- This system is not free enterprise, and it is not capitalism.
-
- It is a cancer that is destroying the world.
-
- Isn't it Finally Time to Enact a Basic Income Guarantee?
-
- The lack of individual and family income security in
the midst of a highly-developed economy is a travesty under any circumstances,
but the basic contradiction of "poverty in the midst of plenty"
that has plagued the world since the start of the Industrial Revolution
is becoming much worse in the early years of the 21st century as the Recession
of 2008 picks up speed.
-
- Winston Churchill spoke on the subject when giving the
Romanes Lecture at Oxford University on June 19, 1930, a few months after
the crash of the U.S. stock market that started the Great Depression. He
said:
-
- "Who would have thought that it would be easier
to produce by toil and skill all the most necessary or desirable commodities
than it is to find consumers for them? Who would have thought that cheap
and abundant supplies of all the basic commodities would find the science
and civilization of the world unable to utilize them? Have all our triumphs
of research and organization bequeathed us only a new punishment: the Curse
of Plenty? Are we really to believe that no better adjustment can be made
between supply and demand? Yet the fact remains that every attempt has
failed. Many various attempts have been made, from the extremes of Communism
in Russia to the extremes of Capitalism in the United States. They include
every form of fiscal policy and currency policy. But all have failed, and
we have advanced little further in this quest than in barbaric times. Surely
it is this mysterious crack and fissure at the basis of all our arrangements
and apparatus upon which the keenest minds throughout the world should
be concentrated.
-
- Evidently we've learned nothing since Churchill spoke.
Isn't it shameful-or just surprising-that since the proponents of "post-modern"
economics restructured the U.S. economy around the concept of a deregulated
financial sector over the past 30 years, income and wealth disparities
between rich and poor have become much worse?
-
- Perhaps we are finally ready to reopen the question of
whether human beings have a right to a sufficient income to keep body and
soul together. This question has been mostly lost since President Ronald
Reagan declared in his 1981 inaugural address that, "Government is
not the solution to the problem; government is the problem."
-
- But it is only government that can authorize and implement
what is today called a Basic Income Guarantee (BIG). Otherwise, if government
is trapped in the ideological straightjacket Reagan and his fellow conservatives
put it in, then the only possible paradigm is Social Darwinism-survival
of the fittest. Today it is not difficult to see that implementation of
a BIG, had it been put in place when the concept still had political life
in the 1960s and early 1970s, would have gone a long way toward ameliorating
human distress from poverty along with assuring a degree of economic justice.
And we would clearly be much better off today.
-
- The last serious efforts at a BIG were President Richard
Nixon's Family Assistance Plan, which passed the House but was defeated
in the Senate in 1970, followed by implementation of the Earned Income
Tax Credit for low-income families, enacted in 1975. Since then, every
step toward economic "reform" has been one permutation or another
of trickle-down economics, including the supply-side tax cuts of the Reagan
and Bush II administrations.
-
- Of course, the purpose of the move to deregulate the
financial industry that has been going on for the past generation was supposed
to have been to create a new "ownership" society based on having
our money "work for us." But the deregulated bubble economy has
now blown up, exposed as the biggest fraud in history.
-
- Yet even in the midst of massive government bailouts
for the banks and the as-yet-to-be-implemented economic stimulus proposals
for the people, a BIG is never mentioned, not even by progressives. One
problem with BIG is that its proponents always presented it as a transfer-of-wealth
program, where a portion of the earnings of people with earned incomes
would be diverted to support those in need. Even the idea of diverting
military expenditures to a BIG could be viewed as a transfer program, since
a smaller war machine would mean a reduction of salary and benefit payments
to military personnel and civilian contractors.
-
- In other words, even those in favor of BIG have viewed
it as a kind of charity. As such, it is likely safe to say that BIG has
little, if any, chance to be implemented within the U.S. at any time in
the foreseeable future, at least in an amount to have an impact.
-
- But there are other ways to look at the problem. One
way is that of the Social Credit movement, where a regular dividend payment
to individuals is seen not only as fair but is viewed as a necessary balancing
force within a developed economy. But Social Credit concepts, while once
a force in the British Commonwealth nations, is virtually unknown in the
U.S. Another way is shown by the Alaska Permanent Fund (APF), where residents
enjoy by right a share of the resource wealth of the state.
