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Bureaucracy-Ridden Welfare System vs. Guaranteed Income

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« on: August 24, 2010, 11:13:48 am »

It is a decades-old tradition among right-wing ideologues (particularly from the Austrian School) to rail self-righteously against the “welfare state” that was instituted by FDR and then expanded by LBJ. And while much of this right-wing criticism is rooted in Malthusianism and in simple class bias -- and is thus, to that extent, invalid and self-discrediting -- what few on the political “Left” seem to realize is the significant extent to which this criticism is actually valid and justified.

In fact, the most devastating critique of federal welfare programs I know of is not even from a right-wing source, but from a source that may surprise most progressives and left-leaning independents. To illustrate what I mean, consider the following excerpt:

------------------------------

"Welfare as we know it cannot be fixed. Tinkering with it for decades has accomplished little of value. Bureaucracies within bureaucracies have bloomed, mutations of a polluted society. Too many contradictory interests compete at the public trough in the name of poor people....Poor people of our inner cities, small towns, and rural countryside exist in a sprawling banana republic where fighting factions of outsiders -- institutionalized poverty pimps -- battle over which issue, which treatment, what cabal will dominate at any given point in time....

"A major impediment to dismantling the existing social welfare programs is the extent to which they have degenerated into patronage troughs. The government contracts to 'help' are first and foremost political tools to strengthen the base of elected officials at all levels of government."

------------------------------

The above is from page 261 of Tyranny of Kindness: Dismantling the Welfare System to End Poverty in America -- a book written by Theresa Funiciello, a former recipient of welfare. It was this book (large portions of which can be read here) more than any other that made me realize just how horribly flawed and shamefully corrupt the federal welfare system truly is.

Now, at this point some of you are probably wondering: what (if anything) does Ms. Funiciello propose replacing these ridiculously bureaucratized “social welfare programs” with? What again may surprise some to learn is that she proposes none other than Milton Friedman's negative income tax.

On page 278 of the same book, she writes:

------------------------------

"People unfamiliar with the history of income maintenance are often surprised to learn that a conservative economist, Milton Friedman, developed the negative income tax model and a Republican president, Nixon, first proposed a bill to implement it. As a practical and political matter, though, it makes sense. In theory, this plan wiped out much of the entrenched multilayered, self-perpetuating welfare bureaucracy." [Emphasis Funiciello's]



------------------------------

I agree with Ms. Funiciello that instituting a guaranteed income via the negative income tax has, over the current system, the advantage of eliminating from the social safety net equation the “entrenched multilayered, self-perpetuating welfare bureaucracy” she rightly criticizes, and hence all of the “institutionalized poverty pimps” who, as such, do far more to exploit poverty for their own personal gain than they ever do to eliminate it. Unfortunately, however, it retains the self-defeating disadvantage of being financed by a tax on labor.

To eliminate the job-destroying, poverty-increasing wage tax from the equation as well, I propose that -- instead of a negative income tax -- we institute a hybrid system consisting of both (a) the credit-based “National Dividend” advocated by author and monetary reformer, Richard C. Cook, and (b) the rent-based “Citizen’s Dividend” advocated by many Georgists.

In the following two posts I’ll provide a brief introduction to each.
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« Reply #1 on: August 24, 2010, 11:15:37 am »

In his excellent book, We Hold These Truths: The Hope of Monetary Reform, Richard C. Cook advocates as a solution to “poverty in the midst of plenty” what he calls the “National Dividend.”

What, specifically, is this Dividend?

It is a “cash stipend” drawn from our national credit and paid out equally to all the legal residents of the U.S. (or, if you live in England, Canada, or some other country, from the national credit -- and to the legal residents -- of that nation).

If you’re now asking, “What is our national credit?”, the answer is that it’s the very same abstract (yet unquestionably real) source that private banks as a whole currently draw from -- in effect -- when they “extend” financial credit to cash-strapped loan customers.

More specifically, and in the words of Richard C. Cook, national credit refers to “the total ability of a nation to produce goods and services through increasing efficient use of science and technology.”

As he puts it on page 57 of We Hold These Truths:

    "The idea of credit when viewed from a macroeconomic perspective refers to the ability of an economy to produce goods and services of value to the members of that community. It refers to the potential value of that economy to support life."

And from page 32:

    "Viewed from a philosophical level, the nation's credit, including that portion from which the National Dividend would be drawn, is the monetization of an intangible; i.e., the totality of the nation's real wealth as expressed by its laws, history, physical plant, land, resources, and the education, skills, and character of its people. Without all of these, the government could print dollars--or the banks could lend them--from here to eternity, and they would be totally useless."

On what basis will the size of the National Dividend be determined?

In short, on the basis of the objectively assessed “gap” between (a) the total market value of the goods and services that are produced in the aggregate and (b) what society, as a whole, is able to purchase.

From pages 18-19:

------------------------------

"In 2006, our Gross Domestic Product was about $12.98 trillion, with the enormous trade deficit of $726 billion figured in. Our total national income was $10.23 trillion, including wages, salaries, interest, dividends, personal business earnings, and capital gains. Of this amount, at least 10 percent, or $1.02 trillion, was reinvested either at home or abroad, including retirement savings, leaving total available purchasing power of $9.21 trillion.

"The $12.98 trillion GDP minus $9.21 trillion of purchasing power equals $3.77 trillion. That's what the figures indicate was the shortfall that would have been required to consume the entire GDP.

"Simply put, we do not earn enough to buy what we produce. What does this mean, and who, or what, is to blame?

"Despite the high CEO compensation, the huge Wall Street salaries and bonuses, and the wealth and income disparities between high and low earners, we should not blame the “capitalists,” i.e., the business owners, for the entire problem. Business profit taken as dividends is only about seven percent of GDP.

"Besides, many of the 'capitalists' are us! Forty-five million Americans have some measure of stock ownership, including a multitude of tax-deferred retirement plans and mutual funds. This is one of the strengths of our economy--the 'ownership society'--for  which we deserve a pat on the back. Also, the dividends we earn are mostly spent, so most of it finds its way back into the economy.

"Let's look at the situation from a slightly different standpoint, starting with the $12.98 trillion GDP. It's said that the U.S. economy is the most powerful and productive in the history of the world. This is true, even with our trade deficit and our decline in manufacturing due to relocating so much of our factory production abroad. So we should be dancing in the streets. There should be festivals, celebrations! Obviously that's not happening. Why not?

"It's not happening because of how we define the $3.77 trillion gap between GDP and earnings. Since we produce the value of our entire GDP with such lower labor costs, the $3.77 trillion differential really should be viewed as the total societal dividend, right?

"Wrong! It's not defined as a dividend; rather it's defined as a shortfall. This is because it still appears in prices. And with the stagnation of wages and salaries, combined with the current slowdown in appreciation of housing values, resulting in lower capital gains, the shortfall is growing.

