Cooperative Capitalism

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Copyright 2005 by J.W. Smith

We believe all ideas should have maximum exposure. Thus for any properlycited individual quotation up to 500 words no permission is necessary.

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The authors, The Institute for Economic Democracy, and their officersand supporters, specifically retain full rights to this work and otherpublished research so that others may use it, correct it, expand upon it, andproduce an ever-more powerful and workable plan for world developmentand elimination of poverty.

Published by: The Institute for Economic Democracywww.ied.info/

Smith, J.W., 1930-Cooperative Capitalism : A Blueprint for Global Peaceand Prosperity / J.W. Smith 2nd ed.

Includes bibliographical references and Index.

ISBN 0-9624423-8-9 (hbk)ISBN 0-9624423-9-7 (pbk)

1. Free enterpriseHistory. 2. Free tradeHistory.3. CapitalismHistory. 4. DemocracyHistory.5. International economic relationsHistory. I. Title

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Table of Contents

INTRODUCTION 1Personal Property Rights, Community Property Rights, and Private

Property Rights 2A Very Short History on the Few Claiming the Rights of the Many 3Subtle-Monopolization is a Remnant ofFeudal Exclusive Property Rights 9SECTION A 17INTERNAL TRADE 17WASTED WEALTH THAT THE DEVELOPING WORLDMUST AVOID 171. HENRY GEORGES CONCEPT OF AN EFFICIENTMODERN LAND COMMONS 18

2. THE EFFICIENCY OF A MODERN TECHNOLOGYCOMMONS THROUGH APPLYING HENRY GEORGESPRINCIPLE OF CONDITIONAL TITLES TO NATURESWEALTH 213. THE EFFICIENCY OF A MODERN MONEYCOMMONS 23Creating a Constant-Value Currency 284. SUBSIDIARY SUBTLE MONOPOLIES WITHIN THEPRIMARY MONOPOLIES OF LAND, TECHNOLOGY ANDMONEY 325. RECLAIMING THE INFORMATION COMMONS 37

Eliminating Political Corruption by the Wealthy and Powerful 39A Modern Communication Commons converts wasted Time to Free Time 39An unseen and unfelt Money Transaction Tax 40That Population can be stabilized without Coercion has been proven 41SECTION B 43EXTERNAL TRADE 43A PEACEFUL AND PROSPEROUS WORLD 436. REFOCUSING ECONOMIC THOUGHT 44Fair and Equal Trade as opposed to Unequal Free Trade 45

Plunder-by-Trade has a Long History 46Never did a Nation develop under Adam Smith Free Trade 48True Freedom, is based on Economic Freedom 51America chose not to Support the Worlds Break for Freedom 53History supports Friedrich List, not Adam Smith 567. HOW A FREE PEOPLE WITH A FREE PRESS AREPROPAGANDIZED 59The CIAsMighty Wurlitzer Suppressing the Worlds break for Freedom 60Corporate-Funded Think-Tanks Backed the CIAsMighty Wurlitzer 63


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Acknowledgments

I wish to thank the many great authors and reporters cited who have laidout reality so clearly. Without their dedication to truth, there would havebeen no way to find ones way through the maze of misinformation.

Petr Kropotkin had to flee for his life when he exposed Europeanaristocracy in much the same way as this work exposes our financial andcorporate aristocracy today. I trust I will not have to flee.

Friedrich List was jailed for his exposure of the fraud of Britainpromoting free trade. Every nation that successfully developed did sofollowing the guidelines laid down in his classic written in 1883, rhetoricthat they developed under Adam Smith free trade notwithstanding. I trust I

will not go to jail for exposing the same fraud which is being imposed uponthe world today.

Ralph Borsodis insights were crucial for understanding money. Laterauthors whose insights into current events were invaluable to me are:Michel Chossudovsky, Jared Israel, William Blum, Sally Covington, JaredDiamond, James Fallows, Jeff Faux, William Greider, Susan George, SeanGervasi, Michael Kettle, Philip Knightley, Mark Lane, Christopher Layne,John Loftus, Arjun Makhijani, Milton Mayer, Ralph McGehee, WilliamMcNeill, Seymour Melman, Yousai Mohammad, George Monbiot, MichaelParenti, L. Fletcher Prouty, Ellen Schrecker, John Stockwell, LesterThurow, and William Appleman Williams. There are many more, toonumerous to mention, and I thank them also.

Ray Miklas and Pete Gannon (stuffguys.com) kept my computersrunning. Special thanks go to Anup Shah, Bernie Maopolski, WilliamKtke, John Bunzl, and Jeff and Diana Jewell. All worked hard for itstimely release. Special thanks go to Mieczyslaw Dobijas research on moneyoriginating as an accounting unit of productive labor.

Special mention must be made of Mochamad Effendi Aboed ofIndonesia and Feisal Mansoor and Jeanne Thwaites of Sri Lanka. ProfessorAndrej Grubacic of Yugoslavia, Professor Radh Achuthan, ProfessorMichael Rivage-Seul, Cosmas Bahali of Tanganyika, Daniel Blackman,Chairman of the Economic Empowerment Initiative of the National YouthCenter, and reporter Dmitry Yanovich from Belarus are valuable membersof our team.

I owe a deep debt to Professor Robert Blain of the Southern IllinoisUniversity, Professor Glen T. Martin of International Philosophers forPeace, and Professor Walter Davis of Kent State University.

Marie Gunther, http:/ / 4thefixbooks.com, brought all this together. Isincerely thank all for their input. I alone remain responsible for any errorsthat remain.
http://4thefixbooks.com/http://4thefixbooks.com/


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Michael Hudson and Baruch Levines Privatization in the N ear E ast andClassical W orld traces the ebb and flow of privatization through 5,000years of history eventually developing into the Western system ofexclusive property rights.We ask the reader to pay close attention to our description of todaysresidual-feudal exclusive property titles that are direct descendants ofaristocratic, monopoly, ex clusive property rights. Note Henry Georgesconcept for changing ex clusive title to natures resources, put on this earthfor everybody, to conditional title (though he did not use the wordconditional) converts that property back to a commons but in modernform. Eliminating those monopolies protects honest property rights,increases competition, and, assuming productive jobs are shared, increaseseconomic efficiency possibly equal to the invention of money, the printingpress, and electricity.D emocratic-cooperative capitalism is superefficient capitalism.

Each gain of rights for the dispossessed has been touted by a powerstructure, and normally accepted by the masses, to be full rights. Obviouslythe power structure has had enough control of the universities and mediafor centuries to maintain that thought control. This control has been inplace for so long that we are all part of itand are unaware of that fact. Nor aremany aware that one function of the massive military of powerful nations isto impose the current monopoly structure on the rest of the world.

Run an Internet search using the key words Christian, libraries,burned. This will alert you that both Western and African cultures wereadvanced to a high educational level with substantial libraries. It will showthat, over a period of 300 years, those libraries and culture centers were

destroyed, the educated were killed or forced underground, and thus thecivilized world dropped into the 700 years of the Dark Ages.

In the destroyed Library of Alexandria had been a working steamengine and an artifact found in the Middle East dating to those earlyperiods was determined could only have been a battery. This means forceswithin society destroying its own culture delayed the onset of the IndustrialRevolution (phones, trains, cars, planes, and TV sets) 1,200 years.

We know that a few millennia ago China had a large iron industry,rotary drills, mechanical seeders, an ocean plying navy, and that thistechnically sophisticated society too regressed into peasant poverty.

The 300-year destruction of the civilization of Rome appears to be, andis, massive. But each event would have been an occasional, and largely

unknown, massacre in some far corner of the empire. Are not occasionalsuppressions and massacres throughout the 20th century, in all parts ofthen-current, and todays, empires an accurate description of todays world?

Contact us if you can add to this picture. Thank you. The Institute forEconomic Democracy support group. (www.ied.info/, [email protected],[email protected]).
http://www.ied.info/mailto:[email protected]:[email protected])mailto:[email protected])mailto:[email protected]://www.ied.info/


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Introduction 1

Introduction

Superior rights for the few and inferior rights for many are structured intothe subtle monopolization of land, technology, and money; all produced bynature or social technology and properly belonging to all. The unearnedwealth from the subtle monopolization of those enclosed commons bothreduces the efficiency of an economy and lowers the share of wealth forothers. Having been born and raised within the current residual-feudalexclusive title legal structure and taught with sincerityby those who learnedthose fables right in the university that this is the most efficient economywe are unaware that these highly inefficient subtle monopolies even exist.