-
- Both Social Credit and the APF as models for action will
be discussed in this paper. The paper focuses on the U.S., though the concepts
are universally applicable, and proposes a method of providing a BIG as
part of a program to rebuild the economy from the bottom up. I call this
program, based on dividend-type approaches, a "Bailout for the People,"
as opposed to the bank bailouts that are adding trillions of dollars to
the national debt. I have presented it previously in articles on the internet
as "The Cook Plan." (Richard C. Cook, "How to Save the U.S.
Economy," Global Research, October 10, 2008 at http://www.globalresearch.ca/index.php?context=va&aid=10508)
-
- Such a program is urgently needed. There is no time to
waste in rescuing our citizens from the onrushing catastrophe that is befalling
an economy where both manufacturing and family farming were long ago gutted
to create today's anemic service economy. If things continue to go as they
are today, there could be U.S. citizens starving within a year, and Congress
knows it.
-
- A Historic Collapse
-
- As the recession of 2008 deepens, with precipitous declines
in employment, business activity, home appraisals, consumer confidence,
and retail sales, it is evident that the U.S. and the world are facing
the possibility of an economic collapse of Great Depression severity, or
worse. Violent crime and stress-caused illnesses are increasing. Behind
each statistic is a human being or family that suffers.
-
- Amazingly, it took a full year of economic distress,
from December 2007, when economic activity last peaked, to a conference
call on November 28, 2008, for the Business Cycle Dating Committee of the
National Bureau of Economic Research to declare that a recession had actually
been taking place during that period. As late as September 15, 2008, Republican
presidential candidate John McCain said, "the fundamentals of our
economy are strong," a statement that repeated what President George
W. Bush had been intoning ever since the housing bubble began its rapid
deflation in 2006.
-
- But even with the economists and politicians finally
acknowledging reality-it was the recession that propelled Barack Obama
to victory in November-the situation is actually worse than they say. A
recession is defined as declining Gross Domestic Product. But there is
a big difference between the type of GDP that represents transactions that
do not add to the real productivity of the nation-as often happens with
financial paperwork-and economic output that puts money in the pockets
of consumers and workers.
-
- If economic health is measured, for instance, by immediate
consumer purchasing power, it is telling that M1-the money in cash and
checking accounts-has been decreasing, when adjusted for inflation, since
December 2003. That was five years ago! The decrease began soon after the
Federal Reserve started raising interest rates following three years of
cuts-over 500 basis points-that created the housing bubble in the first
place.
-
- With the recession now settling in, with the official
unemployment rate approaching seven percent, and with the number of underemployed
or no longer seeking work running at a similar rate, there has not been
a greater need for a Basic Income Guarantee in the last generation. But
the federal budget deficit has been added to significantly by Secretary
of the Treasury Paulson's $700 trillion financial industry bailout, along
with other loans and bailouts to rescue Fannie Mae and Freddie Mac, insurance
giant AIG, and additional emergency loans from the Federal Reserve under
Chairman Ben Bernanke.
-
- No one really has a handle on how much government money
has been committed, though $4+ trillion is a reasonable guess. The size
of the bailout compared to government spending for major projects in the
past is shown in terrifying detail in the following graphic by www.voltagecreative.com/blog.
-
-
-
-
-
- Still to come are any loans Congress or the Treasury
will end up authorizing to save the auto industry and the costs of Obama's
economic stimulus package that may approach $1 trillion.
-
- The severity of the crisis and the disastrous effects
on working people are shown by the insistence by many politicians that
rescue of the auto industry be dependent on the willingness of the United
Auto Workers to agree to the gutting of their wage and benefit package.
This, along with the huge number of layoffs in the financial industry,
shows that even massive bailouts will not save the jobs or livelihoods
of millions of people.
-
- During the coming year the ratio of the federal deficit
to GDP, which peaked at 125% in 1945, will likely exceed that record amount.
The difference is that at the end of World War II American consumers enjoyed
a high rate of savings because of fulltime employment due to wartime spending,
combined with a dearth of consumer goods. After the war, these savings
became available for economic growth that paid down the national debt.
Today, consumer savings are virtually non-existent. And there is no assurance
that more spending will achieve anything like the full employment of the
World War II era.
-
- So the nation is in uncharted territory, a scenario that
is being repeated around the world with growing poverty, the decline of
economic growth, and imposition of austerities by the International Monetary
Fund. Under such circumstances, a Basic Income Guarantee, were anyone to
consider it, cannot be a simple transfer program, as described above, where
those still with money are required to share a significant portion of it
with those who don't have it. Rather new methods of funding must be found.
