Mitt's Millions: Contributions?

In last night's Republican debate, Mitt Romney declined to say how much money he had contributed to his own campaign. This is certainly his privilege, and he can certainly claim that it is strategic information that would give an advantage to his opponents. He is required to reveal that number in the quaterly filings that are required of candidates, and I imagine he will do so at that time. However, I believe that I already know the exact amount of money, to the penny, that Romney has "contributed" to his own campaign. That number is precisely zero. Rather Romney has lent the money to his campaign, $17 million as of last quarters filings, and possibly as much as $40 million by the next filing. Who knows how much he will lend himself before this is all over.

Is there a difference between "contributing" money to your own campaign and lending it? Or at least, is there a difference that the public ought to care about? Well, yes, there is a big difference, one that will make a big difference in governing should Romney win. The difference is this: contributions are lost forever, whether the candidate wins or loses. But loans can be repaid by the campaign, and likely will be if the candidate wins. You see, there are a large number of people (let's call them "lobbyists") who like to bet on the race after the horses have crossed the finish line. What lending money to your campaign does is set up a legal conduit for "campaign contributions" to go directly to the candidate after the election.

Romney likes to boast that his self-financed campaign makes him independent of the lobbyists; in fact, the opposite is true. Further, it sets up a perverse incentive to overspend. If he spends $40 million and loses, he loses everything; but if he can improve his chances by lending himself $80 million, he can easily recover it. In other words, the bigger the loans, the better the chances, and the larger the conduit to "legal" personal contributions from lobbyists.

If Romney is serious about lowering the involvement of lobbyists, then he ought to convert the "loans" to contributions. This will announce to the world that he has no intention of collecting them from lobbyists after the election. If he refuses to do so, it will be as much as an admission that he intends to be repaid, and the lobbyists will have a field day, most likely at the expense of the public.

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Distributism and Henry George

Before reflecting on the relationship between Distributism and Georgism, a few observations about Henry George himself are in order. Economic historians tend to conveniently forget that, with the possible exception of Adam Smith, he was the most popular of all the modern economists. By any standards, his books were bestsellers and made economics accessible to the public. One measure of his popularity is the fact that at his death, over 100,000 people filed past his coffin, and thousands were left outside, unable to get in. It would be difficult to imagine such an outpouring of grief for the death of any other economist. Yet, this very popularity was the cause of resentment on the part of “professional” economists, who have, in the main, attempted to marginalize George, if not to ignore him entirely.

But this hostility is difficult to understand. There is nothing in George that is incompatible with Smith or Ricardo or Mill, or even with most of neo-classical economics (the one economist he really takes to task is Thomas Malthus.) Indeed, there is no particular part of Georgism that is original to Henry George; rather, his genius consists in taking what was already out there and drawing out the implications. Smith had already favored the land tax (see Taxes: Advice from Adam Smith), Ricardo had developed the Law of Rents, and even Walras and Marshall, founders of neo-classicism, recognized the special status that land had in economic theory. What George did was to base his political economy on the fact, a fact not really disputed in economic theory, that land derives its value not from the landlord but from the community. No reasonable economist disputes this. Yet, all the values created by the community are appropriated by the landlord. It is the classic example of economic rent, a value paid but not earned.

Socialism recognizes only public values of land, and capitalism recognizes only private values, and hence both provide an incomplete description of land, which has both public and private values. George's solution is elegance itself: he socialized ownership of land while privatizing its development. By “taxing” the full value of ground rent, he made speculation unprofitable. At the same time, the use of land, that is, improving it by farming, mining, or building, gets its full value without any taxation at all. In other words, the community gets what the community creates, and the individual gets what the individual creates.

Nor is Georgism without precedent in history, or even the present moment. Indeed, before the advent of the modern capitalist and socialist nation-state, land taxes tended to be the main support of the state. As Adam Smith noted, the “customary rents” of the English feudal land system functioned more as taxes than as rents, that is more as amounts paid for services to the property, and less as Ricardo's “economic rent.” Moreover, there are modern states which attempt to be Georgist. In Hong Kong (under the British) all the land was owned by the government and leased out to developers. In Singapore, the government owns 76% of all the land using the same system. Taiwan, Korea, and Japan, are all, in one degree or another “Georgist” and they are all successful economies. (The popularity of Georgism in the orient traces to the fact that Sun Yat-sen, the father of Chinese Nationalism, was a disciple of Henry George.) So we are not dealing with a mere abstract theory, but one with precedent and example.

However, it should be noted that none of these states are examples of pure Georgism, and therein lies the key to the relationship between Georgism and Distributism. In theory, in a free-market economy, it should be easy to determine the ground rent of any piece of property. But in practice, in places where there are vast concentrations of ownership, this task becomes impossible. Large landowners use any number of subterfuges to hide the true value of the land, since this is the basis of their taxes. Hence, in the modern world, actual Georgist states tend to consist of half-measures and compromises.

Distributists and Georgists have often exhibited a certain hostility towards each other, as if they were pushing rival theories. But they are not. In fact, the theories are complimentary. Rather, it is a question of priorities, which comes first. In my opinion, (being a distributist), a system of well-divided property is prior, and without this Georgism cannot really and truly be implemented. But in a system of well-divided property, a land tax is needed to ensure that the worker gets the full value of his work and to maintain the division of property. This is to say that Georgism requires Distributism for it implementation, while Distributism requires the land-tax, or else property will merely re-accumulate. As a further point, Georgism provides Distributism with access to a sophisticated political economy and tools of economic analysis, for which we do not have to apologize to the “orthodox” economists; in fact, the analysis and the tools are much better.

It would be better for both views to have a better understanding of each other, as they are complimentary theories, and each adds something that the other tends to lack.

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Henry George and the Earth Imperative

The following article is by Lindy Davis, the Program Director of The Henry George Institute and an editor of The Georgist Journal. It is part of our series of bringing economic theories that are more or less similar or allied with Distributism to the attention of our readers. This article deals with "Georgism," sometimes called the "single-tax theory."

by Lindy Davies

Human civilization finds itself at a terrifying crossroads. The list of dangers is appallingly long. Would it make things a little less scary to group our challenges into main categories? I've come up with three:

3) Environmental Crisis (including the ideas of "overpopulation and necessary "limits to growth")
2) Economic Stagnation (a chronic problem that takes many forms, including recessions, arrested development and debt crises).

What's number one? We might forget it sometimes, among the long menu of calamities vying to frighten us, but it is at the root of all the others: Poverty. Until we solve that problem, all the other ones will keep getting worse. Until we solve the problem of poverty, we can only place band-aids over ever-deepening wounds and, somehow, hope for the best.

