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Monetary Reform Discussion

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Re: MONETARY: Usury is a problem, a binary response

This message, sent originally on October 23 in response to Dan Parker's posting below, was bounced by the COG server.  Here is the shortened version.

Dan, to correct a misimpression, for over forty years I have been a supporter of a
basic minimum income free of welfare state bureaucrats to meet the basic subsistence needs of the poor.  When I first came to Washington in late 1959 as a lawyer on welfare and education issues in the U.S. Department of Health, Education and Welfare, I was an in-house radical favoring the guaranteed annual income (GAI) or "the negative income tax" (NIT) for the poor.  When I became a program officer in the government's so-called War on Poverty" and later as director of planning for the Citizens Crusade Against Poverty (a broad-based private sector coalition funded by liberal labor unions, church groups and the Ford Foundation), I was directly involved in promoting and subsidizing community action programs to mobilize people from poverty communities to become organized politically to get behind a national goal of a basic income, using a GAI or NIT mechanism.

In 1965, I learned of Kelso's ideas and was immediately convinced that he had
developed a new and comprehensive system model that would overcome many of the objections I encountered about the GAI and NIT, as well as the "debt free money" approach of Major Douglas that I later became exposed to.  While I continue to favor the basic income idea as an expedient while growing the system toward general affluence, Kelso's system, as I try to prove in my paper on prices and money, makes the most sense to me on moral and logical grounds.  Within the Kelso framework it becomes easier to envision a simple and fair tax system to cover the costs of government services as well as to redistribute incomes for meeting basic incomes of the poor, but in a way that would minimize the opposition of taxpayers.  Because it overcomes the political and moral weaknesses of both the Wall Street capitalist model and all socialist models but combines the ideals of both, the Kelso system is the most politically viable system that I've come across.

Here is Kelso in a nutshell:  Private property rights in one's labor inputs as well as universal access to participatory rights as an owner of productive assets, uniquely and systemically connects production to consumption for every person, as well as for society as a whole, without sacrificing basic principles of a free and just market economy, limited government, and the elegant distributive aspect of private property ("To each according to the value of his contribution").  Kelso's system also would make the redistributive principle of welfare and charity ("To each according to need") less and less necessary over the time it takes to add sufficient technologies (productive capital) to achieve universal affluence and maximum opportunities for all to engage in non-paying leisure work.  Most important in my scale of values it would decentralize economic power and free choice to the level of individual human beings, the most effective safeguard against the potential abuses of concentrated power and for sustaining a free and just society.  It is in my mind the essence of true populism and the best social constraint on non-accountable and undeserved elitism.

With this brief description of the Kelso system for those who have not had the
opportunity to study the basic writings by Kelso, Ashford, Shakespeare and CESJ's team, let me now insert my comments to your posting below:

Dan Parker wrote:

