69. Yes, Inflation Is Real.

Yes, Inflation Is Real.
Bob Komives
::

No matter how we do our national accounting, inflation is real. A national budget runs a real deficit if national expenditures fail to balance themselves through income: growth in wealth caused by the communal and private reinvestment of knowledge. What is today commonly labeled "deficit," or "unbalanced national budget," is an accounting fantasy spun from unreal definitions of income. These fantasy deficits get blamed for inflation. Though I dismiss deficit spun of fanasty accounting, I do not dismiss inflation. It is a real phenomenon. It can hurt us. It can also tell us how successful has been our investment.

Inflation may indicate that communal investors made bad investments. A project that fails can cause inflation even if paid for with cash in hand. While the cash-in-hand project creates no new money, it does redistribute, use up, or alter resources. When the project fails, the old amount of money now chases after fewer available goods and services. Inflation will haunt a nation that achieves its fantasy balances year after year but fails to produce and protect wealth with the meager investments that it does make. Frugality at the expense of wisdom will decrease wealth.

Inflation may indicate that the marketplace does not accurately reflect real wealth formation and loss, that successful investments have not produced sellable goods and services fast enough to match the expanding currency circulating in the marketplace. Some benefits and costs do not reflect themselves in the markets or are slow to do so. Just as money should never be mistaken for wealth, the marketplace should never be mistaken as the only conduit for wealth, and monetary inflation should never be taken as the sole measure of successful investment. The low rate of inflation that modern marketplace countries tend to experience even in the best of times may reflect this divergence between total benefit and marketplace benefit.

While inflation never indicates that there has been too little monetary recall or too much fantasy deficit, it is an important concern for managers of money-based economies. We had best avoid inflation. We avoid inflation best when we invest well.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV
:: 69. Yes, Inflation Is Real ::
With attribution these words may be freely shared, but permission
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68. I Challenge The Doubter.

I Challenge The Doubter.
Bob Komives
::

I challenge someone to prove that prosperity comes with budgets balanced by revenue from recall; that economic disaster comes from budgets not balanced by recall.

In U.S. America
unbalanced budgets
(during World War II and the space race)
appear to have caused unprecedented prosperity
(for most of us).
Neither General Motors nor I balance our budgets.
We paper the world
with more credit than we can pay for immediately,
Yet, nobody requires that we recall one paper
before we issue another.
So, somebody show us why
we should hold national government
to a different standard.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 68. I Challenge The Doubter ::
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67. Two Legitimate Recalls

Two Legitimate Recalls
Bob Komives
::

Monetary recall is not without merit. It has two small but legitimate uses: price distortion and surprise extraction.

Monetary recall can distort prices in the marketplace in accordance with a government policy. A tax on beer favors the drinking of soda pop, for example. To discourage smoking, the USA initiated in 1998 significant increases in its tax on cigarettes. To induce capital investment it taxes ordinary income more than income from what we choose to call "capital gains." Such distortions are price taxation.

If imposed as a surprise, monetary recall can remove some currency from circulation. This surprise extraction is useful in times of rampant inflation. It works if government imposes the tax rapidly and one-time-only. Otherwise, the all-knowing marketplace will inflate itself to compensate. Sudden reverses in monetary recall also work for a short time. The tax cuts of the 1980's in U.S. America did put great quantities of unearned income into the pockets of the wealthy who were able to keep some of the inflation that the previous higher level of monetary recall had added to their income.

So, our national government can use recall carefully to remove money from circulation or to distort prices. It should, not, however, keep a general system of recall (such as the national income tax) just to be able to selectively distort prices and suprisingly extract money. Nor should it treat the recalled currency as income. This money is a by-product, an incidental possession, much like moonshine whiskey confiscated from illegal stills. We can burn this money and moonshine for heat, but we cannot use them to balance a national budget.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 67. Two Legitimate Recalls ::
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66. Recall Seems To Tax, But Fails.