"Obviously, those goods and services still have to be paid for--the entire $12.98 trillion. The way they are paid for is through income and through debt. Purchasing power covers three-fourths of it. The rest is covered by borrowing. Yes, you, the consumer must go out and borrow to cover the $3.77 trillion gap between GDP and purchasing power. This is how much our debt increased in 2006--the amount of new debt less what we paid off. This new debt was 29 percent of GDP last year.

"Note that this analysis deals with gross numbers, so does not dwell on the major social problem that income disparities are growing within the U.S., with a higher proportion of income each year going to the wealthiest segments of society. Conversely, the debt burden which fills the gap between GDP and income falls disproportionately on the lower income brackets.

"But the point is undeniable. Our ability to produce our incredible GDP with relatively little labor means that, under the existing system, we have to borrow money from financial institutions and pay with interest to enjoy what really should be the leisure dividend mentioned at the start of this report....

"Finally, these numbers shouldn't surprise anyone. Every responsible analyst has made the point that ours is a consumer-based economy and that consumer borrowing keeps it afloat. It's why economists and politicians keep such a close eye on the "consumer confidence" polls. It's why President George W. Bush, after the 9/11 tragedy, told us to 'go shopping.'"

------------------------------

What is the cause of this production/consumption gap Mr. Cook speaks of?

As hinted to above, it is the unavoidable fact that a significant portion of the business costs that show up in the prices of the goods and services we buy is not paid out in individual earnings (particularly wages and returns on capital goods).

From pages 26-27:

------------------------------

"In 1920, Scottish industrial engineer Major C.H. Douglas published a book entitled Economic Democracy, where he wrote that several major factors associated with modern mechanized production result in a gap between the value of manufactured goods and the purchasing power distributed through wages, salaries, and dividends. That is, he addressed the exact problem the U.S. and other developed economies were facing both then and now.

"After more than a decade of continuously writing on the subject, Douglas, in a 1932 publication, The Old and New Economics, listed several systemic causes 'of a deficiency of purchasing power as compared with collective prices of goods for sale.' These included business profits not distributed as dividends (retained earnings); individual savings, i.e., 'mere abstention from buying'; 'investment of savings in new works, which create a new cost without fresh purchasing power'; accounting factors, where costs previously incurred are carried over into current prices; and 'deflation', i.e., 'sale of securities by banks and recall of loans.'

"Other elements not mentioned by Douglas include insurance, which is costly in the U.S., maintenance of unused plant capacity, which is extensive due to the decline of U.S. manufacturing output, employer retirement contributions, and the cumulative sum of retained earnings and other cost factors when businesses buy from each other.

"These factors all show up in the prices of goods and services but are not paid as earnings to individuals. A simple way to understand what happens is that prices that a business charges must not only pay for labor costs but must also cover all non-labor costs, as well as equip the firm to perform in the future.

"Also, while the financial and accounting systems force consumers to pay for the costs of capital depreciation, they do not give them credit for appreciation of the value of the business that will appear through future capital gains. This applies particularly to technology-intensive companies where high R&D costs much be recovered in prices but do not show up proportionately in employees' immediate take-home pay.

"Taken together, the impact of all these factors is devastating to consumers and the economy at-large, because we cannot possibly earn enough to compensate for what the tax and accounting systems label as costs."



------------------------------

Thus, at a macroeconomic level, the National Dividend will merely delink the “extension” of socially-created credit from institutionalized indebtedness to private banks. So instead of borrowing our own credit from private bankers as we do now, we (through our elected representatives in government) will simply issue it to ourselves. It will be comparable to the amount of credit being “extended” to us already via fractional reserve lending, except that, unlike now, we won't owe it all back -- plus compound interest -- to private banks.

For a more detailed explanation, see:

       http://www.globalresearch.ca/index.php?context=va&aid=11397
       http://www.globalresearch.ca/index.php?context=va&aid=12932
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« Reply #2 on: August 24, 2010, 11:16:27 am »

There are many Georgists and Neo-Georgists who advocate instituting a “Citizen’s Dividend.”

What, specifically, is this Dividend?

It is a dividend paid on an equal per capita basis to all the citizens of a nation out of the surplus revenue generated by a tax on the economic rent of land (otherwise known as the land value tax or Single Tax).

What is the economic rent of land?

To any relative newcomer wishing to fully understand the answer to that question, I first offer the following ten-page visual illustration (which takes only about five minutes to read through):

            http://henrygeorge.org/rent1.htm

Assuming the reader has carefully examined the above illustration, I now offer to him or her the following article by economist Fred Foldvary (all emphasis original):

------------------------------

http://www.progress.org/archive/fold10.htm

See The Cat

by Fred E. Foldvary, Senior Editor

A man was walking down a shopping street and came to a store window where there was a big drawing full of lines and squiggles. A sign by the drawing asked, "Can you see the picture?"

All the man could see was a chaos of lines going every which way. He stared at it and tried to make out some kind of design, but it was all a jumble. Then he saw that some of the lines formed ears, and whiskers, and a tail. Suddenly he realized that there was a cat in the picture. Once he saw the cat, it was unmistakable. When he looked away and then looked back at the drawing, the cat was quite evident now.

                                       

The man then realized that the economy is like the cat. It seems to be a jumble of workers, consumers, enterprises, taxes, regulations, imports and exports, profits and losses - a chaos of all kinds of activities. Here are fine houses and shops full of goods, but yonder is poverty and slums. It doesn't make any sense unless we understand the basic principles of economics. Once we have this understanding, the economy becomes clear - we see the cat instead of a jumble. We then know the cause of poverty and its remedy. But since most folks don't see the cat, social policy just treats the symptoms without applying the remedies that would eliminate the problem.

What is this economics cat? It starts with the three factors or resource inputs of production: land, labor, and capital goods. Land includes all natural resources and opportunities. Labor is all human exertion in the production of wealth. Capital goods are tools (such as machines and buildings) used to produce wealth. The owners of land get rent, workers get wages, and the owners of capital goods get a capital return.

Picture an unpopulated island where we're going to produce one good, corn, and there are eleven grades of land. On the best land, we can grow ten bushels of corn per week; the second land grows nine bushels, and so on to the worst land that grows zero bushels. We'll ignore capital goods at first. The first settlers go the best land. While there is free ten-bushel land, rent is zero, so wages are 10. When the 10-bushel land is all settled, immigrants go to the 9-bushel land.

Wages in the 9-bushel land equal 9 while free land is available. What then are wages in the 10-bushel land? They must also be 9, since labor is mobile. If you offer less, nobody will come, and if you offer a bit more than 9, everybody in the 9-bushel land will want to work for you. Competition among workers makes wages the same all over (we assume all workers are alike). So that extra bushel in the 10-bushel land, after paying 9 for labor, is rent.

