Taking My Own Medicine
being completely rational about my own work
I have been developing for some years a monetary paradigm that would transform the outcomes for society from the existing economic system. I have contended that it is not in any way ideological (much less theological), but is strictly rational*. Yet, I realized recently that I have failed to be completely rational about this paradigm that I have been developing. That was a hard pill to swallow.
I was led astray by a desire to avoid having to impose any limits on income or the accumulation of wealth on any private entity (person or business) for the sake of this paradigm. Limits would still exist, of course, for every actor in the economy, just as they do at present: even the largest corporations or the famous billionaires among us don’t possess infinite resources (though for all practical purposes they might as well).
That probably sounds to most people like the ideology of libertarianism. It is not. It follows from mutual respect as the ethic of justice. Specifically, as individuals and societies we must respect as much as possible the capacity human beings have to choose for themselves. That does maximize liberty, but with mutual respect liberty is the product of justice, not its source, or foundation, or predicate, etc.
Sure, the imposition of limits is unavoidable for human societies to exist. Still, to maximize justice we must minimize imposing limits. They should only be imposed where their absence does actual harm to people. Some people having more income/wealth than others, even vastly more, does not in itself mean that actual harm is being done to anyone.
However, in the economy that now exists in almost every nation in the world (to include ‘Communist’ China) there is a link between wealth and poverty. The size of the ‘pie’ generally grows over time, and as a result life in general in every nation with that economic system gets materially better over time. Still, the fact is that for some people to have way, way more than the average amount of income/wealth, many others must have less than the average — down to zero.
Poverty, even if it is not ‘extreme’, is an ongoing harm inflicted on people (even people working full-time jobs) in every nation on this planet. The existence of poverty is in itself an injustice. It is a harm imposed on people by the structure and functioning of the economic system. Yet, poverty is not an injustice because some people are poor while some people are rich, but because some people are poor, period.
That form of injustice is as old as civilization. In the entire history of civilization the only cure for such injustice that has ever been considered has been redistribution: taking from the rich to give to the poor**.
How has that worked out so far?
The paradigm I have developed absolutely, positively eliminates poverty — without taking one sliver of silver from anyone.
Isn’t eliminating poverty the important thing?
[For those who are convinced that the existence of disparities in income is in itself an injustice, this paradigm can be used to pay all employees of any business or government the same income, no matter what. That can be done with or without allowing different compensation for different positions in businesses and government in the form of benefits. (“To Preserve What We Have, What We Have Must Be Enough,”) I personally favor going there, but a guaranteed minimum income that a person could actually live on that involves no redistribution should be adopted by acclamation. Why anyone rejects a paradigm that would make that a reality that is beyond me to know.]
There are other options available to limit disparities in income/wealth that would be compatible with this paradigm but are not a part of it, such as imposing a limit on the ratio between the highest and lowest paid position in a business. The presence of this paradigm does not even rule out imposing taxes for redistributive purposes. It does nothing to rule out any options to be pursued through the political process. It does set a baseline of outcomes for society. From there, all possibilities remain.
Still, I finally had to acknowledge that imposing a limit of some kind somewhere in the economy is unavoidable in order to be certain that this paradigm will function as designed. I have accepted that a limit must exist on how much businesses can invest by purchasing assets unrelated to the business itself, such as buying the stocks and bonds of other businesses.
So there it is: the one and only limit on the accumulation of wealth this paradigm must impose on economic actors in the private sector of the economy to ensure the efficacious functioning of the paradigm.
[In my defense, it might not have been impossible for this paradigm to function perfectly well without imposing that limit. The existence of it ensures that this paradigm will function efficaciously.]
The exact limit is beside the point for present purposes. That would be decided by a nation when it adopted this paradigm (should such ever happen). The existence of a limit is more important than its details.
I stress that investment by any business in itself, such as adding plant and equipment, is not limited in this paradigm. Neither is investment in its ‘human capital’, the people employed in it: bonuses are verboten (below), but far as as the paradigm is concerned the regular compensation of any or all employees in the form of pay or benefits can be increased by any amount at any time.
There is already in this paradigm a limit imposed on how much money can be hoarded by people and businesses (again, its details to be decided). As long as there is no limit imposed on income and money can be converted in unlimited amounts into assets (stocks, bonds, etc.) to store value, though, a limit on the amount of cash that can be retained does not limit the accumulation of wealth. To be clear, for people, converting money into assets is still completely unlimited in this paradigm.
Yet, there is more to this matter than eliminating poverty. The way poverty is eliminated in this paradigm has other benefits for society.
Currently, there is among the nations on this planet a universal political imperative to maximize economic growth, i.e., increase the GDP as much as possible (without ‘excessive’ inflation). That is necessary to maximize total income, employment, and the collection of taxes (at whatever rates exist). The implications for environmental sustainability are obvious.