Society is a machine to produce and distribute the needs of the people.All inventions are a part of nature and thus a part of a natural commons.Privatizing this natural wealth has seriously reduced economic efficiencythat we are taught otherwise notwithstanding. All wealth is processed fromscarce resources those resources are on or under the earth so land was the

first commons to be privatized.a Restructuring to a modern land commonsand ensuring each person the right to their piece of land would greatlyincrease economic efficiency while protecting earned private property rightseven more thoroughly than the current subtle-monopoly system.

Technology is a part of nature and a common heritage to all waiting tobe discovered and used. Both economic efficiency and rewards to inventorshave been lowered by privatizing technology through the current residual-

feudal exclusive patent structure. The claiming of rights to the communicationspectrums by corporations is a great example of the continued structuringof inequality into law through privatizing what is the common heritage ofall. There was a massive gain in rights by a few subtle monopolists, a loss ofcommon usage of the TV and radio airways for the masses, and a huge loss

a Real wealth is produced by combining resources, capital (both industrial and financial), andlabor. It has been proven that labor anywhere in the world can be trained to run modernfactories so there is a large surplus of labor. We will learn below that both technological andfinancial capital were historically kept scarce through subtle-monopolization but will beplentiful in a modern commons. This leaves availability of resources as the primary limitationon the production of wealth.


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to society through limiting the world economy to operating at a small

percent of its potential efficiency.a

Money is such a powerful tool for producing wealth that the powerfulhave always reserved its creation and control to themselves and, as we allknow well, money (which is only a social technique) remains subtlymonopolized today.

Full rights and equality reclaimed for all people through a modern land,technology, and money commons within democratic-cooperative-capitalism (fundamentally a Henry George concept) would convert the economy tosuperefficient capitalism and, assuming a sharing of productive jobs, efficiencyincreases would equal the gains from the invention of money, the printingpress, and electricity. Private property rights and individualism would bestrengthened, competition would increase, and a quality lifestyle could bemaintained by each while working only 2-to-3 days per week.

That these subtle monopolies are necessary to accumulate capital is afable created to protect wealth and further privatize property that properlybelongs in a modern commons. Capital can be accumulated much faster inan economy with full and equal rights. Removal of subtle monopolizationand returning rights to the modern commons to all would not only increaseyour rights to land, your rights to the use of technology, your rights tofinance capital, your rights to information, and your rights to your share ofthe wealth from their productive use, it will ensure those rights.

Proponents of the current excessive rights structured into law fail tounderstand that giving a few an excessive share of rights restricts the rightsof others (inequality structured in law) and thus is a subtle form ofmonopolization. Through relatively small changes in the legal structure

those subtle monopolies disappear, rights to the modern commons arereclaimed, the essentials of private property rights and individualism areexpanded, and competition is increased.

Personal Property Rights, Community PropertyRights, and Private Property Rights

Under the aristocratic system from which Western society evolved (and isstill evolving) aristocracy claimed all property rights. As all other rights areclosely tied to property rights, the common people had few or no rights.Instead of equal rights to natures wealth, property rights as structuredtoday are direct descendants of thesefeudal aristocratic exclusive rights.

aWitness corporations currently successfully structuring into law a denial of the public tosuper cheap community Wi-Fi connections which would reduce phone and Internetconnection service by possibly 80%. The fast developing Skype free phone service mayderail those communication monopolies before all those laws can be put in place.


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Personal property rights are properly total and unfettered rights to that

produced with ones own labor or that produced by another persons laborpurchased with ones honest earnings. This includes personal possessions,homes, machinery, most industries, and all consumer products.

Community property rights are that produced by nature and whichsustains all life. This includes land and resources on, above, and beneath theearth. Air, water, timber, oil, coal, iron, copper, communication spectrums,and the genes of all plants and animals which are all properly commonproperty to be used by all. No person produced any one of these items andall are essential to life.

Claiming exclusive private property rights to air and water may appearto have social efficiency advantages while there is a surplus. A scarcity ofsuch fruits of nature, however, would likely mean impoverishment or evendeath for those excluded through exclusive titles. Thus, in times of scarcity,community rights should supercede private property rights and that isrecognized in Western law.

But the rights of all stakeholders to the fruits of nature are notrecognized in residual-feudal exclusive private property titles. With onlyoccasional exceptions, the rights of the community are ignored in titles tonatures wealth. Throughout this book we will be addressing how underHenry Georges concept of conditional title (though he may not have usedthat term) to natures wealth (land and the resources on and under the land)all will have rights to their share of this great wealth and it is far moresocially and economically efficient than residual-feudal, exclusive subtlemonopoly titles.

A Very Short H istory on the Few Claiming the Rightsof the Many

While consolidating the first modern states, one by one aristocracy and theChurch defeated the free cities of Europe and began privatizing thecommons. The masses naturally wished to maintain control of theirresources and retain their community support structures. Only wholesalemassacres by the thousand could put a stop to this widely spread popularmovement, and it was by the sword, the fire, and the rack that the youngstates secured their first and decisive victory over the masses of thepeople.1

As more and more of the commons were privatized, the 14th-Century

saw the beginning of a 300-year effort to erase all trace of communitysupport structures and community ownership of social wealth. The processto individualize the masses to limit their power had begun:

For the next three centuries the states ... systematically weeded out allinstitutions in which the mutual-aid tendency had formerly found itsexpression. The village communities were bereft of their folkmotes


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Introduction 5

law, health care, and information are also a natural commons that have

been privatized in that centuries-long process of providing excessive rightsto the powerful through structuring inequality into law.The powerful throughout the past centuries not only claimed an

excessive share of the wealth of nature which was properly shared by allwithin the community, through the unequal trades of mercantilism theyclaimed an excessive share of the wealth on the periphery of their tradingempires. Adam Smith describes mercantilism for us:

[Mercantilisms] ultimate object.... is always the same, to enrich the country[city or state] by an advantageous balance of trade. It discourages theexportation of the materials of manufacture [tools and raw material], and theinstruments of trade, in order to give our own workmen an advantage, and toenable them to undersell those of other nations [cities] in all foreign markets:and by restraining, in this manner, the exportation of a few commodities of

no great price, it proposes to occasion a much greater and more valuableexportation of others. It encourages the importation of the materials ofmanufacture, in order that our own people may be enabled to work them upmore cheaply, and thereby prevent a greater and more valuable importation ofthe manufactured commodities.3

William Appleman Williams describes mercantilism at its zenith: Theworld was defined as known and finite, a principle agreed upon by scienceand theology. Hence the chief way for a nation to promote or achieve itsown wealth and happiness was to take them away from some othercountry.4

When the injustice of mercantilism was understood, it became tooembarrassing and was replaced by the supposedly just Adam Smith free

trade. But free trade as practiced by Adam Smith neo-mercantilists was farfrom fair trade. Adam Smith unequal free trade is little more than aphilosophy for the continued subtle monopolization of the wealth-producing-

process, largely through continued privatization of the commons of both aninternal economy and the economies of weak nations on the periphery oftrading empires. So long as weak nations could be forced to accept theunequal trades of Adam Smith free trade, they would be handing theirwealth to the imperial-centers-of-capital of their own free will. In short, AdamSmith free trade, as established by neo-mercantilists, was only mercantilismhiding under the cover of free trade.

Through the subtle monopolization of highly efficient industrialtechnology (a privatized commons), control of the wealth-producing-process

worldwide was to remain with the imperial centers while the periphery wasto provide the resources to feed their industries. The imposition ofstructural adjustments upon the developing world today is little more than acontinued expansion of the privatization of the commons. The developedworld would never impose those structural adjustments upon themselves,rhetoric that they will notwithstanding. Efforts to do so in a very small way


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relative to adjustments imposed on the periphery of empire were met with

immediate social unrest and abandoned.When the old imperial nations broke themselves battling over theworlds wealth (World Wars I & II), the world began to break free. Theonly wealth left was in America which promptly attained full imperial statusthrough suppressing those breaks for freedom (the Cold War) and takingover Britains job of imposing Adam Smith unequal free trade upon theworld. Those breaks for freedom were successfully suppressed but thebattle goes on.

