As we noted in yesterday’s posting, there is a much better alternative to the proposed “Billionaire Tax” or the minimum corporate tax, which would tax corporations whether or not they made any income — another instance of taxing something that doesn’t exist. It starts to sound as if the game plan for the U.S. economy was drawn up by the Greeks . . . the modern Greeks, not those like Aristotle who knew that economic life centers on being productive and supporting human dignity and sovereignty with equality of opportunity and access to the means. He just didn’t work it out very well, but at least he had the right idea.
Yes, Aristotle. True, he made a big mistake with his “natural slave” argument, but that was 2,500 years ago when slavery was an accepted institution, even considered essential. Who, after all, was supposed to do the menial work of producing marketable or consumable goods and services while actual human beings did the work of civilization?
Well . . . advanced technology, actually. As Aristotle noted, “when the looms weave by themselves, man’s slavery will end.” Of course, Aristotle just assumed that each person would own the automated machinery that was doing his work for him, and thus derive the income from it without actually having to do the labor himself.
That is clearly not the case today, as technology doesn’t shift the source of income for most people from their labor to their capital, it takes it completely away. This creates an untenable situation, in which that which produces (machines) does not consume, and those who need to consume (human beings) do not have the capacity to do so because they cannot produce.
|"Your receipt, sir."|
Unfortunately, instead of making it possible for people who cannot produce with their labor to produce with their capital, the powers-that-be have decided that it is far better to punish those who can produce with punitive taxation and do so in a way that has the potential to destroy the world economy.
The irony is that it would be far easier, simpler, and certainly more just to implement a program to make people productive through capital ownership, than to make everyone dependent on the government and wreck the economy in the process. It would also be more effective, as it has already been proven to work.
The technique has, in fact, been known and practiced for thousands of years. We have hard evidence to that fact from ancient records going back millennia. It’s called the science of finance. Nobody in his right mind obtains a capital asset of any kind unless he figures to gain a profit by it, and the best way to obtain such capital is to make it pay for itself out of its own profits.
We know this has been done throughout all of history because the vast amount of written material that survives from the ancient world does not consist of works of literature, but financial instruments and records. Promissory notes, drafts, bills of exchange, mortgages — all these and more have existed from time immemorial, and give valuable insights as to how ancient economies worked.
There are two basic financial techniques that are at least as old as recorded human history, and probably much older than that. One, a person has something that he trades for something that will produce — or help him produce — something he can consume or trade for something he can consume. This is the “past savings” technique.
Two, a person wants something that will produce, etc., but doesn’t have a good or service to trade for it. What does he do? He makes an agreement with the one who has what he wants, and he promises to give the other something in the future that he will produce. This is the “future savings” technique.
The past savings technique works like this. Ug the Caveman has a few roasts and steaks from his last hunting trip but needs a new spear. He goes to Gu the Cavewoman who has a spear, but no meat. They strike a bargain. Ug gives Gu meat he doesn’t need for the spear that Gu doesn’t want. Both are happy . . . as are the other members of the tribe who won’t have to support Ug and Gu out of what they produce.
The future savings technique works like this. Ug the Caveman doesn’t have any meat and he won’t get any because he doesn’t have a spear, even though he’s a good hunter. Gu the Cavewoman has a spear, but no meat because she’s a lousy hunter. Ug says to Gu, “If you give me your spear, I’ll give you half the meat from the next elk I kill.”
Gu says, “Half an elk’s meat is the price of the spear if you have half an elk’s meat to give me right now. If you are giving me a promise instead of meat on the barrelhead, however, I want half the meat of the next two elks you kill.” (This is called “discounting” using the discounted meat flow method; Ug is not paying interest to Gu, but the future value of meat instead of the present value.)
Ug has no idea what a barrelhead is, but he knows a good deal when he hears it and accepts the counteroffer. Ug goes hunting and pays off his debt in full by killing two elks. Gu knows that Ug is good for the future meat savings because the rest of the tribe stands surety for Ug, i.e., if he doesn’t pay up, they knock him on the head with a club.
Of course, that’s the way (more or less) it was done 50,000 years ago, but what about today? That is what we will look at in the next posting on this subject . . . and which would present a program to beat the Billionaire Tax and the minimum corporate tax all hollow. Or with a club over the head. . . .