Happy 2016 to everybody! The Vintage Rocker had amazing holidays just reading a ton, thinking a good deal and (surprise, surprise!) polishing his dissertation (yep, it takes forever to really close and finish the damn thing, but it is what it is). Not much training, unfortunately, as I injured my left elbow deadlifting at the beginning of September and it doesn’t seem to have healed much. The bright side of it is that I could devote the extra time to consider the multiple implications of the economic system that was taking shape in my head (inspired in my series of posts about how the Earth would look like 500 years from now) and have finally settled on what I now consider a valid alternative to current capitalism (talk of humility and setting realistically low goals!), which I wouldn’t feel embarrassed promoting or even (gasp!) voting for. For those interested in the intellectual underpinnings of such economic ideas, that will round off my AT Manifesto, (for any newcomer reading this, the previous entries are here: AT Manifesto I, II and III). In this final section of the Manifesto, I will explore the basic rules constraining economic activity in an AT society: how what to produce and how to distribute such production is decided (resource allocation), how to ensure basic fairness (taxes) and finally the basis of all regulation to correct the inefficiencies of the price mechanism (zero footprint rule)
Who does what for whom (resource allocation)
During the vast majority of human history, each person’s occupation was decided well before he was born: most would toil in the fields without any expectation of ever improving their lot, or their descendant’s lot, while a few would rule over them thanks to their superior martial prowess (or their possession of superior weaponry) or their belonging to a transcendentally justified minority (priestly class, which always needed to be allied with the former). With the advent of the Industrial Revolution for the first time in History productivity gains outpaced demographic increase, permitting the vast majority to escape that fate. People could choose what they wanted to do with their lives (although it was implicitly assumed that most would submit to joyless activities, their only choice being what type of joyless activity would they devote most of their waking time to), as long as most of it was exchanged for money in the job market (which in turn required markets for most of life necessities that could in turn be obtained in exchange for that money). There was some moral justification for such state of things (exemplified in St. Paul’s not very charitable dictum “he who does not work, neither shall he eat”, in 2 Thessalonians 3:10) while the majority of the time of the majority of the able bodied population was required to keep everybody alive. But today, thanks to technological advances and automation it appears as a woefully inadequate system, that condemns most to lives of meaningless effort just to scrape by existences almost devoid of dignity, with the constant threat of loosing any social respectability (that depends for almost all in having a salaried job and maintaining it for life) if they do not conform to such travesty as pursuing an occupation that is mostly unneeded and whose reward is most arbitrary.
That said, it must also be recognized that such system has enabled the societies that espoused it to extract unheard of quantities of work from their members, and through the “invisible hand” of the market and its incentives led them to historically high levels of material comfort (not necessarily well distributed, but some spillover assured that even the poorest members could end better off than most of the inhabitants of differently organized polities). Any attempt that has been made to achieve similar levels of wealth with centrally planned economies has been an abject failure, from which we should learn. And the lesson those attempts teach is that people work most efficiently and contentedly when a) they can keep the fruit of their labor and b) they feel they have “agency”, they have the capability to take their own decisions (boneheaded as they may appear to an external observer) and steer their own course. However, that agency and freedom can pose an insurmountable obstacle to the coordination of activities that require the collaboration of great numbers of individuals, that left to their own devices end up producing vastly suboptimal collective arrangements (typically known as “tragedy of the commons”, “free rider problem”, “prisoners’ dilemma” and such).
