities must be considered. In some societies, the capacity for violence will be more generally distributed; in others, more concentrated in select individuals. I think it can be assumed that, ceteris paribus, the capacity for violence (for whatever purpose) will be more concentrated in societies with a more developed division of labor, less concentrated where the division of labor is lower. I don't believe there is anything special about the skills and tools associated with violence. In a society where few know how to grow, process, or preserve their own food, there will also be fewer who know how to use and maintain weapons. So while in a less economically developed society every person can be assumed to have access to and be familiar with the use of a serviceable weapon or two, in a more developed society there are and will inevitably be some who develop violent skills and arsenal to a point where they can make a living off them, and others who cringe at the thought of even handling a weapon (at the extremes). What professional use of weapons will the market favor in such a situation?

I divide the "professional" use of weapons into a spectrum bounded by two extremes. At one end you have the violent criminal: one who uses his capacity for violence purely for the satisfaction of his desires at the unwilling expense of others. On the other hand you have the virtuous mercenary: using violence only in exchange for payment, to prevent or remedy the violence of those at the other extreme. But ultimately, this is a spectrum. Even the most virtuous might succumb to the temptation, not necessarily to rob someone outright, but perhaps to bully a bit? Strongarm a deal? Maybe take a somewhat iffy contract, enforcing questionable property rights? On the other end of the spectrum, perhaps a robber might take pity on a pretty girl and protect her, instead of robbing her (or worse)? Maybe he has an aged mother who needs help with some of the local toughs? Maybe someone finally offers him enough money to take up legitimate employment... for a time? And then there's the middle of the spectrum, where you've got men of violence who are concerned purely with the money. If it is profitable to protect, they will protect. If it is profitable to rob, they will rob. This suggests the traditional "protection racket", a forerunner of The State if ever there was one. But which does the Market favor?

Consider the costs of living by violence. First, there is the material: the direct costs of maintaining weapons, a stock of ammunition, as well as the opportunity costs of developing and maintaining the skills of violence. There are the moral  (purely psychological and social) costs, which will be greater or lesser depending on the individual's level of aversion to the use of violence for various purposes. Finally, there is the cost of managing mortality risks. He who lives by the sword dies by the sword... but not necessarily right away if he is careful and clever. For whom will the gains be greatest relative to the costs?

We can assume that whomever is engaged in a particular kind of violence has found a way to minimize the moral costs of their particular kind of "business". While the moral cost is an important component when discussing cultural degeneration, the importance of tradition, religion and/or spirituality and such, I think it can be ignored for the purpose of economic analysis. But what about material costs and mortality risks?

The virtuous mercenary must defend his clients against both the ordinary thug and the operator of a protection racket. He must maintain a capacity for violence sufficient to deter both, and must risk retaliation and the hands of either. The operator of the protection racket, on the other hand, particularly if he has successfully "horizontally integrated" the various protection rackets in his area of operation, needs only maintain that capacity necessary to deter the basic thugs; his own enforcers can be kept in check with but a command. The virtuous mercenary will not be a problem unless he chooses to attack the mercenary's clients.

This brings us to a second factor: economies of scale. A larger business in protection (whether they allow their customers the choice or not) will, assuming they don't surpass the technical limits of effective coordination, be able to provide more protection for lower costs. This is due to their ability to concentrate more force than their competitors; the mere threat discourages violence they would otherwise have to remedy at full cost.

Of course, to be competitive in the market, firms must pass on a portion of their own savings to their customers. If one is in the market for protection, the services of a large firm who makes offers one "can't refuse", is not only the less risky option... it's also probably cheaper (assuming away the cost in personal pride, of course). The larger and more responsive to their "customers" such an operation is, the more "State-like" it becomes.

Thus, from a situation of anarchy, absent a culturally homogeneous population that is willing and able to incur the costs of excluding something like The State, The State will inevitably arise from nothing more than the primordial soup that is the market in a situation of anarchy. The process by which the State arises, however, is messy, as violence is as much a part of the process of "horizontal integration" as "production" itself, and violence, like other "industrial" processes, can have undesirable "byproducts" (read: "collateral damage").

Sunday, September 22, 2013

On Negative Campaigning

Something I've figured out during my 35 years on this earth and only just now found the words for is this: people seem to identify most strongly in a negative fashion. Go among a group of like minded people and try to say something good about what they all ostensibly like, and usually you'll get a lukewarm reception. Go in their midst and insult their common interest and, of course, they'll rally in defense. But nothing gets quite so much of a reaction as going in and insulting something they collectively hate.