Though our previously published research exposed the centuries-longprocess of the powerful few claiming a part of the rights of the many, weneed to look closer. The suppression of the rights of the many by thegoverning few was possible by excluding the masses from consideration aspeople. This is seen most clearly in the description of natives of Africa andthe Americas. The first black Southern Africans brought back to Europewere described as looking like, but not really being, people. Later AmericanIndians were described as not being people because they had no souls.After those ruses (social-control paradigms) were set aside, natives in theundeveloped world were said to be incompetent and incapable. By notbeing recognized as capable people, they could be enslaved and treated asprivate property.

But the same concept of non-persons was at work within Europeansociety. Within the slowly eroding community support structures, all wererelatively equal. But the powerful (aristocracy) slowly gained more powerand claimed ever more of the land. The claiming of that land gavearistocracy more power. They eventually claimed all the land, looked upon

themselves as far superior to the common people, and maintained thesubtle monopolization of wealth through forbidding intermarriage or evenmixing socially.

Those aristocratic rights could not have been claimed without firstinculcating within the population the beliefs of innate superiority of onegroup and the innate inferiority of others. This was accomplished throughthe fables of the heroic knights of aristocracy and our children read thesefables updated to todays world.a Control of aristocratic societys literaturewas so effective that the masses accepted their lower status and developedintense loyalty to their kings and lords and many still revere them today.Note the intense loyalty shown to the wealthy and powerful (the system).

The loyalty of the masses, along with massive firepower and a sharing

of the plunder, provided the manpower for the imperial nations to conquerthe world. Through being Christians with souls, both aristocracy and thecommon people believed they were superior and thus justified their

a Control of a societies foundation beliefs is well understood by powerbroker. Few booksdare to be so politically incorrect as Chapter seven exposing how history and literature of afree society are carefully controlled to protect a power-structure and their unearned wealth.


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Introduction 7

suppression and oppression of savages throughout the world. That belief

in superiority through having Christian souls was eventually set aside but inmany the belief in innate superiority remained.As people of color on the periphery became educated, formed nations,

and developed some power, beliefs in superiority were no longerfashionable. One simply could not control billions of educated people whilesimultaneously telling them they were inferior.

As people told they are equal have to be treated equal, more subtleways of control were required. The subtle monopolies, financial warfare,economic warfare, covert warfare, and overt war as addressed in depth inthis authors E conomic Democracy: The Political S truggle of the Twenty-First Centurywere all aspects of that control. Most battles throughout the world are thepowerful attempting to retain or expand superior rights that have beentheirs for centuries and suppress those attempting to regain their rights.

Inequality is still being structured into law today. The powerful,developed world established the International Monetary Fund (IMF), theWorld Bank, the General Agreement on Trades and Tariffs (GATT), theNorth American Free Trade Agreement (NAFTA), the World TradeOrganization (WTO), and are in the process of establishing the MultilateralAgreement on Investments (MAI [resurfacing under the GeneralAgreement on Trade in Services (GATS)]) and FTAA (Free Trade Area ofthe Americas) as the financial and legal structure under which it retainsaccess to the worlds resources at a fraction of true value.

Final authority will rest with the Gats [MAI, WTO, FTAA] Disputes Panel todetermine whether a law or regulation is, in the memo's language, 'moreburdensome than necessary'. And Gats [MAI, WTO, FTAA], not Parliament,

will decide what is 'necessary'. As a practical matter, this means nations willhave to shape laws protecting the air you breathe, the trains you travel in andthe food you chew by picking not the best or safest means for the nation, butthe cheapest methods for foreign investors and merchants. Under Gats[MAI, WTO, FTAA], as proposed in the memo, national laws and regulationswill be struck down if they are 'more burdensome than necessary' to business.Notice the subtle change. Suddenly the Gats treaty is not about trade at all,but a sly means to wipe away restrictions on business and industry, foreignand local. The WTO reports that, in the course of the secretive multilateralnegotiations, trade ministers agreed that a Gats tribunal would not accept adefense of 'safeguarding the public interest'. In place of a public intereststandard, the Secretariat proposes a deliciously Machiavellian 'efficiencyprinciple': 'It may well be politically more acceptable to countries to acceptinternational obligations which give primacy to economic efficiency.' This is

an unsubtle invitation to load the Gats with requirements that rulers knowtheir democratic parliaments could not otherwise accept. Hearings areclosed. Unions, as well as consumer, environmental and human rights groups,are barred from participating - or even knowing what is said before the panel.5

This book is designed to combine our published research 11 and 16 yearsago on the waste within the subtly-monopolized internal American


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economy with our later research on the waste through covertly and

militarily monopolizing world trade. The only way the world can bedeveloped to a sustainable level is if the wastes of subtle monopolization,both in internal trade and external trade, are avoided. a

The United States of America, founded on the great ideals of freedom ofspeech, freedom of thought, freedom of movement, and freedom fromoppression, is a great country. This author cherishes those values as muchas anyone else and believes firmly that the current war against terrorismmust be waged.b But that war must be fought through granting full rightsand equality to all the worlds citizens not by military power. The immensegains in economic efficiencies through full equality and rights for all peopleunder democratic-cooperative-(superefficient)-capitalism speak for themselves.

Once a society has attained full equality and full rights for all, classdifferences will largely disappear. But society will not be the dull samenesspropagandists have taught us to believe. Groups of people are not innatelysuperior to others. Individuals within all groups have thousands of variedtalents both innate and developed. With both family and communitysupport, talents and individuality can blossom and flourish. Within reason,each persons potential will be maximized.

Certainly there are great individual achievements under individualism.These achievements were pursued relentlessly but what is ignored is thatthey were, one way or another, given great community support. Unnoticedare the talents that have remained undeveloped because of the limitations ofsupport for most in highly individualized societies. Under the enormousefficiencies and supports of democratic-cooperative-(superefficient)-capitalism,people and society will develop and blossom as never before.

a The United Nations was designed specifically to be controlled by the imperial-centers-of-capital.Before it can effectively federalize the world it must become democratized along the lines ofthe World Constitution and Parliament Association Constitution in, (http:/ / www.radford.edu/ ~peace/ ippno/ doc.html, and other groups pushing for federation of poornations: Earth Federation http:/ / old.jccc.net/ ~mfoster/ rs/ constitution. html, Commissionon Global Governance http:/ / www.cgg.ch/, United Planetary Federation http:/ / www.upf.org/ index.html, World Citizen Foundation http:/ / www.worldcitizen.org/, United Nationshttp:/ / www.un.org/.

b As the anthrax used in the anthrax scare immediately after 9/ 11 was DNA-tracedto the CIAs Fort Deitrich labs almost certainly that was a CIA strategy-of-tension tocreate more fear in the American people to further justify the War on Terror. Thisbrings into serious question on the claims that Al Queda is the extensive worldwideorganization as claimed. When one understands strategies-of-tension to justify foreignpolicies one realizes that Muslim terrorists may be much smaller in number andweaker than we are being told
http://old.jccc.net/~mfoster/rs/constitutionhttp://www.cgg.ch/http://www.upf/http://www.worldcitizen.org/http://www.un.org/http://www.un.org/http://www.worldcitizen.org/http://www.upf/http://www.cgg.ch/http://old.jccc.net/~mfoster/rs/constitution


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Introduction 9

Subtle-Monopolization is a Remnant ofFeudalExclusive Property Rights

Social customs are a form of law. It is well recognized that such customsare huge obstacles for societies to evolve efficiently. The fact that the debrisof residual-feudal ex clusive title to natures wealth severely reduces theeconomic efficiency of capitalism is not even considered.

We are taught that monopolies have been eliminated by law. This is nottrue. Laws are designed by the powerful, for their protection, they havespecifically designed subtle monopolization into the laws of capitalism.Under feudal law granting exclusive title a tiny minority totally monopolizedwealth producing property and the wealth produced. Western societiesevolved from Feudalism and those who gained power only granted residual-

feudal exclusive property rights to more people on a basis that could bemathematically proven a large percentage could not become propertyowners.

The basic principals of monopolization were never abandoned, that weare taught they were notwithstanding. We have full rights only in the sensethat each have a chance at becoming a wealthy monopolist. But only acalculable few can attain those superior rights.