During the last century, efforts have been made to alleviate the problems of unbridled markets by subtracting certain sectors of economic activity from their rules, thus creating “mixed economies” where some goods and services are provided free of charge to every citizen (and some legal residents, or even to illegal ones) and other are provided for a price, which is calculated by the more or less regulated encounter of supply and demand. The theory says that the “freer” the market (multiple buyers and sellers with similar small power to influence prices, no asymmetries of information or ability to influence each other) the more apt to be left to private players with minimal regulation, and the farther from such freedom (inordinately big influence of a single provider or purchaser, impossibility to make an educated decision for lack of transparency, etc.) the more demanding of state intervention (or direct state provision). There is nothing inherently wrong with such theory, except that it is the farthest thing from how things really work that you can imagine, as some most regulated markets would gravitate towards almost ideal freedom if left to their own devices, while some apparently free ones are absurdly lopsided. Regulatory capture, and the need to pander differentially to each party’s special interest groups in representative democracies (or to the autocrat cronies in a dictatorship) explain most of those deviations. Thus, an AT society would use the same principle (mixed economy) but guided by more rational principles, striving always to balance the guarantee to all the citizens of a decent (but not luxurious) standard of living with the maximum freedom to spend their time (both as producers and as consumers) as they damn please. A tentative list of what the AT state would produce and provide their citizens free of charge (or subject to minimal, “administrative” charges to avoid unnecessary, capricious use) is:
· Basic foodstuff (2,500 kcal/day per person of a reasonably healthy mix of dairy products, cereals, vegetables and fruits, meat and fish)
· Basic energy (for residential use: whatever is needed given the climatic conditions to keep a medium home heated/ air conditioned and well lit) and reliable transport lines
· Basic communications (passable roads and streets, wireless and wireline networks w accessible Wi-Fi hotspots, working postal service, reasonable access to railways, ports and in some cases airports)
· Basic education (enough to ensure every prospective citizen has the ability to read, write, calculate and use statistics, plus knowledge of history and legal institutions, which would be required to effectively exercise their political rights)
· Healthcare (it is almost impossible to differentiate here between “basic” and “luxurious”… advanced oncological treatment is a luxury until one happens to suffer from a rare cancer, at which point it becomes as basic as it comes… let´s for the moment leave it at “as much healthcare as the state can pay with taxes the citizenry is willing to bear”)
· Security (sadly, given human nature, state intervention is required to prevent malfeasance and crime, and to defend the commonweal… this is another area where it is difficult to set the line of what is strictly needed and what is just satisfying the public tendency towards excessive paranoia, and I believe that a less materialistic society, where material and easily fungible goods are not so idolized would have a much lower crime rate, but even then there will always be a need for a police force and depending on the international scenario the full shebang of army, air force and navy)
We do not claim that the state should be the sole provider of those services, or even that it should manage them from beginning to end through publicly owned companies, run by political appointees (which is a polite term for saying “unprofessional, incompetent and totally deaf to market signals”). Depending on the circumstances pertaining how it can pay for them (more about that when we talk about taxes) it may choose to produce and provide them directly, or it may find more efficient to buy them in the open market to people privately producing them (for a profit). All we say is that the state should ensure that those products and services are freely available to all. At the same time, people will have the maximum freedom to pursue whatever occupation they like and believe can give them a reward worthy of the effort. We do accept that some “crowding out” may occur, but do not think that should frustrate anybody from pursuing their desired vocation: if everybody receives a fixed ration of wheat or of milk, there may be not much of a market for “normal” wheat or milk production, but if agriculture is what ticks you there will always be unattended demand for truffles, goji berries, tiger nuts, barley specialty hops for craft beer and whatnot. Similarly, the state will ensure that everybody can read and count, but if people want to privately teach them how to do differential calculus or research the law system of the Visigoths, as long as they find other people willing to partake of such education they are more than free (I wish to think they would be actively welcome, but good luck with the latter!) to pursue such lines of work.
The question, then, is how will the state pay for such generous supplies. To that end we must turn to our next chapter
What we owe to each other (taxes)
It is a sobering reminder of how much we have strayed from a sensible rationality to read Keynes’ “Economic possibilities for our Grandchildren”, written in 1930, where he famously prophesized that in a hundred years time (that would be in 2030, so a mere 14 years from now) we would be working 15 hours per week, and the great problem of the times would be what the masses would do with so much leisure time. To put it mildly, the great economist what slightly off the mark with this prediction, as we have managed to keep on working more and more (individually, not socially, as less and less people participate in the workforce) to satisfy what he termed “artificial needs”, more than compensating for the declining effort required to satisfy the “natural” ones (why? Because our whole social organization is geared towards extracting the maximum possible effort from every able individual, tossing aside unceremoniously those that it deems not able enough, as It has been selected for its ability to do so and to use that