Recall seems to Tax, But Fails
Bob Komives
::

To an individual taxpayer, monetary recall seems to work. She can trade every dollar in her hands for a small percentage of the wealth traded in the marketplace. If the federal government recalls dollars from her --taking money out of her hands-- she can now trade for less of that wealth. Each dollar she gives to the national government seems to reduce the wealth that she has to make purchases or investments for herself.

To the government official that receives her dollar the tax seems to work. He sees the recalled dollar as revenue. He sees the dollar that comes in as an opportunity for government to buy from the marketplace. The perceptions of both taxpayer and government official are understandable, but erroneous.

First, a superficial problem: taxation has costs. To debate, to legislate, and to receive, as well as to calculate, to send, and to avoid taxes we use resources. The recalled dollar buys less of what the government wants than it does of what the individual wants because part of the dollar erodes away during recall. In what amounts to circular bucket pouring, a little drips out with each pour.

Second, the fundamental problem: within a small margin of error, taxpayers know how much they will have to pay in taxes. They discount every dollar they receive, anticipating the return of part of each dollar to the government.

Into marketplace
goes the taxpayer
and with taxpayer
begins to bargain.
"After taxes I have nothing," he says.
"After taxes I will have nothing" she says.
After exaggeration and inflation,
taxpayer and taxpayer make a deal.

||

Monetary recall is almost never a secret. It may be the biggest topic of conversation after weather and sports. People are smart enough to discount the face value of the money they receive to allow for the amount that they will have to return through the recall. Thus, it takes more discounted money to buy a refrigerator than it would take undiscounted money. Spread through the savings, lending, and investment system, the net effect of discounting is to force the economy to mint more money --to force inflation.

When a seller of chickens believes he should get the equivalent of one 75-cent cement block for each chicken, he will intuitively try to charge $1.00 if he knows 25 cents will eventually go for taxes. In turn, the cement block has a price of 75 cents because the cement block maker must charge that to get the fifty-six cents she wants from the sale of the block. The rest she sets aside in her mind for taxes.

This price-raising system is not perfect. Chicken sellers and block makers cannot raise prices without fear of loss of sales to competitors. However, the entire marketplace operates with discounted money. The value of a dollar is the value we give it. If together we discount its value in anticipation of monetary recall, together we push inflation. Buyers and sellers exchange goods and services for money in the marketplace with full knowledge that they have to pay taxes. All of the money collected by the Internal Revenue Service has already been discounted in value (prices have inflated). The value of each dollar reflects the net value that people believe they can receive from it. It incorporates a discount that reflects the average tax burden experienced by the population. If that average burden is about 25% a suit that would cost about $75 without recall taxes could cost about $100 with them.

When the price of oil went up rapidly in the early 1970's, other prices in the world's marketplaces tended to follow because petroleum users successfully raised their prices. Monetary recall has the same effect.

Income "taxes" raise the cost of my labor.
I raise the price of my labor because
I discount the value of my income
in anticipation of the taxes
I know I must pay.
When I discount the value of dollars I receive,
I, in effect, demand that more dollars be printed.
I have become inflationary pressure.

.....We thought we had severely taxed ourselves
.....when, automatically,
.....we sent back some of our national currency.
Yet, we only taxed sincerity.
.....We thought we had paid
.....for what our government spent.
Yet, we only paid for what we did not earn.
For this is the rule:
.....Our automatic tax,
.....our national income tax,
.....puts more money into circulation,
.....and then tries as best it can to take it back.
If you doubt this rule,
please search for its exception.
Search for:
.....the person,
.....the employer,
.....the employee,
.....the customer,
.....the idiot
.....who bargains and shops
.....ignoring that he knows
.....some of what comes
..........in to him
..........goes right back
.....out to his government.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV
:: 66. Recall Seems To Tax, But Fails ::
With attribution these words may be freely shared, but permission
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65. Monetary Recall: An illegitimate Tax

Monetary Recall: An illegitimate Tax
Bob Komives
::

Our Government tries, in vain,
to finance its actions
by recalling from us
--taking back from us--
a portion of the money
that it minted for us
and spent among us.

||

One government action is conspicuous for its absence from my list of legitimate taxes. The governmental action that we most often call "taxation" is an illegitimate (or pseudo) tax. I call it, monetary recall.