But is there a solution? Various programs have been tried. The solution of a planned economy which would banish competition failed, spectacularly. The "liberal mixed economy" under various guises of "social democracy" aided by "labor unions" has led to today's "race to the bottom." The ideology of "laissez faire" -- a market free of regulation, if not actually a free market -- is causing suffering and havoc around the world. That's what we're told, anyway. But in truth: when abundant labor is compelled to seek scarce employment, there will always be a race to the bottom. Technological progress, free trade and improved education simply steepen the slope.

Henry George claimed, very persuasively, to have identified the root cause of poverty, and the fundamental solution. Perhaps he was wrong. But if he was right? Then we shouldn't waste another minute, should we? Let's briefly examine what Georgist theory says about the fundamental cause of poverty.

Standard Explanations for Poverty

Henry George begins by evaluating the standard explanations for the persistence of poverty amid increasing progress and plenty. Could it be a lack of capital? Does the need to pay wages cut into our ability to store up the tools and equipment we need to move the economy forward? This is a pressing question for development policy: nation after nation has gone into unpayable debt in the attempt to "build a manufacturing base" and "develop export industries" -- only to wind up poorer and deeper in debt.

In fact poverty has never been caused by a lack of capital, and it cannot be. The reason is simple: capital is a product of labor. Tools, machines, seeds, information processors -- all these things are products of human labor. If people have access to natural resources, they can produce capital. They always have. If poverty were caused by a lack of capital, why should there still be hunger and homelessness in advanced economies that are awash in sophisticated capital? Poverty cannot be explained by any lack of capital.

Could the root cause of poverty be our earth's incapacity to cope with increasing human numbers?

It's interesting that overpopulation has been claimed to cause poverty for over two hundred years. In the days of Malthus the earth groaned under the weight of less than one billion people, and yet many believed something urgently had to be done! In the 1960s and 70s the "population bomb" scare predicted huge die-offs after world population reached fifty billion or more. Since then, every prediction of the plateau population level has been revised downward; current predictions call for a leveling-off at somewhere between 9 and 12 billion. (The UN Food and Agricultural Organization estimates that with current farming methods the world can feed more than 30 billion people.) In fact, there is a clear, robust correlation between increasing prosperity and declining fertility: it's called the "demographic shift" and is thoroughly documented.

Sheer human numbers can't be blamed for the persistence of poverty. Supposedly "overpopulated" Ireland and India exported food throughout their years of famine.

Nowadays, another form of Malthuisianism is taking hold: maybe we can grow enough food, after all -- but can we meet the ever-increasing energy demand? What is all this "production" doing to our planet, our only home? Surely something's about to kill us all; it just stands to reason: global warming, hurricanes, floods, wars over dwindling fossil-fuel resources, nuclear proliferation, terrorism...? If we go on the way we're going, we're done for!

These dire outcomes are not entirely unlikely but they are by no means inevitable. Every dismal prediction is based on extrapolating current trends. However, history shows us that one thing we cannot do, with any reliability at all, is extrapolate from current trends! When virtually every tree in the Eastern half of North America had been cut down for firewood, there was a "firewood sustainability crisis." When people were dying of black lung disease in coal-burning London and New York, there was an "urban sustainability crisis." Right now there is a "peak oil crisis."

But we don't have to burn oil forever. In the January, 2008 issue of Scientific American, three solar-power experts explained how the United States could, using only modest improvements of existing technology, derive two-thirds of its entire consumption of energy from renewable, nonpolluting sources by 2050. Significant public investment would be required, yes: approximately half the cost of the war in Iraq. Our energy and environmental problems are solvable. We may, indeed, fail to solve them. But we must put to rest the excuse that the earth's resources are insufficient: it simply isn't so.

The Laws of Distribution

If we cannot blame poverty on insufficient resources, nor on an inability to produce capital, what then? Poverty must be a problem with the distribution of wealth. In some ways, this is a "no-brainer" -- yet, where does it lead us? Is the distribution of wealth in society merely a political arrangement? Are there any eternal, underlying principles that can guide us?

This line of thought led Henry George (like the other classical economists) to seek the Laws of Distribution. Society creates a certain amount of wealth. Among what distinguishable groups is the wealth divided? These groups are called the factors of production. If we're going to talk about the distribution of wealth, the factors must be clearly defined and mutually exclusive. How else could we tell what part goes to each? Up until the Great Obfuscationist Movement of the early 20th century (otherwise known as Neoclassical economics) three factors were universally recognized: Land, Labor and Capital. They are defined as follows:

Land -- the entire material universe, except for human beings and their products; all naturally-occurring forces and opportunities.
Labor -- all human exertion, whether physical or mental, in the production of wealth.
Capital -- products of labor which are used in the process of production.

Labor, working on land and using capital, produces wealth. What is wealth? It is the set of things that 1) are material; 2) are a product of human labor; 3) satisfy human desires; 4) have exchange value. To be classed as wealth in political economy, a thing must satisfy all four criteria. For example: land is not wealth, because it is not made by human labor. Money is not wealth, because it does not satisfy human desires. Items that have sentimental value are not wealth if no one is willing to give something valuable in exchange for them. This unambiguous definition allows us to explore questions of wealth distribution.

Using these definitions, we can deduce the basic laws of wealth distribution from two basic, common-sense observations: 1) No production can happen without access to some land; 2) People seek to satisfy their desires with the least exertion.

The second is a bit like Adam Smith's principle of selfishness, but there is a crucial difference. George does not presume to know what people's desires are. People can have selfish, or altruistic, or ascetic, or athletic desires -- no matter. Whatever it is that people want, they try to get it with a minimum of irksome toil. And what constitutes irksome toil? That's different for everyone, too! Some people run marathons for pleasure; some compute large prime numbers, just for fun.

This endless variety of human desires is what makes trade such a powerful economic force. Whenever we give up something, to get something we want more, the person we're exchanging with does the same thing! Each is better off. If each partner in the trade were not better off, they wouldn't agree to trade in the first place.

But we're getting ahead of ourselves. We were searching for "Laws of Distribution" that would give us insight into the fundamental problem of poverty. Why does poverty deepen as material progress advances? What can be done about it?

The Market for Labor

When we talk about poverty, we're talking about a state of affairs in which people are willing and able to work for their living, but they cannot find work -- or the work they can find pays them no more than mere subsistence. Poverty can be understood, then, as a problem in the market for labor.

"Wages" is the term for the price of labor. Now, we recognize that unemployment exists -- in other words, that a relatively abundant supply of workers competes for a relatively scarce supply of jobs. Competition among laborers bids down the price of labor -- the wage -- to the lowest level that workers will accept for doing that kind of work. What's the lowest level that workers will accept, if they lack any special skill or other advantage? Bare subsistence. Their alternative is starvation.