This little paradigm of mine absolutely, positively eviscerates that “political imperative.” It guarantees no unemployment or poverty at any level of GDP. It also funds government — all government, from local to central — at the current per capita rate of total government spending forevermore without taxes or public debt (the existence of which creates a requirement for taxes to repay it). Any need to stimulate economic growth no longer exists. That by itself greatly increases our chances for sustainability.
To seek to eradicate poverty via redistribution, without changing anything else, has the opposite effect on growth. Growth must in fact be encouraged in that scenario, for there to be more to redistribute. [Just do an internet search of “solutions for poverty.”]
In this alternative paradigm those outcomes are accomplished by ‘printing money’: creating ‘out of thin air’ the money needed to fund government and a minimum guaranteed income (that is sufficient to live on) for individuals: it would not be paid to all, but any adult citizen could become eligible for it. The amount of money that is created is strictly limited: no person, committee, or organization can determine how much money will be created. It depends solely on the number of people eligible for (and receiving) that ‘allotted’ income and the numeric size of the population of the nation (which determines how much money government will get).
Still, that is a vast amount of money flowing regularly into the economy. A person does not have to be academically trained in economics to see how that could be a problem. There has to be a way for money to be returned to the central bank, where all that money is originating. [A nation adopting this paradigm could opt to create a new Monetary Agency to administer this money, but here we’ll assume the existing central bank is handling it.]
That is where the limit comes in. Its purpose is to ensure that sufficient money gets returned to the central bank.
To further aid that part of the paradigm, people are restricted to selling assets to other people. As stated previously, there is no limit on the amount of assets people can purchase. There is no restriction in this paradigm on the kinds of assets people can purchase. They can purchase assets from any entity. They are only restricted to selling assets to other people. That prevents money being shuffled back and forth between people and businesses rather than being returned to the central bank. (The ban on bonuses serves the same purpose.)
This paradigm also makes the economy self-regulating. Some people might not think that is a particular benefit, but it is. It lessens arbitrariness in the economy. As John Locke pointed out about 3 1/2 centuries ago, injustice is people being “subject to the arbitrary will[s]” of other people. [That is basically another way of saying that mutual respect is the ethic of justice: if being subject to the arbitrary will of any other person(s) is an injustice, then justice requires that we refrain from subjecting any others to our own arbitrary wills.]
At present, governments and central banks must intervene in the economy because it is not self-regulating. Left to itself the economy would self-destruct, as it did about one century ago in what is called the Great Depression. Those entities intervene to keep that from happening. While the economic powers that be can make various claims to justify why they do what they do, the effect is to make the entire economy subject to the wills of particular people. Whatever justifications they might proffer for the options they choose, the actions they take are in the end determined by beliefs they happen to hold concerning justice, the good, etc. From the point of view of other people that makes those those actions arbitrary. Those actions inevitably at a minimum generate more benefit for some than others, if not create winners and losers. A self-regulating economy removes that specter of arbitrariness/injustice from society.
So this paradigm absolutely, positively eliminates poverty. It just as surely eliminates unemployment. It increases sustainability. It provides the means to eliminate taxes/public debt (as long as public spending does not exceed anywhere the money allotted for government). It accomplishes all that while making the economy self-regulating. The only limit on income/wealth that is imposed is to limit how much money a business can invest in the form of purchasing assets unrelated to the business. It does not in any way restrict any other choices for society to be pursued in the political process — to include expanding the ‘allotted income’ to diminish disparities in income/wealth.
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*To say it is rational is to strike fear into the minds of many people — oddly enough, especially religious fundamentalists and postmodernists. People within those perspectives profoundly mistrust rationality for completely different reasons, but the result is the same. Meanwhile, people whose worldviews are political ideologies are convinced that they are being rational, even though they are not being any more rational than religious people are: like religions, ideologies are based on beliefs. The other two groups, however, are happy to reinforce that conviction. The salient point is that, unlike the other two groups, for the ideologically oriented among us this alternative approach to the issues my paradigm addresses is not rejected because it is rationalistic. It is rejected by them because it is not a product of their preferred ideology. It is hard to imagine a worse reason than that for rejecting it — except for rejecting it only because it is rational.
**UBIs, schemes for a Basic Income that is supplemental, but not in itself enough to live on, seek to obfuscate their redistributive nature by paying the income everyone: making it Universal. As long as some people are paying more than others in taxes to fund such an income, though, it is being redistributive — and still not really solving the problem of poverty.
More about the paradigm: for non-economists the best place to start is “Permanent ‘Quantitative Easing’” (a “4 min read” here in Medium). It explains something important about money and has links to the two following articles. People who are more familiar with economics as a discipline could go to “Paradigm Shift.” It is a generic, more technical relation of the paradigm. “Same Economy, Way Better Outcomes for Society” has the most details concerning a possible implementation of it.
[All linked articles are here in Medium, but not behind the paywall.]