This is not visible to Americans and Europeans because of the largepercentage that have a high standard of living and thus appears to have fullrights. But, unrealized by the masses and most in academia, that highstandard of living is only through the purchase of the wealth of weaknations for a fraction of its true value, and the distribution of that

appropriated wealth through the massive expenditures (the multiplierfactor) on the military which is the final arbiter to maintain the system oflaying claim to the worlds wealth. This translates to an economic systemnot viable in times of peace. The powerful today are fighting to retain theirmonopoly property rights to natures wealth just as the feudal powersfought to maintain the monopolization of wealth based on their ex clusive

feudal property rights.All this will become visible as we demonstrate how, through

abandoning those remnants of exclusive feudal titles to natures wealth,restructuring to democratic-cooperative-capitalism and becoming superefficientcapitalism, economic efficiency will increase equal to the invention of money,the printing press, and electricity. As we describe todays internal economies

and global trade, we ask the reader to take note of the close connection ofcurrent subtle-monopoly laws to the total monopoly laws of feudalism. Todayswars are protecting a monopolized wealth-producing-process just as aristocracyfought to retain their feudal monopoly structure. Todays partialdemocracies are only a stepping stone towards full freedom and full rightsfor all. Once the last remnant of exclusive feudal property titles to what is


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properly social wealth is converted to Henry Georges concept ofconditional

titles that recognize everyones rights to their share of natures bounty fulldemocracy, true freedom, and full rights will have been achieved.At each point in the centuries-long march to full rights and full

democracy, the powerful have structured the laws for their protection. Therights of the masses were only considered when a crisis threatened and allieswere needed. Full rights were not attained even after revolutions. There wassimply too much debris of monopoly law and monopoly custom (residual-

feudal exclusiveproperty rights) to clean away.Our previous research on the current inefficiencies and potential

efficiencies of world trade kept referring to the savings possible withininternal subtly-monopolized economies. The first five chapters summarizethat research

Historically, members of many hunter/ gatherer tribes worked less thanfour hours a day and, in the few areas where they survive, some still do.Even during the Middle Ages, normally half of ones waking hours wereavailable for leisure time. But during the Industrial Revolution, the pressureto increase profits forced a steady increase in working time. Between theyears 1600 and 1850, the average working hours per year doubled, from1,880 to 3,650 hours. After 1850, the strength of unions reversed theprocess, and by 1939 had almost halved the average working hours.Although unions were moving toward the 30-hour week, from 1939 to1992due to WWII, the Cold War, and the following prosperityunionstrength steadily declined and weekly working hours in America increasedfrom 40.7 hours in 1973 to 47-hours in 1988.6

The reduction of working hours to 20 hours a week or less was a

recognized possibility during the 1920s and 1930s; but then came WWIIand the Cold War. Even as labor productivity doubled and then doubledagain the concept of drastically shorter working hours disappeared from thesocial mind.a

While the Cold War was being fought, society was not permitted theluxury of toying with alternative social contracts. The status quo wasprotected by branding any challenging ideas as communist, socialist, orun-patriotic. This reaction is a conditioned reflex for most within theimperial centers who are trained to view people advocating such ideas asenemies.

For perspective, one should consider that nothing was morecommunist in America than Social Security when it was first proposed.

But under the crisis of the Great Depression, when the threat of worldwiderevolution was high, unemployment insurance and funded retirements weregiven to the powerless as their right.

a Juliet B. Schor, Overwork ed A merican, (New York: Basic Books, 1991), p. 2. Social studiestextbooks still mentioned the potential of short working hours as late as the 1950s and theconcept is again becoming fashionable.


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Introduction 11

No one today considers unemployment insurance and the community

support structure of Social Security as anything other than a right, andeveryone would scoff at the suggestion that it is communist, socialist,or un-American. The same would be true if ever the last of labors rightswere claimed, i.e., the right to a productive job and a full share of the fruits ofland, technology, created money, information, and free time. Once claimed, all wouldinsist on and defend these newly won rights, which can only be realized byeliminating currently wasted labor, currently wasted capital, and the currentwaste of resources under subtle monopolization.

People are so accustomed to the current structure of residual-feudalexclusive property rights that they do not realize the gains that are possible iflaws and customs were changed to correspond with the increasedefficiencies of technology. Full rights would mean each obtaining a decentstandard of living while working only 2-to-3 days per week.

Of course, those who have gained excessive rights by interceptingproduction from that increased efficiency would loudly proclaim that anychange would harm everyone. This, of course, would be only for theirprotection. There is an enormous cost to the rest of society, and eventuallyto everyone, as the powerful continually expand their residual-feudal ex clusiverights by restructuring laws and institutions to systematically intercept thewealth produced by our increasingly efficient technology. Most booksdescribe problems but provide few solutions. Through exposing the truecauses of poverty and wars the solutions stand out in bold relief.

Understanding economics becomes easy when we realize that theclassical economists were also protecting wealth and power. Theyconsistently insisted that labor should be paid just enough to reproduce

itself and that all wealth produced by increased efficiencies of technologyshould go to capital even as they ignored that this primitive accumulation ofcapital went first and foremost to grand castles and high living.7

Gerard Winstanley in the 16th-Century, Jean Jacques Rousseau in the17th-Century, Johann Herder in the 18th-Century, and Karl Marx in the 19th-Century spoke to the rights of the weak; primarily labor.8 Other classicaleconomists were protecting wealth and power.

Aristocrats would not be caught dead doing common labor. Thus thosenecessary to run an economy (the bourgeois) were given some residual-feudal-exclusion rights. Those beneath the new arrivals to polite society still weredenied those rights.

Aristocratic feudal property rights were being implanted in America but

the dispossessed only had to move to the vast expanse of unclaimed landand this left no one to operate the feudal estates. The common peoplewere, only by default, given rights to land. Although a gain, land was, asHenry George taught us, still subtly monopolized by residual-feudal ex clusivetitles and, due to the high cost of that monopolized land, full rights were yetdenied the majority.


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Century

The gain in rights in America spilled back into Europe. The short-lived

French Revolution promising full rights to all was overthrown but, toprevent more revolutions, those in power released some land rights and,over the next 150 years, unemployment insurance, social security and otherrights were granted to the common people of Europe. To prevent a ballotbox revolution during the Great Depression of the 1930s, Social Security,unemployment benefits, and other rights were granted to Americans.During that crisis the same threat again faced Europe and almost allgovernments were turned over to Fascists to prevent a voters revolution.a

A ballot box revolution did occur in Spain. The powerful were votedout but Fascists took that government back by force (1936-1939). Thatexternally-orchestrated overthrow of a true democracy was improperlynamed in history as the Spanish Revolution. After WWII, the powerbrokersfaced the prospect of the world taking the rhetoric of democracy seriouslyand breaking free. The process of denying those rights to most requiredimperial centers giving rights to nations on the periphery essential for alliesand the immense expenditure of money on the Cold War gave buyingpower and the appearance of more rights to almost all labor in those imperialcenters.

As the common people fought for equal rights, and did gain, thepower-structure protected itself by trumpeting each partial gain of rights asfull and equal rights. But the residual-feudal ex clusive rights of capitalpromoted by classical economists have never been fully set aside and fulland equal rights as promoted by a minority of philosophers has never beenattained. It is this lack of full rights which creates the poverty and violenceof todays world.

Providing equal rights through Henry Georges suggested slightchanges in the structure of residual-feudal exclusive titles to natures wealthwould eliminate the current unacknowledged subtle land, technology, andmoney monopolies that are the essence of todays economy. At minimumcost and without waste use-values would be distributed to all. The quality oflife will rise rapidly even as the hours of required labor and the GDP dropspossibly 50 percent. The drop in GDP, even as quality of life rises,measures the previously wasted labor, capital, and resources of a subtly-monopolized, residual-feudal, economy. The GDP then rises as people utilizetheir new free time for family interactions, to develop their many artistictalents, or to simply socialize with friends.

Under a modern commons within democratic-cooperative-(superefficient)-

capitalism, the just rights of private property are fully protected,individualism and competition are strengthened, and money no longerflows through those subtle monopolies to the interceptors of wealth.

a An attempt to turn Americas government over to fascism at the same time was made butGeneral Smedley Butler refused to head the overthrow and exposed their plot. Smedley D.Butler, W ar is a Rack et(Los Angeles: Feral House, 2003)


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Introduction 13

Societys production is insteadthrough the mechanisms of equal rights to

natures wealth, equal pay for equal labor, and equal sharing of productivejobsdistributed instantly and without unnecessary costs to the producersof wealth. Under those rules of equality, the need for massive militaryforces and their attendant massive slaughters disappear.

The efficient economy we are describing can not happen until residual- feudal exclusive titles to natures wealth are restructured into conditional titles.At each point in the centuries-long march to full rights and full democracy,the powerful structured the laws for their own protection. The rights of themasses were only considered when a crisis threatened. Full rights were notattained even after revolutions. There was simply too much debris ofresidual-feudal ex clusive law and custom (monopolies) to clean away.

