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The Great Political Question

The political controversy that looms largest in the political landscape is the one that even defines and identifies most political parties. Occasionally, a political party might be the voice of a particular region, ethnic group, or even religious faith. But most political parties are identified as the party of the Right or of the Left.

Positions on many issues are associated with these two political viewpoints. But the central issue that defines these two sides, I think most people will agree, is the question of to what extent the government should attempt to aid the poor by means of the expenditure of revenues raised through taxation.

Abstract Issues

Both sides have their arguments which appeal to the common moral sense of most people.

What could be more appealing to our sympathies than the sight of a child, without proper food, clothing, or shelter? Obviously, the child is not to blame for his predicament; if the possibility exists to remedy that predicament, but nothing is done, this seems to be very wrong, which seems to lead to the conclusion that the child has a right which is being violated in this situation.

But while it may seem reasonable that we should acknowledge that people have a right to be provided even with the most essential things, such as food and shelter, it is not nearly as clear that being able to marry and raise a family is something we should be forced to subsidize other people in doing. If I choose to have a few children, and work hard so that they can receive a good education and be productive, is it fair that this should be made harder because others have chosen to have many children, who they cannot even afford to feed?

Historical Issues

The question of how much government should do to help the poor would not be a burning question if the money required to solve the problem were a sum that people would hardly notice.

If, in an otherwise wealthy country, a few people were poor because of a disabling injury, or because of being widowed, generous financial support for such people would not be a great economic burden, and people would generally support it because they would feel that this might happen to them.

But people who didn't do well in school; whose parents didn't do well in school; who belong to a group of people who speak with the wrong accent, or, worse, have skin the wrong color; a group of people whose children seem to tease or annoy children who try to pay attention in school, particularly others from within their own group... it's harder to drum up enthusiasm for helping this kind of poor people. Racism isn't the only cause of that; it does look, at first glance, to an outsider that such poor people are, to some extent, the cause of their own predicament. Also, it should be apparent that a country with a large group of people in such a condition, were it to institute policies of social welfare as generous as those another country without such a problem might have, would require a considerably higher proportion of its GNP to do so. Eventually, such policies might lead to the poverty problem being eliminated, with only a very few people being unemployable, but that could well take decades.

Some forms of assistance to the poor are less controversial than others. Public libraries and schools, being free or nearly so to everyone, make education and reading available to the poor. Medical care, as it is valuable in preventing the spread of infectious disease, is also very common as a universal government service.

Sometimes, welfare money is doled out in a paternalistic manner; sometimes with good reason, but it does mean that the cost is increased, as the salaries of professional workers must now be paid.

In Europe, it is possible for historians to point to feudalism as an institution that drove farmers into dependency on lords who acquired ownership of land that formerly belonged to the peasants. Other features of the same time were laws that restricted common laborers from moving to another town in search of work and otherwise preventing them from searching for more remunerative employers.

Thus, one can claim that the gap between the upper class and the lower class is the result of a theft, not simply the accumulation of wealth in a free market by the more clever and the more able.

There are less obvious and extreme ways, involving no actual theft, in which differences in wealth become exaggerated. People who can't scrape together a down payment on a mortgage become renters, and pay their landlord's mortage payments. This sometimes leads to political support for rent controls, which have created slums in some countries, and which have led to the pillaging of small landlords in others.

In the New World, there was no history of feudalism. People flocked to the Americas from Europe in search of opportunity. Their success depended only on their own ability to wrest sustenance from a harsh environment. If someone became a millionaire in America, it was because, through brains or sweat, he provided something other people found useful.

Certainly, after World War II, it looked for a while as if poverty was on the way out in North America. But after 1968 (in Canada) or 1973 (in the United States), unemployment has stayed high for decades.

And, even in the absence of feudalism, some thefts did take place in New World history. The original inhabitants of these continents; and the descendants of those who were abducted from Africa in chains to toil in slavery; they are the face of the most serious poverty that exists in wealthy North America today. So one cannot really claim that in America, unlike Europe, there is no past theft at the root of existing poverty.

