U.S. Capitalist Party

One of the founding fathers of the United States, John Adams, rarely mentioned today, was important enough to be the first Vice President to George Washington and our second President. He wrote a little bit about constitutional laws and principals. The main idea of a Republic is to keep all power from collecting in one center. History taught us that to accomplish this we have to divide the power between the three classes of people: Democratic, Capitalist and Government.

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Reading the classics teaches one the basic principles on which our world was established. This has nearly all been lost in the fog of time past. All that remains are syllogysms and subjunctives it seems. In my BLOGs, i attempt to incorporate principals that are the real basis underlying civilizations as contrasted with the mythology we learn in our childhoods that goes unreflected. About me as a person: I enjoy wine(organic)and pizza (organic), and in the morning a nice strong cup of coffee - organic and fair trade whenever I can get it. I started cooking a lot more lately.

Sunday, January 08, 2006

Musings on John Adams and Republican Government

After reading John Adams' "Defence of the Constitutions of the Governments of the United States" (1787 - 1788, 3 volumes), his views on how a republic can work have become very clear. Further reading on John Adams in the Encarta Encyclopedia showed that he was the primary author of the Massachusetts constitution (still in use today) which became the model for many of the other states' constitutions. It appears also, judging from his book, that he was a primary architect of the U.S. constitution, though it was not all his own work.

The Wikipedia article on Adams gives only one mention of his book (The Encarta gives little more). Their statement is:

"While in London, Adams published a work entitled A Defence of the Constitution of Government of the United States (1787), in which he repudiated the views of Turgot and other European writers as to the viciousness of the framework of state governments. In this work, he made the controversial statement that "the rich, the well-born and the able" should be set apart from other men in a senate."

Well, first of all, Adams' oppostion to monarchical governments are what separated him from Turgot. His opposition to aristocracy is what separated him from Hamilton which is actually what led to his falling out with the Federalist party- to apply such a statement as the above to him is dishearteningly ignorant. His oppostion to simple Democracy is what separated him from Thomas Jefferson. Unlike these other men, Adams appears to have learned from history, that whenever all power is concentrated in one center there is tyranny. The solution began with Plato in his "Republic" though it was rather primitive. It advanced somewhat with Machiavelli and was revolutionized with Adams, though it is not a very common view. The common principal is the division of government into three parts.

The word Republic comes from 'res publica' and means: 'representing the people'. The problem is not with the word, but with the practice. A representative assembly that makes decisions by majority alone can only represent little more than half the population, and much of their time will be taken up with preserving their majority by oppressing the minority. We see that in the U.S. today on issues of race and religion very clearly, but these issues mask the larger issues of Capital production v.s. military preoccupation.

An aristocratic government, or government by a senate comprised of the "the rich, the well-born and the able" will be contemptuous of the commons and slavery in various forms will emerge anon. In Early Rome for instance, after monarchy was outlawed, the nation was ruled by a senate, who oppressed the commoners with debt to the point of shackles. They even held the power to create and disempower dictators to carry out their will. In Titus Livy book 2 we read:

"In spite of this triple military success both parties in Rome remained as anxious as ever about the issue of the political struggle, for the money-lenders had used all their influence and employed every device to produce a situation which was not only unfavorable to the commons, but tied the hands of the Dictator himself".

It was upon this occassion that the Tribunes were formed whose function it was to protect the people from the consuls, which were the normal executive agents of the senate. The tribunes could not be composed of anyone from the senate. It was only after this that Rome could recover from their weakening condition and fend off their hostile neighbors, who were bent on destroying Rome while it was in this state of potential civil war.

This sort of history fills Adams' works. He was never an advocate of government of one class alone, let alone a senate, although he was landed himself. For a wealthy, functioning nation, history shows only one clear pathway, and that is a balanced government that contains each of the three forms. Whenever one form or another gets the upper hand, it will usurp the rest of the power, and there is nothing then to stop it except violence by the oppressed.

So, first of all the statement in the Wikipedia is misleading in that it is out of context. It appears, to the uninformed mind searching for knowledge, that Adams was a snobby aristocrat who believed entirely in aristocracy. This is such a base insult to Adams. Adams was against simple forms of government, which is why he had so many antagonists. It was primarly his antagonists who were the lesser informed.

