And the Answer Is . . .
First, the question: What do we want of the economy?
The economy is the production and acquisition of goods and services. As human beings we need and want goods and services. Some, we can produce for ourselves, combining production and acquisition into one activity. We purchase those we cannot provide for ourselves, or if purchasing is more convenient, or if it is a better version of it than we could do ourselves. (Or, to cover all bases, a good or service is produced or purchased for us as a gift). In a barter economy we would swap something we produced for that which we needed/wanted. In today’s economy we use money (on hand or borrowed) for purchases. The point is that economic activity is an unavoidable aspect of life for every human being.
As it is for individual human beings, so it is for groups — communities — of human beings. A community will have need of some goods and services for the community as a unit. In economics those are called ‘public goods’.
One of the very most important questions a national community must ask and answer is this: What form is the economy of the nation to take? How will it be structured? How will it function?
In the U.S. there is a particular system already in place (actually, one shared by almost every nation on the planet). That is to say, there are in place three institutional structures within which the production and acquisition of goods and services transpires: money, a banking system culminating in a central bank, and the central government, which enacts the rules and regulations that govern participation in the economy. While almost every nation has that same overall economic system, those rules and regulations can and do differ a great deal, creating very different national economies.
In sum, those rules and regulations are any nation’s answer to this question: What do we want of our economy?
I submit that there are two outcomes that every nation would like to obtain for all of its adult citizens: no unemployment and no poverty.
No nation has ever fully achieved either of those outcomes. A few countries in the northern part of Europe have come close, but even those have not completely eliminated unemployment or poverty among their adult citizens.
Why not?
In a word, the reason for that failure is ‘taxes’. Whatever any nation has done to ameliorate unemployment and poverty, it has done so through taxation. (Norway famously has a dividend it pays to every citizen from the oil pumped in its territory, but that does not address unemployment and is not enough to eliminate poverty completely.)
Apparently, it simply isn’t possible to completely eliminate unemployment and poverty for adult citizens through taxation. If it were, one of those nations would have done it by now.
Back to the U.S., there are other outcomes for the economy as a system that some people want to see achieved, but others do not. Some people would like for the economy to be self-regulating, rather than its being ‘managed’ by the central government and central bank. Other people here want us to address sustainability. As things stand, both of those goals go to the rules and regulations governing participation in the economy.
All of that is fodder for our political process. At this point, our politics seem to be so messed up that people are more afraid of success for their opponents than they are concerned with trying to achieve their own goals.
There is a discernable reason for that: as things stand, all of those goals are zero-sum outcomes. A victory for one side is a defeat for the other.
I prefer golf to tennis because in tennis a good outcome for one player is necessarily a bad outcome for the other, whereas in golf a good outcome for one player is not necessarily bad for the other: that player can still have an outcome as good or even better. Tennis is a zero-sum game; golf is not.
Achieving goals for the nation through taxation is a zero-sum game: some get more and others have less. Setting aside the politics per se, any action undertaken in ‘managing’ the economy necessarily has zero-sum implications: it will benefit some to the detriment of others. It is the same with achieving sustainability through taxes, rules and regulations: politics aside, even if all would benefit materially, some would suffer a loss that others did not suffer. No wonder those parts of our politics are so fractious.
So, I will say (yet again) that there is a way that, using the existing economic system, we can achieve all of those goals: no unemployment or poverty for any adult citizen and systemically increased sustainability while making the economy self-regulating. Moreover, all of that would be accomplished in a completely non-zero-sum way. There are no losers. Everybody wins. All of that is accomplished without redistributing anything, without imposing any cost on employers, without imposing any limit on income/wealth, and without requiring people to act any particular way (cooperatively or competitively, altruistically or selfishly, etc.).
This proposal can accomplish all of that because it does not use taxation for any part of it. Indeed, with this proposal taxes can be eliminated.
Moreover, it does not accomplish those outcomes through rules and regulations governing participation in the economy. Rather, it focuses on the institution of money itself: how it is created, the purposes for which it is created, and how it enters the economy.
It is the case that with this approach to achieving all of those outcomes in a completely zero-sum way some money must be captured, to be returned to its place of origin (either the central bank or a new monetary institution outside and independent of the banking system and government). However, unlike taxation, no money would be collected from any person or business before it could be used for purchases/investment. Moreover, the amount of money collected from any entity would not be dictated by any person, committee, or organization. Rather, it would be due to actions that had been undertaken with complete liberty. In short, it would be highly unlikely that any person, however rich or not, would have any of one’s money collected.
That still leaves plenty of issues related to the economy to fight about. The economy would still have rules and regulations governing participation in it. Yet, those contests of political power would take place in a very different and, all would have to agree, much better nation than we have at present.
So, who’s with me?
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if curious for more about this idea: “Economic System Not the Problem” (here in Medium, but not behind the paywall)