But, if the prospects of the jobs offered, say, by industrial society are so poor -- no better than bare subsistence -- why don't workers find ways to employ themselves? Indeed, they will, if any viable self-employment opportunity presents itself. What's the minimum requirement for a better opportunity? How about a small farmstead of one's own? It wouldn't be an easy living, but in good years one could store up a bit of surplus, which would make life a little easier.

The alternative to subsistence wages, then, is free land -- if there is some. That leads us to the basic principle of wealth distribution: the Law of Wages (derived from David Ricardo's long-recognized Law of Rent): wages depend on what labor can enjoy on the best land that's available for free.

Of course, labor and capital must pay to use any land that's better than the free land. In modern economies the value of choice sites is astronomical. Indeed, our most valuable natural resource, by far, is land that offers no mineral riches, provides no game animals, and will yield no crops: the world's most valuable natural resource is urban land.

What gives value to land? The community that surrounds it! The people that live nearby and who travel past it; the public infrastructure that makes advanced production possible on it; the huge demand for resources that lie beneath it. As the community grows, so does the value of land.

Free Land? Where?

We said that wages, at the base, depend on what ordinary workers can gain, working for themselves on land that is free. But where is the free land today? Is there any? You might find street vendors setting up shop on sidewalks, or people fishing off of docks. You could stake a claim to acreage on the moon (some have done this) or in the middle of the desert, but: no. There's no free land today -- no viable alternative for self-employment. A permanent glut of labor supply.

The market for unskilled labor is the only one that exhibits the properties of what economists call "perfect competition." The product is interchangeable; there's no shortage of it. In microeconomic terms, in a perfectly competitive market, price is equal to marginal cost. What's the marginal cost of a laborer? You guessed it: subsistence. The alternative is starvation.

There's no free land. Does that mean the earth has run out of room? It would, if we could show that all the available land were being efficiently used, but that is certainly not the case. Natural resources are egregiously wasted, all around the world. In the wealthiest cities, large areas of valuable land lie idle, as their owners wait for higher prices in the future. Meanwhile, millions go hungry while giant farms grow feed for animals -- or crops for export. Agribusiness receives payments to hold fields out of use to "stabilize" food prices. Investors discover that producing wealth is far less profitable than simply holding onto valuable real estate and, later, pocketing its increased value.

There is a built-in incentive in our system to hold land for speculation. How does this work? The supply of land is fixed. There will never be any more of it. And land is needed for all production. As an economy grows -- becomes more productive, as technology and trade allow greater yield from the same effort -- the demand for land increases, and its supply stays the same. This means that the share of wealth taken by landowners gets bigger, whenever the total economy grows. This creates an irresistible incentive to hold land out of use.

The more the economy grows, the greater the expectation of future growth in land value, and the more land is held out of use! This further restricts the supply of land, and increases the price -- until labor and capital can no longer afford to pay it! When this happens, production starts to decline, and we're in the bust phase of the boom-bust cycle.

The Role of Government

Even a modestly advanced economy needs some public goods. As societies grow, there is an ever-greater need for streets, schools, public safety, etc. Even though it's obvious that society stands to benefit from such things, people have always struggled to find some sensible, acceptable way to pay for them. This perennial wrangle became the classic "left-wing/right-wing" debate. Far on the right, they tell us that self-interested private ownership is the fairest and most efficient way to assign resources. The government should do as little as possible, just exercise essential "traffic cop" functions. Far on the left, they protest that the "free market" can only lead to consolidation of giant corporate concerns, to the rich getting richer and the poor getting left out; either there will be a violent revolution, or some sort of "redistribution" must be used to rectify the injustice.

That brings us full circle, right back to where we started. The "dismal science," eh?

Let's consider an example of the problem of public goods. Like many great cities, New York City found itself, at the start of the 20th century, in desperate need of modern public transportation. So, a huge public/private partnership built the subway system. It was carrying some half a million riders per day, even before the advent of the automobile -- and it proved a tremendous engine of city growth. Fares were kept low, so workers could afford to ride. Financing was often a problem. By the 1970s, New York was in a fiscal crisis, and the subway system had become a dingy, broken-down relic (which still, nevertheless, carried New York's workers to their jobs). It can be said that all New Yorkers benefited from the subway system. But, those who used it paid for it. And, the taxpayers paid for it. One group, however, derived great profits from the subway, and scarcely paid for it at all. Proximity to transportation is a prime determinant of land value. It's a gift to landowners. Just like all public services and infrastructure: a gift, from productive workers and taxpayers, to rent-collecting landowners.

Henry George looked at this mess, this paradox, and saw a solution. As society grows more complex, it develops a greater need for public goods. But, how to pay for these things, without overburdening producers? Why not return to the community what the community itself has created -- the value of land? Had New York City paid for its subway system out of land rents, it could have done away with fares (and the cost of collecting them) and would have had ample funds to support a system which, in turn, brought great vitality to the city.

Today's conventional wisdom advocates "broad-based" tax systems. We're told that all taxes are bad; they burden people and slow the economy -- so to spread the burden around (and incur the least resistance) we should tax as many different sources as we can. Income, sales, excise taxes, lotteries, sin taxes, import duties, estate taxes, taxes on real and moveable property. The US federal tax code is thousands of pages long and changes every year; states and cities have codes of their own. Georgists look at the tortured logic of "broad-based taxation" and cry, "Away with them all!" There is one fair and efficient source of public revenue. All taxes must be done away with, and the value of land must be taken for public revenue.

Radical -- and Essential

This reform is doubly just -- for it simultaneously removes two great injustices. Everyone has a right to life, and everyone needs land to live. If we must pay private "owners" for access to land (and where is this not the case, today?) then we must pay for our own right to life. Also, public goods -- which benefit landowners -- are paid for with wealth that has been confiscated, via taxation, from its producers.

The reform is doubly efficient -- for it simultaneously removes two great inefficiencies. By collecting the rent of land for public revenue, it removes the burden of taxation from production. And by eliminating the incentive to hold land for speculation, it removes great waste and inefficiency in our use of natural resources.

But even more that that: the reform makes it possible for us to make sense of our relationship, as a species, with our home. The earth is not owned by anyone. It must be held in trust for all people, and all life. It's no accident that our ability to destroy all life on earth has coincided, in a single generation, with our awareness of our home as a single, fragile oasis in a huge, cold universe.

Getting there won't be easy. But it's our only hope.

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This is Not Your Father's Recession

Washington and Wall Street have finally discovered what everybody else already knew: we are in a recession. The political airwaves are crowded with bail-out plans and even the tone-deaf White House has heard the music. Now, this is nothing new. Since the end of World War II, the government has proven very good at “managing” recessions with a bit of monetary policy and fiscal stimulus. These basically Keynesian tools have kept recessions from becoming full-blown depressions. Washington hopes for a repeat performance, and a 60-year history of success gives them confidence that all will be well in a few quarters. Both sides hope to claim credit (in time for the elections) for the “recovery.” However, I am not convinced that history will repeat itself. Rather, we face a “perfect storm” in the economy, a storm that will swamp the standard analysis of these events and perhaps even force a crises of capitalism itself.