Secondly, much of what Adams wrote in his work was quotes from other sources. After reading his work, I recall this statement, (the version I read came from a library, so I can't quote details, though I wrote some stuff down) but I believe it was made by Machiavelli. In that segment, Adams conditionally agrees with Machiavelli, but not entirely. He makes several corrections, the one being the control over the 'purse' of government by a house of representatives, and an independent judiciary appointed during periods relatively free of political turmoil. Hence, the words quoted by Wikipedia as Adams', are not even his. Though he did believe that the classes had to each be represented by the independent branches of the government.

Historically the Senate belongs to the aristocracy, and Adams would agree with that. In our times, this would be the capitalists and not the money-lenders, since money is NOT capital, it holds value only by fiat and in fact the actual value is grounded in the functioning of the economy itself. Hence, if anyone were entitled to interest, it would be the consumers themselves and not the banks. That sounds odd, but it is much more based on capitalist principals than the charging of interest today is. If, for instance, we choose that the money lenders and not capitalists should hold the Senate, then capital should all join the Democratic party, because commoners is all they will soon be.

Now, let us look and see if Adams was correct in fighting for a senate where capital would reign dominant and accept their position in the functioning of a well constructed nation. That is within his view where there is also a House of Representatives that hold one third of the power and an executive branch that represents the government class which also retains one third of the power. Gosh, need I start another paragraph or is the term 'lobby' enough.

Today, lobbies have taken the place of capital having an actual branch of the government where their actions would otherwise be measured, contemplated and executed in a fair and rational manner to the advance of themselves AND everyone else. Sadly, this loophole is not limited to the senate, but to the house of representatives and executive branches equally. Resulting in all power concentrated in one center. Article IV, section 4 of the United States constitution guarantees every state a 'Republican' form of government. An aristocracy is not a republican form of government in the modern world. In ancient Rome people learned this was false, and recorded its failure. We know it is false, hence it is false. Being false, it is unconstitutional. Being allowed to use gambling machines on election days doesn't do anything to assuage this situation either.++++

One suggestion is a constitutional amendment limiting campaign contributions to House challengers to $100.00 per donor, Senate contestants to $10,000.00 per donor and Executive contestants get something that matches the average of the upper Senate totals out of tax coffers, divided equally between the top four contestants.

This would start to shape the branches of government to the way they were intended by those who actually knew what they were doing. Further, lobby sums should be regulated in the same way. Ultimately, it could be construed that the 24th amendment against poll taxes should bear on lobbying. If a congressperson can take money or gifts in order to gain their favor or attention, this is a defacto purchasing of votes.

For example, almost any competent econometricist could come up with a fairly dependable figure for the price of a vote on the marketing side of the equation. If a congress person ran on a ticket and gathered such and so many votes over their competition, they could technically trade those votes for cash on the various sundry issues of lobbyists. If their accounting were accurate, they could earn enough cash to purchase a reelection but not truly represent the people who voted for them. This is in fact buying votes. If the people whom the representative represents can't afford the price the representative puts on hearing issues, there is in fact a poll tax, since their votes were cast in vain unless they can pay to play. In other words, they can vote, but it doesn't count until they pay.

One suggestion is for lobby sums to reflect the same limitation as campaign contributions. This at least would level the playing field for the House of Representatives so the people, whose branch this is supposed to be, could afford to have their issues heard.

While this can be construed as a diatribe against capitalist power, in fact it is the opposite. Smaller capital makes up over 80% of the capital in the United States. Smaller capital doesn't come up with the tens of thousands of dollars that lobbying dispenses on a regular basis. Most of this money comes from the larger conglomerates and banking. For the majority of the capitalist class to be represented, it needs a common political party, one it doesn't have to share with the other form of political power.