That border line where the best free land is being settled is called the "margin of production." When the margin moves to the 8- bushel land, wages drop to 8. Rent is now 1 on the 9-bushel land and 2 on the 10-bushel land. Do you see what the trend is? As the margin moves to less productive lands, wages are going down and rent is going up. We can also now see that wages are determined at the margin of production. That is the "law of wages." The wage at the margin sets the wage for all lands. The production in the better lands left after paying wages goes to rent. That is the "law of rent." If you understand the law of wages and the law of rent, you see the cat! To complete our cat story, suppose folks can get land to rent and sell for higher prices later rather than using it now. This land speculation will hog up lands and make the margin move further out than without speculation, lowering wages and raising rent even more.

Now we have good news and bad news. The good news is that when we put in the capital goods we first left out from the example above, the tools and technology increase the productivity of all the lands. If production doubles, rent doubles, and wages go up. Wages won't double, because workers have to pay for the tools, but even if wages go up 50 percent, that's good news, and why industrialized economies have a high standard of living. Also, high skills enable educated workers to have a wage premium above the basic wage level. The bad news is that the technology enables us to extend the margin to less productive land, which lowers wages again. So there is this constant race between technology raising wages and lower margins reducing wages.

It's bad enough that a low margin sets the wage level at the poverty level, especially in countries with low technology and low skills. Government then taxes away a large chunk of those wages, which hurts those workers with higher wages. The result is a highly unequal distribution of income. Workers have the low wage set at the margin and reduced further by taxes, while the owners of land get all the extra production as rent, but pay less in taxes because of tax breaks to landowners. (Capital-goods returns boil down to wages and rents, because capital goods are ultimately produced using land and labor.)

Behold the cat! The margin at the least productive land sets low wages, and the rest goes to rent, resulting in inequality, with poverty for low-skilled workers. If we see the cat, the remedy is also clear: stop taxing workers, and let everybody share the rent. If we get public revenues from the rent instead of wages, the public benefits equally from the rent, while workers get the full product of their labor. And wages will be higher, too, because by collecting the rent, we eliminate land speculation, moving the margin up to more productive lands, which raises the wage level. The economy grows faster too, since the government no longer punishes enterprise and investment with taxes, so wages go up faster over time. We all become fat cats.

Those who see the cat have a clear picture of how the economy works. They can see why we have social problems, and what the remedy is. Those who don't see the cat keep trying treat the symptoms with welfare, but they never cure the economic disease. Others see the welfare as not curing anything, and think they can just get rid of the welfare. Only those who see the cat realize that the remedy is a shift of public revenue from labor to land so that we eliminate poverty and thus any need for the welfare state.

------------------------------

For those who haven't already seen it, the following YouTube clip dovetails quite nicely with the above:

       

For answers to common objections, see:

       http://globalgulag.freesmfhosting.com/index.php/topic,333.0.html
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« Reply #3 on: August 24, 2010, 11:19:20 am »

To eliminate the job-destroying, poverty-increasing wage tax from the equation as well, I propose that...we institute a hybrid system consisting of both (a) the credit-based “National Dividend” advocated by author and monetary reformer, Richard C. Cook, and (b) the rent-based “Citizen’s Dividend” advocated by many Georgists.

I'd like to elaborate on the above. Based on his estimation that the production/consumption "gap" is approximately $3.8 trillion, Mr. Cook advocates closing this gap by paying out to every U.S. citizen an annual dividend of $12,000 (give or take a little, depending on how large the "gap" is that year).

Yet according to his own argument, much if not most of this "gap" could be closed simply by instituting both a Greenback money system and a Georgist tax system. Allow me to explain.

On page 26 of his book, We Hold These Truths, Mr. Cook writes:

------------------------------

"After more than a decade of continuously writing on the subject, Douglas, in a 1932 publication, The Old and New Economics, listed several systemic causes 'of a deficiency of purchasing power as compared with collective prices of goods for sale.' These included business profits not distributed as dividends (retained earnings); individual savings, i.e., 'mere abstention from buying'; 'investment of savings in new works, which create a new cost without fresh purchasing power'; accounting factors, where costs previously incurred are carried over into current prices; and 'deflation', i.e., 'sale of securities by banks and recall of loans.'

"Other elements not mentioned by Douglas include insurance, which is costly in the U.S., maintenance of unused plant capacity, which is extensive due to the decline of U.S. manufacturing output, employer retirement contributions, and the cumulative sum of retained earnings and other cost factors when businesses buy from each other.

"These factors all show up in the prices of goods and services but are not paid as earnings to individuals. A simple way to understand what happens is that prices that a business charges must not only pay for labor costs but must also cover all non-labor costs, as well as equip the firm to perform in the future." [Emphasis added]

------------------------------

Of all the "non-labor costs" that add to the prices of goods and services, the three most costly to business owners as a whole are

(a) usurious interest (which business owners pay not just directly through debt service to private banks, but indirectly as a result of the silent incorporation of usurious interest costs into the selling price of all the capital goods they buy -- higher prices being the only way that the indebted producers of those capital goods can capture the necessary portion of other people's loan principal to service their interest-bearing debts to private banks);

(b) the deadweight loss imposed by taxes on labor and capital goods (see this and this); and

(c) speculative rents and land prices ("rack-renting" for short).

A Greenback money system will delink the issuance of new money from the lending of it. In doing so, it will greatly reduce the need that most (if not all) business owners currently have to incur usurious interest costs in the first place, and thereby reduce the aforementioned "gap" to a considerable degree.

A Georgist tax system will reduce this gap still further by simultaneously eliminating both the deadweight loss imposed by taxes on wages, sales and capital goods and the parasitic rack-renting to which land speculation invariably and inevitably gives rise.

Thus, by implementing those two reforms, the "gap" between our gross domestic product and what each of us, on average, is able to purchase will be much smaller than it is now. Consequently, although there might still be a need for the size of the gap-closing National Dividend to be several hundred billion, it will not be necessary to resort to the multi-trillion dollar cash handout that Mr. Cook calls for.

It is for this reason that the "hybrid system" I advocate contains a much more modest version of Mr. Cook's "National Dividend."
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« Reply #4 on: August 24, 2010, 11:20:33 am »

In his excellent book, We Hold These Truths: The Hope of Monetary Reform, Richard C. Cook advocates as a solution to “poverty in the midst of plenty” what he calls the “National Dividend.”

If a grassroots push for the National Dividend -- whether the all-out version proposed by Richard C. Cook, or the more modest version proposed by me -- ever attracts serious media attention, it will be met by all sorts of objections (including the usual hysterical reactions by monetary flat-earthers from the Austrian School). Below are responses by Cook himself to what I predict will be the two most common.

Wouldn’t even a modest version of the National Dividend cause runaway hyperinflation?

From pages 33-34 of We Hold These Truths:

    "Bankers and their apologists have always argued that any program that publicly-generated credit would cause inflation. This is nothing but propaganda.

    "Because a National Dividend would replace bank-credit of the same amount, it would bring the total monetary supply of the nation only up to the level of the GDP. It would not result in 'more dollars chasing the same amount of goods,' but would simply bridge the gap. Not only would the National Dividend be non-inflationary, it could even be counter-inflationary. It would allow businesses to liquidate previous financial costs incurred when they borrow from banks without creating new ones to the same extent.

