Well. Let’s get right to it shall we?
Imagine yourself in a small village, and learning a trade or craft. You are smart, diligent and hard working. Eventually you get quite good at producing some product or service that people value, and you improve your process so that you can provide more for less cost and labor.
You hire people to produce for you, Things are going well, until someone notices that you are successful and acquiring some greater wealth than other people in that village. They complain, and then some king, or council decides that it is unfair for you to be rich, while others are poor.
It is decided that a portion of your profits must be donated to the poor.
You work hard, and the profits from your innovation and mastery of craft are now being given to those who don’t work hard, and will not expend any effort to better themselves.
Don’t go flying off into some rant about this not being reality we have. I know it’s not reality. I asked you to imagine it. Consider how you might feel about those poor people. Do you feel caring or compassionate towards them? Will you consider ways to hide some profits from the council, to keep more of what is rightfully yours?
In this imaginary scenario, do you wonder why you must give up your labors to provide for those who refuse to labor?
That is the attitude of the capital market to taxation that is used to support social programs. It is ugly and mean. However it is also honest and righteous.
In reality you may choose to be charitable and feel ennobled by your kindness, however that goodness runs to disdain and contempt when your good work is taken from you and given to others without your consent. You might even consider it robbery, criminals stealing what you have earned. This is not a healthy attitude, and resentment, and ill will rampages through the social order. Those who seek to provide goods and services to the public for the public good, become hardened to charitable thoughts and acts and less inclined to be fair and kind.
Notice anything ugly like that in our society?
Now, imagine yourself once again, in that small village, learning a trade or craft. In this village every person gives all they can, and every person receives an equal share, (except the elders on the council, and their buddies, and others who may have favor).
You work hard and learn so well, that eventually you innovate a better process, which lets you produce more with less labor. However, the village insist that because everyone must give all they have, you are not allowed to relax after producing your quota, you are expected to keep working as fast and as hard as you can, while you watch others relax and loaf about, claiming they are doing all that they can.
Again, do not go spouting off about how this does not reflect reality. I know it is not reality, it is a fantasy I made up and asked you to play along.
Now consider your feelings about those who refuse to work as hard as yourself. Do you feel resentment? Will you decide that whatever innovative improvements you might have developed are too good for those around you? Would you consider deciding to slack off yourself, and claim some weakness or defect to lessen your labors. Would you begin to think of those others as criminals, stealing your value, and giving nothing in return?
This is what the capitalist rails against in socialism.
We saw this in other nations when they were socialist.
Now, imagine yourself in a village, learning a craft or trade.
During your education, you are earning a subsistence, nothing fancy, but sufficient. Nothing extra, but no where near poverty.
Eventually you become skilled and begin producing quality goods or services. In this village, any person who works for 6 hours on providing for the community, is assured that they will get that subsistence. However what you are producing is not greatly needed by the community, and therefor you need only work for 2 hours doing that labor, and then the village asks you to spend 4 hours doing other work, such as sweeping up in the library, or reading to a sick child, or feeding an elderly woman.
When you are done with community work, you then can spend another 2 hours producing your product or service, and selling that to others in your village or to people in other villages, for a profit. Yes, why not? You have fulfilled your community obligation, your basic life needs are assured, and now that profit is all yours. No one complains that you are becoming wealthy, because your wealth does not reduce the ability of the village to support others.
Continue imagining that you are smart, and innovative. You develop a new process that lets you now produce what the village needs in 30 minutes. What you do with your extra 1 1/2 hour is yours. You own that.
You still are asked to spend 4 hours doing other community work, to earn the basic subsistence you need. However, now you have 3 1/2 hours to produce for profit, and again, your profit does not reduce the ability of the village to support the entire population. No one is complaining and no one is taking any of your profits. None. It’s all yours.
Now, imagine that you realize that with your new, improved process you can work 4 hours producing whatever you do, and by selling that, your profits are great enough that you can buy your resources from the village, and purchase your own subsistence without doing any community work.
Your absence from the pool of community labor does not hurt anyone, there are plenty of other people who are not as smart, innovative and driven to succeed as you, They plod along and get things done, well enough to sustain the community without you, your labor or your innovations. Whomever replaces you to provide your products uses the old process, and spends 2 hours doing it. Or more, or less.
You are now a capitalist, you benefit from your intelligence, and drive to succeed, and your success has not caused any hardship whatsoever on the social order.