Banking, need I go into my arguments, does not really represent capital, since money is NOT capital, but a vessel to hold value by fiat. Banking does belong in the republican party of today. Having money does not qualify as a right to profit, though the ownership of the bank itself and the employees' labor fully deserve what they earn. So, this additional money has set up a power loop which influences the government to sustain interest and in fact minimize the regulation of it, which in turn extorts copious returns that can readily be fed back into the political parties and legislators to widen the loophole. Since the charging of interest causes inflation and inflation and interest together diminish profits, functional, real capital loses political influence to the same extent that the financial extortionists gain it. The result is a diminishing of the wealth of the country, a diminishing of new investment in energy efficiency, new technologies, sustainable farming, more marginal economic sectors..., since the riskier investment returns can not compete with the extortionist power loop.

So, the argument goes, we need a U.S. Capitalist party to bring together all the capitalist interests in the country, whereupon, the smaller capitals would have an influence more proportional to their numbers. In addition if the U.S. Capitalist party were to take over the U.S. Senate, we could realize the full intent of our founding father's vision of a model republic. This in a time where we really need to come together and function as one nation rather than an assembly of selfish individuals. Or more accurately, selfish tyrants. Thomas Hobbes and John Locke have good arguments against that one.

Monday, January 02, 2006

Summary of 2005 posts

Three Constitutional Amendments

There are three constitutional amendments that we need, to keep our Republic strong and our liberty from being undermined.
  1. Economic Republic: Since money is power too, we need to divide the social product equally between the three classes: 1/3 kept by Capital, currently less than 20% of the profits of capital are retained by capital for reinvestment. 1/3 to the people, currently social security and the medicare stuff total to just over 1/5 of the social product. 1/3 for government - they take about 60% of the profits of capital to invest in aggrandizing political power = the use of force. If this balance were reestablished strictly out of the military budget, we would still have a larger military budget than China and Russia combined.
  2. Real Republic, Simple Math: To set up campaign finance law so that a Representative, who's job is supposed to be to represent the common people can take no more that the equivalent of $100.00 per head. A Senator can take all the corporate money they like, as the Senate is historically the branch held by the aristocracy. All presidential candidates must use their own fortunes but also get an equal amount given to each plausible candidate out of theFederal budget - with no other contributions.
  3. The Problem with Interest, How Arbitrary is Interest: Since we've switched to a fiat money back in the 1970s, money is no longer backed by capital, which is what the gold thingy was about, but rather is backed by the credit of the United States Government alone. Well, we have a capitalist economy. Why is it that only some people have a right to profit, as interest payments, on the "credit of the United Stated Government", and avoid all that messy stuff having to do with actually producing wealth? I suggest a third constitutional amendment banning interest on any fiat money and also establishing a monetary policy that holds the money supply in proportion with functional capital. to prevent all this inflation crap. For instance, what is the stock market worth after correcting for inflation? Interest on fiat money undermines real capital directly... what's the big idea?
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Real Republic

In a real democratic republic, there would be a mechanism for ensuring that the proper classes dominated in their respective branches of government. Where there is nothing but free election for any branch, it doesn't matter whether there are three branches or fifty, the power will accumulate to one center and the tyranny of the majority will prevail as it always has. Throw reason out the window. Tyranny has been and always will be the emergence of specious and arbitrary rules and laws that defy reason and the well functioning of society. The majority will always pick idols and icons as their leaders and reasoning individuals will be excluded from political power. We know this from our own experiences.

As John Adams said: "That the majority will oppress the minority is proven on every page of the history of the whole world".
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Economic Republic

The thesis of a republic is to balance the power between all three classes that comprise a nation or commonwealth. To do this requires first that the legislative power be divided between the three classes by dividing it between a House of Representatives, a Senate and an Executive. In this way, the people, capital and the government class all have the opportunity to agree or disagree with the legislation. That which negatively impacts one third or more of the mechanism of society will have a difficult time becoming the law of the land. The constitution is also equipped with checks and balances to prevent all power from accumulating in one branch or another. This, however means political power.

Today, there is a more popular power than political power, and that is financial power. Money goes a long way to influencing political power, it shapes the landscape and usually has the final say in decision making. To balance all power between the three classes of society, the social product, that is the money left over to do stuff with after all costs are taken care of, needs to be divided equally between the three classes as well. The social product in our capitalist economy is the sum of all profits taken before any taxes and minus any taxes taken from wages as well.