-
- The Failure of Economics
-
- So what is really wrong with the economy? Some say the
housing bubble is to blame, where the banks made credit so easy to get
that the prices of homes inflated beyond their real value. Others blame
it on the "toxic debt" from subprime mortgages that investment
banks packaged and sold to unwary investors. Others blame the unregulated
U.S. financial system that generated huge amounts of speculative investments,
accomplished through bank leveraging, that now have gone sour.
-
- Here's what economist Joseph Stiglitz wrote recently
in Vanity Fair:
-
- "Of course, the current problems with our financial
system are not solely the result of bad lending. The banks have made mega-bets
with one another through complicated instruments such as derivatives, credit-default
swaps, and so forth. With these, one party pays another if certain events
happen-for instance, if Bear Stearns goes bankrupt, or if the dollar soars.
These instruments were originally created to help manage risk, but they
can also be used to gamble. Thus, if you felt confident that the dollar
was going to fall, you could make a big bet accordingly, and if the dollar
indeed fell, your profits would soar. The problem is that, with this complicated
intertwining of bets of great magnitude, no one could be sure of the financial
position of anyone else-or even of one's own position. Not surprisingly,
the credit markets froze."
-
- Stiglitz is a former World Bank economist, winner of
the Nobel Prize, and now a noted critic of the world financial system.
But what is puzzling, besides the fact that Stiglitz buys into the basic
validity of the world's debt-based monetary system, is his apparent failure
to recognize the role of collapsing consumer purchasing power as a principal
cause of the freezing of the markets.
-
- Individuals can no longer get loans because they can't
afford to repay them. Businesses can't get loans because consumer income
is insufficient to buy their products. Within the U.S., consumer purchasing
power has fallen not only because of the export of so many manufacturing
jobs to low-paying overseas labor markets like those in China, but also
because workers have not shared in the benefits of constantly rising productivity.
See the following chart from www.Heritage.org that compares growth in productivity
to median household income over almost 40 years:
-
-
-
-
-
-
- As stated, for commentators like Stiglitz, or like Paul
Krugman, another Nobel Prize winner who writes for the New York Times,
the debt-based monetary system run by the banks is a "given"
as the unchallenged centerpiece of the world economy.
-
- Here is Krugman's prescription from a November 18, 2008,
column:
-
- "What the world needs right now is a rescue operation.
The global credit system is in a state of paralysis, and a global slump
is building momentum as I write this. Reform of the weaknesses that made
this crisis possible is essential, but it can wait a little while. First,
we need to deal with the clear and present danger. To do this, policymakers
around the world need to do two things: get credit flowing again and prop
up spending."
-
- But even as Krugman and others argue for more government
spending to prime the economic pump and restore employment-a few more trillion
added to the national debt can't hurt, they say-such spending can only
take place through deficit financing funneled through the banking system.
So their answer to a crisis marked by overwhelming public and private debt
is more debt. Some call this "Keynesian economics," and as Richard
Nixon famously said way back in 1971, "We are all Keynesians now."
-
- The problem is that the world has changed radically since
John Maynard Keynes wrote in the 1930s at a time when the banking system
had discredited itself with the economic collapse that started the Great
Depression. Then, the banks were contracting the currency and causing a
liquidity shortage. But they were brought to heel by the federal government
under President Franklin D. Roosevelt. To get things moving again, the
government ran its own low-cost credit programs through agencies like the
Reconstruction Finance Corporation. And while the government borrowed for
job-creation programs like the WPA and CCC, business and household debt
weren't even close to what they are today.
-
- What has happened since then is that the full-employment
industrial state that was brought into existence by the New Deal and World
War II, and which produced so much wealth that a BIG-then defined as a
negative income tax-actually was taken seriously as a matter of discussion
in the 1960s, no longer exists. Instead of the industrial state, we have
what could be called the international empire of usury.
-
- By the late 1960s the industrial state was in decline.
The key event took place in 1971 when Nixon removed the gold peg from the
dollar and world currencies began to float. From that point on, credit
became separated from production, and people began to look to paper profits
through currency, resource, and asset speculation as the source of wealth.