I believe that any economic theory has to provide good analytical tools, and that a theory can be judged in part by how well these tools work. Distributism is no different in this regard; if we cannot provide a better analysis, we cannot claim to have a better theory. Although Distributists have often avoided any “technical” analysis, my experience is that they actually have better tools, when they bother to apply them. Now is the moment to do this analysis, and to compare that analysis with the analysis of the standard economic theory. The standard analysis involves some variant of the so-called “Minsky Moment,” which reduces these shocks to psychology. Briefly, (and somewhat inadequately) in a Minsky Moment, investor's for some reason or other “pile-on” to some particular asset (technology, real estate, tulips, whatever) that is showing a higher return than other assets. As investment increases, risk premiums disappear and returns fall. Over-investment causes the asset values to inflate far beyond their “true” returns. Suddenly, the market catches up with the actual values, and the investments turn negative. The market is suddenly filled with more sellers and than buyers. Panic spreads beyond the specific market into the credit system itself, and there is a contraction of credit and with it, a contraction in economic activity. There are layoffs and a general contraction of demand. Such a crises in confidence is easily “managed” by having the Fed print up some money to shore up credit markets and having the government stimulate demand with extra spending or rebates. These are essentially the plans that are being debated now; they have worked in the past, and everyone expects them to work now.

I don't think that they will. I think the analysis fails to explain the reasons for boom/bust cycle. Certainly, there is a cycle of optimism/panic, but the “explanation” doesn't explain. Why do we have a an over-investment? Distributism provides an answer, and the answer is a lack of justice, specifically distributive justice. When workers do not get the full value of what they produce, then the wages they should have gotten end up going to the “top.” But this has two effects. One, there is an over-supply of capital, and two, there is a narrowing of the market (since the size of any market is given by the number of people who have funds with which to enter that market.) This narrowing market cannot support the funds available for investment. But capital must seek a return, and hence it ends up taking bigger and bigger risks. Risk premiums disappear, but risk itself does not. Eventually, the risks come home to roost, and the market collapses. For a more complete description of this process, see The Investor's Dilemma.

Since 1980, the median wage in this country has actually declined in real dollar terms. Yet, during the same period, worker productivity has exploded. This means that the worker is no longer getting the values he produces; the wealth created by increased productivity is all going the top. In other words, injustice has increased, and with it, so has instability.

But if this is correct, it is fair to ask why the policies of the standard analysis have worked up until now, and why they won't work in this case. I believe they worked not because of the reasons stated (“restoring the confidence of the markets,” etc.) but because they had a mildly redistributive effect, and this effect was strong enough to limit the damage. In truth, there must always be a distributive principle in any economy that is strong enough to balance supply and demand. When that principle isn't satisfied by the wage system, then other systems—redistributive systems—must be invoked or the economy collapses. Keynesianism uses a redistributive principle to restore aggregate demand and thereby balance supply. But since the Reagan Administration, Keynesianism has been under attack, and has actually become its own opposite: government power is used to transfer wealth from the bottom and the middle to the top (Does Obama really want to imitate Reagan? I hope not.) With the failure (or subversion) of Keynesianism, some other method was necessary to balance supply and demand. The method of choice, for many years now, has been vast amounts of consumer credit—at usurious rates. Those with too much money lend to those with too little purchasing power, and demand is restored. Sort of. Of course, this can only be a short-term solution, since the money must be repaid; demand can be increased by a dollar today only by decreasing it by that same dollar—plus interest—tomorrow. Well, tomorrow has come, and the debt is choking the system.

It is not merely the sub-prime mortgage market, but larger markets that are showing the strains of collapse. The same “securitization” techniques used to spread the risk of mortgage loans has been used in the credit card market. And the bond insurance market, upon which the whole bond market depends, is in similar distress. That's too much sand in the gears of any credit system.

CheneyBush is proposing a “1% solution.” Rebate 1% of the GDP back to the taxpayers (about $150 Billion) to stimulate demand, combined with cuts in interest rates. This will not be a redistribution; they are simply going to print up the money and add to the debt. Further, a lot of the money will go to business tax cuts, cuts which aren't needed, since there is no shortage of capital; the markets are drowning in “liquidity”; that is part and parcel of the problem. Finally, it is only income taxes that are being rebated, while most people at the middle and bottom are taxed mainly through the payroll tax.

A stimulus package based on debt simply won't work any longer. The economy has had seven years of this kind of stimulus, and that string has played itself out, has become part of the problem, not the solution. What will work? The ultimate solution is to restore distributive justice in the wage system (which will involve restoring justice in the property system), but that is a long-term solution. For the short-term, we need an aggressive, even ruthless, redistributive package. Tax the vast concentrations of wealth and income at the top 2 or 3% of taxpayers. The simplest way to do this would be to make the payroll tax progressive and extend to all income levels: slash the taxes at the low end and raise it at the high end. Restore the inheritance tax for the largest estates to discourage the generational accumulation of vast fortunes.

The investor class will scream blue-bloody murder. But this is in their own best interests. What really makes investors happy is having a place to invest at a decent return. But this requires growing markets. You cannot shrink wages and grow markets at the same time. You may engage in some tricks, like consumer credit or printing up money, to finance a market expansion, but this will always lead to collapse. In truth, over the long-term, the investor can only obtain a decent return if the worker also makes a decent wage; there has to be a sharing of rewards, a common purpose, for the economy to balance. And balance is the primary principle not only of economics, but of life itself; those who do not understand this balance can never understand economics, and will likely never understand life.

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Zen and the Art of Traffic Control

During my time in Vietnam, I was convinced that there were two major threats to life and limb: the Viet Cong and Saigon traffic. Now, I am pretty sure that I was right about the Viet Cong, but Iosue Andreas, The Western Confucian, points out that I may have totally missed the boat on Saigon traffic. Appearances to the contrary, the anarchy of Saigon traffic may have been a lot safer than the highly controlled traffic of an American city. His reflections can be found at LewRockwell.com.

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Is the Devil from Paris?

Is the devil from Paris? Many people seem to think so. And if not the devil himself, then at least a particular demon, one whose name is not “Legion” but “Postmodernism.” Postmodernism is a philosophical movement that originates largely with a legion of Frenchmen, three in particular, Jacques Derrida, Jean-François Lyotard, and Michel Foucault. This “unholy trinity” (as Jamie Smith calls them) has raised a challenge to the received wisdom of Enlightenment thought that many find as perplexing as it is (at times) incomprehensible. By the “Enlightenment” I mean basically the challenge of 17^th and 18^th century philosophy to the authority of traditional faith and belief, in general, and to the Catholic Church in particular. This challenge consisted of asserting the autonomy of the individual, and a claim of a pure “objectivity” which results in a science that has a unique access to universal truth and rationalism to which all cults, creeds, and cultures must submit themselves if they wish to have any validity.