extraction to fund better armies that allowed it to displace and subjugate any potential competitor… but I’m repeating myself here once again). Although the calculation of those 15 hours was reached by some questionable methods (assuming a rate of global economic growth that has held remarkably well along these impressively turbulent years), it happens to be not so far from my own calculations of how much it would take to provide for the basic needs of an advanced society with our current level of technical development. Think about it for a moment: the US produced about 17,000 billion $ in 2013 (that was the total value of its GNP, which considers both goods produced and services rendered for a price), which amounts to roughly 55,000 $ per capita (given a population of 300 million, give or take a few). If we remember the exercise I did when considering what it would take to provide everybody in the USA with a Universal Basic Income, while the state maintained its essential functions of healthcare, defense, infrastructure, education and R&D (which you can find detailed here: UBI in USA) I settled on a figure of roughly 14,000 $/year to be paid per person. That figure could be interpreted as meaning that people should pay in taxes about 25% of their income (as 14K is about a 25% of 55K), and thus should work about 25% of their time to cover their basic needs (remember that we reached the figure of 14K precisely as the amount required to cover such needs), which translates into 10 hours a week (if we assume a standard work week of 40 hours). At this point let’s remember that while we have to cover for everybody’s needs (all the 300 millions), the 17,000 billion $ were produced by just a fraction of the population, to be precise by the 67% that is counted as “active” (which is, let us remember, very low by historical standards, although the unmistakable trend is for it to go even lower). That means that the real “average” wealth production of each working individual is 82,000 $/year, and if we could decouple occupation from taxation (and thus have everybody, regardless of employment status, contributing to the satisfaction of common needs, which seems just fair given that everybody, equally regardless of employment status, would be receiving the UBI and the other services provided by the state) the average contribution required to provided the basics we identified previously “only” rises to 20,000 $/year (taking into account the whole population between 18 and 65 years old), which requires about 8 hours/ week to discharge, slightly below 10% of the standard working time. However, I’ll be a bit more conservative, assume the system is riddled with inefficiencies and so to provide the aforementioned services the state has to collect as much as 30% of the average worker’s time (that would be 12 hours/ week, not that far from Keynes 15 hours) to have enough to ensure that everybody receives a UBI (of 8,000 $/year) plus can enjoy the full list of the basic goods and services described.
So our AT society would expect everybody (in the right age bracket and physically able, it goes without saying) to work 12 hours per week to discharge their duties towards their fellow citizens. That would be the counterpart to a bunch of rights we mentioned in our initial list, and thus not optional. But that would be ALL that the state demanded. There would be two ways of discharging such obligation. One would be by communal work under the direction of the phratry administrators doing either non skilled work (from picking the garbage to milking cows to repairing roads) or skilled work (according to needs that could range from teaching children to providing primary care to designing power plants). Such skilled work would be counted applying a “correcting factor” to take into account the extra time invested by the worker in acquiring the required skill (although the maximum factor allowed would be 1:2, so for example an hour of a skilled pediatrician attending kids would count as 2 hours of a tractor driver plowing the fields). The other would be paying the equivalent price in money, at average market rates (those rates would be calculated dividing the total hours worked by the total wealth produced by the phratry; in the case of the US, that produced those 17 billion $ with a 67% of its 300 million inhabitants that rate would be 17,000B /(300M * 1,700 h/year * 0,67) = 49.75 $/h. That means that people could choose to work roughly 12 hours/week, or 576 hour/year (about three months and a half) in non skilled work, a fraction of that depending on how much skill and training was required (but of course they would need to acquire those skills/ training first) OR pay 28,656 $/year and be done with their fiscal obligations. I can hear the shrieks of disgust from 99.9% of the political spectrum (if that 99.9 read my blog, which is emphatically not the case), as what I am proposing is not just a flat tax rate (anathema to liberals the world over, although an old beloved idea of the far libertarian right) but a flat tax fixed amount. The most monstrously regressive idea ever! Billionaires paying the same as their humble secretaries or as the honest manual laborer who toils from dusk til dawn! I will leave the defense of such proposal for a later post, although I’ll only point out here that both the secretary and the laborer would toil more than one and a half hours a day strictly if they want to (and the compensation they get from that extra work justifies it in their own eyes), as their lives would be sufficiently secured with that minimal amount of exertion.
A more reasoned objection would be that such a scheme may perpetuate social stratification, as the rich would not just get richer (that occurrence may be initially credited to their extra effort, ingenuity and drive –or just as well to their enhanced psychopathy, relentlessness and lack of knowledge of how to live a properly fulfilling life), but be able to bestow their extra wealth to their undeserving heirs. As this post is already too long I’ll leave its answer to my next one, in which I will defend that, given the right regulatory framework that prevents the rich from exploiting common goods for their advantage, as it happens much too frequently today, such difference in outcomes is not necessarily a moral failing of the system. That regulatory framework, in the form of the zero footprint rule, will be the subject then of my next post on this series.