-
- Also during the 1970s, the U.S. government worked with
OPEC to bring about radical increases in petroleum prices. The flood of
"petrodollars" which resulted financed the growing U.S. trade
and fiscal deficits and caused a sharp rise in inflation. When the Federal
Reserve under Paul Volcker began to attack the inflation with interest
rates that would exceed 20 percent, the worst recession since the Great
Depression followed. The recession lasted from 1979-83 and wrecked the
U.S. industrial economy. Never before in U.S. history had the financiers
wielded such dictatorial-and destructive-power.
-
- The last straw came when the financial industry began
to be deregulated to take advantage of the orgy of greed that had been
made possible by government policy. Accordingly, every period of economic
growth since the 1980s has been a financial bubble, including the merger-acquisition
bubble of the Reagan/Bush I years, the dot.com bubble of the 1990s, and
the housing/equity/derivative bubble of the 2000s.
-
- During this time, the U.S. became one of the most grievously
mismanaged nations in history, with every president since Reagan making
their own contributions to the madness. The loss of manufacturing jobs
that started with the Volcker recession accelerated under President Bill
Clinton, who signed NAFTA and gave China most-favored-nation status. Economists
like Stiglitz and Krugman, not to mention those who cling to the myth that
what we have today is really free-market economics, fail to recognize the
tremendous sea change that has made the U.S. economy dysfunctional to its
roots. This means that none of their solutions can solve the problem.
-
- Let me also observe, with respect to the tender concern
that economists have that the credit markets get up and running again,
doesn't this also illustrate the human tendency to "kiss the whip
that scourges"?
-
- The financial system holds everyone hostage, including
citizens, politicians, and economists too. A good analogy might be "Stockholm
Syndrome," where, according to Yahoo.com:
-
- "Captives begin to identify with their captors initially
as a defensive mechanism, out of fear of violence. Small acts of kindness
by the captor are magnified, since finding perspective in a hostage situation
is by definition impossible. Rescue attempts are also seen as a threat,
since it's likely the captive would be injured during such attempts."
-
- Cancer
-
- There is not a single academic or popular economist writing
today who admits that the international empire of usury we have been watching
collapse is a qualitatively different phenomenon from anything seen before
and that it has nothing to do with any of the concepts we are so familiar
with such as democracy, economics, or even capitalism. A better concept
might be one drawn from medicine-what we are seeing is a rapidly metastasizing
case of terminal cancer. The host of this cancer is the population of the
U.S., and the cancer of debt is deadly. The progressive prescriptions of
people like Stiglitz and Krugman, and even those of president-elect Barack
Obama, are like offering a pair of crutches to a cancer patient so ill
he can no longer even stand up.
-
- The international empire of usury has a long pedigree.
It goes back to ancient Sumeria, when debtors first began to be sold into
slavery. Excessive debt ruined many of the Greek city-states and helped
wreck the Roman Empire. During the Middle Ages, usury was such a scourge
that the Catholic Church outlawed it.
-
- The current phase of the empire dates to the creation
of the Bank of England, which was a privately-owned banking institution
that made its money by lending to the British government so it could fight
its wars. The Bank of England was cloned on American soil when the Federal
Reserve System was created by Congress in 1913. The bankers had previously
tried take control of the U.S. through the First and Second Banks of the
United States but had been defeated by democratic forces led initially
by Thomas Jefferson.
-
- Since the founding of the nation, there has been a struggle
within the U.S. between pro-and anti-bank forces. The banks finally saw
complete triumph in the 1970s when the philosophy of monetarism took over
and assured that a chronic insufficiency of real money in the economy would
be answered by an exponentially growing amount of bank-generated debt.
Monetarism was not directed solely by figures within the U.S. Rather it
was part of a worldwide financier conspiracy. The "Reagan Revolution"
which facilitated it was matched by "Thatcherism" in the U.K.
and similar regimes around the world.
-
- Since American economists have failed so egregiously,
we are forced to turn elsewhere for explanations. The triumph of usury-i.e.,
cancer-was ably described by New Zealand author Les Hunter in his 2002
book, Courage to Change: A Case for Monetary Reform.
-
- "It was the artificial scarcity of money imposed
by the application of
-
- monetarist policies that caused the usurious system to
mutate from the industrial and allowed the collection of usury in amounts
greater than that forthcoming as industrial economic rent. What has come
to be practiced is a corruption of the investment practices that, in the
past, and particularly in the industrial systems, had driven civilization
forward.
-
- "As investment proceeds within a usurious system,
debt securities are accumulated and valued by the holders as income-earning
assets. Of course, unlike the industrial assets such as the powered machine,
a debt security produces nothing that is real.