Norman, I am always happy to support any initiative that
deals knowledgably and honestly with the current means
of money creation.  To my mind, subsequent details must
be accurate to the reality of the situation to maintain credibility
in the face of what can be fierce criticism.  However, among
those working for positive economic change, I think we are
wise to downplay the differences in our proposals; in the service
of working on the ideas of progress, especially monetary reform,
that are held in common.
I agree that we can agree to disagree on approaches but must be able to unite on the common goal of fundamental restructuring of the money creation and credit systems.  Coming together in modern Rome (Washington, D.C.) on that goal was the purpose of the 10,000 Name Campaign launched by Shann Turnbull and me.  Organized right, we would be in a position to request that Fed Chairman Alan Greenspan, President Bush, James Wolfensohn and other people located in this crossroads of the world add their names to the "Statement of Shared Vision."  Presented with a display of unity, we could attract the world media to the "fatal flaw" in monetary policy -- it disenfranchises economically most of the voters and makes them increasingly dependent on a small power elite, it widens the wealth gap within all countries and among countries.  If we get our act together on our objectives, we can focus the "spotlight of shame" on current policy makers if they refuse to face the facts that lie at the roots of global terrorism and the anarchistic elements in the anti-globalization movement.
This is what will build the pressure necessary to
spur positive change in my opinion, without which few if any
of the details of any reform effort will be enacted.
When we reach a critical mass of people totally committed to working together based on a shared vision and common goal of radical overhaul of monetary policy, we will succeed.  We're getting there.
I agree that the real, or administrative, costs of creating money
should be passed on to the user, as this will of course encourage
efficiencies.  If there is no interest, whether money is issued as
a share or as a debt has no mathematical bearing on the effects
of these symbolic units.
I see a big legal and philosophical difference between a share of stock (a bundle of rights and powers with respect to productive assets of a going concern) and debt (a mere promise to pay back in the future something acquired on an advance of credit).  And I think that a rational monetary system would make a sharp distinction between credit extended for producing wealth and credit extended for consuming wealth.  The first is designed to increase the productive power of the borrower and the second creates artificial purchasing power that has historically weakened and enslaved the borrower economically.
However, I do think some money issued as a dividend on a share, is
a good reminder of the populations right to their Cultural Heritage, and a
positive psychological boost.
This brings us closer together.
However, given the choice of quibbling
over this issue now, or supporting another effort that seeks positive
change regarding the money system, the choice to make is obvious in
my opinion.
I agree with you, but it not an either-or issue.  The two go together in building a winning coalition of people power.
There is a growing movement towards a basic income in
some countries that could incorporate the concept of the Cultural
Heritage into binary economics (if I am correct in understanding that a
basic income is not a central plank of your model - even though
Rodney has it mentioned in two areas).
Rodney and I are together on this, but I favor the tax route over the money creation route for providing a basic income.  The important thing is to put interest-free money for financing growth linked to universal access to capital ownership, at the leading edge of the movement.  I am less concerned over the method for achieving the short-term goal of a minimal basic income for the poor.  When we win on the strategic goal, we will have sustainable growth that will generate full employment for several generations at least, while creating personal Capital Homesteading stakes to generate adequate and secure incomes for people to retire on. and pass on to their heirs.
As a reminder, I am not, strictly speaking, a social crediter, as I
belong to a political party (which I see as a good platform for spreading
ideas, and nothing more).
Good for you.  I'm a proud political independent and revolutionary centrist myself.
I also questioned the compensated price
specifics, but only in the matter of *possible* efficiency increases, and
not the intent. There is a rather strong group of social crediters,
operating
out of Rougemont (sp?), near Montreal, who advocate two possible versions
of a compensated price that are based on percentage discounts, rather than
profits, as Wally Klinck and C.H. Douglas do.  I think the latter is
preferable,
as although the discount method simplifies matters, it does not account for
what will be widely varations in capital investment and disinvestment that
will occur among various mature and new industries.  So there is some
variance
on the details, even from those who consider themselves Douglasites.
Where can I learn about the "Compensated Price based on percentage discounts"?  I  happen to favor a workably competitive free market system as the best way to determine prices.  The free and just marketplace, in my opinion,  is one of four essential pillars of a binary economic system for determining the "Just Price", the "Just Wage" and the "Just Profit."  It is the most efficient means I can conceive of for adjusting prices to consumer demands (and keeping costs under control), while charity and state-subsidized basic incomes, in my opinion, are the most efficient means to enable poor people to be able to pay the market prices for all their necessities of life.  (Our tax proposals would eliminate all taxes in incomes below the poverty line, so that basic government services would have to be paid for by the non-poor with a single rate tax on all forms of consumable incomes above the poverty line, as a sort of user fee for a minimalist government to perform functions that the private sector cannot provide, e.g., defense, the monetary system, the regulatory system, the judiciary, the legislature.
Speaking of which, Wally Klinck wrote a piece which expressed a
beautiful vision, in which prices trended down to zero, as technological
and process improvements necessitate a larger and larger compensated
price.  This to my mind seems to be the most likely positive future for
earth,
at least for all basic needs and wants for a reasonable standard of living.
Automation will cause this, if we but let it, and all relationships that
currently
circulate around the money necessary to live will be re-oriented to higher
levels.
In a recent meeting with Rodney, he justified using debt-free money creation as an expedient way to maintain stable price levels, given the counter-inflationary effects of a binary growth macroeconomic institutional environment.  I could not deny his logic.  However, binary economics does not require stable prices.  Automation and an elimination of the wage slave system (which increases wage rates artificially and coercively) would allow prices to decline, as Wally Kling has rightfully stated, trending toward zero costs.  I'm with Wally on this, as argued in my paper on prices and money.
But again, I see it as pointless focus on debate too much, and in
the
process, not share the carrying of what is not exactly a light load.  And
again, I think the basic income ideas, perhaps strengthened a bit, in
Rodney's
take on binary economics could bridge this gap, for a significant step
toward
further improvement.

