Tuesday, December 13, 2011

Crisis of Democracy

Democracy for politicians means cobbling together a coalition of interests into a majority.  This often involves packaging individually corrupt programs and promises to enough interest groups such that the coalition defends each other's corrupt gains.  In the US the traditional Republican coalition in the last 10-30 years has been the unholy triumvirate of religious conservatives, large corporations and those influenced by small government demagoguery.  The Democratic party coalition has included unions, and education, but mostly anti-unholy alliance proponents.

Seniors and over-50 baby boomers are an interest group in of themselves, have remarkably homogeneous interests, and will only get larger and more important over the next 40 years.  Older people have more wealth on average than younger people (due principally to the time available to acquire it).  Older people vote more than younger people, and they have the wealth to directly influence elections as well. Global population forecasts estimate 9B people in 2050 and a peak of 10B in 2100. The increase from our current 7B is expected to come entirely from undeveloped nations.  We can imagine that food shortages and competition for food explain these peak population forecasts.  These images can turn horrifying the more we contemplate them.

The logic of the social contract made sense in the 1930s.  At its core, children and the elderly subsidized by working adults makes sense in that we are all once young and hopefully old.     What we pay in taxes should on average amount to what we get in lifetime benefits.  The use of the term "pyramid scheme" is appropriate for 2 reasons though.  1. New adults pay for the benefits of old adults, and 2. Its only sustainable if the population pyramid (birth and death rates) continue to have a large amount of new working adults. We are all destined to become Japan eventually, and Japan expects a 1 worker to 1 retiree ratio by 2050

The crisis of democracy is the silent conspiracy of older citizens who can individually vote their self-interest in keeping the entitlements granted by previous generations, while voting against the other social contract components.  Secondary aspects of the social contract include welfare and economic stimulus.  Does an older citizen want more education spending?  No.  Welfare? No.  Job Creation? No.  Protecting Unions? will just increase consumer costs.  Just lower taxes on their investments and keep medical and pension entitlements.  If we lower taxes on corporations there could still be enough revenue available to pay their entitlements, and (short sightedly)  it might lead to a value increase in their investment portfolios.  The crisis of democracy is that other people's grandchildren paying for your lifetime benefits sounds like the best idea ever to the self, and the collapse of civilization after your lifetime, an inconsequential cost.

At the root of this, is the concept of whether a society/nation carries in its heart the mandate to grow/sustain the society/nation.  Portraying a pretense for this mandate makes politicians and people seem nice, moral and sincerely caring about the society.  The belief is propagandized and instilled in children.  Social growth and sustainability is in the interest of children and working aged people (especially if family focused).  Its also in the humanist/divine's interest/goals to have social growth and sustainability.  However, democracy is a mere collection of self interests and has no axiomatic principles.  If a majority wants prisons for blacks and jobs and opportunities for whites, it can vote to promote such policies while patting itself on the back for eliminating slavery and creating civil rights.  An autocratic king is more committed to social growth and sustainability than a democracy, because the king hopes to bequest rule over the society to an heir, while a democracy does not have tangible concerns beyond the individual lifespan of its members.

While I am finger pointing older citizens for their self-interest to cash out of a society rather than contribute to its sustainability, they are not alone in that self interest, and this phenomenon happens frequently in the corporate world.  Corporate management will always propagandize and sell commitment to future growth and sustainability of the organization.  A board of directors is similar to a congress or parliament in that they have official power over organizational management, but are frequently hand picked by management, and influenced by the same people and factors.  Both management and the board are insiders of a corporation capable of inflating the perceived value of the firm (justifying bonuses, salaries and benefits), while knowing when to sell (cash out) before the rest of the shareholders will hear and understand the news.  Shareholders have the same pretenses of democratic decision inputs that our state democracies do, but are at a significant information disadvantage, and tend to vote for who they are told to.  The  corporate analogy to older democratic citizens is the block of shareholders enabling management and the board to eventually bankrupt the company.  (The eventual fate of all corporations is bankruptcy).  While there is a much weaker religious dogma for the sustainability of a corporation than of a nation, it is useful to management for the employees and stakeholders to believe in the sustainability mandate.

I'll first mention a violent, unpleasant and undesirable solution:  Soylent Green.  Violent war between the young and the old.  The young can win a violence contest with the old, even though the old can win a property/wealth based contest.  Moral examination of this involves understanding the right of property, even if productive and valuable for social growth, as a right only deserving respect if it is accompanied with social justice/fairness.  The current common accusations of class warfare every time a banker is criticized is fundamentally an attempt to escape the burden of social justice for property owners. One side can't morally justify the allowable tools of war if limiting the tools allows their side win.  A more moderate version of this proposal is to simply cancel the pension and healthcare entitlements to the elderly.  This is still violent theft of the contributions they made to the social contract.  Entitlements they counted on.

Part 1:  There is 2 parts to the solution I recommend.  They both involve the basic income aspect of natural governance.  The first part could be skipped, and may at first sound as ridiculous as the violent solution above.  If our nation is a sinking ship, and the upper floor champagne and caviar entitlements will run out before most of us can complete our 45 year term in the engine room bailing out water, then the fairest solution is to open up the champagne and caviar access to everyone, even if that both causes the benefits to run out more quickly and distracts some people from bailing out the water.  Basic income is providing the same old age social pensions to citizens of all ages (or just to adult citizens) without any means (poverty) test.  I've already justified basic income as a social right to a dividend, as an economic growth program, as a comparative cost to an expensive and inefficient bureaucratic empire that filters welfare recipients, and with a social peace and social justice benefit that forgoes the abuse and expense of militaristic justice and prison system.  This new justification is based on the proper reaction to the consensus that the social contract ship is sinking.  It is unfair to limit the benefits of the social contract to a select few who are electorally motivated to sink the ship as long as it carries the full weight of their benefits.

