Tuesday, January 19, 2016

Where Capital Is Best Treated in Localism

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I see from an article on Zero Hedge that the 62 richest people control more capital wealth than does half of the human race. Further, the "top 1%" control more wealth than the rest of the human race put together. Many people see these statistics and feel that there is no justification for this state of affairs, others consider that there is no need for them to be justified. It is just the way things are.

As is usual, my position is somewhere in the middle of these two views. I don't have a problem with wealth inequality per se. It is a necessary consequence of freedom. Still, the radical concentration in the distribution of wealth is peculiar and at its face does not seem to reflect reality. That is, I find it doubtful that those 62 humans personally add more value to the world than the nearly four billion humans which comprise the lower half of humanity. I find it doubtful that those one out of one hundred humans provide more honest value than the next 99 put together. 

What I am suggesting is that our current world economy is not an honest one. Wealth is transferred to those closest to the state and the financial institutions which influence them. Fiat money is merely one example of how wealth is inequitably transferred. Bailouts to global banks while the rest of us must liquidate when we make financial mistakes, is another. So while I agree that economic inequality in itself is not unjust in the least, the means by which much of the present wealth inequality has been generated are unjust. And because the means have been unjust, the results produced by those means are unjust. 

One might answer, when looking at the original Zero Hedge article I referenced, that it makes no difference that wealth is being concentrated, even if by unfair means, if the overall pie is growing. That is to say, even the poor are seeing teeny increases in their "wealth" as the total amount of wealth the human race generates increases. It is just that 62 individuals are scooping up more of that new wealth than half the planet put together. So long as the pie is growing, so the thinking goes, people should not complain.

Such thinking is greatly flawed. Much of our "wealth increase" is not real. It is a result of the debt-based fiat money system which is among the prime drivers of wealth inequality. To be more particular- trillions of dollars worth of debt has been created in order to "stimulate" the economy. The money attached to that debt has found its way into certain connected hands, but the debt will be stuck with the population as a whole. Those who benefited from the money attached to the debt will arrange the rules so that they are not required to pay it back. Someone else will shoulder that burden. In the meantime, the money spent is counted as GDP "growth". Right now it only looks like the rest of us benefited from the spending because we have not yet paid for the debt which financed it. Once we do, once we get an accurate picture of the true growth in wealth minus the debt which artificially swells it, I think we will find that the rest of us are not getting better off. We are getting ripped off. 

If those at the very top paid off this debt in proportion to how much they benefited from its creation, then maybe it could be justified. What we have all seen is an intense rush to privatize profits and socialize costs. Those who benefited from the issuance of incredible amounts of public debt will make every effort to insure that the citizens at large will be stuck with most of the tab. This plan to borrow until every source of credit has been exhausted made the issue of who is benefited the most less important while the party was in progress. While everyone was getting a piece, even a tiny piece, no one wanted to stop the party. But now the debt party is ending and its time to divvy up the bill.

What we are about to see is just the sort of thing Localism is meant to protect people from. If one reads that book they will understand why restrictions on debt, restrictions on the state, restrictions on corporations, restrictions on banks, and restrictions on fiat money are necessary in order to preserve human freedom (if you think that the state itself is not necessary, then please see Localism Defended which argues the necessity of the state, as well as the necessity of its decentralization). Localism is a blue print for building a society in a way which avoids (to the which extent systems can, there is no substitute for popular virtue) exactly the sort of freedom-destroying centralization and systemic corruption the world is now experiencing.

But one may say, "capital goes where it is best treated. If you put such restrictions on capital as are suggested under the philosophy of localism then it will leave your nation and go to others."

Not quite. Debt masquerading as capital will leave localist nations and enter those where certain predatory practices, such as slave labor and bankster bailouts, are easier to pull off. What will stay in localist nations is capital itself. I agree that "capital goes where it is best treated." In localism, various regions within the nation will compete vigorously for capital. It will be treated best there because it will not be exchanged for mere paper promises from foreigners. If they want access to it, they will have to trade value for value. It will be treated best because it will be run by people who are connected to the nation in which the wealth is created. It will be treated best because it will be in the safest and stablest of all possible human societies- one in which there is no pressure-cooker from some suppressed regions or slivers of the population just waiting to spill over into violence because the central government insists on making all decisions and denying all avenues of peaceful resolutions to political differences.

In a localist nation real capital will be treated best in the nation in which it is created.

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