-
- "However, monetary income received as interest from
compounding debt does give claim on current output-wealth at the point
of sale-as does any form of economic rent once it has been collected in
a monetized economy. Within usurious society, the rich are made richer
and the poor, poorer, for no justifiable reason."
-
- How did this come about? Hunter writes in terms similar
to those I used previously:
-
- In the late 1960s, an aberrant socio-economic phase emerged:
the usurious state, in which the control over money, rather than the ownership
of machinery, is the most important lever of economic and social power.
Investment in debt, and the speculative buying and selling of paper assets,
are the most significant means of accumulating personal wealth.
-
- Hunter provides the following list of characteristics
of usurious systems, features that are agonizingly familiar:
-
- * Crushing debt;
- * A widening gap between rich and poor;
- * Share markets subject to collapse;
- * Currency meltdowns;
- * Mounting social distress;
- * A pervading belief that the free market should be allowed
free reign;
- * Banks driven by profit but holding tremendous power
through their ability to create and extinguish the national currency, that
is, money.
-
-
- Hunter's analysis is light-years ahead of U.S. economists,
who, even when playing the role of an "official" opposition,
really only enable the international financial elite to continue their
looting unabated. Of course industrial society is at the mercy of the financial
predators, because large quantities of money are needed for the economy
to function. Hunter continues:
-
- "The accumulation of usurious debt-money-lenders'
assets-became possible because those in business have an absolute requirement
for access to sufficient working funds to pay costs. (The payment of costs
is the main means of generating the national income; investment makes up
the difference.)
-
- "The money needed as working funds is defined as
M1, which is the sum of base-metal coin, notes, and cheque money. It is
this money that is accepted as the national currency. In many nations,
applying monetarist policy has given business's working funds-as the ancillary
factor of production-sufficient scarcity value that significant amounts
of usury, as the relevant form of economic rent, can be, and are being,
collected.
-
- Monetarism rests on one basic lie-that higher interest
rates slow inflation. Actually higher rates kill economic activity. This
is not slowing inflation; it is wrecking human life. In the long run, higher
rates add to inflation by increasing the proportion of costs that go to
pay interest. This system is not free enterprise, and it is not capitalism.
It is a cancer that destroying the world.
-
- Revolution
-
- The bankers' takeover of the world economy that began
in earnest in the 1970s cannot be undone by Barack Obama's economic stimulus
program or any other progressive nostrums. Thus, the goal of creating up
to five million new jobs is not likely to succeed, simply due to the enormous
amount of debt the productive economy is currently carrying.
-
- The amount of debt is staggering. If we count individual,
household, business, and government debt, that figure now exceeds $40 trillion,
including the recent bailouts. What the General Accounting Office calls
"unfunded liabilities" of the federal government, due to future
costs of entitlement programs like Social Security and Medicare, adds another
$60 trillion. This doesn't include outstanding debt for derivatives, most
of it bank-leveraged, which, according to the Bank for International Settlements,
may amount to $1.28 quadrillion worldwide.
-
- Growth in debt through 2006-understated, compared to
figures derived by independent analysts-is shown by the following chart
based on Federal Reserve figures. Note that virtually all of the debt has
been incurred since removal of the gold peg and that its growth is exponential.
-
-
-
-
- The economic geniuses who write for newspapers like the
Washington Post or give advice to the Federal Reserve have come up with
solutions like slashing Social Security and Medicare benefits or selling
more U.S. assets to creditor nations like China. They refuse to propose
the obvious, which is that the debt must be written off as soon as possible
and the monetary system changed to prevent further debt to be accumulated.
Nor do they realize that debt; i.e., credit, should be viewed solely as
a means of generating working capital, not a permanent millstone around
the neck of humanity.
-
- To overcome today's tragedy requires a political revolution
to remove the bankers from power. Today they control the political process
in the U.S. and around the world. They control the powerful intelligence
agencies of the Western nations. They control international agencies such
as the International Monetary Fund and the World Trade Organization. They
also control the Western military machine, with NATO now being sworn to
protect Western "neoliberalism," which means the bankers' empire.
-
- The only U.S. political figure who has called for revolution
is Dr. Ron Paul, Republican candidate for the 2008 presidential nomination
and author of legislation to abolish the Federal Reserve. In the opinion
of this writer, the only people who have a right to speak of "change"
in today's political and economic environment-including Nobel laureates-are
those who support this revolution. There is no other way to fight the unlawful
takeover of power by the financiers.