    "Besides, what is truly inflationary is the Federal Reserve's policy of creating, then deflating, asset bubbles, the latest being the housing bubble. With such bubbles, prices inflate on the way up but stay well above their original level on the way down. This can do irreversible structural damage to the economy and is in fact a wealth transfer mechanism from ordinary consumers to wealthier people who own more assets.

    "Inflation due to the housing bubble has affected not only home prices--it has also escalated rents and business leases, made it harder for people to start small businesses, and increased the difficulty for young people even to find a rented room. Meanwhile, home and property ownership is becoming a high-priced commodity available only to the rich.

    "This type of inflation has an immense ripple effect. What it means is that the dollars people earn purchase less throughout the economy, because every business must operate in a building and on a parcel of land which now costs much more....

    "Also, bank interest by itself is inflationary, because it adds to the cost of doing business at many points in the production-consumption stream. The Federal Reserve claims it is fighting inflation when it raises interest rates, but what it actually does is slow down economic activity by suppressing wages and salaries or throwing people out of work. The higher interest itself pulls in the other direction by adding to costs. Thus inflation has continued even during periods of monetary contraction, as in the 1979-83 recession when the Consumer Price Index rose almost 20 percent."

Isn't the National Dividend just “socialism” or “communism” in disguise?

From pages 31-32 of We Hold These Truths:

    "A National Dividend would represent the truth wealth of the community, the bounty of our incredible GDP and our amazing efficiency, of which all citizens should be the beneficiaries once the business owners receive a reasonable profit. Again, it's important to realize that Social Credit is not a socialist system. Rather it is 'democratic capitalism,' in contrast to the 'finance capitalism' that has become so destructive that it threatens to destroy the world rather than submit to reform."

And from pages 84-85:

    "The idea current today of the individual and community in conflict is a sign of an unbalanced, even sociopathic, frame of mind. Thus we have in our own time two extreme views. One is that individuals should be able to do just about anything they want and that society is a hindrance—the mind-set that has fostered free-market capitalist economics. The other is that the individual should be totally subservient to the group as in state communism.

    "Curiously, though, neither ideology upholds the same ideals for all members of the culture. Free-market capitalists see nothing wrong if a handful of oligarchs holds everyone else in thrall to debt. The commissars of communism find it perfectly natural if their position in the party grants them privileges the rank-and-file will never attain. So both systems are rife with oppression, brutality, and hypocrisy."
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« Reply #5 on: August 24, 2010, 11:25:18 am »

There are many Georgists and Neo-Georgists who advocate instituting a “Citizen’s Dividend.”

What, specifically, is this Dividend?

It is a dividend paid on an equal per capita basis to all the citizens of a nation out of the surplus revenue generated by a tax on the economic rent of land (otherwise known as the land value tax or Single Tax).

Below are my responses to two questions that many are likely to have about the Citizen's Dividend.

Will it be either necessary or desirable for the federal LVT (land value tax) to be levied directly on individuals?

No and no. A Georgist author explains it this way:

    "The question naturally arises: How should Federal, state, and local governments obtain the rental value of land? The practical answer is that we should return to the constitutional provision that requires our Federal government to apportion direct land taxes among the states according to their respective populations. The states, in turn, should obtain this revenue and the revenue for their own support by apportionment among their counties, in the way Nebraska, Texas, Montana, and a number of other states still do. The counties, as agents of the states, should collect their revenue, and the revenue needed by state and Federal governments, from the rental value of their lands, using existing property tax collection machinery. These changes would reverse the trend of the last 50 years. Instead of lower levels of government becoming increasingly dependent upon higher levels of government for aid, thereby losing their independence, the higher levels of government would return to dependence upon the lower. That is as it should be if we wish to preserve our liberties."

-- Robert De Fremery, Rights vs. Privileges, pp. 39-40


How large will this rent-based Citizen’s Dividend (“Rent Dividend” for short) be?

This will depend on (a) what (if any) cuts are made to the federal budget, and (b) the rate at which land rent is taxed.

According to a study conducted by economist Michael Hudson in 1997 -- and subsequently cited by economist Fred Harrison in the book, The Losses of Nations -- land rent makes up roughly 14% of the national income, or what in 2009 was approximately $1.7 trillion. Even higher estimates have been made by economists such as Fred Foldvary and Mason Gaffney, but for now I’ll work with Dr. Hudson’s more conservative estimate.

Now, even if that $1.7 trillion had been federally taxed at a full 100% rate, then, all else being equal, it still would not have been enough to replace all other federal taxes.

However, if combined with both (a) the National Dividend discussed earlier, and (b) urgently-needed spending cuts, then even at a more modest tax rate of, say, 50%, it would easily have allowed for the complete elimination of what are by far the two most costliest and burdensome of all federal taxes -- the individual income tax and the payroll tax.

Now, what may surprise some to learn is that, of those two, the one that hits most American households the hardest is actually the payroll tax, not the income tax. And since much of the payroll tax goes to pay what is, in effect, a “dividend” of sorts (whatever actual money was once in the so-called Social Security “trust fund” was raided long ago and replaced with government IOUs), it only makes sense that this horribly regressive, job-destroying tax be replaced with the National Dividend. (This of course means that, during the transition period, the National Dividend will apply only to qualified recipients of Social Security and Medicare. But everyone else will benefit from it as well -- albeit indirectly -- due to the consequent elimination of the payroll tax.)

This leaves only the individual income tax to contend with, and that in turn brings us to the issue of spending cuts.

What again may surprise some to learn is the extent to which federal spending can be reduced without so much as touching Social Security, Medicare, Medicaid, or any of the poverty assistance programs (e.g., TANF) administered by the Department of Health and Human Services.

First of all, with regard to the so-called “Troubled Asset Relief Program” (TARP), although for obvious political reasons the actual cost of this program has yet to appear in the official budget, virtually no one (except, of course, for Wall Street bankers and both their puppet politicians in Washington D.C. and their lapdog apologists in the corporate **** “news” media) disputes that it has put taxpayers on the line for literally tens of trillions of dollars.

To understand just how outrageous and criminal the TARP really is, consider the following analogy. Let’s say that a casino gambler incurs a gambling debt that is so fraudulent that it exceeds not only the entire U.S. money supply, but the annual productive output of the entire planet. Since the gambler is obviously unable to pay, let’s further assume that he proceeds to have bought-off politicians use their taxing power to steal most of your future money on his behalf in order to pay down his gambling debt, and that he then adds insult to injury by saying you shouldn’t complain since he’ll likely “loan” some of your own money back to you at interest.

Would you consider that an even semi-“legitimate” use of your tax dollars? Neither would I.

Yet that is exactly what bought-off politicians from both major parties (including John McCain and Barack Obama) essentially did when they instituted and subsequently expanded the TARP, because the quadrillion-dollar derivatives bubble that created the apparent “need” for the TARP in the first place was (and is) nothing more than the accumulated gambling debt of Wall Street speculators. That’s why, in my “Monetary Reform” thread, I call for putting all derivatives-infected mega-banks through Chapter 11 bankruptcy and legally voiding all of their derivatives contracts. That, coupled with both the abolition of fractional reserve lending and the institution of a debt-free money supply in place of the current debt-based money supply, would render the TARP meaningless, and thus allow for its quick, unconditional and long-overdue repeal.