Theoretically we have democratic governments today. But in reality wehave only partial democracies with the potential of full democracies. But weare getting closer. Once those residual-feudal exclusive subtle monopolies areabandoned, a full democracy will emerge. Likewise, if a crisis transposespartial democracies into a full democracies the simple legal changes toeliminate those residual-feudal ex clusive subtle monopolies and establishsuperefficient capitalism can be made.

Those owning and working within the superstructure of those subtlemonopolies are the worlds brightest and most talented. That is why theyreached for and attained those positions and they will unanimously disputetheir redundancy even as a few of them finance and guide the enormouspropaganda process, as outlined in Chapter seven, which protects theirexcess rights.

The gains to society will be enormous when under a system of full and

equal rights with a sharing of productive jobs these talented and brilliantpeople will be producing wealth instead of intercepting wealth.

If we are so militarily secure, why does America have such a violentforeign policy as this book exposes? It is because the rest of the world maydeclare their freedom and federate into powerful centers of capital just asAmerica is so federated, as the former Soviet federation was at the height ofits power, and as all of Europe is becoming.

If most of the developing world formed trading alliances, and assumingthat cohesiveness held, they could negotiate with the imperial centers forequality in trade and would soon build equality in wealth. Thus thefederation of weak nations is a threat to all imperial centers of capital.However, it is also the foundation for peace. Unless they are being

destabilized by outside powers, federations typically do not have internalmilitary struggles.Once weak nations first ally, and then federate, there will be no

periphery for the imperial centers to control. With the assurance of thedestruction of all belligerents, surely the imperial centers will not go to warwith each other. With most the worlds precious resources in a newly


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federated world, the federation of the entire world is the route to equal

access to resources and a quality life for all.The first five chapters condense the concept of distribution throughunnecessary labor which is the central theses of The W orlds W asted W ealthand The W orlds Wasted W ealth 2. Later chapters borrow heavily fromE conomic D emocracy: The Political Struggle of the 21 st-Century. The thesis of amodern commons and residual-feudal exclusive title to natures wealth in thismanuscript developed so much strength that we inserted those conceptsinto W H Y ? The D eeper H istory Behind the September 11, 2001 Terrorist A ttack on

A merica and later editions of E conomic Democracy to give those readers thebenefit of those thoughts. However, each book has its own focus whichgains strength when built upon the central theses in our magnum opus,E conomic Democracy. We trust our readers will bear with us on theduplications.

We highly recommend picking keywords, key people and countries offthese pages and run Google/ Nexus-Lexus Internet searches. One will besurprised at what has been missed in the news and history books and eachsearch only takes minutes. With normally hidden history right at thereaders fingertips, in a few years authors will insert only a few citations. Asearch for alternative views on subjects on the evening news will be a greateducation.

The title of John Perkins book, Confessions of an E conomic H itM an (2004),alerts us that this is a must read. Finally, one of the managers of statedefected and eposes the heart of the beast; our analysis was right on target.

Michael Hudsons Super Imperialism: The Origin and Fundamentals of U .S.W orld D ominance, giving a point by point description of how financial

warfare and economic warfare are waged,is also crucial.Likewise Sheldon Rampton and John Staubers Banana Republicans: How

the Right W ing is Turning A merica into a One-Party State. These authors explainhow once a week the hard right pass out crucial talking points to their radiotalk shows, to news outlets they control, and to key government officials.The essence of those talking points flow out of those news outletssimultaneously building an echo chamber which imprints upon theAmerican mind a view of the world that protects their excessive rights.

Michael Hudson and Baruch A. Levines Privatization in the A ncient N earE ast and Classical W orldaddresses the 5,000 years of the ebb and flow ofprivatization. We outline how, in one stroke, Henry Georges conversion ofexclusive titles to natures wealth to conditional titles restores those original

commons in modern form and is the answer for full and equal rights with aquality life for all.


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Introduction 15

Notes1 Petr Kropotkin, Mutual Aid (Boston: Porter Sargent, 1914), Chapters 6-8, especially p. 225.2 Ibid, especially p. 226. See also Renard, Guilds of the Middle A ges, p. 66 and Chapters 7-8;

Adam Smith, W ealth of N ations, pp. 523-626, 713; Immanuel Wallerstein, The Modern WorldSystem, (New York: Academic Press, Inc., 1974),vol. 2, pp. 5, 37, 245, vol. 3, p. 137.

3 Adam Smith, The W ealth of N ations (New York: Random House, 1965), p. 607.4 William Appleman Williams, Contours of A merican History (New York: Academic Press Inc.,1974, p. 41.5 Necessity Test is Mother of GATS Intervention The Observer(April 15, 2001). See also:

John McMurtry, The FTAA and the WTO: The Meta-Program for Global CorporateRule, E conomic Reform (April, 2001).

6 Schor, The Overwork ed A merican, chs. 1. & 3; Peter Drucker, The N ew Realities (New York:Harper and Row, 1989) p. 123; Roy Morrison, W e Build the Road as W e Travel(Philadelphia: New Society Publishers, 1991), p. 221; Lester Thurow,H ead to Head: TheComing E conomic Battle A mong Japan, E urope, and A merica (New York: William Morrow and

Company Inc., 1992), p. 53; Lester Thurow, Investing in Americas Future, E conomicPolicy Institute, C-Span transcript (Oct. 21, 1991): p. 9; Kevin Phillips,Boiling Point(NewYork: Random House, 1993), p. 24; Walter Russell Mead, After Hegemony,N ewPerspective Quarterly (1987), quoted in As Reagan Crumbles, p. 14.

7 Michael Perelman, The Invention of Capitalism: Classical Political Economy and the Secret History ofPrimitive A ccumulation (London: Duke University Press, 2000), especially p. 91: Thomas C.Patterson,InventingW estern Civilization (New York: Monthly Review Press, 1997).

8 Perelman, The Invention of Capitalism, Chapter 3.


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16 Cooperative Capitalism: A Blueprint for Global Peace and Prosperity


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17

Section A

Internal Trade

Wasted Wealth that the Developing World

Must Avoid


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1. Henry Georges Concept of an EfficientModern Land Commons

Michael Hudson and Baruch L. Levine (Privatization in the A ncient N ear E astand C lassical W orld) trace the 5,000-year history of privatization of natureswealth. Henry Georges concepts of restructuring those exclusive titles toconditional titles has, in one stroke, retained the claimed efficiencies ofprivatization (private property, individualism, competition) even as it

restores (in modern form) the commons that was the original economicstructure for every people on earth.We will be applying Henry Georgesprinciples to elimination of land, technology, finance, and communicationsmonopolies.

Land is social wealth. It was not created by labor, we all require land tolive and everyone should have full and equal rights to space on this earth.Those full and equal rights can be obtained by a simple change in residual-

feudal exclusive land titlessociety should collect the landrent. A nationslandrent, currently collected by subtle land monopolists under laws of theirown design, is adequate, once that change is made, to pay all normal costsof government.a R esidual-feudal exclusiveland monopolization and sales and

a Mason Gaffney and Fred Harrison, The Corruption of Economics: W ith T he Development ofD emocracy, Mind Control Became the Urgent N eed: N eo-Classical E conomics Was the Tool (London:Shepheard-Walwyn, 1994), p. 183. Social Security, Railroad Retirement, Federal EmployeesRetirement, unemployment insurance, Medicare, and Medicaid, areat this timeallimproperly labeled as government expenses; they are actually paid-for insurance fundsseparate from expenses of running governments.


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19

income taxes disappear as use values are distributed instantly and without

cost.a

With society collecting the landrent, the price of land drops to zerowhile its use-value actually increases and the economy becomes moreefficient. The payment of that landrent is, at first look, only slightly lesscostly than purchasing that land under the current residual-feudal ex clusivetitles. But a second look takes into consideration the elimination of all othertaxes which, on balance, returns the price of land to zero. All would thenhave access to land at no net cost due to landrent replacing all other taxes.

That tax cannot be evaded and the collection system is already in place.Each person or business would then pay their share of the costs ofgovernment. All will have access to land for a home and true producerswould be able to start a business with only the capital necessary to buybuildings, machinery, and inventory. These are easy to finance while thepurchasing of subtly-monopolized land is very difficult to finance.