-
- Of course it's not only politicians, pundits, and economists
who have failed. We are all responsible for our own lives and actions.
If the American people wanted a just economic system and were willing to
do what was necessary to get it, they could have it-now.
-
- What Must be Done
-
- Approximately 20-30 percent of the people in the developed
world are doing just fine financially. They are either professionals, technical
experts who are indispensable in making the world economy function, former
government employees on pensions, or a small minority who live off compound
interest-i.e., the bankers and their dependents. Most of this 20-30 percent,
particularly the latter group, do not seem to have a great deal of compassion
for the majority within their own nations and even less for the billions
of underprivileged people around the world.
-
- For the remaining 70-80 percent who realize, with the
recession now having arrived, that their livelihoods are on a slippery
slope downward, possibly taking them toward personal and family catastrophe,
they need only one thing-MONEY!
-
- For many of these it would be nice to have a job, or
a better job. But jobs are not the answer, even though any time a politician,
economist, activist, or commentator offers an opinion on how to improve
the economy they say MORE JOBS!
-
- And they are completely wrong.
-
- The way to generate income security is not to give someone
a job. It is to give them money. If we began with this simple fact the
economy would soon generate far more jobs than people could fill. Of course
some of these jobs would be low-paying or even volunteer jobs, which would
be acceptable provided that people still had enough to live on and had
opportunities to earn more.
-
- For the world economy to function and for there to be
enough produced to support everyone at a decent standard of living, not
everyone has to work. In fact too many workers get in each other's way.
In 2007 world GDP was $55 trillion. The population was 6.6 billion. Per
capita that's $8,300. It's not a large sum, but in many countries the cost
of living is far lower than in the developed nations of the West.
-
- The productivity of a modern industrial economy is phenomenal.
It surpasses the wildest dreams of generations past. The problem today
is not a shortage of goods and services. It is too many goods and services.
There is a worldwide glut of automobiles. The same goes for many other
products such as clothing, CD players, TVs, and most consumer products.
This does not mean that threats like climate change or resource depletion
should be ignored. The reason these threats are not being faced is that
industry must work so hard to cut costs and keep prices down in the face
of the catastrophic shortage of consumer purchasing power.
-
- So why do we need more jobs? Only because we are too
cheap and so poorly informed that we fail to realize that a cash payment
to everyone, at least at a subsistence level, should be viewed as a dividend.
It's something everyone should receive as the benefit of our incredible
producing economy. It should be treated as a HUMAN RIGHT.
-
- The situation does not require that someone else should
be taxed in order for that dividend to be provided. This is not a transfer
payment. It is not a share-the-wealth scheme. It is the acknowledgement
by the economic system that the universe is bountiful and abundant. Modern
industry has tapped into that abundance. Today the abundance is being stolen
by the bankers and their debt-based monetary system. This is what must
be taken back by, and on behalf of, "We the People."
-
- If you want to read the history of dividend-economics,
study the history of the worldwide Social Credit movement. I am not going
to repeat that history here. I have written about it in many articles over
the past two years, most of which can be found at www.GlobalResearch.ca.
It's one of the basic themes in my new book, We Hold These Truths: The
Hope of Monetary Reform (Tendril Press, 2008). You can find a lot of information
about Social Credit on the internet, including the website for the Michael
Journal in Canada at www.michaeljournal.org.
-
- One of the world's leading experts on Social Credit is
Wallace Klinck of Alberta, Canada, who provides the following commentary
on the crisis:
-
- "The base cause of our essential economic, and social,
afflictions isa fundamental and widening disparity between effective consumer
income and financial prices-resulting essentially from a basic flaw in
national financial cost accountancy involving a premature withdrawal of
credit because of added allocated capital charges in consumer prices. The
consequent widening deficiency of effective purchasing-power forces the
consuming public increasingly into dependency upon debt.
-
- "We are now witnessing the inevitable, entirely
predictable, and devastating results of such folly (or more likely, high
policy). Governments are forced to make a futile attempt to ameliorate
this problem by assuming debt to compensate or accommodate the ballooning
private debt. I am sure that the financial powers look on with almost puzzled
amusement as we engage in a sterile debate about the evils of interest
and usury when we obviously have no strategy to deal with the rapid expansion
of debt upon which interest is demanded. We waste our energy on a misguided
and sterile debate while ignoring the fact that the consumer is charged
with capital depreciation but not credited with capital appreciation.