However, as much as persons of faith might appreciate a challenge to such rationalism, they often find that postmodernism has a basic problem. Namely, although it purports to reject the Enlightenment's notions of truth, it regards these notions as the only possible notions of truth. Hence, postmodernism secretly accepts back what it rejects, and ends up rejecting truth itself; it therefore ends in nihilism. Indeed, in practice, postmodernism often ends up as hypermodernism (see Battling the Swooshtika), the idea that we have no real identity save what we create for ourselves, largely (in a capitalist society) through the products that we buy or the politics that we practice, products and politics that have no real meaning in themselves, save the meanings we can be persuaded to give them. This results in the primacy of marketing and ideology.

Nevertheless, a critique of modernism should be welcomed by Christians, or at least by those Christians whose Christianity has not been completely tainted by rationalism. And we find that many Christians have indeed appropriated the postmodernist critique; this forms the heart of the Radical Orthodoxy movement, for example, which would return theology to its pre-Enlightenment (and even pre-14^th century) roots. And Pope Benedict XVI appropriated much of postmodernist thought in his recent encyclical, Spe Salvi (see The Postmodernist Pope.) From the other side, postmodernist critics are discovering the value of Christianity in their analysis. For example, Slavoj Žižek has made heavy use of Christianity in general and G. K. Chesterton in particular (see G. K. Chesterton, Postmodernist.)

One problem, however, is that the postmodernists often use a vocabulary that is inaccessible to general reader. Indeed, it seems to some that the postmoderns get entirely too much credit for translating Enlightenment drivel into incomprehensible French. Hence postmodernist thought has remained beyond the reach of most people. This problem is addressed by James K. A. Smith in Who's Afraid of Postmodernism?: Taking Derrida, Lyotard, and Foucault to Church (The Church and Postmodern Culture). In this brief book (156 pages), Smith manages to take the most problematic expressions of postmodernism and not only to explain them in clear and accessible language, but to show their relevance to traditional Christianity. Jamie Smith concentrates on three statements of postmodernism: “There is nothing outside the text” (Derrida); “An incredulity towards metanarratives” (Lyotard), and; “Power is knowledge” (Foucault). Smith undertakes the formidable task of making these statements understandable in plain English, and showing their relevance to Christianity. Concerning the Derrida's “deconstructionism,” Smith concludes that it helps us recover two key fundamentals of the faith: the centrality of Scirpture for mediating our understanding of the world and the role of the community in the interpretation of Scripture. As for Lyotard's “metanarratives,” these help us recover the understanding of faith as a narrative, rather than a collection of propositions, and the confessional nature of our narrative. In regard to Foucault's Nietzschean claim that “power is knoweldge,” Smith counters that it should “push us to realize what MTV learned long ago: (a) the cultural power of formation and discipline, and hence (b) the necessity of the church to enact counterformation and counterdisciplines. In other words, we need to think about discipline as a creational that needs proper direction.”

Prof. Smith notes that, “One of the reasons postmodernism has been the boyeyman for the Christian church is that we have become so thoroughly modern. But while postmodernism may be the enemy of our modernity, it can be the ally of our ancient heritage.” This is an important insight; it may well be that the best way to be “postmodern” is to be “pre-modern.” While the postmodern is often forced into nihilism by an inadequate notion of truth, the Christian has older models and older means, and so can appropriate the postmodern critique to the advantage of Christ and His Church.

My sole critique of this book comes in Smith's application of postmodernism to liturgy, an application that strikes me as excessively modern rather than pre-modern; it seems to me to be mere “muti-culturalism.” However, this is a nitpick in an otherwise excellent treatment; liturgy is hard, especially for the liturgists. If you can read but one book on Postmodernism, this is the book to read.

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A License to Steal?

John Kindley and nmsnow recently conducted an interesting (if somewhat acrimonious) debate in these pages (see Mitt Romney's Planet) on the subject of professional licensing. Supporters of licensing believe that it is the best way to ensure that professionals such as doctors, lawyers, and real estate agents are competent to perform their tasks. Libertarians, on the other hand, regard licenses as nothing more than state-imposed monopolies that do nothing more than raise prices, unfairly exclude some people from the professions, and do little to raise professional competence. That is to say that they are little more than a license to steal. Needless to say, these two positions are irreconcilable. However, I believe that distributism offers a way out of this dilemma, a way that addresses the concerns of both sides, and vastly improves the present system.

The reason we need, or think we need, a system of licenses is that the professions provide services of such a specialized nature that the ordinary consumer simply cannot judge their services. I certainly cannot judge the work of a neurosurgeon, and am in less of a position to do so at the time I need one. The license at least guarantees me that the surgeon has had a certain level of training, and re-training and has passed some sort of examination. This may be, as the libertarians claim, thin cover, but at least it is some cover.

On the other hand, John Kindley ably sums up the arguments of Milton Friedman against licenses. On the whole, I must say that I do not find Friedman's totally convincing. Mostly, I wish that Milton, who claims to be an empiricist, would occasionally look at the empirical world. The fact of the matter is that medical licensing in the United States is of relatively recent origin; it didn't come about until the early 20^th century. Prof. Friedman doesn't need to speculate about what a medical system looks like without licenses; he could have simply looked to the 19^th century. At that time, “doctors” earned their right to practice by taking 9 to 18 months of courses at a local doctors college, a for-profit institution often run by local physicians. The student would never have seen a cadaver or touched a microscope, and would know little of pharmacology. Quackery and incompetence were the order of the day, and the shortcomings of the system became apparent in the great Influenza Epidemic of 1918, which afflicted 25% of the population. Few people would be tempted to return to 19^th practice.

Nevertheless, Friedman does point to real abuses of the system. There is no question that when the state assumes control of the licensing process, members of a given profession use the law to raise their own incomes and limit their own liabilities. (In the interest of full disclosure, I am a real estate agent, and we are past masters of the art of using the law for these purposes.) Medical boards (as well as Bar Associations and other professional organizations) frequently overlook abuses by their own members. And given the frequency with which doctors and other professionals are successfully sued, there are valid arguments against the claim that licenses guarantee a standard level of competency.

Of course, some have a simple solution to this last problem: they would simply end or restrict the right to bring a lawsuit against doctors and other professionals. However, restricting a citizen's right to bring a tort is a violation of both constitutional and common law, not to mention common sense. Removing the penalties for incompetence will only encourage the worst practices and discourage the best. This is clearly the wrong solution.