I saw that Wally's post addressed this list, and I hope to see it here, as
it
is an inspiring goal as any.  BTW, Wally has also helped out in many
monetary reform efforts that contradicted some goals of social credit,
i.e. one that advocated full employment.  I agree with Wally on this,
but I also participated in this effort, because it gave us a good platform
to
present the important plank of monetary reform.

Do you and Wally Klinck reject the conventional goal of "full employment", a goal which in my mind shackles people to the wage slave system and pits them up against machines that can outperform many human skills?  Binary economists do reject "full employment" as a short-sighted goal for national income distribution, but we generally would support policies that would encourage everyone to engage in creative works.  To do this, we would redefine and subdivide the meaning of work in the post-industrial world of the future, as did Aristotle.  Henry George, like Kelso and Douglas, also understood that the purpose of technology in a free society was to provide people more free time to become more fully human.  Under a binary world where people's incomes shifted from wage incomes to capital incomes with the advance of labor-saving technology, people would still need work to give meaning to their lives.  As we can see from observing the most affluent members of society, as the most responsible of the leisured class acquire independent asset incomes to meet their material wants, they liberate themselves from economic work (work for pay) and shift their energies to non-paying leisure work, what Aristotle called the most important work, engaging in the endless frontier of creative work of civilization, like lifetime learning, politics, spiritual mediation, scientific exploration and discovery, coaching and mentoring the young, writing, art, music, etc.
If we would have stuck
by the details of our beliefs, we would have missed the chance for thousands
of free flyers on monetary reform.  I also had the chance to address
literally
hundreds of people, as I was running in cabinet ministers riding. Some of
these people became very interested in social credit.
I've been fortunate to have had better luck in Washington.  (See http://www.cesj.org/thirdway/history3rd/kelsomeetslong.htm)
Incidently, Ernest Manning also largely rejected social credit concepts,
and for any Douglasites, his endorsement will be a mark against your
specifics for progress.
That might very well be true.  I only know what he did in 1969 as an advocate of Kelso's ideas.  As an advocate of revolutionary ideas, I give heavier weight to the message than the messenger.  When our tiny team in the 1980s advocated a
Kelsonian model for achieving regional economic democratization for U.S. assistance policy in the Caribbean and Central America to counter growing Marxist-Leninist initiatives in the region, we were successful in uniting political opposites on Capitol Hill and gained passage of a provision tacked on to the Foreign Aid Authorization Bill to establish (without taxpayer funds) under President Reagan a bipartisan Presidential Task Force on Project Economic Justice.  I was honored to serve as deputy chairman under a very conservative former Ambassador to the OAS, Secretary of the Navy, Ambassador to the European Community.  On the task force, which delivered a unanimous report to the president, the Congress and in a private audience with Pope John Paul II, were representatives of leading Washington think tanks, the AFL-CIO, the Teamsters, two leading economists, etc.  The press and academics never paid much attention to the report, but several of its provisions were included as policy options by the State Department and the World Bank.  The point I'm making is that our message, if based on universally appealing principles, should be inclusive in its outreach and we have to stay as positive as you have been, Dan, to win the war of ideas.
For myself, I am going to work largely towards the C.H. Douglas version of
social credit, as expressed by Wally Klinck, but to always be ready to lend
support or a hand for any effort that is reasonably in line with a social
credit
plank.  Whether it be interest-free local currencies, or guaranteed annual
incomes, it is all good, and advances towards the goal, without locking it
in to a suboptimal routine. Evolution is constant I believe, and that even
the punctuated equilibrium theory would be more accurately stated as
fast progress that happened because of the slow progress than went before.
We're in agreement on the evolutionary nature of change, especially if we are espousing truly revolutionary ideas.  Social systems have a natural inertia to change, confirming that we're all creatures of habit, especially if we are comfortable with the status quo.
I will look over your paper, and comment, as much as my still nascent
knowledge about binary economics will allow.

rgds
Dan Parker

Again, thanks for all your inputs.

Best regards,
Norm