Using data from 1996, and rounding it all off, gives us a pretty clear picture of what we have now and what we would have with this Republican economy.
  • Corporate profits for that year were about 650 billion dollars.
  • Corporate taxes paid were about 171 billion dollars.
  • Corporate social security taxes were 233 billion dollars.
  • Individuals paid 655 billion in taxes
  • Individuals paid a total of 232 billion in social security, Medicare and Medicaid taxes.
Now, to see how much social product there actually was before any taxes, we need to add 650 billion onto the 655 billion, along with 232 billion plus 233 billion. We ignore the corporate tax paid, since it is already included in the profit number. The sum is 1.77 trillion. Now, the total of all taxes is 826 billion dollars, which originates from profits, so, the total take home profit minus only the monarchy's (government's) portion is 944 billion dollars. The total dispensation (social security and hospital) taxes were 465 billion, 232 from labor + 233 from capital, and the total profit then, was 479 billion.


If we subtract from the government taxes a rate of 10% for the basic functioning of government itself, we must subtract out 83 billion, leaving them with 743 billion dollars of the social product. This is clearly not a balance of power. The difference went to military expenses.

Take the sum of 1.77 trillion dollars, subtract the 83 billion of legitimate cost, gives 1.69 trillion dollars of pure social product, one third of that is 562 billion dollars.

To give each class one third of the surplus value produced by our nation, would lower the government's share by 743 billion - 562 billion = 181 billion, which if it came out of the military budget, would still leave us enough military to conquer all the world's largest countries. It would raise social security by an additional 97 billion, which ought to be enough to keep seniors solvent ad infinitum. The remaining money would go back into corporate profits, which would add an additional economic stimulus package to the tune of 83 billion.

Comparing the economic difference between the classes for the years 1996 to 2001 we see the money taken:


    Year:
    1996 (millions)
    1998 (millions)
    2000 (millions)
    2001 (millions)
    GOV (G)
    826,041,404
    970,087,125
    1,242,729,393
    1,054,648,264
    Capital (C)
    469,219,050
    481,840,382
    556,360,546
    468,545,428
    Labor (L)
    490,109,550
    556,349,751
    638,834,880
    671,579,948
    G-(C+L) =
    -133,287,196
    -68,103,008
    47,533,967
    -85,477,112
    G/C =
    1.7
    2.01
    2.23
    2.25
    G/L =
    1.68
    1.74
    1.95
    1.57
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How Arbitrary is Interest?

Interest is an arbitrary term in the first place, as mentioned in a previous post, it was once considered as compensation for the loss in value that the wear on the gold or silver removed. It has also been considered a compensation for taking the risk of lending out of the gold or silver, back when highway robbery was actually considered lawful in places... Some authors even considered interest in the sense of a bond, where there is an obvious net sharing in profit and ownership, the venture capitalist approach. It certainly is not a form of punishment, since in the United States, everyone has a right to a jury trial where the amount in question exceeds $20.00 (Amendment 7 of the United States Constitution).