I believe it is clear that we need a system of licenses; however, it is not clear that these licenses need to be directly granted by the state. Rather, there is another vehicle of ancient and honorable lineage that could fill this role, and do it in a manner consistent with both professional competence and the free market. That institution is the guild. Rather than have the state grant licenses, let the state license any number of guilds to do the job. The guild would take responsibility for anyone to whom they granted a license. That is, a person who has harmed by the incompetence or malpractice of a doctor, lawyer, real estate agent, etc., would not sue that doctor or lawyer, but would sue his guild. The guild, and each of its members, would be financially responsible for malfeasance by any one of its members. If a suit were successfully carried against a guild, that guild could in turn sue the doctor involved in an attempt to recover their losses and their reputation.

This would force the guild members to take responsibility for each other. An incompetent member of the guild could have his license revoked by his colleagues, and they would be more than willing to do so, since such an incompetent threatens not only the reputation of all of the members, but their financial health as well. The guilds could set their own education, training, and practice standards. By common consent of the members, and by their internal and mutually agreed-on constitution, the guild would have the right to audit the practice of each of its members, and would likely do so at regular intervals for its own protection. Instead of one vast AMA, there would be all sorts of competing guilds, all with their own approach to medicine (or law, or whatever.) These guilds would compete with other guilds on service, science, and price, and the market, as well as science, would get its say. Over time, best practices would win out, as the worst practices fell victim to the market and the tort system.

One might ask, “Why would any doctor join a group where he has to take financial liability for all the other members of the group?” The simple answer is that he already does; this is what insurance is. Insurance is merely a method of cost averaging. A competent doctor, who has never had a claim or a complaint, nevertheless pays in his insurance premiums for all the mistakes of his colleagues. The difference is that now he does not get to choose the colleagues with whom he will share this liability. Under a guild system, a doctor would not have insurance at all; his guild fees would cover that, and he, as a member of the guild, could pass judgment on which of his colleagues he will share the liabilities.

The role of the state would be to license the guilds, set some minimum standards to prevent outright quackery, and audit them to ensure that they had the financial stability and resources to stand behind their members. This would greatly reduce the role of the state without eliminating it entirely. The state would do things that it is equipped to do, while guilds could provide a wide variety of competing services and prices. Further, it would be much easier for the public to judge the overall performance of a guild than to judge individual doctors or lawyers. John Kindley wants a system were he could practice law as an apprentice, and I suspect that any number of guilds would be willing to do this, since it would lower their costs and provide them with a way to develop talent without relying on the expensive law schools.

In this area, as in so many, I believe that distributism provides creative answers to the practical problems that we face everyday.

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Small is Bountiful

Joseph Stalin had a very easy method of estimating the size of new factories. He would find out the size of the largest factories in the west and then order that a bigger one be built. Whole cities were conjured up out of thin air to support vast industrial complexes. Nor is it any accident that these new cities were often built by slave labor, since the human person was sacrificed to mere size and power. But as simplistic as this method might seem, the dictator was only following in the economic orthodoxy received from both East and West. For capitalist doctrine dictated that bigness by itself lead to economies of scale and more efficient production. And Karl Marx, who was a great admirer of capitalist production technique, had decreed that increasing scale of industrial establishments led to a “wider development of their material powers.”

This cult of bigness as an end in itself had its justification in economies of scale. However, it totally ignored the corresponding dis-economies of scale. But there were more serious problems, as the cult made certain assumptions about the nature of man and even about nature itself, assumptions which do not bear up under close examination. Man had to be reduced to a utility-maximizing hedonist, guided only by pleasure and pain. But even this was too “humane” for the neo-classical economists; man had to be further reduced to a mere cog in an economic machine, at best equal to any other factor of production. But this stood economic science on its head: instead of being a tool to serve man's material needs, man became a tool of the machine, just another servo-mechanism in an industrial complex. And just as man was reduced to a cog, so nature was reduced to just another undifferentiated resource to be consumed in the name of “efficiency.” It became impossible from within economic theory to distinguish between natural and man-made objects, and between renewable and non-renewable resources. In other words, by reducing man and nature to mathematical abstractions, economics made a clean break with reality, becoming less of a science and more of a cult. Economics lost any descriptive power whatsoever, and lost any predictive power it might have had. As the economist Paul Ormerod noted:

By definition, any model necessarily abstracts from and simplifies reality. But the model of competitive equilibrium is a travesty of reality. The world does not consist, for example, of an enormous number of small firms, none of which has any degree of control over the market in which it is operating. ...it is large multi-national companies…which dominate the world economy. It is entirely illegitimate to make the link between the model and the observed success of the Western market economies.

It was in this climate of giganticism that the English economist E. F. Schumacher wrote, in 1973, his classic work, Small Is Beautiful: Economics as if People Mattered. The title is significant because Schumacher wished to restore the human person to his central place in economic theory, a task that also meant restoring a human scale to economic enterprise. At the time he wrote his classic work, Schumacher was a recent convert to Catholicism, and found in the Church's social encyclicals precisely the tools he needed to correct economic science. This may strike some as rather odd; that a purely moral doctrine was necessary to complete a purely “scientific” endeavor. But in fact the humane sciences (and economics is certainly a humane science) are all rooted in the moral order, that is, in some theory of proper human action. Thus, Schumacher did not make economics less scientific and more “moralistic,” but both more moral and hence more scientific.

It has been 35 years since Schumacher's book was published, a long enough period of time to evaluate his impact. This task has been undertaken by Joseph Pearce in Small is Still Beautiful: Economics as if Families Mattered, a book which updates Schumacher's work and applies it to the current situation. This is a necessary task, because economics deals with a world that is always changing, and economic theories must be constantly re-examined over time to see how well they bear up under the weight of experience. And in Pearce's judgment, Schumacher has stood the test of time, for small, as it turns out, is not merely beautiful, but bountiful; in terms of hard-headed economic reality, returns to small capital exceed those to large capital. Indeed, bigness creates a cancer, an internal “logic” which can only sustain itself by growth at any cost, particularly costs in terms of the environment and the human person. Of course, cancerous growth must sooner or later kill the host, and this is the process that we witness today, in the parade of tragic headlines about the economy. Indeed, as capital accumulates, it must take on ever-greater risks to get even a marginal return, and as the risks pile up, the danger to the credit system (and hence to the whole economy) become unmanageable (see The Investor's Dilemma and The Investor's Dilemma II.)