One can argue that taking from the rich, even through democratically enacted taxation, to help the poor is still a form of theft, or related to theft; but returning wealth that has been stolen, how can one argue against that?

Also, the argument that taxation is a form of theft, and therefore can only be grudgingly tolerated for the most essential purposes, such as national defence, misses one important point.

Many goods can indeed be purchased for a fixed price. But other goods, some of which are of extreme importance, are of a nature such that one's access to them is affected by the amount of money one has, but only indirectly, by means of one's relative wealth. One simple example is housing: the size of the house one lives in is determined by the actual money one spends on lumber, but the people who are one's neighbors is determined by the value of land, which fluctuates with demand. If everyone has less money, the same people still have about the same amount of money, and so can live in the same neighborhood as each other. (Spending more tax money on law enforcement might also make it less necessary for one to worry about who one's neighbors are.) Thus, it is neither surprising nor irrational that people are willing to pay a certain amount of their money in taxes for a certain common good with the assurance that everyone else pays their share as well, while they would not, in the absence of such a tax, freely donate the same amount of money to that purpose.

Practical Issues

But "giving America back to the Indians" has become a byword for impractical Utopianism. And that isn't entirely unreasonable. The economic and military strength of the United States, in two World Wars, and in the Cold War, has been largely responsible for the continued existence of individual liberty on this planet.

It may, incidentally, be noted that Communism in Russia, over the course of its existence, had at many times proved itself as vile a tyranny as Nazism in Germany. However, its downfall did not settle the debate between Right and Left, because the Communist rulers worked to obtain power for themselves, not to benefit the worker, as they pretended; and, any central plan that measures the productivity of a clock factory in terms of the total weight of the clocks it produces, without regard for whether or not they work, will naturally result in heavy clocks that don't work, but that is no proof that centralized economic planning is doomed to fail, even when it is applied with a modicum of intelligence.

And freedom is not simply some sort of political luxury. Freedom, and the relative prosperity in which it thrives, are preconditions of much that makes human life meaningful. Including the scientific and technical progress that is the only genuine hope of having enough of everything to go around.

It isn't just the ecology or anti-nuclear movements, however, that have caused technology to look less exciting today than it did in the 1960s. Progress in rocketry, or in materials science, or even in medicine (although there have been some stunning advances there, such as in organ transplantation) seems to have been lackluster recently, outshone by the advance of the microprocessor.

Computer power can help us organize activities and resource utilization to make them more efficient. But a computer cannot fill a gallon pail of milk from a quart bottle. It is beginning to look as if we will be able to provide every person on Earth with a computer having the power of a giant mainframe of the past (an Intel Pentium microprocessor, like IBM's once top-of-the-line System/360 model 195, features both cache memory and an instruction pipeline) and a wireless Internet connection (today still an expensive luxury, but justifiable for some businesses)...before we will be able to provide most of the people on Earth with enough to eat.

There is an irony in that, and it is a discouraging irony.

There are those who say that we are unnecessarily delaying the prospect of a new Golden Age by failing to more aggressively pursue the exploration of space.

Obviously, however, even if Mars were fully terraformed, or the construction of orbiting space colonies posed no problems, Earthly resources would not suffice to launch any significant proportion of Earth's population into space. To be of benefit to the mass of humanity, such a program would have to result in resources from space making a difference on Earth. Unlimited quantities of platinum, iridium, and gold would serve to reduce the price of catalysts and electrical contacts. Gold could even replace stainless steel for use in cutlery. The prospect is not overwhelming. Gold has been revered for what it can buy, not merely its beauty; more gold by itself will not make the world much wealthier. (But at least it will make the world a little wealthier, which printing a few more zeroes on all the paper money would not do.)