Second, with regard to our imperialist, terroristic, hornets’ nest-stirring foreign policy, by putting an immediate end to this policy, we can (and must!) reduce the parasitic war budget by at least $400 billion.

Third, the institution of a Greenback money system will, by eliminating the need for a “national debt,” free taxpayers from the burden of servicing the interest on such debt. This will generate an additional savings of at least $164 billion.

Other key cuts I advocate include the following:

* Abolish both FEMA and the CIA.

* In view of the fact that 9/11 was an inside job orchestrated by traitors within our own government (see this and this), abolish all post-9/11 police state expansion measures -- including the “Patriot” Act, Homeland “Security” Act, Military Commissions Act, and Presidential Directive 51 -- and with them the entire “Homeland Security Monstrosity.”

* Abolish the DEA (while ending the insane drug war).

* Abolish the BATFE (while repealing all federal gun control laws).

* Abolish the so-called Department of “Education” (while eliminating any and all federal involvement in education).

* Abolish corporate welfare.

* Delink the “ground transportation” function of the Department of Transportation from taxation, since this function will be financed instead via the process of “monetizing” (free of debt) the construction and renovation of roads, bridges and rail lines.

When combined with the minimum savings afforded by a non-interventionist foreign policy ($400 billion) and a Greenback money system ($164 billion), the above cuts yield a total savings of at least $861 billion.

Subtract this from the $1.061 trillion in revenue that the individual income tax is expected to generate in 2010, and we have a mere $200 billion in federal outlays (not counting those outlays currently financed by other federal taxes) to fund from a tax on land rent. Thus, if we assume a tax rate of 50% -- and hence a minimum of $850 billion in revenue -- we have a revenue surplus of at least $650 billion.

In the interest of making the transition to a Georgist tax system as smooth and graceful as possible, the first spending priority for that surplus will be to fund emergency relief tax credits to “fixed income” homeowners (i.e., retirees dependent entirely upon government transfer payments) who experience a net increase in their overall tax burden. But this will only be needed as a temporary transition measure, because the combined economic effect of a Georgist tax system and Greenback money system will (among other things) make it many times easier for the average wage-earner to save for his or her own retirement. So much so, in fact, that within 20 to 30 years there will be little if any need to devote most of the rent surplus to a mere segment of the population, because by then general prosperity will have been so much greater than now for so long, that it will be virtually impossible for anyone to be property "rich” yet monetarily "poor” (as is the case now among many “seniors”).

As to the question of homeowners still in the workforce, they will need no such “relief” during the transition phase. Why? Two reasons. First, because -- unlike low-income retirees on Social Security (who pay comparatively very little in federal taxes) -- the savings that workers and small business owners will incur from no longer having to pay either the federal payroll tax or individual income tax will completely offset the cost of paying a higher tax on land rent. Second, because the surge in pre-tax income they’ll experience as a result of the LVT-induced economic boom will offset said cost even further.

In light of all this, it follows that, once the transition phase is complete, the entire surplus can be safely distributed equally among everyone (not just retirees), and thereby become a true “Citizen’s Dividend.”

Returning now to the original question of how large the Rent Dividend will be, if we divide the aforementioned minimum surplus of $650 billion by the current number of adult U.S. citizens -- roughly 230 million -- we have a relatively modest figure of about $3,000. (Note: at the start of the aforementioned transition phase, it will of course be at least double this for fixed income homeowners and zero for those still in the workforce; but upon completion of said phase the surplus will be distributed equally among all adult citizens, thus reducing the per person figure by 1/3 to 1/2). However, when we take into account the estimate made by economist Nicolaus Tideman on page 147 of The Losses of Nations -- that the U.S. economy could (and almost certainly would) produce nearly 25 percent more than it does now if land rent were the primary source of public revenue -- and how this, in turn, would dramatically increase the market-based rental value of land -- and hence the tax base, and hence the surplus -- we find that the Dividend will start out closer to $4,000 per person, then rise slowly over time as the economy continues to grow.

Thus, if we assume the aformentioned National Dividend is $800 billion, then when we combine these two dividends we have a guaranteed minimum income of at least $7,000. That may not sound like much at first, but it must always be remembered how much lower housing costs will be under a Georgist tax system (see this and this).
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« Reply #6 on: August 24, 2010, 11:25:58 am »

Of the many Pavlovian reactions and emotion-driven objections that the advocates of a Guaranteed Income are certain to encounter from the countless armchair critics, reactionary naysayers and do-nothing ideologues who always come out of the woodwork whenever someone proposes a meaningful, non-partisan solution to a major social problem, one of the most common will be the usual Chicken Little prediction that it will unleash a nationwide epidemic of chronic laziness and leech-like behavior.

Yet in most if not all cases this is nothing more than a desperate and shameless appeal to either class prejudice or, worse, racial prejudice.

In my view, no one in world history has ever provided a more eloquent response to this age-old objection (in all its variants) than Henry George:

------------------------------

"But it may be said, to banish want and the fear of want, would be to destroy the stimulus to exertion; men would become simply idlers, and such a happy state of general comfort and content would be the death of progress. This is the old slaveholders' argument, that men can be driven to labor only with the lash. Nothing is more untrue.

"Want might be banished, but desire would remain. Man is the unsatisfied animal. He has but begun to explore, and the universe lies before him. Each step that he takes opens new vistas and kindles new desires. He is the constructive animal; he builds, he improves, he invents, and puts together, and the greater the thing he does, the greater the thing he wants to do. He is more than an animal. Whatever be the intelligence that breathes through nature, it is in that likeness that man is made. The steamship, driven by her throbbing engines through the sea, is in kind, though not in degree, as much a creation as the whale that swims beneath. The telescope and the microscope, what are they but added eyes, which man has made for himself; the soft webs and fair colors in which our women array themselves, do they not answer to the plumage that nature gives the bird? Man must be doing something, or fancy that he is doing something, for in him throbs the creative impulse; the mere basker in the sunshine is not a natural, but an abnormal man.

"As soon as a child can command its muscles, it will begin to make mud pies or dress a doll; its play is but the imitation of the work of its elders; its very destructiveness arises from the desire to be doing something, from the satisfaction of seeing itself accomplish something. There is no such thing as the pursuit of pleasure for the sake of pleasure. Our very amusements amuse only as they are, or simulate, the learning or the doing of something. The moment they cease to appeal either to our inquisitive or to our constructive powers, they cease to amuse. It will spoil the interest of the novel reader to be told just how the story will end; it is only the chance and the skill involved in the game that enable the card-player to 'kill time' by shuffling bits of pasteboard....People who lead what are called lives of fashion and pleasure must have some other object in view, or they would die of ennui; they support it only because they imagine that they are gaining position, making friends, or improving the chances of their children. Shut a man up, and deny him employment, and he must either die or go mad.