Pearce takes each of the principles of Schumacher and examines our current situation in light of these principles. Here we will find the current themes of free trade, land use, the environment, sustainability, democracy, technology, and militarism (among others) analyzed in terms of the failure of current economic theory to understand these things, or to make meaningful statements about them. Schumacher's understanding of human scale and human purpose, on the other hand, provides the practical tools with which we can understand and interpret the current situation. This emphasis on the practical is crucial. It is easy to come up with abstract systems and explanations; but systems that have never existed and theories that cannot be tested should be viewed with suspicion. As The Wit has noted, “philosophy is easy; plumbing is hard,” and if a system can't be plumbed in practice, one would be well-advised not to install it. Of ideas that deal with the operations of the day-to-day world, practice is the only true test of an idea.

The ideas of well-distributed property, human-scale production, family-centered economics, worker-owned firms, etc., are derided by the theorists as mere Romantic notions. But in fact, these ideas are well-tested, not only in history, but in the present moment. We may point to thousands of examples, from large-scale enterprises like the Mondragón Cooperative Corporation (with 80,000 worker-owners and $20 billion in sales), to the economy of Emilia-Romagna (40% of which comes from cooperatives), to thousands of ESOP's, and to thousands of other examples. These ideas work, and it turns out that it is the theorists of the established order who occupy a fantasy-land that is not well-connected with reality. The example that Pearce takes particular delight in is that of the success of the micro-breweries. I like this example, not only because I like good beer, but because 35 years ago, when the industry was dominated by two companies (Busch and Miller), I wrote a paper predicting that they would face challenges from regional and micro-breweries, enterprises that did not exist in any numbers at that time.

This book is a useful and valuable addition to any distributist's library, and I recommend it to all who are interested in understanding our current situation, and the way out of it.

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Mitt Romney's Planet

Am I the only one who noticed this? I couldn't believe it when I heard it. I was sure I must have mis-understood what he was saying. And when I didn't see the spin doctors and the bloggers and pundits pick-up on the point, then I had to assume that I was wrong. Surely, a statement like the one I thought I heard would have produced headlines. So I must be wrong.

Hence, I waited for the transcripts to come out. And according to the transcripts, I did hear him right. I heard him right, but what I heard was so astonishingly wrong that I still am having difficulty understanding one, how anybody could say such a thing, and two, how he could get away with it without it causing a storm of protest. But here is the transcript from the New Hampshire Republican Debate of an exchange between Mitt Romney and John McCain on health care:

MCCAIN: Both the attorney general of South Carolina -- I don't know why I mention South Carolina...

GIBSON: Because there's a primary there.

... and the attorney general of Iowa -- and I don't -- well, anyway...

GIBSON: That's too late.

MCCAIN: ... have sued the pharmaceutical companies because of overcharging of millions of dollars of Medicaid costs to their patients. How could that happen? How could pharmaceutical companies be able to cover up the cost to the point where nobody knows? Why shouldn't we be able to reimport drugs from Canada?

It's because of the power of the pharmaceutical companies. We should have pharmaceutical companies competing to take care of our Medicare and Medicaid patients.

ROMNEY: OK, don't leave me. Don't send the pharmaceutical companies into the big bad guys.

MCCAIN: Well, they are.

ROMNEY: No, actually they're trying to create products to make us well and make us better, and they're doing the work of the free market.

And are there excesses? I'm sure there are, and we should go after excesses. But they're an important industry to this country.

But let me note something else, and that is the market will work. And the reason health care isn't working like a market right now is you have 47 million people that are saying, "I'm not going to play. I'm just going to get free care paid for by everybody else." That doesn't work.

Number two, the buyer doesn't have information about what the cost or quality is, or different choices they could have. If you take the government out of it to a much greater extent, you'd get it to work like a market and it will rein in cost.

Okay, here's what I find astounding, and I would like to know if anybody agrees with me. Apparently, Mitt Romney believes that 47 million Americans go uninsured because they are “freeloaders,” that they willfully game the system. The idea that health care (and consequently, health insurance) is priced out of the reach of far too many people has not occurred to the governor. Romney reveals himself to be so disconnected from the reality of most Americans lives, that you wonder where he has spent his adult life. Well, I know where he has spent most of his life; more of this in a moment. But first, his statement also reveals an incredible ignorance both about the “free market” and about the nature of insurance.

Concerning the “free market,” a market that depends on licenses and patents cannot be a free market. A patent allows one to charge monopoly prices, not free market prices. Now, Romney would be right in asserting that if we took the government out of it, there could be no patents, and hence no monopoly pricing, but that is not what he means. In fact, he means the opposite, namely that what few restrictions there are on the monopolists ought to be removed. In other words, he means exactly the opposite of a free market. Nor is this system necessary to fund research and development, which could be done at a far lower cost (see Sicko-phancy).

Further, Romney does not seem to understand insurance. Insurance can only be cost-averaging; some must pay too much so that others can pay too little. We take the risk that we are paying too much because we balance that against the risk of not being able to pay if we have a major loss. And since it is just cost-averaging, we seek the lowest risk-pool we can. If you are a bad driver with lots of tickets and accidents, you will be placed in a high-risk pool and your costs will be averaged with other high-risk drivers. If you are a safe driver with few accidents and no tickets, you will be placed in a lower risk-pool and will pay a lower average cost. When you go for health insurance, the same thing happens; if you have a bum ticker, you will get a bum price on the insurance, perhaps more than you can afford. Now, if we mandate insurance, we will force people to buy what they cannot afford. If we put everybody in the same risk-pool and mandate the insurance, it will be exactly like a tax. And if we mandate that people buy insurance, and put them in the same risk-pool, and subsidize those who can't afford it, what we will have is the most inefficient possible system of socialized medicine, one where care is delivered by government subsidy and tax (mandated insurance) but with the proviso that a tribute has to be paid to private insurance companies, for no particular reason. The insurance companies will have no incentive to manage costs, will be free of most marketing expenses, and no matter what the cost, they can rely on the government to make up the difference. Of all possible health care worlds, Romney has designed the worst, the most inefficient. He has combined the worst features of a predatory market and outright socialism. Quite a trick, when you think about it.

How could Mitt Romney, a very rich man, be so wrong about basic economics, the free market, and health care? Romney made his fortune as a hedge-fund manager, and his company Bain Capital, made its money by closing American factories and moving the jobs overseas. On Romney's planet, this is called “the free market.” Well, free for some, less free for others. On Romney's planet, freedom is maintained because the people thrown out of work could simply have moved to Bangladesh and taken the jobs he offered. But Romney's planet is not our planet, is not Mother Earth, our temporary home in this vale of tears, and now one should be allowed to make it more tear-full than it already is.

Mitt is free to live on any planet he likes, and he is certainly rich enough to buy his own planet. But he should not be allowed to buy his own country, particularly not my country.