The other unfairness is that of one (age) class insisting that the lower classes in the pyramid work to maintain benefits for those at the top which they are at high risk to never be able to obtain themselves.  Entitling everyone to the same benefits, importantly, provides an incentive to keep bailing water longer if the consequences of stopping means an end to current benefits.  It is a clear tangible loss rather than future retirement benefits that may have been cancelled anyways for any number of reasons.  Its reasonable that shared benefit in society leads to shared commitment to its sustainability.

Part 2:  Although I disagree that basic income creates a net spending drain on a society, that fear is the only justifiable opposition to basic income (though the most common opposition is that all welfare and all taxes are evil).  If granting all citizens basic income leads to overwhelming unsustainable debt that forces a default slightly sooner than the otherwise expected  default, the solution then is to simply default and start a new society under a new name.  I argue that a natural governance society would be the proper replacement of a sovereign, but let's discuss the alternative of USA 2.  First, Sovereignties are artificial entities.  The term sovereignty is still relevant today, even though there are few remaining kingdoms, because Sovereigns issue bonds for the state.   Unlike corporations which have machines, slaves, and Intellectual property which they can turn into cash by either making and selling widgets or selling the assets, and even some levels of government who can put up buildings as collateral for loans or bonds, Sovereign bonds are exclusively backed by the reasonably immoral power of the state to violently extort taxes and duties from people.  All of the major revolutions (US, French, Russian) involved a repudiation of national/sovereign debt.  Though, its not listed on the  link, I recall the US arguing for the repudiation of Iraqi debt after they captured Saddam Hussein.  Another major difference between Sovereign and corporate debt, is that there is no court with jurisdiction over Sovereign actions of any kind, and no power or jurisdiction to enforce any payment or restitution.  The only recourse is war.  In the case of declaring USA 2, and repudiating all debt, the question of who and whose army would/could do anything violent is probably a null set.  In the case of Greece 2 or Iceland 2, though there are powers that could impose their will, it is my hopeful opinion, that shared democratic idealism would prevent military action.

Sovereign bond lenders have likely miscalculated the possibility that a democratic government could be declared corrupt.  Fundamentally, the declaration that USA 1 government is corrupt is the only propaganda declaration (odius debts) necessary to justify repudiating its debt for the new USA 2.  I assume that the majority of Americans consider the US government currently corrupt, considering that the Ebola virus has the approximate same approval ratings.  If a referendum to declare the US government odius/corrupt had the consequence that a yes answer means eliminating over $10T in financial obligations (and growing significantly each year), then many fence sitters would vote yes.  The USA 2 concept is within the current political spectrum because elected officials can envision retaining power, while repudiating debt.

There is an alternative retaliatory option  than war available to creditors.  The threat to never lend any more.  If the US government just declares itself evil, repudiates its debt, but stays in power without good revolutionary theater, then USA 2 will not attract new foreign investors.  An explanation for the delay in the declaration of Greece 2 (default on its debt)  is that the timing for Greece 2 is dependent on foreign creditors refusing to lend it any more.  If foreign creditors haven't yet refused to lend Greece more money, then there is no reason for Greece to default right now.   When creditors do refuse to lend it additional funds, Greece will have no reason (other than fear of war) to not repudiate/default on its debt.   I expect a crisis in all sovereign debt after Greece repudiates its debt, because they will show how easy it is... Better lend Greece more money.

The reasons that a natural governance society is better than a simple rebranding of the sovereign are many.  First, relevant to these discussions, is that natural governance's basis as an association of people means that it can claim a message of being less corrupt than the state it replaces, and so can claim with a straight face that it deserves to repudiate its former state's debt.  The undeniable impression of revolutionary social justice in Egypt's 2011 Arab spring, limited the US's aid to its puppet regime to supplying it more tear gas.  Second, an association of people can form a real basis for borrowing money that a sovereign lacks.  The association of people can be jointly liable for the loan.  So at the very least, foreign creditors may overlook new and innovative ways they could fail to be repaid.  Third, and most important, natural governance has no basis for long term debt.  Each social function and program is proposed, created and continued with a funded budget.  There cannot be an unfunded program.  Furthermore, tax collections should be targeting the overfunding of total program costs, because natural governance targets surpluses to distribute as egalitarian dividends.  Fourth, if there is an accidental or short term deficit incurred, it is to every society member's interest to repay it as quickly as possible so as to resume receiving cash dividends.

To summarize the argument for natural governance over the rebranding of a nation:  It allows the credible repudiation of debt on previous corruption grounds, provides for the shared liability of the people in incurring new debt, doesn't require or use any debt in governance, and its members are deeply motivated to repay debt quickly if it is incurred.

Another basis for natural governance is that even if it promotes a target level of survival basic income as a fixed entitlement, its designed around distributing surplus revenue as a citizen dividend.  If the burden of those not creating taxable income ever becomes too high, relative to the dividend amounts, then the dividends/entitlements can (and should) be adjusted down.  The difference between fixed entitlements that society is obligated to pay you, and shared surpluses dependent and proportional to you and your neighbours' (and thier children's) efforts, is that the latter encourages nurturing society.  Even if nurturing society is against the collective financial interests of many individuals, nurturing society will still make them happier and less shameful.