To: Friends on several mail lists
While searching for something constructive which would add to the intense
discussion of Welfare, Workfare, Work for the Dole, etc., I happened on this
four year old post to the first mail list I joined in January 1995. The list
was focused on the economic problems of former members of the U.S.S.R., and I
was soon invited to take my posts to some other list. In this larger
conceptual framework, which reaches to the stability of the global economy,
the whole submerged iceberg is brought into clear view along with the
welfare/workfare issue which is the visible tip of the iceberg.
Cheers,
WesBurt
>>>>>>>>>>>>>>>>> Begin three year old post <<<<<<<<<<<<<<<<<<<<<<
January 31, 1995
Subject: #173, Requirements For An Efficient Market
To: [EMAIL PROTECTED]
A few will find the subject of this letter somewhere between unnecessary
and anathema. The many who are educated, managed, and governed by the few
will remain oblivious of the subject. But if two or three of us can agree on
a valid data set and on a valid conceptual model to explain the data, we
might be able, God willing, to answer the question: Why are the United
Kingdom, the United States, and the Russian Federation losing ground to
Germany, Japan, Switzerland, and the Scandinavian countries?
This is not a new subject. Charles Murray raised the question in 1984.
Gunnar Myrdal raised the same question in CHALLENGE TO AFFLUENCE, 1963.
Stuart Chase raised it in a series of six books on WHEN THE WAR ENDS, 1942,
for The Twentieth Century Fund. Richard T. Ely, founder of the American
Economic Association in 1885, discussed the subject in his 1938 autobiography
GROUND UNDER OUR FEET, and called our attention in appendix I to European
(Catholic) teaching on the "family wage." But then, Thomas Paine had
anticipated all of them in his RIGHTS OF MAN, Part II, 1792, and in his
AGRARIAN JUSTICE, 1797.
Of course, Paine was trying to persuade the establishments of England and
France to properly capitalize the cost of developing their most valuable
assets, their people. Prior to the 1890's, America's only defects were
slavery and the tariff, according to THE LAW, 1850, by Frederic Bastiat.
Today, however, when the national GNP/capita values tabulated below for the
years 1949, 1961, and 1992 are divided by the Swiss GNP/capita to remove
inflation, and plotted as % of Swiss for each year, the declining trends for
the world's three greatest empires are so gross, so obscene, that they
would not be obscured if the data were only half right.
Better data will certainly bring the trends into sharper focus and I would
welcome it, but that's not the question. Our urgent duty is to identify and
cure the social pathology that allows such data to accumulate for more than a
century without the American establishment bringing it to the public's
attention. It is as if the natural process of diffusion of information on
public policy had been arrested after Bastiat wrote THE LAW, and as if there
had been no communication between the "Cognitive Elites" of the several
nations since Pope Leo XIII proposed a "Family Wage" in RERUM NOVARUM, 1891.
Is it any wonder that we see the free market falling short of our
expectations..
>From The World Bank's laboratory of 207 nations, for 1949, 1961, and 1992:
Six of the important nations and their respective data are:
U. S. A., Switzerland, U. K., F. R. G., Russia,
Japan.
(1949 GNP/capita (United Nations report))
$1,453/yr. $849/yr. $773/yr. $320/yr. $308/yr.
$100/yr.
(1961 GNP/capita (United Nations report))
$2,308/yr. $1,463/yr. $1,149/yr. $1,072/yr. $800/yr.
$402/yr.
(1992 GNP/capita (The World Bank 1994 Atlas))
$23,120/yr., $36,230/yr., $17,760/yr., $23,030/yr., $2,680/yr.,
$28,220/yr.
(1992 GNP in $U.S. @ exchange rates & other national data for 1992:)
$5,905 B/yr. $249 B/yr. $1,025 B/yr. $1,846 B/yr. $398 B/yr. $3,508
B/yr.
(Total tax rate %GDP (The Washington Post 07/05/92 Michael Wolff.))
30% 33% 37% 38% 50%
31%
(Cap. Inv. %GDP (The World Bank 1994 Atlas))
15% 27% 16% 23% 39%
32%
(Exports %GDP (The World Bank 1994 Atlas))
11% 35% 24% 24% n/a
10%
(K to 12 Edu. %GDP (estimate @ engineering accuracy))
3.5% 3.5% 3.5% 3.5% 3.5%
3.5%
(University., Edu. %GDP (estimate @ engineering accuracy))
(*) 1.5% (*) 1.5%
(?) 1.5%
(Child Support %GDP (estimate @ engineering accuracy))
(*) 5.0% (*) 5.0%
(?) 5.0%
U. S. A., Switzerland, U. K., F. R. G., Russia,
Japan.
(*) defined by law as a taxable consumption expenditure of the family.
Two or three of us might agree on this small data set, but if we cannot
formulate a model that makes the data comprehensible to the public and
acceptable to the establishment, we will waste our time. I contend that
there is only one valid model for the optimum market economy. The following
observations are offered for your thoughtful evaluation and comment.
When the above values for 1992 on national performance (GNP/capita in
$U.S. at exchange rates) are plotted against total tax rates we can see the
shape of the real "Laffer Curve" which Theodore Geiger described in WELFARE
AND EFFICIENCY, 1978. The curve peaks when the expense of government is 30%
of GNP. As Adam Smith told us in 1776, "the expense of government is like
the expense of management," in which capital investment and development,
executive compensation, debt service, and dividends if any, are covered by
the 30% of sales revenue allocated to the corporate General and
Administrative (G&A) account.
This is not a new idea, Moses promulgated three tithes at Sinai. The first
tithe, following the custom of Abraham and Jacob, was for education and
development of children at Melchizedek's school. A second tithe was for
executive compensation of the Levitical establishment at 4.5 times the
average income of the twelve tribes of Israel, just as we pay members of
Congress 4.5 times the $30,000/yr. average American household income today.
And a third tithe for defense, justice, infrastructure, and the poor.
This subject should be taught in America's Sunday Schools because the
optimum financial structure of a corporation or commonwealth is more
concisely set forth in the books of Genesis and Numbers than it is in James
H. R. Cromwell's 1937 book IN DEFENSE OF CAPITALISM, Peter Drucker's CONCEPT
OF THE CORPORATION, Alfred P. Sloan's 1963 book MY YEARS WITH GENERAL MOTORS,
or Mancur Olson's 1982 book THE RISE AND DECLINE OF NATIONS.
After you have corrected any mistakes I have made in the analysis so far, and
there must be a few, we can construct a valid model to explain why the United
Kingdom, the United States, and the Russian Federation are still LOSING
GROUND.
Best regards,
WesBurt