Most talented accountants, federal tax agents, a substantial number oflawyers, their support staff, as well as all who built and serviced their officesand equipment would now be available for productive work. Product priceswould drop as sales and income taxes and their accounting costs disappear.All this would be gained with no increase in costs to the true producer(subtle monopolists arewithout realizing itinterceptors of wealth, nottrue producers). Landrent taxes would be paid out of cash flow instead ofbeing deducted from net income. Societys collecting of the landrent is abargain for hard working and talented productive people.

With subtle monopolization eliminated, the most efficient farmers canpay the highest landrent, so the most efficient farmers will own their farms.

The most efficient industries will own their required land because they canpay the highest landrent. The most efficient businesses will own theirrequired land because they too can pay the greater landrent. And all citizenswill have rights to the land under their homes at no initial cost and, againconsidering the elimination of sales and income taxes, no net cost. Theannual landrent cost will appear only slightly smaller than subtle-monopolyrent but it is fully offset by other taxes disappearing so it is far cheaper:

Oil, copper, iron ore, and the like, while still in the ground, are land and canvery properly be privately owned so long as society is paid the landrent. Theworld has adequate reserves of most of these minerals. It is only richer

a This is a summary of our chapter on Henry George, J.W. Smith, E conomic Democracy: The

Political struggle of the Twenty-First Century, expanded and updated 4th

edition (www.ied.info/:The Institute for Economic Democracy, 2003), Chapter 24; Henry George, Progress andPoverty (New York: Robert Schalkenbach Foundation, 1981).

Henry Georges Progress and Poverty, published in 1879, is the classic on this subject. Werecommend reading that deeper study. All his works and many authors writing on him areavailable from the Robert Schalkenbach Foundation, 41 East 72nd St., NY, NY 10021 (212-988-1680), established for the purpose of keeping Henry Georges philosophy alive. For up-to-date listserve info contact Alanna [email protected]..
http://www.ied.info/mailto:[email protected]:[email protected]://www.ied.info/


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deposits and cheaper labor in developing world countries that make theirminerals more available. Under Adam Smith unequal free market philosophy,the developed world's more expensive deposits are not mined until the undeveloped world'scheap deposits are exhausted. Ecological taxes or surcharges on rich mineraldeposits to equalize production costs between developed regions with theirexpensive mineral deposits and the developing world and their cheap minerals... is really landrent.1

Landowners invested their money honestly and they should not be forcedto shoulder the cost of a change in tax structure which changes residual-feudalexclusive property rights, eliminates monopoly profits, and thus changesmonetized values. Homeowners and business will be instantly compensatedthrough the elimination of other taxes. Farmers, large landowners,landlords, and others only partially compensated can be made wholethrough bonds up to the value of their loss. Retirement funds would

expand to compensate retirees.Buying power is badly needed in a depression. Bonds could then be

issued to compensate for the loss ofresidual-feudal ex clusive property rights.

1 J.W. Smith, E conomic Democracy: The Political Struggle of the Twenty-First Century expanded andupdated 3rd edition (www.ied.info/: The Institute for Economic Democracy, 2003), Chapter25.
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21

2. The Efficiency of a Modern TechnologyCommons through Applying Henry GeorgesPrinciple of Conditional Titles to NaturesWealth

Societys tools (technology) are subtly monopolized through residual-feudalexclusive title to patents and the stock market is the economic structurethrough which those subtle-monopoly profits are harvested:

That stock markets are crucial to raising investment capital in a moderneconomy is a myth. Most stock traders have no contact with new issues ofstock and those who [do] are primarily taking an already established privatecompany public. Most corporate investment needs are financed from profits,liberal depreciation schedules, and borrowing. As currently structured,investing in stock markets is primarily a bet on which corporation will mostsuccessfully expand its share of national and world markets. These are notinvestments in production.1

Adam Smith recognized that capital is a part of the commons, properlybelongs to labor, and that the current residual-feudal exclusive structure ofproperty rights increases costs: Produce is the natural wages of labor.Originally the whole belonged to the labourer. If this had continued allthings would have become cheaper, though in appearance many thingsmight have become dearer.2 Nowhere is this clearer than in residual-feudalexclusive patent rights. This can be understood by analyzing the increase inwealth through restructuring those laws to eliminate subtle monopolies.

While leaving old patents intact, all should be able to use any newpatent through paying a reasonable royalty. When older patents run out allpatents will be available for use by all. Through a modern commonseliminating unnecessary labor and wasted capital (over 90% of stock market

activity) within the current legal structure, patent overcharges disappear,inventors are better paid, and consumer prices drop precipitously.

Patent laws should be expanded to include development patents thatalso are available for all to use through paying a royalty. Both the inventorand the developer are now protected by patents, just as now, but theycannot monopolize. This is right by the philosophy of Adam Smith; the


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only protection to the producer would be the highest quality production at

the lowest possible price.An even cheaper and more efficient system would be society analyzingpatent use, paying inventors a capitalized cash payment, and placing thosepatents in the public domain. This would eliminate most accounting costs.Full rights and true free trade will have replaced residual-feudal ex clusiveproperty rights. Prices will drop rapidly as product quality is maximized.

Subtle-monopoly profits are currently harvested through stock prices.With all companies having rights to use any technology, creative destructionof perfectly good industries (capital destroying capital) through residual-feudalexclusive rights to superior technology will be replaced by all companiesusing the latest and most efficient technology. Creative destruction will nowbe internal within industries rather than new industries utilizing newtechnology causing the shutting down of others perfectly good industries.The cost to society of well-run industries shutting down will be replaced bythey retooling, continuing to operate, and calmly expanding to other regionsin step with the increase in buying power in those regions. The logistics ofbeing near resources and markets replaces subtle monopolization of keytechnologies taking over markets.

As industries rationalize, so do markets. With calm secure industriesmaking minimum (yet adequate), not maximum, profits in a truly-competitive, truly-free, market as opposed to maximum profits in a subtly-monopolized market, the market for options, futures, selling short, allderivatives, and the enormous sums they claim, will shrink to a tiny fractionof todays subtly-monopolized markets. Under the modernized laws of thecommons, full values will be produced, those values distributed to all

citizens without added monopoly costs, andthough fair wages, fairprofits, and an efficient market remainthe tribute paid to subtlemonopolists and the gambling casinos (over 90% of stock market activity)will disappear. The nonproductive speculator has been transformed into aproductive investor.

All producers could use the most efficient technology and the mostefficient would capture the markets. Subtle monopolists who once livedhigh on unearned income will have to find productive employment, theworkweek will shrink the same percentage as the drop in prices, and far lesslabor per individual will be required for the same standard of living.

As production and profits will be stable, stock prices will be stable.Investments in new technology however will be as normally speculative as

today and, for the alert and truly talented, very profitable. We will nowaddress a financial structure in which, so long as there are unused resourcesand unemployed labor, there is never a shortage of finance capital.

1 Smith, E conomic Democracy, updated and expanded 3rd edition, Chapter 25. See also VandanaShiva, Protect or Plunder: Understanding Intellectual Property Rights (Zed Books: London, 2001)

2 Adam Smith, W ealth of N ations (New York: Random House, 1965), p. 64.


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The Efficiency of a Modern Money Commons 23

3. The Efficiency of a Modern MoneyCommons

Outlining an honest banking system will expose the simplicity of money. a Apart of the money created by powerful nations are banked outside theirborders and become currencies for international trade. Through suspensionof access to central bank reserves, targeted banks lose the right to credit anddebit other banks in that currency. (This power was used to cut off dollartransactions for overseas banks not cooperating in following the terroristmoney trail.)

Money is a social technology. It represents wealth but is not real wealth.Powerful nations create money (up to a point this is productive) but if aweak nation prints (creates) money, that currency is immediatelydiscounted, effectively denying those regions that crucial sovereign right. Todevelop industrially and gain control of their destiny, a region of weaknations must ally together and create their own trading currency.b

All wealth is created by combining resources, labor, and industrialtechnology (capital). Most of the worlds resources and labor is in thedeveloping world. If a developing region were truly free, its central bankcould create the money to build the industry and mine, harvest, or purchasethe necessary resources. More money would have to be created to financethe first production of that industry (labor, energy, et al.). The industry,resources, products produced, and the wealth created by the economic

a J.W. Smith, E conomic Democracy: The Political Struggle of the 21stCentury, updated and expanded4th edition, Chapter 26 addresses the history of money and an honest country, regional, andworld banking system in depth. All subjects addressed in this book are highly abbreviated.For the full story, we encourage the reader to read those 430 pages.b To understand the enormous power the dollar has at this time over other nations currenciesand Americas fear of those nations trading in their own or other currencies read W. Clark,The Real Reason for the ongoing War with Iraq, http://www.ratical.org/ratville/ CAH/RRiraqWar.html
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multiplier as that money circulates within the economy, provide the value to

back the money created.That primary-created money productively spent circulates within theeconomy (the economic multiplier creating more money [circulation-createdmoney]) and energizes more production. If that first primary-created moneyis insufficient for a fully functioning economy, more money should becreated and added to the circulating money to build banks, businesses andstores. The new values created back both the primary-created andcirculation-created money.

