Friday, June 11, 2010

News from the Network, Vol. 3, No. 23

Earlier this week we happened to catch a few minutes of a PBS show giving financial advice. The orientation seemed to have been inspired by the Tea Party movement, for the theme was that, given the current situation and the degree of government control over the economy and the financial system, taxes were going to have to go up.

It wasn't clear what solution was being proposed, aside from reducing government involvement in people's lives and reducing taxes. Of course, from the perspective of binary economics, the solution is obvious: don't tax a shrinking tax base more in an effort to wrest additional funding for massive government spending. Instead, sponsor a program of economic growth in which everyone can participate, both as owners of labor and as owners of capital.

By "economic growth" we do not mean inflating the prices of equity shares and debt on the secondary market ("Wall Street") for the benefit of speculators and gamblers. Instead, we mean a program of new capital formation to produce marketable goods and services. This must be done in such a way as to ensure as far as possible that Say's Law of Markets operates. Thus, all new capital must be financed by the expansion of bank credit collateralized by capital credit insurance and reinsurance instead of existing accumulations of savings. Further (and this is critical), all new capital must be directly owned by as many people as possible who will use the income from the new capital first to make debt service payments, and then for consumption instead of reinvestment.

The real point of the PBS show, however, seemed to be to frighten the audience of mostly older people by stating that the only source of taxation was "rich dead people." The presenter highlighted funding deficiencies in Social Security, health care, insurance, and pensions ("SHIP") and claimed that the SHIP was about to hit the fan. The clear implication was that the government was planning on implementing a confiscatory estate tax, and then ensuring that the wealthy elderly wouldn't be long for this world by cutting health services and retirement income. There is, however, a far bigger target that the presenter did not consider, although at first it seemed as though he might be heading in that direction.

Throughout history there have been non-governmental organizations that, except in collectivist or socialist societies, have provided a social safety net that supplemented or, in many cases, replaced State efforts. Traditionally this has been organized religion. Religious institutions, Jewish, Christian, Muslim, and Pagan, have provided certain basic social services that the State was unable or unwilling to supply.

Naturally, providing social services requires funding. This led religious foundations to accumulate large amounts of sterile wealth in the form of current money and (more importantly) productive wealth in the form of land and other investments. As we might expect, this often provided too great a temptation for the State to resist when it got into financial difficulties — as States have a tendency to do when the people lack a private property stake and thus the power to force the State to be accountable for its spending and other bad habits. Time and again throughout history governments have yielded to temptation and confiscated the wealth of temples, churches, synagogues, and mosques.

Yes, it has been (temporarily) profitable for a State to confiscate wealth from religious organizations. It usually backfires, however, and the State ends up in worse financial difficulties than before — and usually suffers from a decline in public morals as a result of having undermined the authority of organized religion. There is, however, a much more lucrative target these days, a target whose wealth is, by ordinary standards, almost beyond belief, dwarfing anything that organized religion was ever able to accumulate. That is the private secular foundation, an institution unique to Anglo-American civilization. (Yes, countries outside of the Anglo-American civilization have private foundations, but these are, by and large, either imitations of the Anglo-American model, or formerly religious institutions that were secularized.)

It will require very little for today's politicians to realize that confiscating the immense wealth of private foundations would be very easy to carry out — and to justify. There are, after all, government programs duplicating virtually everything done by private foundations, from saving animals to funding colleges and universities. Harvard's endowment, for example, is huge — and the ordinary taxpayer is unlikely to shed many tears were that wealth to be seized and replaced with a government "guarantee" of funding. And what need have we of the Gates or Ford Foundations when the State can take care of everyone?

Of course, such accumulations would not be the first targets. They have money, and thus the ability to hire competent legal help. No, the first victims would be the small family foundations and non-profits that, while well-intentioned, are frequently not as well-run or as effective as they should be in carrying out their stated purposes. It would be much more efficient for the State to take over their functions — and endowments. Nor would it be difficult for investigators to find just cause for such confiscations. Early in the 16th century the agents of Henry VIII Tudor were always able to find some kind of irregularity that justified shutting down the many small religious establishments throughout England. On those rare occasions when the investigators simply weren't able to find anything, they were ordered to manufacture something. Of course, during the whole process, the larger religious establishments were continually assured that they were completely safe. The king was only concerned with the poorly run small establishments.

Until he needed more money. State power had increased so much by then that Henry VIII was able to get indictments for treason (and confiscation of wealth) on any grounds and against anyone he chose. This included even the king's best friend, the outstandingly innocent Thomas More, whose abilities as one of the greatest lawyers who ever lived couldn't save him once Henry decided that Thomas stood in the way of the king getting what he wanted.

