Despite all the baggage and misconceptions that have been
loaded on to the term, we can look to the laws and characteristics of social
justice for guidance in what to do with the Export-Import Bank of the United
States. First and foremost, of course,
the goal of social justice is not the destruction of institutions or the social
order, even if we believe with all our hearts and souls that is the only way to
build new, presumably more just institutions and a social order.
No, social justice is directed to the common good,
specifically the institutional environment within which humanity realizes its
individual goods. Social justice is
therefore concerned with removing barriers that inhibit or prevent full
participation in the institutions of the social order, so that each person may
optimize his or her development as a human being.
With this as our guiding principle, it becomes obvious what
to do about the Ex-Im Bank.
One, the
government is concerned with the common good, our institutional
environment. It is not supposed to be
taking care of individual goods, except as an expedient in an emergency when no
other recourse is available. The Ex-Im
Bank, however, is concerned with providing an individual good: access to credit
to finance foreign purchases of U.S. exports.
That being the case, it makes sense that in the short-term
the Ex-Im Bank should be privatized. Not
in the usual way, of course. The
purchaser(s) should not be people with existing accumulations of savings. Instead, the employees of the Bank should be
permitted to purchase the Bank on credit, and pay the federal government out of
future profits.
The Bank’s charter should require that it continue to do
exactly what it is doing now and on the same terms, only as a private institution
instead of a government agency. It
should also prohibit acquisition of the Bank by anything other than a genuine
commercial bank, if it is ever sold. No
insurance. No investment banking. No consumer credit, home mortgages,
securities investments, or anything other than accepting bills and issuing
promissory notes to finance foreign purchases of U.S. exports. Period.
One advantage to privatization is that it would get the
government out of the business of trying to provide individual goods, and get
it back to its proper role of looking after the common good. Contrary to popular misconceptions, the
common good is not goods owned in common, or the aggregate of individual
goods. These are not the government’s
concern.
Another advantage is that privatization on these terms could
lead the way in a reform of the financial services industry — especially if the
Bank is at least as successful as a private sector company as it has been as a
government agency. Instead of financial
“box stores” and Megalowmarts, the financial services industry by its nature must be specialized. There is otherwise too much of a chance of
conflicts of interest and complete loss of internal control through lack of systemic
checks and balances. The repeal of
Glass-Steagall was a disaster, as some people are now finally beginning to
understand.
Two, in the
long-term a privatization of the Ex-Im Bank must be a part of a comprehensive
shift in public and private monetary and fiscal policy and a reform of the tax
system. It would otherwise be
unsustainable.
Currently, monetary, fiscal, and tax policy is dictated by
the disproved belief that the only way to finance new capital formation (or
anything else) is to produce more than is consumed and accumulate the surplus
in the form of money savings, and the near-religious dogma that human labor is the only true input to
production — the labor theory of value.
Consequently, corporations are given favorable tax treatment in the
belief that the savings thereby generated will be invested in new capital instead of being paid out to the owners, which
will presumably create jobs.
This unnecessarily complicates the tax code, and diverts
what should be income to capital owners to income for labor owners . . . in the unlikely event that it really does create jobs. It also encourages stock market speculation
by retaining earnings, shifting stock valuation from the present value of the
anticipated future stream of dividend income to changes in the value per share.
Finally, it virtually guarantees that capital ownership will
become increasingly concentrated. Small
capital owners are forced out of the capital markets by economies of scale and
the reliance on past savings that are by definition a monopoly of large capital
owners — “savings equals investment.”
It is therefore essential that sweeping reforms be implemented
at the earliest possible date. Some of
these are,
• Reform of the tax system.
Merge all personal taxation, including Social Security and Medicare,
into a single rate, levied on all income from all sources above a meaningful
exemption, e.g., $100,000 for a
“typical” family of four. Taxes should
be deferred on all income used to make debt service payments on loans used to purchase
qualified equity shares, with a lifetime limit on the amount of the deferral, e.g., $1 million. The single rate should be set at an amount
required to run the government and begin paying down the debt. Dividends should be tax deductible at the
corporate level, and treated as ordinary income at the personal level.
• Phase out all government debt financing except for
short-term borrowing out of existing savings to meet temporary shortfalls in
tax collections.
• Implement an aggressive program of expanded capital
ownership financed by commercial bank issuance of promissory notes to discount
bills of exchange, which are then immediately rediscounted at the Federal Reserve
to establish and maintain 100% reserves of asset-backed currency.
• Divest government of all ownership. Citizens should directly own everything, including land and
infrastructure, through for-profit leasing, development, and holding companies. Deeds can be covenanted to protect national parks
and similar resources, but there is no reason why, in an advanced economy,
government even needs to own the buildings it occupies or the vehicles they use
— rent or lease them from their own citizens . . . putting the people back in
charge of everything.
This list is, of course, far from exhaustive. A much more complete plan can be found in Capital
Homesteading for Every Citizen.
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