Monday, March 25, 2013

Mazurek Dąbrowskiego, VI: Credit Vouchers, NOT Share Vouchers


The word “voucher” is pretty much a dirty word in Central and Eastern Europe when connected with “privatization.”  It gets almost the same kneejerk reaction as “school voucher” does in certain circles in the United States.  This writer recalls when he was in Moscow (Russia, not Idaho), he was told that just mentioning “voucher” in a barroom was as provocative as wearing an orange ribbon in certain areas of Chicago or Boston on March 17th.

That’s why we hastened to tell John that what we’re talking about is NOT the same as the voucher scheme that was proposed in which people were to receive vouchers that could be traded for existing shares directly, as was done in Russia.  Capital Homesteading works by allowing people to purchase new full dividend-payout, voting shares on credit, and having the shares pay for themselves out of future dividends tax-deductible at the enterprise level.  If full payout of profits are encouraged at the enterprise level to escape paying taxes on enterprise income, and profits are tax deductible when received at the enterprise level but treated as ordinary income when distributed at the personal level, most shares will pay for themselves in less than ten years.

The key here is that as the old voucher scheme operated in Russia, the vouchers themselves had value.  That meant that most people sold them for a quick profit because they needed money right away.  Vouchers that were worth U.S. $200 were sold for as little as U.S. $6.

In contrast, a Capital Homesteading voucher would be absolutely worthless to anyone except the person to whom it was given.  The voucher would be exclusively to support the right of every citizen to borrow money from local commercial banks to purchase shares that had been properly investigated. In turn, the nation’s central bank would (as in Section 13 of America’s Federal Reserve Act, be empowered to rediscount the local bank’s loan paper by issuing currency backed by productive assets.  It would not give anybody the shares for free, nor could the right be transferred.  (See “A New Look at Prices and Money.”)

Depending on the rate of economic growth and starting from birth, it is possible that by age 50 or 60 a child born today could accumulate enough shares to generate an income sufficient to meet all reasonable needs, including education and healthcare.

#30#

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