By Silvano Borruso
While agreeing that competition is the principal barrier to social improvement, competition, far from being a cause, is itself the effect of policies that for a long time have caused an artificial scarcity of much needed resources, natural as well as artificial.
The real cause of the present malaise is hoarding: of land, of raw materials and of money.
Causes and effects
The hoarding of land is an ancient phenomenon in all continents. Tacitus remarked that the latifundia (large estates worked by slaves) were the underlying cause of the ruin of Rome two thousand years ago. The feudal lords and the Church inherited the system, but for seven centuries or so they took upon themselves the social charges of administration, defence and social services. With the end of feudalism these charges were increasingly transferred on the people, while ancient privileges increasingly failed to correspond to duty. The landless of Europe either starved or migrated, exporting the phenomenon abroad. Landlessness is at the bottom of phenomena like colonialism, slavery, revolution and violence up to and including war. It is also the real cause of “overpopulation,” which perversely is still touted at the cause of poverty whereas it is its most glaring effect.
That the land hoarders become rich on the sweat of the landless can be gauged from a news item of January 30th 2002: in Kenya, a paragon of Third World poverty-stricken country, the sales of Mercedes Benz cars increased by 285% between 2000 and 2001. 238 units were sold in the past year, at 4.1 million shillings each, in a country where the minimum monthly wage is 3500 shillings.
The hoarding of natural resources is behind their artificial scarcity and high prices. No natural resource is naturally scarce. If the price of gold hovers around $300 an ounce, it is because its bulk is buried in bank vaults gathering dust. If the price of diamonds is astronomical, it is because their bulk is buried in the De Beers basement at 2 Charterhouse Street in London. If the price of wool to the manufacturers of clothes forces them to charge outrageous prices to buyers, it is because the hoarders of wool sell it to speculators, each of whom adds his own cut to the bales of the stuff. The same process takes place with all commodities. Their market is not free at all, but controlled by hoarders, all with a common interest in artificial scarcity for their own exclusive benefit.
The hoarding of money is the main cause of the loss of sovereignty by the national states to the global financial markets as depicted in the second paragraph of the ISPO document. The issue and control of money passed from governments to the international usurers in about two centuries, 1609-1815. From Waterloo onwards, sovereignty has increasingly been transferred from crowned to uncrowned dynasties, the more tyrannical for being the more surreptitious. The situation today is that the State controls a paltry 5-10% of the money circulation, which it issues free of debt as notes and coins. The banks control the bulk: 90-95%, which they issue as credit loaded with debt. The banks issue money corresponding to the principal but not to the interest, thereby causing intense competition and compulsory growth. Further, interest rates must be higher than the return of investment on land, otherwise they would not attract clients. The result is that credit is shut off from the bulk of the population. Thus the double hoarding of land and of money works to the benefit of the super rich. The rest must necessarily become poorer and poorer.
At international level, the world is victim of the 1944 Bretton Woods agreement, which replaced the gold standard with the dollar standard. The result is that countries are forced to emit no more money for domestic use than dollars they happen to have, thereby strangling their economies. The exceptions are the powerful Group of 8 countries, exempted somehow from the stranglehold.
The Simultaneous Policy will remain a dream for as long as the modern State, its sovereignty weakened and its institutions increasingly paralysed, is not in a position to regain the control lost to the money power. Historically, Napoleon, Lincoln, Nicholas II, Hitler, Trujillo and Kennedy all tried and failed. To ask for a Simultaneous Policy from politicians and politics, especially after the dramatic loss of sovereignty represented by the introduction of the Euro, is futile.
Remedies, however, exist, but they must be people-driven before the State can intervene with subsidiary and not totalitarian functions.
This providential institution, begun around 1980 and now active by means of 2500-plus communities throughout the world, has the potential for curbing the usurer’s power. The working principle is that every sale of goods or services within a local community need not be paid in national currency, but in a currency emitted and controlled by the community itself. The community currency is not alternative, but complementary to the national currency, thereby relieving pressure on it and concomitantly competition. Details can be had at the website ccdev.lets on the Internet.
CCs intrinsically support co-operation instead of competition, local economies instead of globalisation and hard work instead of parasitism. They are also immune from theft, both private and public. They have the potential for restoring sovereignty to the State, which can then flex its muscle to bring speculators and transnationals to heel.
Land Value Taxation
This remedy has been proposed since 1879 by Henry George (1839-97) as a means for controlling the hoarding and speculation of land. Wherever applied (Denmark in the 1950s, Taiwan after 1949) it has been very successful, but elsewhere it has been resisted for the simple reason that the landlords are generally also in power. It is not difficult to see, for instance, that the sole reason for the existence of the House of Lords is to prevent the Commons from passing laws detrimental to landed interests.
But the idea is gathering momentum. Support is growing for a strong State in a position to abolish all taxes on value added and replace them with taxes on value subtracted from natural resources, mainly land and energy.
Once this is done, the State will also be in a position to impose 100% reserve requirement on the banks, which could only lend what already exists, namely debt-free money issued by the State. To discourage hoarding, and therefore favouring co-operation instead of competition, money should be considered as a public service subjected to a demurrage charge as suggested by the economist Silvio Gesell (1862-1930).
Speculation and Hoarding
Once the incentive to speculation is removed from land and money, the raison d’ętre for speculation in other commodities will disappear. Their markets would become truly free, and free trade would begin to make sense.
With the present constraints and artificial scarcities, neither free trade nor protection are solutions. The first ends up benefiting the hoarders. Free trade between non-free people is the situation that existed in the U.S. before the Civil War. The South had 3/4 million land hoarders and their entourages, two million black slaves and six million poor whites. The first group passionately supported free trade with England, who provided cheap trinkets against bales of cheap cotton.
But Lincoln’s American System (protectionism), was no better: it ended up benefiting manufacturers at the expense of consumers, who had to pay outrageous prices for expensive trinkets with no guarantee of quality. The problem was that land and money speculators were busy hoarding without anyone stopping them.
Whenever an economic-political system creates and maintains imbalances against the interests of the common good, the cause has to be sought in ingrained injustice: for whatever reasons, someone is not given his/her due, and as a result those enjoying privilege live off the work of others.
We are witnessing the end of the line. If democracy means anything, the people and common sense must take the initiative, without having to be “represented” by opportunists who forget all their promises the moment they reach positions of power. The political party is a parasitic institution that has seen its day. It is also time that intermediate associations, from the family to the professions and trades to the municipalities act as effective “checks and balances” on the powers of the State and on those of Mammon.