"It is not labor in itself that is repugnant to man; it is not the natural necessity for exertion which is a curse. It is only labor which produces nothing—exertion of which he cannot see the results. To toil day after day, and yet get but the necessaries of life, this is indeed hard; it is like the infernal punishment of compelling a man to pump lest he be drowned, or to trudge on a treadmill lest he be crushed. But, released from this necessity, men would but work the harder and the better, for then they would work as their inclinations led them; then would they seem to be really doing something for themselves or for others. Was Humboldt's life an idle one? Did Franklin find no occupation when he retired from the printing business with enough to live on? Is Herbert Spencer a laggard? Did Michael Angelo paint for board and clothes?

"The fact is that the work which improves the condition of mankind, the work which extends knowledge and increases power, and enriches literature, and elevates thought, is not done to secure a living. It is not the work of slaves, driven to their task either by the lash of a master or by animal necessities. It is the work of men who perform it for its own sake, and not that they may get more to eat or drink, or wear, or display. In a state of society where want was abolished, work of this sort would be enormously increased."

-- Henry George, Progress and Poverty, pp. 466-68

------------------------------
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« Reply #7 on: August 24, 2010, 11:27:35 am »

http://www.globalresearch.ca/index.php?context=va&aid=18568

“Job Creation”–Stupid Is as Stupid Does

by Richard C. Cook



Global Research, April 9, 2010
Richard C. Cook - 2010-04-06

No one can seriously doubt that the huge amounts of borrowed federal dollars poured into the economy since Barack Obama became president has prevented even more jobs from being lost than might otherwise have been the case in the current devastating recession. It’s impossible, however, to come up with a “real” number, because no economist has a good enough handle on matters to sort out all the variables at play, including readjustments due to the fall of housing prices, low interest rates, a slightly improved export environment, rebounding of depleted inventories, new highway construction resulting from stimulus spending, etc. Still, let’s look at some facts about the current so-called “recovery”:

*  Un- and under-employment remains high–officially over 17 percent, not including people who have given up looking for work.

*  The cost to create (or save) jobs has been ludicrously high. Estimates of what it has cost the federal government–meaning the taxpayer–to create a single job range from $70,000 to $500,000, depending on whether bailouts lavished on the failed banking system are included.

*  While Wall Street rakes in record profits and the stock market creeps back  with the DJIA now approaching 11,000, the rest of the economy is sputtering. Public service jobs at the state and local level, including teacher positions, are disappearing like shredded newspaper in a blast furnace. The best the Obama administration can come up with for the next phase is some extremely convoluted encouragement for more bank lending to small businesses, even though these businesses are operating in an environment of crippled consumer demand that may last for years to come.

*  The two economic sectors that are reasonably “strong”–the military and health care–are essentially non-productive. The military uses Keynesian deficit-spending to support its gargantuan job base, while the health care industry feasts at the public trough through the ever-increasing cost of Medicare and other spending programs. But like the bailouts and stimulus, it’s being done by both sectors with borrowed or printed money through marketing of Treasury bonds whose value becomes more precarious by the day.

*  What stimulus there is has been is coming to an end as the Federal Reserve reduces “quantitative easing” and the Obama administration launches its bipartisan deficit reduction commission.

Many commentators have said, as a joke, that it would have been cheaper if the government had just printed the money and given it away. But such an approach would not be a joke at all. It would be enlightened public policy.

The real joke is that in a technological age job-creation is a completely wrong approach to distributing consumer purchasing power, because the world does not need everyone to have a job in order to produce what is needed for the population to live a decent, comfortable life. This is the great fallacy of Keynesian economics, which aims at full employment and endless economic growth.

Not only does the fruitless quest for a full-employment economy put the entire population under the most brutal forms of financial and psychological stress, it also erodes the value of a constantly inflating currency and puts entirely too much money in the hands of the big banking and government institutions which spend it for their own aggrandizement on financial bubbles and wars.

America is the most wasteful, bloated, materialistic, and violent culture on the planet precisely because the economic treadmill we are racing along moves constantly faster all the time. This treadmill has been created on purpose by the only people who benefit from it–the ones at the very top of the heap.

The solution is simple though paradoxical: sufficient numbers of adult persons should be given enough money to purchase the necessities of life without having to work at all.

This is so because the benefits of technology have brought us to the point where distribution of purchasing power without reference to labor is the most efficient and least wasteful economic model available. The borrowed or printed federal dollars currently lavished on the banks, the armed forces, and the government bureaucracies that implement stimulus programs would be much more efficiently spent if simply given away.

Call it a basic income guarantee or a national dividend or whatever you like and pay for however much of it you want to through fair taxation of the obscenely wealthy–it really doesn’t matter. You could even establish an optional retirement age of 40 or 45. The important thing is that such a program would recognize that with productivity as high as it is today, too many workers get in each other’s way. Those who don’t have to work shouldn’t be required to do so. Instead, they can create, do volunteer service, or work at low-paying jobs that are still socially desirable such as teaching or the arts.

An adjunct to such a program would be to provide local producers’ cooperatives the legal authority to create credit on their own either by utilizing the national currency or by use of trading credits that not only would circulate locally but could also be used to pay taxes. Such legislation at the national level would free small business from bank usury much more effectively than current government proposals and create more jobs.

Today’s economic crisis is actually the mismanagement of nature’s bounty in an age where technology has solved the problem of scarcity if it is properly viewed as the heritage of all mankind, not the cartel of financiers, corporate oligarchs, military strongmen, and politicians who have the world at the throat in order to safeguard their own wealth and power. Instead they should relax their grip and realize that they too would benefit from a world where all could breathe freely in an economic environment of peace, dignity, and sharing.

Believe me, it could happen and someday probably will.


© Copyright Richard C. Cook, Richard C. Cook , 2010
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« Reply #8 on: August 24, 2010, 11:29:23 am »

http://www.wealthandwant.com/HG/crime_of_poverty.html

The Crime of Poverty

by Henry George

An address delivered in the Opera House,
Burlington, Iowa, April 1, 1885



Ladies and Gentlemen:

I PROPOSE to talk to you tonight of the Crime of Poverty. I cannot, in a short time, hope to convince you of much; but the thing of things I should like to show you is that poverty is a crime. I do not mean that it is a crime to be poor. Murder is a crime; but it is not a crime to be murdered; and a man who is in poverty, I look upon, not as a criminal in himself, so much as the victim of a crime for which others, as well perhaps as himself, are responsible. That poverty is a curse, the bitterest of curses, we all know. Carlyle was right when he said that the hell of which Englishmen are most afraid is the hell of poverty; and this is true, not of Englishmen alone, but of people all over the civilised world, no matter what their nationality. It is to escape this hell that we strive and strain and struggle; and work on oftentimes in blind habit long after the necessity for work is gone.