But unlimited quantities of energy would indeed serve as a direct input to the production of just about everything people use and need, including food. And energy is a resource that can be obtained from space.

But unlike microprocessors, agriculture is a mature technology. Fertilizers and pesticides have their problems. There are limits to what can be done to improve agricultural yields, and putting more land into production threatens the limited habitats of many kinds of wild animals.

Research into controlled thermonuclear fusion is also not being pursued as energetically as it might be. And, if the prospect of fusion power seems unrealistic, there is another alternative of which there is little awareness, but which is being investigated seriously in India (understandably, given its resource of monazite sands): the Thorium breeder reactor. When I was young, I remember comic books explaining how the breeder reactor created more fuel than it consumed. Even in my tender years, I knew this was creating a false impression; it did indeed create more fissionable Plutonium-239 from Uranium-238 than it consumed fissionable Uranium-235, with the result of multiplying nuclear fuel supplies many times over, but the multiplication was still by a fixed amount, increasing our stock of fissionable material to the size of our total supply of Uranium rather than the much smaller size of the rare isotope Uranium-235, and not inexhaustible.

Thorium, however, is even more common than ordinary Uranium. The idea of the Thorium breeder is not new; near the dawn of the Atomic Age the prospect of someday "burning the rocks" was noted, as Thorium could even be extracted from ordinary granite. Thorium-232, with a half-life of over 14 billion years, is only weakly radioactive, but Uranium-233, which can be formed from it in a breeder reactor, is fissionable.

Using electricity to grow more food than can be grown on the available arable land is possible; such food would be more expensive, because of the cost of building multi-story farms, and of artificial lighting, but if supplies of energy are abundant, so that people are wealthy enough to afford high grocery bills, then this is a way to provide more people with food. In the present situation, of course, poverty, and not actual limits to available food supplies, are the problem.

The Root of the Problem

The production of most things of value requires three types of input: human labor, natural resources (land, rain, sunlight, minerals), and capital (buildings, roads, tools). Without the latter two inputs, people have limited prospects of producing anything useful or valuable from their efforts. An Einstein or a Beethoven can produce things of immense value with just pencil and paper, but not everyone can be expected to be an Einstein or a Beethoven. (And even if everyone was, we would still need food to eat, buildings to shelter us, and clothes to wear.)

If resources and capital are in short supply, unemployment is a natural consequence, however convoluted the economic and financial chain of causality that translates this physical problem into its economic manifestation.

The "Labor Theory of Value", a doctrine held by both Marxists and Social Credit followers, does not claim that resources and capital are worthless. It is those who assume that, under unrestricted laissez-faire or Libertarian capitalism, the poor will have no problems that are not their own fault come closer to doing that.

Rather, it claims that since only people spend money, ensuring that everything that is produced can get bought can be achieved by only paying for the labor input to production.

In fact, of course, owners of resources and capital also spend the money they recieve. And if they have come by what they own honestly, it is only fair that they too should be paid. And the benefits of spending money on new equipment for production are obvious; more production for less effort.

The ultimate cause of poverty, then, is simply too many people for this Earth to support, given the current state of our technical knowledge. This will improve in time, but it can't be expected to improve as fast as we might wish. And one of the things that encourages people to unwisely have larger families is being caught up in a situation of ethnic strife; thus, where possible, preventing this problem from arising by giving each ethnic group national independence in its homeland, and forestalling any attempt at wars of aggression, is a very constructive measure.

In principle, as well, if we believe that all individuals are equal, then it follows that a young child born into an Armenian-speaking family should have the same opportunities open to him, without the obligation of spending the large amount of time and effort required to learn a second language, as a child born into an English-speaking family. In practise, in an overpopulated world, enabling the many smaller linguistic groups in the world to grow to a size consistent with greater economic self-sufficiency is, understandably, dismissed as impractical.