-
- "In other words, we blindly forgo our inheritance
for a mess of pottage. You only pay interest on debt-eliminate debt and
you have effectively eliminated any tribute of interest or 'usury.' There
should be no need for any overall national consumer debt at all-consumers
in aggregate should always be provided sufficient income to purchase the
entire final product of industry without resorting to borrowing. The physical
cost of production has been provided in full when goods are completed,
and the financial means to liquidate the financial costs of that production
should be made fully available as each 'cycle' of production is completed.
-
- "Whatever the costs to industry, including interest
or service charges, the consumer should always be in a position to liquidate
them with his or her financial income. Being increasingly inadequate under
the orthodox system of financial accountancy, that consumer income must
be supplemented from a source which originates outside the price-system
and does not, therefore, create new financial costs through its issue.
The mechanisms to achieve this condition recommended by Social Credit are
the payment to all citizens of a National Dividend and to all retailers
a compensatory payment in order to effect a falling price-level, i.e.,
a Compensated Price.
-
- "When the expenditure of human labor is being rapidly
replaced by other factors of production, as it is in a most spectacular
manner, talk of there being 'no free lunch' is entirely irrational from
the standpoint of reason, downright sacrilegious from a theological standpoint,
absolutely disastrous from an economic and social perspective-and absurd
from a philosophical aspect."
-
- I strongly recommend that readers try to understand and
absorb what Mr. Klinck is saying. He is explaining why everyone doesn't
have to work all the time for us to enjoy a decent standard of living.
People in the U.S. understood this in the 1950s, when a single breadwinner
could support a family. Does anyone wonder why conditions have changed
so much for the worse since then? In a private message to me dated December
13, 2008, Mr. Klinck made the following observations on jobs vs. income:
-
- "I find it quite maddening that we have these recent
desperate appeals for industrial state 'bailouts' to help industry go on
producing even more unsalable goods, when it should be quite obvious that
what needs 'subsidizing' is consumption and not production. Of course,
as we know from a Social Credit perspective, these appeals are based on
a number of major misconceptions about national cost accounting, the purpose
of industry, work, and life in general. I think that this erroneous and
indelibly entrenched 'moral' mindset is our biggest obstacle. For instance,
I heard extended appeals on television today from the Canadian Autoworker's
Union for protection of their 'jobs', etc. If only we could show them that
it is their incomes and not their 'jobs' which should be preserved. They
are so obsessed with 'work' that they are blinded to reality."
-
- We have another well-developed plan for monetary reform
here in the United States with the American Monetary Act proposed by the
American Monetary Institute. (www.monetary.org) This plan would eliminate
public debt for federal government expenditures by returning to a Greenback-type
system of direct government purchasing like we had during and after the
Civil War. Public expenditures would focus on the creation of infrastructure
assets as the basis for the monetary system. The American Monetary Act
became part of the platform of Congressman Dennis Kucinich in his 2008
congressional campaign. The Act also contains a dividend provision.
-
- Lessons from the Alaska Permanent Fund
-
- We can find one small but extremely important example
of dividend economics in the U.S. by examining the Alaska Permanent Fund
which paid every resident of Alaska a dividend of $3,269 in 2008 out of
state resource revenues. The APF was set up in 1976 when Alaska voters
passed a constitutional amendment calling for a direct payment to individuals
rather than turning the money over to the state bureaucracy for "social
services."
-
- Today the Alaska Permanent Fund is a shining-and rare-example
of economic democracy at work. At first the APF made dividends incremental
based on a person's years of residency, but the U.S. Supreme Court declared
this provision unconstitutional. The Alaska legislature responded by providing
equal dividends to all residents of six-months or more. The first dividend,
amounting to $1,000, was paid on June 14, 1982.
-
- The APF dividend is not a welfare payment. It is a resident's
fair share of the bounty of the Earth. There are no means tests, no lines
to wait in, no bureaucrats snooping around to find out what someone used
the money for. The APF has not ruined the character of those who get it.
A millionaire receives the same payment as a person living in poverty.
Spent into circulation, the money becomes part of the lifeblood of the
community without having to be repaid and with no interest being charged.
Deposited into banks, the money capitalizes consumer borrowing and economic
growth.