The curse born of poverty is not confined to the poor alone; it runs through all classes, even to the very rich. They, too, suffer; they must suffer; for there cannot be suffering in a community from which any class can totally escape. The vice, the crime, the ignorance, the meanness born of poverty, poison, so to speak, the very air which rich and poor alike must breathe.

Poverty is the mother of ignorance, the breeder of crime. I walked down one of your streets this morning, and I saw three men going along with their hands chained together. I knew for certain that those men were not rich men; and, although I do not know the offence for which they were carried in chains through your streets, this I think I can safely say, that, if you trace it up you will find it in some way to spring from poverty. Nine tenths of human misery, I think you will find, if you look, to be due to poverty. If a man chooses to be poor, he commits no crime in being poor, provided his poverty hurts no one but himself. If a man has others dependent upon him; if there are a wife and children whom it is his duty to support, then, if he voluntarily chooses poverty, it is a crime — aye, and I think that, in most cases, the men who have no one to support but themselves are men that are shirking their duty. A woman comes into the world for every man; and for every man who lives a single life, caring only for himself, there is some woman who is deprived of her natural supporter. But while a man who chooses to be poor cannot be charged with crime, it is certainly a crime to force poverty on others. And it seems to me clear that the great majority of those who suffer from poverty are poor not from their own particular faults, but because of conditions imposed by society at large. Therefore I hold that poverty is a crime – not an individual crime, but a social crime, a crime for which we all, poor as well as rich, are responsible.

Two or three weeks ago I went one Sunday evening to the church of a famous Brooklyn preacher. Mr. Sankey was singing and something like a revival was going on there. The clergyman told some anecdotes connected with the revival, and recounted some of the reasons why men failed to become Christians. One case he mentioned struck me. He said that he had noticed on the outskirts of the congregation, night after night, a man who listened intently and who gradually moved forward. One night, the clergyman said, he went to him, saying: "My brother, are you not ready to become a Christian?" The man said, no, he was not. He said it, not in a defiant tone, but in a sorrowful tone; the clergyman asked him why, whether he did not believe in the truths he had been hearing? Yes, he believed them all. Why, then, wouldn't he become a Christian? "Well," he said, "I can't join the church without giving up my business; and it is necessary for the support of my wife and children. If I give that up, I don't know how in the world I can get along. I had a hard time before I found my present business, and I cannot afford to give it up. Yet I can't become a Christian without giving it up." The clergyman asked, "are you a rum-seller?" No, he was not a rum-seller. Well, the clergyman said, he didn't know what in the world the man could be; it seemed to him that a rum-seller was the only man who does a business that would prevent his becoming a Christian; and he finally said: "What is your business?" The man said, "I sell soap." "Soap!" exclaimed the clergyman, "you sell soap? How in the world does that prevent your becoming a Christian?" "Well," the man said, "it is this way; the soap I sell is one of these patent soaps that are extensively advertised as enabling you to clean clothes very quickly, as containing no deleterious compound whatever. Every cake of the soap that I sell is wrapped in a paper on which is printed a statement that it contains no injurious chemicals, whereas the truth of the matter is that it does, and that though it will take the dirt out of clothes pretty quickly, it will, in a little while, rot them completely. I have to make my living in this way; and I cannot feel that I can become a Christian if I sell that soap." The minister went on, describing how he labored unsuccessfully with that man, and finally wound up by saying: "He stuck to his soap and lost his soul."

But, if that man lost his soul, was it his fault alone? Whose fault is it that social conditions are such that men have to make that terrible choice between what conscience tells them is right, and the necessity of earning a living? I hold that it is the fault of society; that it is the fault of us all. Pestilence is a curse. The man who would bring cholera to this country, or the man who, having the power to prevent its coming here, would make no effort to do so, would be guilty of a crime. Poverty is worse than cholera; poverty kills more people than pestilence, even in the best of times. Look at the death statistics of our cities; see where the deaths come quickest; see where it is that the little children die like flies – it is in the poorer quarters. And the man who looks with careless eyes upon the ravages of this pestilence, the man who does not set himself to stay and eradicate it, he, I say, is guilty of a crime.

If poverty is appointed by the power which is above us all, then it is no crime; but if poverty is unnecessary, then it is a crime for which society is responsible and for which society must suffer. I hold, and I think no one who looks at the facts can fail to see, that poverty is utterly unnecessary. It is not by the decree of the Almighty, but it is because of our own injustice, our own selfishness, our own ignorance, that this scourge, worse than any pestilence, ravages our civilisation, bringing want and suffering and degradation, destroying souls as well as bodies.  Look over the world, in this heyday of nineteenth century civilisation. In every civilised country under the sun you will find men and women whose condition is worse than that of the savage: men and women and little children with whom the veriest savage could not afford to exchange. Even in this new city of yours with virgin soil around you, you have had this winter to institute a relief society. Your roads have been filled with tramps, fifteen, I am told, at one time taking shelter in a round-house here. As here, so everywhere; and poverty is deepest where wealth most abounds.

What more unnatural than this? There is nothing in nature like this poverty which today curses us. We see rapine in nature; we see one species destroying another; but as a general thing animals do not feed on their own kind; and, wherever we see one kind enjoying plenty, all creatures of that kind share it. No man, I think, ever saw a herd of buffalo, of which a few were fat and the great majority lean. No man ever saw a flock of birds, of which two or three were swimming in grease and the others all skin and bone. Nor in savage life is there anything like the poverty that festers in our civilisation.

In a rude state of society there are seasons of want, seasons when people starve; but they are seasons when the earth has refused to yield her increase, when the rain has not fallen from the heavens, or when the land has been swept by some foe – not when there is plenty. And yet the peculiar characteristic of this modern poverty of ours is that it is deepest where wealth most abounds.

Why, today, while over the civilised world there is so much distress, so much want, what is the cry that goes up? What is the current explanation of the hard times? Overproduction! There are so many clothes that men must go ragged, so much coal that in the bitter winters people have to shiver, such over-filled granaries that people actually die by starvation! Want due to over-production! Was a greater absurdity ever uttered? How can there be over-production till all have enough? It is not over-production; it is unjust distribution.

Poverty necessary! Why, think of the enormous powers that are latent in the human brain! Think how invention enables us to do with the power of one man what not long ago could not be done by the power of a thousand. Think that in England alone the steam machinery in operation is said to exert a productive force greater than the physical force of the population of the world, were they all adults. And yet we have only begun to invent and discover. We have not yet utilised all that has already been invented and discovered. And look at the powers of the earth. They have hardly been touched. In every direction as we look new resources seem to open. Man's ability to produce wealth seems almost infinite—we can set no bounds to it. Look at the power that is flowing by your city in the current of the Mississippi that might be set at work for you. So in every direction energy that we might utilise goes to waste; resources that we might draw upon are untouched. Yet men are delving and straining to satisfy mere animal wants; women are working, working, working their lives away, and too frequently turning in despair from that hard struggle to cast away all that makes the charm of woman.