Some of the arbitrary, unreasonable and unpredictable excuses for perpetuating the myth of interest:
  • Credit risk - the risk of default on the loan due to bankrupcy. This risk should be set to zero if the individual has debt insurance.
  • Maturity/Term risk – the risk involved in a long-term investment: This risk is forfeit by the lender when the investment is not made in the real capital market, that of business and industrial growth. When an investor chooses to invest in, say, consumer loans, it must be due to the fact that they have no other option and the loss of future opportunity is their own and must be borne by them. The equivalent is; if I invest in a stock and it goes down, I do not get any compensation for that, so what magical incantation priviledges the monied class over the commoner class in the United States when it comes to loans?
  • Liquidity risk – the need of compensating the illiquidity of the debt: This 'risk' is borne by both the lender and the borrower and is not a real risk unless viewed from the perspective of an illegal priviledging of a class of people. Ultimately, such a priviledging does not include profit making capitalists, only old leisure class money and corrupt bankers. And this "compensation" comes directly out of the profits of working capital, whether via labor costs or loss of consumer power.
  • Inflation risk; Is the most disengenuous of the excuses, since it is unbridled debt and illegitimate interest charging that are most responsible for inflation. With a fiat money, inflation is 100% manageable by the government that backs the money's value and hence, to charge for this nature of 'risk' is to fail to trust in the government and the money's value itself, which is absurd. That the propagation of this inflation is by these very same lenders who fein to doubt the value of the money is in fact treachery against the government and could readily be viewed as treason. Obviously there is also corruption within the U.S. Treasury Department to allow ot this sale of individual liberty, which needs to be removed and harshly dealt with.
  • The fluctuation of a currency due to the currency exchange rate is normal economics and it is irrational to ground any excuse to charge interest on this notion of risk. The value of a money is due to the quantity of money in circulation. If there is an imbalance in international trade, where there is a sound monetary system, the value of the money will in fact fluctuate, but such fluctuation in a large economy is minimal, and were it to occur it would represent an increasing in the wealth of the nation, and an increase in the purchasing potential of all money. If the loan were large and the value of money increased, that is that much more wealthier the banker becomes as the loan is repaid. If the value of money decreases due to a revolution in productivity and international sales, that is all the more insignificant the magnitude of the loan becomes. In neither case is there a genuine 'risk'.
Other excuses for charging of interest today are:
  • Time value of money: having money now is more valuable than having it at some future time because interest is earned; Obviously this is the profit earning motive for lending money. It is also the very reason why there is a prime lending rate. The investment incentive should be to investing in industry, stocks and bonds and not proffering loans. John Maynard Keynes ("The General Theory of Employment Interest and Money",1936) very ably showed that there is no market limit to the rate of interest and that if it can find a way to exceed the rate of profit it will do so to the detriment of industry, and employment. Allowing of this excuse for the charging of interest should occasion the elimination of Ben Bernache's job. As it stands, the prime lending rate should be the only allowed lending rate for any and all loans made in the public or private sectors, since all interest payments ultimately derive from the profits of capital, and protecting the right to profit is the very point of setting a prime lending rate in the first place.
  • Interest is the value borrowers place on having money now; Wants are unlimited, hence by this excuse, interest should be unlimited. This is the very justification of the need not to have interest. And when money is of the fiat nature, and does not represent any form of real capital, it is in direct competition with real capital for the right of profit... under any name.
  • Opportunity cost: The cost in terms of options no longer available once one particular option is chosen; Again, this is the 'want' factor. Wants are unlimited. If another individual has the means to make the purchase, they are the rightful purchasers. If there is no one capable of making the purchase, by the law of supply and demand, the price must come down. If it is a profit making venture, say during the course of business competition, then the sharing in the profit through the tool of a bond is justified, but the term interest, due to it's current state of corruption might be changed to profit, which the 'interest' in a bond represents.
The United States Constitution, Article 1 section 9 states that: No title of nobility shall be granted by the United States.
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The Problem with Interest

David Ricardo wrote his "Principles of Political Economy and Taxation" in 1817. Of the many enlightening things he discusses in the book is taxation. He shows with clear reason that all taxes except taxes on 'landowners' are taxes on the profits of capital.

The reasons being that first, a tax on wages diminishes the wage. If the laborer is to survive and maintain a normal lifestyle, any taxes out of their wage must be made up by the capitalist out of profits. Failing this, the labor quality will diminish and consumer potential will also diminish in proportion that the laborer's liquidity diminishes due to taxes.

A tax on commodities is an indirect tax on wages, since it raises the effective price of the commodity by the amount of the tax. The tax on wages, again must be made good by the capitalist out of profits. Failing this, we get the negative effects of Marx's first contradiction of capital again.

Okay, so I jump around a bit... it's usually to provide a parallel mechanism or an example. Sometimes its a simple tangent. This time, however it is to show a clear parallel. Taxes and interest have identical properties.

Interest on commodities via consumer credit, are a direct cost to productive capital, since the difference the interest payment represents must be compensated by future wage increases. That's increases above the rate of inflation, or the laborer's standard of living will fall and they will look for other work, lose morale or give up.

