Wednesday, April 18, 2012

Reform Capitalism - a concise introduction

What is Reformed Capitalism

Reformed Capitalism is the name for a set of economic rules that preserves the core benefits and strengths of free-market capitalism, while eliminating or lessening the weaknesses and downsides of that system.

Reformed Capitalism seeks to preserve the key elements of private property, open markets, and entrepreneurial reward which drive the success of the capitalist system.

Reformed Capitalism seeks to end the elements of exploitative rent-seeking, usury, and wealth disparity which exhibit the downsides of the capitalist system.

Reformed Capitalism is not intended as a political platform for any given contemporary nation-state, although in the course of exhibition of Reformed Capitalist principles, historical and contemporary examples are mined copiously. The problems of any specific country’s economic system are complex and variable, and will not necessarily be addressed directly.

Rather, Reformed Capitalism is intended as an expression of general principles and policies, which can be applied to any present or future circumstances. If a country is starting from scratch, theoretically the entire body of Reformed Capitalism could be implemented at once. Or, more likely, single planks of Reformed Capitalism could be implemented one at a time by an existing nation.

The point of Reformed Capitalism is to establish a body of economic knowledge and practical rules which can be applied to all, to the benefit of our collective unity, justice, peace, welfare, and liberty.

For the Benefit of Whom?

Any economic policy must first determine for whom the economic benefits are intended. The primary critiques of traditional capitalism mostly boil down to the way in which it facilitates the economic exploitation of the masses for the benefit of the few. Reformed Capitalism takes the opposite course, explicitly defining its target as the benefit of the masses over the benefits of the few.

The exploitative features of traditional capitalism are a direct result of its origins in ancient conquests and the feudal governments set up to secure the benefits to the conquerors. While much political reform of the modern era has succeeding in eliminating feudal ideas in government, the feudal legacy has not been eliminated from our economic system. That feudal legacy is summed up in one word: rent.

Rent was invented as a fruit of conquest. Basically, rent developed from the practice of tribute. The ancient tribute system was simple enough: “We, your conqueror, allow you to live, in exchange for a regular payment.” Rent developed from that basic concept, except as applied to the land, rather than to the people directly. A tribute was what we would call a capitation tax, a tax directly “on the head” of the person: “pay or die!” Rent is a tax directly on the land of the person: “pay or be kicked off!”

Absentee Ownership of Land

The theoretical basis of rent is found in the concept of absentee ownership. This is the idea that, though someone lives far distant, and has nothing to do with the activities on the land, they nonetheless have the right to claim the produce of those activities.

Obviously, the idea that someone can be totally absent, yet claim ownership of the land and its produce, is also based on the ancient practice of conquest. No one would voluntarily pay a portion of their hard-earned produce to some far-off stranger who contributed nothing. Rent was originally a forcible extraction from a subjected population by a deadly invasion force.

Unfortunately, this ill-begotten concept of absentee ownership survived into the modern era. In fact, it provides the basis of much of our economic practice today. In the medieval economic world, absentee ownership was largely confined to the question of land ownership. With the development of industrialized mass-production techniques, absentee ownership took on a new, more virulent form.

Absentee Ownership of Production

These absentee owners of factories are the proverbial “capitalist pigs” of the Industrial Era. Like their absentee landlord predecessors, these absentee owners claimed the wealth produced by others. The concept of absentee ownership is codified through the legal fiction of the business corporation, the main function of which is to protect absentee owners from liability.

Under this system, absentee owners are created solely by virtue of their possession of the money to finance some productive economic activity. This exposes the ugly underbelly of the traditional capitalist system: with money, it is absurdly easy to make lots more money. Conversely, without lots of money to start with, it is almost impossible to make lots of money. In short, the possession of money itself is self-perpetuating and self-reinforcing.

Absentee Ownership of Money

This keystone role for the power of money is further strengthened by the changing nature of banking. They concept of absentee ownership plays a key role here as well. Lending on interest, known as usury, is nothing less than the idea of absentee ownership applied to money. Interest is the rent charged by the absentee owner on the possession of the money by the borrower. Like all absentee owner rent-seeking, the act is exploitative, as the person doing the actual economically-productive work is forced to share the profit with someone who has done nothing.

The worst part about modern banking is that today’s bankers don’t even have to acquire the money before they lend it out! It is incredible, but true, and it is called fractional reserve banking. Banks can literally lend out money they don’t even possess.

Imagine you have $100, and your family needs some money. So you loan out $500 to your mom, $300 to your brother, and $200 to your sister, plus you get to keep the original $100 in your own wallet. THAT is fractional reserve lending on a 10% reserve ratio. The 10% means you have to keep cash on hand equal to 10% of your outstanding loans, which means you can lend out 10 times the amount of money you actually possess. The weird part is, you get to charge interest on the money that you loaned out, that you never even possessed in the first place.

Obviously, under the fractional reserve banking system, the power of money has been multiplied exponentially, at least, for those who have it. For those who don’t have it, things are business-as-usual: a life of wage-labor, struggling to stay ahead while suffering numerous exploitations at the hands of various rent-seeking absentee owners, such as land owners, business owners, and bank owners. Even the effort to save for the future is undermined by the moneyed powers, who crush savings through planned inflation of the money supply.

Ending Absentee Ownership

Reformed Capitalism seeks to end all this exploitation, by doing away with the various forms of absentee ownership. The base principle of Reformed Capitalism is that no person is entitled to the profit in work of which they had no part. Under the rules of Reformed Capitalism, a free market in wages for labor is still perfectly legitimate. Thus, there is no silliness about government interference with wages or income levels. Indeed, a man is perfectly entitled to the full fruits of his labors, and in a free market, some labor is worth far more than others, and rightly so.

However, profits are illegitimate that come from the exploitation of the labor of others. In Reformed Capitalism, the basic rule of thumb is that if you have no part in the productive activity, you have no right to part of the proceeds. The motto of Reformed Capitalism is a phrase that strikes terror in the heart of every member of the rentier class: you are only entitled to profit from the work you actually do. In short, sitting back and profiting off the work of others will no longer be allowed.

Protecting True Ownership

A key distinction should be made here on this concept. Unlike in Marxism, in Reformed Capitalism, not all forms ownership or contract labor is considered illegitimate exploitation. An owner who is risking his own capital and actively managing an ongoing concern is fully entitled to the full profits thereof. That is true ownership, and Reformed Capitalism affirms and supports it as a vital element of a free and prosperous economy. The concepts of private ownership and a free market for wages are fully supported.


Siobhan said...


Great site! I'm trying to find an email address to contact you on to ask if you would please consider adding a link to my website. I'd really appreciate if you could email me back.

Thanks and have a great day!

Justin said...

Sure, what's your website?