In ignorance, national governments recall money from their citizens, hoping to reduce the market wealth controlled by taxpayers and pass that investment power to the government. Since this pseudo taxation does not tax, it is no wonder that these national governments get confused when they try to balance their budgets. They try to balance real investments with pseudo taxes --fantasy taxes. A minting government can tax national resources by minting and spending money, but cannot get that money back --even though it believes and tries, and tries and tries again.

While few of us will kid ourselves into believing that the day we spend today is actually the day we spent yesterday, national governments continue to believe that the dollar that they recall today to spend tomorrow is the same one they issued yesterday. It is not because --in anticipation of the recall-- wages and prices have risen to null the effect of the recall. Monetary recall generates no income for the minting government, rather it inflates the currency, decreasing its value.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV
:: 65. Monetary Recall: An illegitimate Tax ::
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64. Tax In Price

Tax In Price
Bob Komives
::

Artificially,
our government raises

(or lowers)

the price of a good or a service
so that
we change our patterns of purchase,
so that

(for communal benefit)

we change our private investment.

||

The U.S. American government does not forbid that we work on the 4th of July, but rather requires that employers pay extra to those of us who do work. That is a tax in price. We raise the cost of labor on the holiday to induce employers to give us the day off. When our government put a tariff on certain electronic equipment imported from Japan, it raised the cost to consumers in the USA. When it twisted the collective arm of Japanese auto makers to put a quota on exports to the USA Japanese manufacturers began to export to us more expensive cars. The increased prices and changes in products induced some of us to buy other products --perhaps made in the USA by a Japanese firm, perhaps made by a USA company in Mexico. Some of us may have changed to the more expensive, more luxurious Japanese autos, because, though it was more luxury than we needed, we were willing to sacrifice in some other part of our budget in order to have Japanese quality in our transportation. With or without intent, our government induced these changes in the way we play our roles as consumers. The tariff brought money into the USA treasury, while the quota gave higher per-item profit to the Japanese companies. Both tariff and quota induced a reallocation of our resources in U.S. America. Both were price taxation because changes in price and product-for-price caused the reallocation. These reallocated resources were the income (and loss) from the tax in price. Any money that came into the USA treasury was incidental by-product, not income.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV
:: 64. Tax In Price ::
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63. Whose Time, Whose Money?

Whose Time, Whose Money?

Bob Komives
::

In kind, we give to our government
......some of our goods and our services,
or, in kind, we may give to our government
......strange money,
......once minted,
......once spent
......by a foreign government.

||

The governing bodies of groups that do not mint and caretake money may tax their members in money. Even a national government can tax citizens in a foreign currency. Money minted by another government is a good, a mobile and flexible good that can be collected and converted into food, fuel, and books. The collected money is legitimate budgetary income. It is a tax in kind.

My insistence on the difference between minting and non-minting governments may seem puzzling, but it is the same difference that is obvious to a farmer who needs 120 hours of work to harvest his wheat. He knows that he can work twelve hours a day for several days to get the crop in. (He'll need another twelve hours each day to eat, sleep and attend to other important matters.) He can tax himself ten days of work to harvest the wheat. Unfortunately, this year, he needs to harvest the crop in one day because he expects a big storm. He knows that no matter how he uses his time, he cannot tax himself 120 hours in one day. He produces his own time, just as national governments produce their own money.

No amount
of self-taxation of self-production
creates more resources
to do the task at hand.

||

The farmer asks nine neighbors who have already harvested to give him tomorrow twelve hours of work each. Their organized 120 hours of effort bring enough time to the task to harvest the crop in one twenty-four-hour day. The farmer gets a tax in kind from nine neighbors. He taxes them in their time, not his time, and multiplies his resources for harvesting his crop.