Economic Issues

Some of the misery in the world appears to be caused by problems that are difficult to solve. When a Hitler, a Stalin, or a Torquemada comes along to create misery that need not have existed but for his actions, it is not surprising people focus on a problem area that seems to involve a large problem that can be easily and directly solved.

Solving the problem of poverty, however, appears to be a problem that will require a large expense. And one that threatens to be an ongoing one. Feeding a hungry child has an immediate emotional appeal; but subsidizing adults so that they can produce more children is what many people are afraid of doing, and this is the underlying reason that income redistribution is as controversial as it is.

In any event, the disadvantaged prefer employment to welfare. Not just because it pays better, or because they can feel more self-respect, but because they rightly feel that they will not be regarded as dispensable if they are useful.

As noted previously, unemployment comes about because of a shortage of the other factors of production; resources and capital. Is it possible to "redistribute" these, just as incomes can be redistributed when tax money is used to pay welfare, in a way that increases the total number of jobs?

There are certain forms of idle capital in Canada that could be mobilized through a kind of subsidy. However, what I propose here involves the demand side of the equation more directly than the supply side of the equation.

A dollar bill was essentially a cheque written by the Bank of Canada on its own bank account, that had gold in it instead of Canadian dollars. Today, that is made a bit more complicated by things like Special Drawing Rights, and the fact that only foreign governments can redeem Canadian dollars, but it is still basically true.

Much of the money in Canada only exists as bank deposits instead of as paper dollars. Banks are allowed to lend out more money than they actually have, thus in effect creating money, but only under strict conditions. This is why a bank can only lend money if there is collateral as security.

Some people have criticized such a system of "debt money"; however, experience has proven that if it is desired to increase the money supply above that provided by the direct use of precious metal coinage, the only safe way to do so is through issuers that, being part of private enterprise, will carefully avoid issuing money that can't somehow be redeemed for equivalent value.

Money issued by politicians, such as the Continental Currency in the early United States, or the Assignats in France, tends not to be trusted because it is too easy for a politician to yield to the temptation to become popular by printing extra money to create a more buoyant economy.

When a Canadian purchases something made by another Canadian, then, the Canadian dollars are just circulating within Canada. When, on the other hand, a Canadian purchases something imported from another country, such as Japan, in a sense he is now spending "real money"; if this purchase is not matched by purchases from other countries of Canadian products, some Canadian dollars will be returned to the Bank of Canada for redemption. Canada will be spending more gold than it earns. For a country as for a family, spending more than one earns is the road to debt problems.

Under the present economic system, the corrective action that is taken in a situation like this is to throw Canadians out of jobs so they don't have as much money to spend on imported goods any more.

This is wasteful.

Thus, here is a proposed remedy for unemployment. It doesn't come without costs; the people it rescues from unemployment will still be "second-class citizens" in some respect, and hence any implementation will have to include safeguards against abuse.

I suggest that the government get back in the business of printing money, but a separate kind of money, existing in parallel with the existing currency. No law will force people to accept this new money at any specified exchange rate with the old money, hence Gresham's Law will not trouble us (though it is highly valid when applicable; when is the last time you got a quarter in your change that was made out of silver?).

But the unemployed will have the opportunity to work, and get paid with that money, to produce things that they can buy with that money. But since it will be a "soft" currency, it won't be usable to buy imported goods. (However, such workers would recieve Foreign Exchange Ration Coupons, which would entitle them to exchange a limited amount of that money for real money, so that they could buy things like citrus fruits.) So they would be making things like transistor radios and color TV sets once again here in Canada.

Housing would be an issue; constructing new cities on inexpensive land would fit with the logic of the scheme, but having to move to somewhere isolated would limit the percieved benefits of this scheme. There might be a temptation to treat landlords unfairly by forcing them alone to accept the new currency at par.

Of course, there are those who will note that I am merely proposing the old, discredited theory of mercantilism, which is hopelessly out of date in a world in which nearly all the world's nations have seen the benefits of joining the WTO.

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