Whatever their feelings, then, it is clearly in the best interests of every private foundation as well as every religious establishment in the world to push for immediate enactment of the Capital Homestead Act. Toward that end, here's what we've been doing over the past week:
• On Monday CESJ had its triennial visit from Father William Christensen, S.M., a missionary in Bangladesh. "Brother Bill," as he is known, gave a presentation on his work with the Institute for Integrated Rural Development (IIRD). Technical problems prevented the gathering from previewing a short video about the work IIRD is doing, but Brother Bill is a very entertaining and informative speaker. He did very well without the visual aid. The video is a work-in-progress for broadcast on PBS, and we should be able to let you know when it is ready. More information on Brother Bill's work can be obtained from the website of "Partners in Sustainable Development International" in St. Louis, Missouri.

• On Wednesday the CESJ core group went to Maryland to the beautiful home of Rev. Robert Brantley and his wife, Dr. Astra Brantley, to attend another presentation by Brother Bill, this time to leaders in business and academia. Possibly due to the heavy rainstorms that swept through the area, few were able to attend, but the Johns Hopkins representative, from the new Carey School of Business Global MBA program was able to make it. She made tentative arrangements for a possible follow-up meeting in Chicago with Lydia Fisher, author of Cinderella of Wall Street, who is planning on hosting a dinner for Brother Bill some time in September or October of this year. The Johns Hopkins representative also raised the possibility of visiting Brother Bill after his return to Bangladesh to view the operation of IIRD on site.

• An interesting subject Brother Bill covered in his presentation was tissue culturing to improve plant varieties. If we understand what he described correctly, it sounds like the "reverse" of the process invented by Louis Pasteur to produce vaccines. Pasteur's process involves isolating a disease under laboratory conditions, then progressively weakening it until a strain develops that is too weak to be fatal, but still strong enough to cause the host to produce effective defenses. This was an improvement on Edward Jenner's technique that relied on locating a naturally weak strain of a disease and introducing it into the host, e.g., cowpox, a naturally occurring and generally non-lethal strain of smallpox. What Brother Bill described was taking tissue samples of, e.g., potatoes, isolating them, and progressively strengthening them until a strain develops that is too strong for the naturally occurring diseases and pests in the environment, thereby increasing crop yields. This may be an improvement on the technique used by Luther Burbank, which — similar to Jenner's method — relies on finding naturally occurring new strains of (obviously) potatoes and other plant varieties. The Jenner/Burbank approach depends on chance, while the Pasteur approach is more guided and geared toward specific results. Both methods are invaluable and complement each other.

• A brief discussion on Justice University, a special project of Rev. Brantley, followed the presentation by Brother Bill. A number of interconnections were seen, linking the project to a number of efforts throughout the rapidly growing Just Third Way network.

• On Thursday, Norm, Bob Brantley, and Mohktar Kamel met at the home of Dr. Ahmed Subhy Mansour, head of the International Quranic Center in Northern Virginia. Mohktar was formerly with the IMF, and now has a weekly show on Fairfax Public Access. The meeting was to discuss bringing together the International Quranic Center, Bob Brantley's Universal Peacemakers Foundation, the Center for Economic and Social Justice, the Coalition for Capital Homesteading, the American Revolutionary Party, and other groups working toward the goal of economic and social justice for all to mobilize popular support for getting American leadership to adopt the Just Third Way to win the War of Ideas. Some potential "prime movers" have been identified. The idea is to reach out to the Muslim world and mobilize moderates and grassroots to counter Muslim fanatics. The common ground is the natural moral law, the basic principles of which are common to all major religions and philosophies. The immediate goal is to put justice and the Just Third Way at the leading edge of change by September of this year. The hope is to awaken American leaders on how to win the War of Ideas. One possible project would be a radio program, similar to the Voice of America but privately funded and independent, to bring these ideas to the Muslim world.

• On Friday, Mohktar interviewed Brother Bill on his television show. This allowed Brother Bill to present his work to a wider audience.

• As of this morning, we have had visitors from 48 different countries and 40 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Brazil, Canada, and Australia. People in Belgium, Egypt, Maldives, the United States and Brazil spent the most average time on the blog. The most popular posting is the "Prologue" to the current "Out of the Depths" series on French financial experiments. This is followed by the weekly "News from the Network" with two of the top five spots, followed by three of the postings on a more just tax.
Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

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