On the first point. The more money that is lent out, the more money there is in the money supply, since lending money, especially through credit cards, adds money. The more money there is in an economy, the less it is worth, because the volume of exchange stays relatively the same. Even with gold, the rate of circulation of the currency is the limiting factor in the exchange of goods and services. The less money there is in the economy, the more each coin must be worth, since it has to do more work. The opposite is also true, the more money there is in an economy, the less each piece has to do, so the less each piece is worth. This leads immediately to inflation unless the supply of money is tied strictly to the quantity of productive capital. One should consult Milton Friedman's "Capitalism and Freedom" for a more thorough discussion of this.

I suspect that the purpose for charging interest is in FACT that out of the fear of losing access to oil, the oligarchical types bending the ears in government made the decision to reestablish slavery.

Now I will discuss the Keynesian angle on interest, in short, the market does not find any level for interest, which is why we have Ben Bernache (sp?) setting the prime lending rate. If he did not, the lending rate would exceed the profits of capital and capital could not function profitably, or at all where any need for borrowing occurs e.g start-ups. This is what led to the long series of depressions and recessions so ably described by Edward Chancellor in his "Devil Take the Hindmost, A History of Financial Speculation", 1999. To guard against depressions, the government was charged with the responsibility of establishing the interest rate. This is what John Maynard Keynes really wrote about in his work "The General Theory of Employment, Interest and Money", 1936. As shown above, however, interest paid on consumer credit is in fact interest stolen from capital.

In addition, the interest rate is based on the GDP, which does not see that it is its own basis of inflation. Hence it attacks capital two ways, by worming through an interest loophole and by inflating prices such that capital sales diminish internationally and often neoclassically.
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Simple Math

The knee jerk response to a "U.S. Capitalist Party" by a general reader will probably be "whatever", but that is the general response to most anything that differs from the status quo. In Harriet and John Stuart Mill's work "On Liberty" published in 1859, they explain that the benefit of liberty in a society is to enable progress to be made. Change happens and when we try to prevent it from happening, it still happens. One of the effects of change is that ideas that were true or 'just' at one point in time become untrue or injust due to some physical, cultural, political, economic, technological or environmental change beyond governmental control. Liberty is the capacity within a society to tolerate and consider new ideas and new behaviours to adapt to those changes, not only those perceived as rational, but those as well that could be rational, but that are currently not part of the popular perspective. Ideas such as abandoning interest to correspond with the abandonmnent of the gold standard is one such solidly principled idea that is not part of the current social habit of thought.

Now, simple algebra, which every American should learn in school shows us that one cannot solve for three unknowns with only two equations. To solve for three unknowns requires three equations. In the United States, we have always had two political parties to differentiate three branches of government. This appears to be an intentional error, but we must look back to the time period to see what was going on in the late 18th century to see if there is an explanation, and there is. This was the dawn of the industrial age, and Capitalism was gigantic. There was no need of a third party because the entire purse (finances) of government came from the pockets of a handful of wealthy industrialists.

Siding with the Democratic party, we get excessive unionizing, which effectively undermined the true democratic power of the people, concentrating it in the hands of a few thug unionists. Any rational debate and regulation over Marx's one contribution to society, the first contradiction of capital; that labor and consumers are one and the same, so should wages be low or high? , can never come under public discussion where a functional solution can be arrived at and enforced. Instead we see SOME people earning great wages and excellent benefits and the rest of us supporting their dead weight.

Siding with the Republican party, we get all kinds of militarist favoritism and their brand of economic dogma, which is readily shown to degrade the wealth of any nation, despite whether money is spent or not (the GDP lie), since the products made are not for consumption or of use to any individual, but the wages earned by these weapon's manufacturers sure do go to boosting the price of domestic goods and the consequent wages of every other industry necessary to purchase them, which also leads to job emigration... oh yea and more consumer indenture.

So, as you can see, we do not need a second Democratic party or a second Republican party (whose job it is to keep all power from accumulating in one center or to one party... choke!). We need a U.S. Capitalist party to emerge.
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