The farmer knows he cannot get his own time back, call it income, and spend it again --knowing how foolish he would look if he pretended to do so. Governments that mint and caretake money must learn that they cannot get their own money back, call it income, and spend it again --no matter how responsible they look when they pretend to do so.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV
:: 63. Whose Time, Whose Money? ::
With attribution these words may be freely shared, but permission
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62. Tax in Kind

Tax in Kind
Bob Komives
::

In kind, we give to our government
some of our goods and our services ...

||

A group or its government might collect food to feed communal workers, fuel to heat communal buildings, and books to use in communal schools. Most groups do not print or mint money --family, United Nations, city, state, Girl Scouts, bridge club. They do sometimes collect from members the goods and services that the group needs. In doing so, they collect in-kind taxes.

We can see the July 4th holiday as a tax in kind, since employers must put up the time-costs of a paid holiday. The government of the United States of America wants most employees to have one day off from work to celebrate the anniversary of the nation's independence. If we see the employers as giving those days to the government which then awards them to the workers, we can say the employers have paid a tax in kind.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 62. Tax in Kind ::
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61. Tax in Money

Tax in Money
Bob Komives
::

Our government offers negotiable currency
to induce us to play our roles--

to provide goods and
to provide services
to support communal efforts.

In short,
our government mints and spends our money.

||

Most of us were taught that money is a means of exchange. Yes, once in the marketplace, it does simplify the exchange of goods and services. However, when first spent by government it is not a substitute for goods and services, but rather a mobile tax. Wherever our government chooses to spend it, our new money changes how we play our societal roles and allocate our resources. Each new dollar spent by our government reduces the market share controlled by old dollars --it reduces the percentage of marketplace goods and services that people holding old dollars can acquire. This is taxation, just as it would be if the government came to the door and physically collected the goods and services. Physical collection is unnecessary because our individual selfish acts, in pursuit of the dollars, collect the goods and services and take them to new places in the economy. Congress could, for example, decide to buy the July 4th holiday, compensating employers in cash. That would be a tax in money. Dollars spent by our government would attract employers and employees to a 4th-of-July holiday.

Most national governments mint and caretake a national currency. When they spend new money they tax their nations; when they spend new money they create income. Thus, the common balanced budget formula, "Spend = Income" is a tautology. It says only:

"Spend = Spend"
"Income = Income"

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 61. Tax in Money ::
With attribution these words may be freely shared, but permission
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60. Tax in Law and Custom

Tax in Law and Custom
Bob Komives
::

We tax ourselves in law and custom,

rule and ceremony;
role and symphony.

As best we can,
we tend to our interaction.

||

Each of our formal laws, each of our less formal customs channels our actions. Each is a tax upon us.

"Thou shalt be available for jury duty."
"Thou shalt put x% butterfat in our ice cream."
"We shall send our children to school."
"Men should wear ties to church."
"Our employees shall not work on the 4th of July."

Be it law or custom, each of these rules for participation in society taxes citizenry by inducing or demanding individuals to allocate their resources --that is, to play new roles or to keep old ones. The resources collected and distributed have, in effect, been collected by society's tax collectors and spent by its administrators --mostly common citizens, but society's collectors and administrators none the less.

In U.S. America on July 4th, Independence Day, we get broadly taxed by our law and custom. The nation accomplishes the role playing it desires. Most people go to the beach or to their back yards on the 4th of July rather than to work. Human and material resources get taxed from one activity --the typical work day-- to another --celebration. The nation presumes that the holiday role playing is more beneficial than costly, so it takes resources away from a day's production in widgets and allocates them to a day's worth of celebration.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 60. Tax in Law and Custom ::
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59. Tax is in Our Roles.