I'll give you an example of what I'm talking about. I am a nerd. As such, I am a devoted fan of a number of different things, Japanese music included, and I mod a Google Group dedicated to this interest. If someone shows up and posts a song, or a picture associated with the subject, they'll get a few +1s, maybe one or two, maybe even eight or ten. Then some kid comes in with a "Justin Bieber sucks" memepic... and the forum goes nuts in agreement. Then I mod it out of existence, since I don't want this group to be about what we hate, but what we like, and Justin Bieber is decidedly off topic.

This is just a juvenile example, but I've seen it everywhere. Tell me the same doesn't happen in political groups. A politician talking about how good his policy will be will maybe get a few yawns and some accolades from a few marginalized intellectuals. Claim that his opponent eats babies and maintains a shrine to Hitler in his basement... now that will get a supportive reaction. Politicians understand this, of course, and the most savvy of them will always make use of this. I pity the poor, principled politician who attempts to campaign in a purely positive manner.

I can guess why this is. In a past world, one in which people were divided into far more, and far smaller, and far more independent groups of people, warfare was pretty much a constant in life. A tribe or clan needs unity most when an enemy threatens from without, and a people who lacks this negative unity is likely a people who will not pass their ways onto the next generation.

But perhaps it is time we become conscious of, and reexamine, this particular impulse. What was once an important adaptation may well now be maladaptive. So next time someone shows up with a post decrying something you agree is a bad thing... stop and think a moment. Is this really necessary? Is it a true threat? Is the self-congratulatory dogpile that is almost guaranteed to ensue worth the psychic damage that hate, even of the best intentioned kind, can cause?

Friday, March 22, 2013

Capital and Capital

Two Distinct Concepts under One Word

Thinking about the Civil War, I was working a concept over in my head. I believe that, though there is some question as to whether or not Slavery was the principle issue motivating those fighting the Civil War, it is most certainly the reason the South lost. The reason for this, is "Slavery ties up capital in the purchasing of labor, which would be available with or without the institution of slavery." Then I reformulated it, "Capital was tied up in the purchasing of things which are not Capital." I suddenly realized, that there are two concepts in play here, which are related, but not the same, yet they are both referred to by the same word: "Capital."

In one usage, Capital refers to wealth (the outcome of a previous productive cycle) which, rather than being consumed, becomes an input into the next productive cycle, whether as seed, inventory, tools and machinery, extra consumer goods (which free up labor to produce more capital), or even simply insurance against unexpected costs or losses. In this sense, Capital is simply one of the three classical Factors of Production, alongside Labor and Land.

However, in another usage, Capital refers simply to accumulated funds. This concept is related to the previous usage, because before someone can purchase additional capital goods in a money based market economy, the funds necessary to purchase them must first be accumulated. One who decides to save money rather than living check-to-check thus gains additional influence over the production structure, as the entrepreneur who most successfully anticipates his needs is the entrepreneur that is rewarded. Thus, people tend to refer to accumulated funds as "Capital", as well.

Thus, Capital and Capital are not the same thing. One use represents an accumulated claim on anything that may be bought or sold. The other represents an earlier phase's output that becomes a later phase's input. They are similar, but not the same. This accounts for the rather large gulf with regard to the accepted meaning of the word "Capitalism."

Simply put, when a person buys something, it's because he wants control over it. Whether it be a capital good, a consumer good, a slave, or a plot of land, what the buyer buys is the right of exclusive control over the object. It just happens to be a happy accident that, in purchasing a consumer good, he provides employment to his fellow man, and in purchasing a capital good, he both provides employment and creates opportunities for others. This is the nature of Adam Smith's “invisible hand”, that in pursuing his own interests, a man quite unintentionally benefits society.

However, it is not the same thing, for accumulated funds may be used to purchase anything society allows to be bought and sold. It can be used to purchase capital goods, but it can also be used to purchase other things. It can be used to purchase more expensive consumer goods (a big house, a nice car, a boat, etc.), thus turning the productive structure toward the production of these sorts of things. It can be used to purchase political influence, through the support of political campaigns or perhaps direct bribes. If the society permits Slavery, it can be used to purchase a slave, which because this can enhance the purchaser's revenue stream as surely as a wise investment in capital goods, can be miscategorized as a kind of "capital investment". He could also purchase land—physical space, that is.

These accumulated funds are a sort of potential power, a kind of authority. If it is invested in the right capital goods, society benefits from access to desired consumer goods (or more and better capital goods) at lower prices than would otherwise exist. If it is spent on durable consumer goods, society does not benefit... but if the buyer earned this money honestly, in service to the consumer, society benefited earlier, and this is the producer's proper reward. Even the employment of publicists and advertisers in service to a political cause creates something where it did not previously exist... though the benefit is questionable. But then there is another kind of purchase, the spending of these accumulated funds on things which are neither capital nor consumer goods.