-
- In the Fall 2008 Newsletter of the U.S. Basic Income
Guarantee Network there appeared an editorial on the Alaska Permanent Fund
by Karl Widerquist, one of the leaders of the worldwide BIG movement, now
a professor at Reading University in England. This editorial is reprinted
as follows:
-
- "EDITORIAL: The Alaska Dividend and the Presidential
Election (The views expressed in this editorial are my own and do not represent
the views of USBIG or its membership. -Karl Widerquist)
-
- "Most people will be surprised to learn that the
Republican vice-presidential nominee and the Democratic presidential nominee
have both endorsed the Basic Income Guarantee. In one form or another both
support policies to guarantee a small government-provided income for everyone.
As reported in the USBIG Newsletter earlier this year, Obama has voiced
support for reducing carbon emissions with the cap-and-dividend strategy,
which includes a small BIG.
-
- "Sarah Palin, like most Alaskan politicians, supports
the Alaska Permanent Fund (APF). Existing rules caused the APF dividend
to reach a new high of 2,069 this year. That much had nothing to do with
Palin. But, whatever else you might think of her, she deserves credit for
adding $1200 more to this year's dividend. She proposed it to the legislature,
and pushed it through, resisting counter proposals to reduce the supplement
to $1000 or $250.
-
- "Most people who learned about Palin at the Republican
National Convention in August would probably be surprised to learn that
such a hard-line conservative supports handing out $16,345 checks to even
the poorest families. Actually, families the size of Palin's will receive
$19,416-no conditions imposed besides residency, no judgments made.
-
- "The support of politicians like Palin provides
evidence against the belief that BIG is some kind of leftist utopian fantasy
with no political viability. In the one place BIG exists it is one of the
most popular government programs, and it is endorsed by people across the
political spectrum.
-
- "The APF has not become an issue in the campaign,
and I doubt she has plans to introduce a similar plan at the national level,
but when the issue has come up, Palin has taken credit for it as a conservative
policy. In an interview on the Fox News network, Sean Hannity confirmed
that Palin increased the Alaska dividend by $1200 this year. Hannity commented,
'I have to move to Alaska. New York taxes are killing me.'
- "Sounding like some kind of progressive-era land
reformer, Palin replied, 'What we're doing up there is returning a share
of resource development dollars back to the people who own the resources.
And our constitution up there mandates that as you develop resources it's
to be for the maximum benefit of the people, not the corporations, not
the government, but the people of Alaska.'
-
- "Tim Graham, writing for the conservative website
Newsbuster.com criticized NPR's Terry Gross for asking questions that implied
opposition to the APF in an interview with Alaska Public Broadcasting host,
Michael Carey. Graham writes, 'Gross walked Carey through the idea that
it's not hard for Palin to be popular in Alaska when she's handing every
family a $1200 check from all the oil business. She then elbowed Carey
about how that money could have been better "invested" (as Obama
would say) in government programs.' Suddenly conservatives are ridiculing
people they assume do not support unconditional grants.
-
- "Palin justified a tax increase on the oil companies
to support higher BIG on the PBS Now program before she was nominated for
vice-president. 'This is a big darn deal for Alaska. That non-renewable
resource, of course, is so valuable . And of course [the oil companies]
they're fighting us every step of the way when we say, "Well we wanna
make sure, especially as it's being sold for a premium, that we're receiving
- appropriate value." The oil companies don't own
the resources. They have leases and the right to develop our resources
for us. And we share a value, we're partners there, because they do the
producing for us. But we own the resources.'
-
- "The lesson here is that the APF is a model ready
for export. Readers of this newsletter will know that governments in places
as diverse as Alberta, Brazil, Iraq, Libya, and Mongolia have recently
thought seriously about imitating the Alaska model.
-
- "Some might be tempted to think that the APF isn't
a true BIG and it isn't motivated to help the poor. Not so: Jay Hammond,
the Republican governor of Alaska who created the APF, came all the way
to Washington, D.C., to speak at the U.S. Basic Income Guarantee Network
conference in 2004. He told me that his intention was to create a BIG to
help everyone-most especially the disadvantaged. If he had his way the
APF fund would now be producing dividends four to eight times the current
individual level of $2,069.
- "Others might dismiss the Alaska model saying that
it is a unique case because Alaska has so much oil wealth. Again, not so:
Alaska ranks only sixth in U.S. states in terms of per capita GDP, with
an average income just over $43,000 in 2006, more than $15,000 per year
less than number-one Delaware, and only $6,000 per year ahead of the national
average. Any other state or the federal government can afford to do what
Alaska has done.
-
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