A modern economy requires electric power stations, roads, sewersystems, water systems, et al. In step with the ability of industrialproduction to produce products to soak up the regions new buying power,more money must be created to build social infrastructure. To the extentthat infrastructure is built with primary-created money, there is no debt.When money is understood, an increase or decrease in its primary creationcan fine-tune an economy to the maximum capacity of resources and labor.

Economists can easily calculate any surplus buying power that mayoccasionally develop and increased reserve requirements (of banker orborrower) and quickly soak up that surplus. As a region develops, moneycreation, both primary and circulation created, will have to be within thecapacity of the earth to recycle wastes and to protect resources, andenvironment for future generations

All banks should be required, as now, to keep a percentage of theirdeposits with the central bank. When the economy needs more money, thecentral bank increases the loan capital of needy banks by recording anincrease in those banks central bank deposits (an interest bearing loan). As

only an increased accounting entry was made and there was no deductionentered from another account; that is primary-created money.

Assuming the reserve requirement is 10%, those banks could loan outnine times (900%) the increase in their reserves. That 9-times increase,deducted from one account and added to another account at each point inits circulation, is circulation-created money. By increasing or decreasingreserve requirements, a central bank can precisely control the creation, ordestruction, of money.

Bankers will have to be knowledgeable about, and loan appropriatelyfor, community needs. Needs of regions and communities should becalculated and each region and each community should have equal rights toboth savings and created money. These would be community banks

servicing a community and a region, their loyalty would not be toshareholder profits. They would not be banks siphoning savings from thefarthest reaches of a nation to financial centers maximizing profits throughmonopolization and speculation. Through increasing or decreasing interestrates on productive capital investments or for consumer credit, as well asincreasing or decreasing reserve requirements, an economy can be balanced.


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Subject to change to balance the economy, all checking accounts should

receive a 3% real interest rate on average balances. As this is well above thelong-term average real interest rate, there need be no savings accounts. Apersons checking account is simultaneously their savings account.

Instead of the historic accumulations of capital through subtlemonopolization of land, technology, and money, higher risk finance capitalcan be made available through assigning a share of created money for riskcapital and/ or applying a surcharge on those loans to cover risk.a Throughrepayments of principal plus interest, plus the right to a share of createdmoney, this capital accumulation fund will expand in step with theexpansion of an economy.

Most loans will be funded from normal savings against collateralizedequity. But productive individuals with special expertise and projects ofproductive merit will have access to this high risk capital accumulation fundto develop the millions of ideas necessary for the progress of science,industry, and society. The capital accumulation fund loan should be to boththe owner and his/ her workers.

With 70-to-80% of stock reserved for employees, talented workers canstudy the prospectus and agree to 10 to 20% wage deduction to pay forhis/ her share of stock. They become owner employees. With land havinghigh value but no cost, as per the above chapter on a modern landcommons, borrowing needs to start an industry or business will be a smallfraction of current costs. Having first mortgage, and backed by equity, apart of cash flow, and increased landrent values, the loan would be secure.Instead of profits going to subtle land, technology, and money monopolists,broadly-diffused highly-productive citizens will accumulate capital. A

computerized stock market would bypass expensive brokers; selling sharesdirectly to the public:

Most workers would stay on the job, but, once the new business was secureand their new stock had capitalized value, the talented ones would search outanother prospectus, help develop another business, train more workers, gainmore capitalized value, and move on again. Labor would be mobile, highlyproductive, and highly paid accumulators of capital. This would bemobilization of labor without the dispossession that has been so typical ofpast capitalization processes. Labor would have the same rights to gains inefficiencies of technology as investors now have. The talented would be inhigh demand by the developers of industry.

Besides collateral protection, there are three flows of money that makethose loans securelandrent, profits, and a share of wages. Societys

a The almost unnoticeable transaction tax on the circulation of money would be verypractical for funding a capital accumulation fund. This tax has been studied by theCongressional Research Service of the Library of Congress and found feasible.

Tax lawyer John A. Newman proposed this transaction tax on the circulation of money tothe American Congress in 1988 and Paul Bottis (http:/ / www.taxmoney-notpeople.com http:/ / www.madashellclub.com) is continually proposing it to the American Congress today.
http://www.taxmoney-notpeople.com/http://www.madashellclub.com%29/http://www.madashellclub.com%29/http://www.taxmoney-notpeople.com/


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collection of landrent could, and should, permit it to accept a larger share ofthe risks of new entrepreneurs. Every success increases the use-value, andthus the rental value, of that land. The risk of uncollateralized investmentloans could be offset by a surcharge on the interest to go into an insurancefund. With these restructured borrowing rights, many more people wouldqualify for investment capital than under equity loans. If entrepreneurs weresuccessful, they and their workers, through the shares purchased, would ownthat capital honestly, as opposed to the current custom of capitalizing valuesthrough subtle monopolization of social wealth.

Those searching for a higher returnand confident they have foundgood investmentscould directly employ their capital. Those who wished to,and who could find the opportunity to lend their savings at a higher rate,would be free to do so. But they could no longer obtain high profits by simpletribute for the use of subtly monopolized capital. Those who once bid formoney market funds would now have to compete for loans on their projectsproductive merits. This would eliminate pure speculation with social funds

while retaining that right with personal funds.1

For maximum care for all its citizens, regional directors would be umpiresoverseeing their regions financial rights, while local directors would overseestate, county, and community funding rights. A minimum housing standardcould be set and that goal reached as could goals for roads, parks, schools,and public buildings.

With infrared thermogram images of palm, artery, vein, eye pattern, andsignature scanning confirming identity, local credit unions, an integral partof the banking system, would issue consumer credit much as credit cards donow but at a fraction the interest rates.

Working on a bill to submit to the Eighth Session of the ProvisionalWorld Parliament, Professor Glen Martin of Radford University expandedupon the Biblical and Koranic principles that it is wrong to charge interest.As money and banking are social technologies understood for thousands ofyears and ownership is only proper for items built by ones labor orpurchased with funds earned by ones labor, and money and bankingsystems are neither, this is a logical social-legal structure.

What caught professor Martins attention was, if properly structured,the elimination of the waste of monopolies and the attaining of full andequal rights through sharing the remaining productive jobs (each workingonly 2-to-3 days per week) equalized the earnings of all and thus did awaywith the huge accumulations of money formerly appropriated by thosemonopolies.

With the disappearance of those huge blocks of appropriated wealth

and the equalization of pay for equally productive work, the need for payinginterest disappears. Beyond application, accounting, and brick and mortarcosts, well under 1% of loan values, there was no one producing anythingthrough either mental or physical labor so no one would be entitled toearnings of 6%-to-24% interest on loan values.


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Professor Martin further recognized that banks paying high interest on

savings and typically zero interest on checking accounts recognized thisdifference. After all, the average positive balance in checking accounts is asmuch a part of a banks loanable funds as are savings accounts.

The Eighth Session of the Provisional World Parliament may considerthe suggestion that the productivity difference of labor is a maximum of 1-to-4 and thus the maximum differential in pay for a federated earth wouldbe that same differential. With each productively employed, most peopleon balanceconsuming most of their earnings, and a policy of no interestloans, checking accounts would operate as now, depositors paying their billsfrom their checking accounts. The banks would loan out the averageminimum monthly balance covering costs through a nominal 1% servicecharge.

No interest buffs and socialists here is an opening to expand yourphilosophies. Study the elimination of monopolies, the disappearance of thehuge blocks of appropriated capital, and the equality of income through fulland equal rights as presented in our research.

Throughout our work we have stated that, economic efficiency underdemocratic-cooperative-capitalism would be so efficient the world would bequickly stripped of its resources and this would force social oversight of theentire production-distribution system. As the medium of exchange inevery transaction, money movements are a mirror image of an economy.Thus control of an economy is logically through society controlling banksand money.