For some, it refers simply to a complex of law and custom that respects property rights, allows free trade, and encourages the accumulation of wealth for the purpose of creating more wealth. This is as opposed to a system under which others have claims on the individual's wealth, such as the State, the Poor, the Family, the Sick, the robber down the road, or whoever. Any accumulation of wealth is nothing more than an attractant to these others who come to claim "their rightful share" (a bit like how lost relatives are suddenly found when someone wins the lottery), thus people decline to accumulate wealth, thus capital does not develop, thus society remains in constant poverty.

But the other definition of the word "Capitalism" refers to a society in which lawful authority to dominate other men by violence and threats of violence is up for sale. The Ruling Class is determined not by military prowess, nor by dynastic inheritance, nor by religiously derived authority, nor by any other principle. The Ruling Class is composed of those who are able to, first, accumulate capital, and second, leverage that capital into political influence, among other things. Whatever form of power is up for lawful sale opens the door for the first kind of Capitalism to become this kind of Capitalism.

Land and Labor

For example, it could be used to purchase a slave. The purchase of a slave does not reward the bringing into existence of wealth that would not otherwise exist. People will reproduce, whether or not they are locked in a shed for “breeding” purposes, and so long as work is necessary to eat, they will work. Slaves need not be purchased to bring labor into existence. Even in the early days of the Virginia colony, when planters continually complained about a shortage of labor, it wasn't actually labor that was short, but rather laborers who, in a place where land was cheap and plentiful, were willing to work at the planters' preferred rates, when self-employment remained a better option. Thus, a pool of unwilling laborers was bought.

Similarly, with a land purchase, nothing is brought into existence by the seller. Outside the realm of ancient holy texts, there is no “producer” of physical space. With both slaves and land, accumulated funds, “Capital” as people call it, is wasted on something that would be there whether or not someone was around to buy it. The land's existence predates Man's. In both cases, “Capital” is wasted. So why do people spend money on these things?

However, that does not mean that our institutions of property should not be periodically reexamined, for there are things a man can buy that offer no benefit to society, outside efficient allocation of these resources, which can be achieved without permitting these things to be capitalized on an open market. Labor is one of those things. When a man buys a slave, he rewards only violence—the enslavement of other men—and is not creating labor, but only increasing his own power at the expense of others. Today, we do not allow labor to be capitalized; rather, all labor is rented from its proper, inalienable owner: the laborer itself. This allows efficient allocation on the market without dispossessing men of their birthright: liberty.

Likewise, with land, the buyer does not reward any kind of producer, but rather yet more violence—that of the conqueror. I do not believe there has ever been a spot on this earth that was homesteaded into our property system; rather, all land was made property through the violent removal of other men from that land. Efficient allocation of land does not require that the land be capitalized any more than the efficient allocation of labor does. Rather, we need simply to identify a proper, inalienable owner for the land, as well, and allow it to be rented, rather than sold outright, just as we do with labor.

In the absence of such a being, if we believe in the democratic ideal that all men are created equal and endowed by their creator with certain inalienable rights, particularly Life, then the proper nature of a land regime naturally follows. If we all have an equal right to live, that means we all have an equal right to exist. To exist, we must have physical space in which to exist. No man can have a greater right to the land than any other. While it is convenient to allow people who are better able to make use of the land greater control over the land, it does not necessarily follow that some should be a landholding over-class (however fluid)  while others can be legally deported from reality itself (or at least from solid ground) should the landowners decide they are not wanted. Thus, an equal right to Life implies an equal right to the Land.

Interestingly enough, the former, in the only religiously based land code with which I am familiar, is remarkably similar to the latter. (“You shall not sell the land forever, for you are but wanderers and sojourners  The Land belongs to God.”). In that system, the land was divided evenly among tribes, clans, and families. People could sell their land to others (allowing for efficient market allocation of land), but only temporarily. Every fifty years, land ownership was reset to their ancestral titles, and even before those fifty years were up, the original, inalienable owner had the right to reclaim his land in exchange for the prorated value of the remaining years of ownership.

Clearly, such a system is not workable in the present-day United States. We have no ancestral titles to restore. This does not, however, mean that the basic principle of a basic human right of equal access to the land should be abandoned in favor of a capitalist allocation of land, which I see as being morally equivalent to capitalist allocation of labor (Slavery). To implement an equal right to land is to implement a “social safety net” of sorts, rooted in nature, lacking the moral hazard intrinsic to the means tested programs currently used to alleviate poverty.

EDIT: Years later, this entry is an absolute mess. Did I mess up in my editing, or did something somehow happen to the files?