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Ron Paul, Dennis Kucinich, and Bill Moyers

This evening, Bill Moyers held excellent interviews with Ron Paul and Dennis Kucinich, two candidates who have been more or less excluded from serious coverage by the mainstream media. Ron Paul, in fact, has been excluded from the next Fox News debate, despite his respectable 10% showing in Iowa, while Kuinich has been “dis-invited” by ABC as well as being excluded from the Des Moines Register debate (which even had Alan Keys, for crying out loud). Both candidates conducted themselves well, especially Ron Paul. Bill himself did a good job; in largely sympathetic interviews, he nevertheless challenged the candidates on some of their more problematic points. Moyers pointed out to Ron Paul that it is the private media, and not the federal government, that has excluded him. I don't think Paul had a good answer on this point, because libertarians generally don't. Libertarians generally don't like to acknowledge the fact that private owners, when they become too rich, can raise barriers to free markets just as effectively as the government can. The point that my libertarian friends never get is that free markets are created by regulation of a certain sort, just as they are destroyed by regulation of another sort. It is important to be able to tell one sort from the other.

Kucinich was taken to task for his rather odd “endorsement” of Barack Obama in Iowa, bypassing some candidates that may have more affinity with his point of view. In any case, they were very good interviews, much better than what one usually on television. The interview with Ron Paul can be seen here and the one with Dennis Kucinich here.

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The Left and Ron Paul

Can a liberal vote for Ron Paul?

Click here.

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Making a List; Checking it Twice

I used to believe that it made very little difference for whom we voted. Indeed, the choice between a Bush and a Gore did not strike me as that important; each took most of his money and all of his ideology from the same sources and were as like as not to have the same results, in a merely slightly different version, one a bit more left-ward, the other a bit to the right. And so I usually turned in a blank ballot or voted for a third-party candidate. The last seven years have revealed to me my mistake and my naivety. I could not have imagined the naked grab for power by the executive branch, the fiscal irresponsibility, the constant wars waged for ambiguous reasons, the huge debts, the complete indifference to growing inequality, the waste of the environment, the “free” trade agreements that drain the nation's wealth and industrial base, and all the other horrors perpetrated on the people by Dick Cheney and what's-his-name. Who could have foreseen in the year 2000, for example, that in a few years torture would be something seriously debated in American politics? It is a sign of how low the people have sunk and how high the government has risen. High enough, I believe to lord it over the people, and more than high enough to threaten our most basic liberties.

In truth, I have discovered the obvious (since it is the obvious that takes the longest to learn): that even small differences are still real differences and can have large results. Indeed, I believe that we are being frog-marched to a fascist dictatorship with the mere trappings of a republic. It is not that I am looking for a distributist hero, or the quick conversion of the land to something approaching sanity, if not Christianity. Rather, I would like to see someone capable of addressing the major problems and doing at least something about them.

And so, here is my list. It is a pragmatic list; that is to say, these are the issues that are, in my opinion, the most pressing and immediate; other issues are important for a longer term, but I don't think we can begin to address them unless we give the Republic some breathing room. The object is not to get to utopia in a day—or ever—but to hold the Republic together for another day until a better day comes with better politics.

1. Repudiate the illegal powers seized by the President. The past seven years has seen hundreds of “signing statements” (promises to break the law), the suborning of the justice department into a political apparatus, the open flouting of the courts (even the already impotent FISA court), the use of torture, the illegal rendition to third-world death camps, the illegal surveillance of citizens, and an hundred other violations of the Constitution and common sense. The great temptation by the next president is that he (or she) will say, “Yes, Cheney and what's-his-name used these powers for evil, but I will use them for good.” But that way lies madness. The temptations of power can prove irresistible. The powers must be repudiated from the start. The candidates should be specific about what they plan to do, and should be held to account by both the public and the public's representatives. I could wish that the founders, in their wisdom, had left the appointment of the Attorney General (and all the judges as well) in the hands of the Senate rather than in the Presidential gift. But as things are, we must rely on the Senate to be vigorous in vetting the next Attorney General to look after the interests of justice, and not just the interests of a particular political party.

2. Restore Fiscal Responsibility. Promises of tax cuts will fill the airwaves, but “cuts” financed by borrowing are not “tax-cuts” at all; they are tax-shifting, a moving of the burdens of this generation onto the shoulders of the next. Borrowing is simply another form of taxation, and the one with the least representation, since the generation that has to pay has, as yet, no voice and no vote. I am more interested in a balanced budget than in cuts which are not cuts. First finance the government (which will mean, in the current situation, cutting off all the illegitimate uses of tax funds) and then cut the taxes if you can.

3. Inter-generational Justice. There is, of course, another reason for not burdening the next generation with more debt, since we have already burdened them with debts that they cannot pay. I refer of course to the Social Security and Medicare messes. Justice here is tricky, and I don't have any real answers. The “baby boomers” have, since the Reagan “reforms,” paid far more into the system than was necessary to support its payouts. That would have been okay, had the money been sequestered and invested in something other than Government IOU's. But it wasn't. It was treated as ordinary income to defray the day to day expenditures of the government and to hide the true size of the deficits (see Social Insecurity.) Now, it is justice that the young support the elderly, because once the elderly supported the young. The obligations here are mutual. However, the situation is totally out of hand, and some way through this thicket will have to be found, and that right soon.

4. End the “Free-Trade” dogma. America is the most productive country in the world with the most productive work-force in the world, and has little to fear (and much to gain) from trade that is both free and fair. But the current trading regime is neither. We trade against an artificially price Yuan; we trade against laborers in so-call “free-trade zones” which are actually “justice-free zones” paying slave wages (see Battling the Swooshtika.) If our industrial base disappears, then America has no future, because the only real way to prosperity is to actually make things. We will learn what is is like to live in a third-world country, because we will become the world's largest “banana republic.”

5. Address the Income Gap. This may strike some as a purely “moral” problem but it is in fact supremely practical. What characterizes poor nations is a permanent gap between the wealthy and the poor. In fact, that gap is what makes a country poor. When capital over-accumulates at the top, it cannot find profitable investments, and so begins to take absurd risks, or to invest overseas (which also entails certain risks).

6. Return the Abortion Question to the States. Some will criticize me for putting this so far down on the list, but in truth we have made this the single-issue for 35 years and have almost nothing to show for our efforts; they have taken our votes and sneered at our cause. By lowering the intensity, we may actually accomplish more. A Constitutional Amendment is likely out of the question. But in fact this is not a federal issue, and never should have been. The congress has the power to return this issue to the states, and should. We can win at this level in most states.

7. Address the Environment. Yes, Virginia, time is running out. The costs of pollution must be charged back to the polluters. The full costs.

8. Address the Health-care mess. We pay twice what any other industrialized nation pays on a per patient basis, but get results that are far worse.

This is the list I will use to evaluate the candidates. You are welcome to correct me on any one of these, or all of them, or to suggest items I should add or delete.

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