As resources get scarcer and scarcer the variables are many. So we leaveit at that with the confidence that, through social control of money under

strict rules of full and equal rights for all, the elected managers of afederated earth will control the wealth-producing-process to provide aquality of life for both current citizens and those into the far distant future.

Those full and equal rights can be attained under a system of intereston, or one with no interest on, savings and loans. However, our philosophyis that savings (financial capital) is but a symbol for wealth produced butnot yet consumed. That unconsumed wealth is primarily highly efficientindustrial capital and infrastructure continually increasing the efficiency oflabor.

The key is what is done with that interest. As capital is but stored laborwe hold that those who did the mental or physical labor deserve to be paid.For that reason, even with Professor Martins pointing out that an economy

can run efficiently without paying interest, we will change the abovedescription of an efficient banking system only to the extent of what is tobe done with that interest.

Saving should be rewarded and we do so through, as outlined above,the payment of interest at the high end of long term averages, three percentwhich goes to the savers. This conforms to the need for investment profits;


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savers have the choice of secure investing in bonds or savings accounts

with low earnings or higher risk investing in stocks with higher earnings.But, as no ones labor is involved beyond that of the well-paidmanagers and accountants, the proper recipients of the higher interestearned by banks is society itself. Along with societies collection of landrent,as per above, this adds up to enormous sums of money. Such hugeinvestment funds match up well with the worlds need for the severalinnovative economic policies we are advocating.

The world must developnonpolluting energy, build industry and basicinfrastructure within impoverished regions, establish a satellite educationalsystem which will graduate students worldwide in all languages for 5% to15% the cost of brick and mortar schools, create a worldwide currency andbanking system that protects all regions rights to created money andinvestment capital, and establish an Earth Federation to oversee this systemof full and equal rights for all.

As those interest charges go right back to the people in the form ofessential services and none is accumulated in huge blocks of unearnedwealth, there is, just as preached in the Bible and Koran, effectively nointerest. Without that source of funds, those expenditures would have to beobtained through taxes. Society has simply taxed the loan structure in theform of an annual percentage on outstanding loans at 3%-to-10% asopposed to the current 6%-to-24%.

Once the impoverished world is developed to a sustainable level, thewealthy world will have repaid the world for 500 years of slavery andplunder through which their massive wealth was accumulated. At that pointinterest and other taxes must be reduced to the level it requires to operate a

peaceful federated world. To not federate means continual war. To federatemeans peace for all time.

Creating a Constant-Value Currency

A developing region needs to protect its trading currency against bothinflation and deflation. The average price of a broad range of commoditiesstays relatively constant over time. A constant-value currency can beattained by tying its value to

a basket of 30 or more of the most commonly used commoditiesgold,wheat, soybeans, rice, steel, copper, etc.... The essential difference [betweenspeculation and arbitrage in commodity and currency markets] is that the

arbitrageur buys and sells [contracts of different maturity dates]simultaneously [on different markets] while the speculator buys and sells atdifferent times. The effect of arbitrage on price movements is to stabilizethem; the effect of speculation is to intensify them. If arbitrage were to beconducted on a large enough and wide enough scale, speculation wouldbecome less and less enticing. But perhaps even more than this, if it were tobe promoted and practiced by an independent international agency such as


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the bank-of-issue I am calling for on the magnitude this would make possible,it would stabilize prices to such a degree that stabilization as a seriousproblem would disappear. Stabilization would make speculation peripheralinstead of central in the determination of the prices of basic commodities ofthe world.2

Instead of 10% of its funds sitting idle, a bank (or the Central Bank wherethose reserves are deposited) should purchase a broad range of commoditycontracts and hold them as reserves. The values of the worlds commoditiesnow back the value of that trading currency. With risk eliminated,international traders will write contracts in, and accept and make paymentsin, that constant-value currency. Those bankers, now also commoditytraders, would do no speculating. They would only sell contractsapproaching delivery dates and purchase new contracts. Once established,incoming and outgoing money will balance as commodity contracts arebought and sold.

With world travelers and world traders flocking to commodity-backedconstant-value currency, other nations would quickly back their currencieswith commodity contracts. To not do so would risk traders abandoningtheir currency. Thus any nation or region establishing commodity-backedmoney will force the worlds central banks to tie their currencies to thevalue of commodities. The national character of currencies would be of noconsequence, since they would be but different tokens representing thesame commodities.... We will have Greshams law operating in reverse;good money will be driving bad money out of circulation. 3

Commodity speculation will disappear and the percentage of a nationscurrency invested in commodities will lower as other nations reserves are

invested. All trades will match equal-value currency transfers, speculation incurrency will disappear, and all contracts will equal the value of allcommodities in the field, in transit, and in storage. On balance, eachcurrency would be valued and backed by its nations production.a

With commodity-backed, equal-value currency widely used, countrieswould have to use their currency creating powers productively. Debasingtheir currency by printing money for nonproductive purposes would beproducing no value and their currency would immediately be discounted inthe markets. With a currency securely tied to the value of a broad basket ofcommodities, external powers could not siphon away the wealth of weaknations through discounting their currency and thus deflating its value:

With stable constant values, individuals not using those commodities orcurrencies in their businesses would no longer borrow societys finance capitalto speculate in commodity markets, nor would they do so with their owncash. Protected by constant-value money backed by the worlds commodities,

a. Inflation and deflation can also be eliminated, and thus a stable value currency created, byindexing wages and contracts to the price changes of a broad basket of commodities.


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true producers would not need to speculate. Speculation in commodity andcurrency markets would cease and the funds of both speculators and trueproducers would be available for true investment. Commodity prices, thusconsumer prices, would decrease by whatever amount was once siphonedaway by these gamblers and confidence in constant-value money wouldincrease efficiencies in international trade, creating even more values.Individual commodities could suffer temporary losses in value but averagevalues would remain stable and those stabilized values would virtuallyeliminate world economic collapses.4

By tying money to commodities one has only gained a part of full traderights. Equality in commodity trades requires weak countries being equallypaid for their labor and resources. When equally and fully paidandassuming quality management, access to markets, access to technology, etal.poor nations can immediately start accumulating wealth.

Eventually money can also be valued against a basket of consumerproducts or a combination of commodities and consumer products. As thevalue of both money and commodities fall together, there can be noeconomic collapses. But if a crisis creates shortages across the board,money values must decrease.

Once the labor of all nations are roughly equally paid and subtlemonopolization of land, technology, and finance capital are eliminated,money will be a measure of productive labor value.a

Once the waste of wars, waste of capital destroying perfectly goodcapital, and waste of labor and capital of subtle monopolies are eliminated,a modern economy will function with less than half the current workforce.Sharing productive jobs would reduce the workweek to some 2-to-3 days

per week.Once tied to the value of a broad basket of commodities, money willhave been returned to a modern commons for common use by everybody.Once subtle monopolization has been eliminated, the value of commoditieswill be equal to the value of the labor that produced them. Money wouldthen represent the value of productive labor just as it did when evolvingfrom clay tablet accounting in Sumer over 5,000 years ago.b

a One will search books on money in vain for the simple fact that money originated as whatit should be, a measure of productive labor value. Once society advanced from money as asymbol of labor value to money as a medium of exchange, most of the sense of true valuewhich money properly represents was lost. An honest banking system returns money to itsoriginal meaning, a measure of productive labor value. Miezyslaw Dobija and Martyna Sliwa,

Money as an Intellectual Adventure, pages 131-85, especially p. 135 in Stefan Kwiatkowskiand Charles Stowes Knowledge Caf for Intellectual Product and Intellectual capital (Warsaw, Poland:Leon Kozminski, 2001).b Through preventing, on average, surpluses in commodities or consumer products,commodity backed money will prevent economic crashes. But, if shortages occur, there willbe an increase in price which means a lowering of the value of money. Community oversightmaintaining a balance between resources and consumption will be necessary.


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1

Smith, E conomicDemocracy, updated and expanded 3rd

edition, Chapter 26.2 Ralph Borsodi,Inflation (Great Barrington, MA: E.F. Schumacher Society, 1989), p. 73.3 Ibid, p. 8.4 Smith, E conomicDemocracy, updated and expanded 3rd edition, Chapter 26.


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4. Subsidiary Subtle Monopolies within the PrimaryMonopolies of Land, Technology and Money

Insurance. On average, 50% of insurance premiums are consumed inselling and managing insurance. With almost no sales expenses, the cost ofgroup insurance is only six percent.

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Cooperative Capitalism

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