If the animals can reason what must they think of us? Look at one of those great ocean steamers ploughing her way across the Atlantic, against wind, against wave, absolutely setting at defiance the utmost power of the elements. If the gulls that hover over her were thinking beings could they imagine that the animal that could create such a structure as that could actually want for enough to eat? Yet, so it is. How many even of those of us who find life easiest are there who really live a rational life? Think of it, you who believe that there is only one life for man — what a fool at the very best is a man to pass his life in this struggle to merely live? And you who believe, as I believe, that this is not the last of man, that this is a life that opens but another life, think how nine tenths, aye, I do not know but ninety-nine-hundredths of all our vital powers are spent in a mere effort to get a living; or to heap together that which we cannot by any possibility take away. Take the life of the average workingman. Is that the life for which the human brain was intended and the human heart was made? Look at the factories scattered through our country. They are little better than penitentiaries.

I read in the New York papers a while ago that the girls at the Yonkers factories had struck. The papers said that the girls did not seem to know why they had struck, and intimated that it must be just for the fun of striking. Then came out the girls' side of the story and it appeared that they had struck against the rules in force. They were fined if they spoke to one another, and they were fined still more heavily if they laughed. There was a heavy fine for being a minute late. I visited a lady in Philadelphia who had been a forewoman in various factories, and I asked her, "Is it possible that such rules are enforced?" She said it was so in Philadelphia. There is a fine for speaking to your next neighbour, a fine for laughing; and she told me that the girls in one place where she was employed were fined ten cents a minute for being late, though many of them had to come for miles in winter storms. She told me of one poor girl who really worked hard one week and made $3.50; but the fines against her were $5.25. That seems ridiculous; it is ridiculous, but it is pathetic and it is shameful.

But take the cases of those even who are comparatively independent and well off. Here is a man working hour after hour, day after day, week after week, in doing one thing over and over again, and for what? Just to live! He is working ten hours a day in order that he may sleep eight and may have two or three hours for himself when he is tired out and all his faculties are exhausted. That is not a reasonable life; that is not a life for a being possessed of the powers that are in man, and I think every man must have felt it for himself. I know that when I first went to my trade I thought to myself that it was incredible that a man was created to work all day long just to live. I used to read the "Scientific American," and as invention after invention was heralded in that paper I used to think to myself that when I became a man it would not be necessary to work so hard. But on the contrary, the struggle for existence has become more and more intense. People who want to prove the contrary get up masses of statistics to show that the condition of the working classes is improving. Improvement that you have to take a statistical microscope to discover does not amount to anything. But there is not improvement.

Improvement! Why, according to the last report of the Michigan Bureau of Labor Statistics, as I read yesterday in a Detroit paper, taking all the trades, including some of the very high priced ones, where the wages are from $6 to $7 a day, the average earnings amount to $1.77, and, taking out waste time, to $1.40. Now, when you consider how a man can live and bring up a family on $1.40 a day, even in Michigan, I do not think you will conclude that the condition of the working classes can have very much improved.

Here is a broad general fact that is asserted by all who have investigated the question, by such men as Hallam, the historian, and Professor Thorold Rogers, who has made a study of the history of prices as they were five centuries ago. When all the productive arts were in the most primitive state, when the most prolific of our modern vegetables had not been introduced, when the breeds of cattle were small and poor, when there were hardly any roads and transportation was exceedingly difficult, when all manufacturing was done by hand — in that rude time the condition of the laborers of England was far better than it is today. In those rude times no man need fear want save when actual famine came, and owing to the difficulties of transportation the plenty of one district could not relieve the scarcity of another. Save in such times, no man need fear want. Pauperism, such as exists in modern times, was absolutely unknown. Everyone, save the physically disabled, could make a living, and the poorest lived in rude plenty. But perhaps the most astonishing fact brought to light by this investigation is that at that time, under those conditions in those "dark ages," as we call them, the working day was only eight hours. While with all our modern inventions and improvements, our working classes have been agitating and struggling in vain to get the working day reduced to eight hours.

Do these facts show improvement? Why, in the rudest state of society in the most primitive state of the arts the labor of the natural bread-winner will suffice to provide a living for himself and for those who are dependent upon him. Amid all our inventions there are large bodies of men who cannot do this. What is the most astonishing thing in our civilisation? Why, the most astonishing thing to those Sioux chiefs who were recently brought from the Far West and taken through our manufacturing cities in the East, was not the marvellous inventions that enabled machinery to act almost as if it had intellect; it was not the growth of our cities; it was not the speed with which the railway car whirled along; it was not the telegraph or the telephone that most astonished them; but the fact that amid this marvellous development of productive power they found little children at work. And astonishing that ought to be to us; a most astounding thing!

Talk about improvement in the condition of the working classes, when the facts are that a larger and larger proportion of women and children are forced to toil. Why, I am told that, even here in your own city, there are children of thirteen and fourteen working in factories. In Detroit, according to the report of the Michigan Bureau of Labor Statistics, one half of the children of school age do not go to school. In New Jersey, the report made to the legislature discloses an amount of misery and ignorance that is appalling. Children are growing up there, compelled to monotonous toil when they ought to be at play, children who do not know how to play; children who have been so long accustomed to work that they have become used to it; children growing up in such ignorance that they do not know what country New Jersey is in, that they never heard of George Washington, that some of them think Europe is in New York. Such facts are appalling; they mean that the very foundations of the Republic are being sapped. The dangerous man is not the man who tries to excite discontent; the dangerous man is the man who says that all is as it ought to be. Such a state of things cannot continue; such tendencies as we see at work here cannot go on without bringing at last an overwhelming crash.

I say that all this poverty and the ignorance that flows from it is unnecessary; I say that there is no natural reason why we should not all be rich, in the sense, not of having more than each other, but in the sense of all having enough to completely satisfy all physical wants; of all having enough to get such an easy living that we could develop the better part of humanity. There is no reason why wealth should not be so abundant, that no one should think of such a thing as little children at work, or a woman compelled to a toil that nature never intended her to perform; wealth so abundant that there would be no cause for that harassing fear that sometimes paralyses even those who are not considered "the poor," the fear that every man of us has probably felt, that if sickness should smite him, or if he should be taken away, those whom he loves better than his life would become charges upon charity. "Consider the lilies of the field, how they grow; they toil not, neither do they spin." I believe that in a really Christian community, in a society that honored not with the lips but with the act, the doctrines of Jesus, no one would have occasion to worry about physical needs any more than do the lilies of the field. There is enough and to spare. The trouble is that, in this mad struggle, we trample in the mire what has been provided in sufficiency for us all; trample it in the mire while we tear and rend each other.

There is a cause for this poverty; and, if you trace it down, you will find its root in a primary injustice. Look over the world today—poverty everywhere. The cause must be a common one. You cannot attribute it to the tariff, or to the form of government, or to this thing or to that in which nations differ; because, as deep poverty is common to them all the cause that produces it must be a common cause. What is that common cause?

[Continued...]
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"For the first years of [Ludwig von] Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling

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