Now, please stay with me. I know this is long winded and may seem to wander into fantasy, but stay with me here. This is important.
Imagine that you are a baker, and actually you are a quite good baker. You make great breads and cakes. You sell your bread for one unit and sell your cakes for two units of currency.
Each day you sell everything you make, and you begin to wonder if perhaps you could raise the price. You do that, and the next day you sell your bread at two units and cakes for 4 units. You get some complaints but still you sell everything you baked.
This is interesting, so you raise your prices again, to four and eight units each respectively.
More complaints, and at the end of the day you have 3 cakes and two loaves unsold, and people standing around wanting to buy but not able to pay that price. You sell off your remaining stock for your original price of one and two units.
When you tally up the day, you realize that even having unsold product, the amount of sales you did make increased your profits immensely.
You continue to sell this way and people become used to paying your price, but too many people are waiting for the price to drop at the end of the day. Then you tell them that you will not drop the price. Then the grumbling really starts, but most do pay, and some walk away.
You feed the waste to the neighbors pigs.
After some time, you have a lot of money and want a nicer house, so you hire a builder. He charges you a high price, pays high wages to his workers and you get a new house. Your neighbor is getting nice fat pigs and can sell them for more than he would have, the builder and his workers are making more money. This little economy is growing. Your wealth is creating opportunities for others to become more wealthy.
The butcher is raising prices, the leather worker is raising prices, the builder is building more new homes. It’s a booming economy.
The farmer you buy your wheat from, tells your grinder to pay more for his wheat. Then the grinder tells you you must pay more for your flour.
You say, no. You insist that the price you pay is all you will pay, and because you are basically his only customer, he must agree.
He tells the farmer, no, and because the farmer basically only has one customer, he must agree.
However, the farmer now has growing children and the price of bread is so high that he cannot afford to feed his children bread and meat. He cannot afford to pay the blacksmith to repair his tools, he cannot afford to pay the leather worker to make and repair the harness for his draft animals, nor can he afford to pay his workers enough for them to buy bread and meat.
That booming economy just created poverty.
You might agree that the baker should have agreed to pay a fair price, but think about this.
If the baker HAD agreed to pay more for flour, he would have reduced his profits, and the economy would have slumped, because remember it was the wealth of the baker that started the economic growth, if his profits decrease, the economy slows. If he had agreed, and if the economy were to continue growing, his prices had to increase.
We just watched a booming economy, that created poverty, or inflation.
The end result in either case is a busted economy. Dead farmers don’t grow wheat, and if the inflation increases, poverty cannot keep up, and again, dead farmers don’t grow wheat.
Economic theory, rampant today, insists that by tightly controlling the currency interest rates, a central bank can allow an economy to grow, while mitigating both inflation and poverty.
This is true. However they never claim to prevent poverty nor inflation.
The best a capital market can do is to balance the two destroyers as the growth continues. Yet the reality is that as the number of wealthy people increases, prices will increase. Those poor people are driven into poverty as they are less able to afford the higher prices. The gap between the rich and poverty becomes greater.
Does that remind you of anything ugly in our own society?
Look, this is what we need. We need a social market that has no profit motive. With a currency based on the minimum value of voluntary labor within that market. That value needs to be set and fixed such that anyone willing to provide labor to support the participants is paid a wage, (in goods, services and currency) equal to a fair and reasonable subsistence.
That currency is a representative currency. It’s value is created by the labor of each worker by the labor invested into that social market.
That social market also issues and loans, at zero interest that same currency, as fiat currency, to the capital market. The capital market is free to set prices as that market deems fit, by supply and demand. The value of that currency however is set and fixed by the social market and cannot be negotiated in the capital market. The goods and services provided by the social market are subsistence items only, there is no competition with the capital market for luxury goods and services. The bread might be exactly the same in both markets and one is a social price of one unit, and the the other is “grandmas Finest” from a family recipe 400 years old and be 8 units in price. The social market does not care. The social market pays a fixed set price for wheat and grinding from social labor.
The capital market is free to buy their wheat and grinding at whatever price they can negotiate with capital market labor.
No one is forced to participate in an economy that ill suits their morals, temperament or abilities. No one can be driven to poverty and no one is penalized for success.
A cooperative melding of the two economic models, with a generous and prosperous middle class that enjoys the benefits of both models, without enduring any shortcomings of either model. No person can be forced to participate in either model, or excluded from either.