Tax is in Our Roles.
Bob Komives
::

Taxation is our tendency
to cooperate toward abundance.
It is the role of roles,
the sustenance of organization,
the carver of niches.

||

Few economic proposals attract more interest in U.S America than strategies to balance the federal budget. If you fear what will happen if the federal government spends more than it takes in through taxes, your fear probably comes from your acceptance of an intuitive equation:

Spend = Income

As spokesman for both the fear and the equation, President Reagan complained in his 1987 State of the Union address that over the past half-century the United States of America had outspent its means. For many people his complaint portrayed well the problem facing the country. To others, his words sounded like a cover-up for the national debt that burgeoned during Reagan's years as president. For me, Reagan's complaint reinforced my doubt in the validity of the problem as popularly stated. After all, despite some downs and ups, the country prospered during those fifty years. Some disadvantaged groups fell to further disadvantage. Yet, income, defined as growth in national wealth, increased.

Paradoxical.
Fifty years of lousy national management,
fifty years of deficit
between revenue and spending,
bring fifty years of unprecedented wealth.

Conventional explanations:
(1) We finance deficit,
sell the deficit to our citizens.
(2) We exploit
environment,
minorities,
other countries,
to make up the difference,
(3) Private enterprise makes up
for the failings of government.
Attractive and defensible explanations!

Yet, now a quandary.
Does bad management make a country wealthy
if it borrows from its citizens,
fosters private enterprise,
exploits poorer countries,
weaker citizens,
and a defenseless biosphere?

I offer two other explanations:

(4) SPEND has nothing to do with INCOME
when we correctly account
national government's attempt
to tax its own currency
back to itself
in order to spend it again,

(5) SPEND always equals INCOME
when INCOME refers to LEGITIMATE TAX.

||

There are at least four legitimate taxes: tax in law or custom, tax in money, tax in kind, and tax in price. Each type offers advantages but is often interchangeable with the others.

Legitimate taxes start with communal policy; call it government policy. The taxes take effect when society responds. Society adjusts its pattern of role playing, creating a new distribution of wealth. Singers, carpenters, and bakers ply their trades in new ways and places. They change trades, change the way they ply their old trades, produce different products and services, change their consumption, move to new towns, go back to school. They alter their roles in society. In short, they pay their taxes. They are well taxed if their changed roles create new wealth and protect old wealth. A society that is well taxed has it's budget in balance.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 59. Tax is in Our Roles ::
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58. Former Debtor Nations

Former Debtor Nations
Bob Komives
::

When we abandon international loans we will see changes outside the walls of treasury departments of national governments. Projects that international loans would finance today may differ when financed locally. Some projects favored and proposed by international lenders will die because the target nation does not forsee enough benefit. Other projects will be designed differently. Local project managers are likely to use and develop local goods and services to replace more expensive foreign options mandated or favored by international lenders. Purchasing departments will make foreign suppliers compete in a free market --rather than in a restricted market that favors suppliers from the lending nations. Conscientious governments in developing nations will feel even greater responsibility for their nations' futures. They will not hesitate to undertake projects that are likely to produce and to distribute justly more wealth than they consume. They will see that newly printed and well invested money out performs newly signed foreign loans.

In setting fiscal policy, developing nations will be subject to foreign political and economic pressure, but perhaps the pressure will be little more than that exerted among developed nations. Officers of foreign lending institutions and the International Monetary Fund will lose their extraordinary influence over the internal policies of the former debtor nations.

"Former debtor nations," I have not suggested what can be done with the present international debt. It exists, built upon false principles and good intentions. I have no magic answer. Diplomacy, rather than economics, must eliminate existing debt. As to the future, in order to promote peaceful paths to mutual prosperity among nations we must eliminate both the practice and the machinery of foreign monetary debt. In its place we can hope for constructive cooperation among former debtor and lender nations who act with discipline and responsibility.

As child and parent the word, discipline, intrigued me. One moment it seems to mean a steady rigor by which an individual or group works through a challenge. The athlete who sticks to a rigorous training routine has discipline. So does the scholar who works methodically for years to uncover the mysteries of genetic inheritance, as does the former smoker working through a successful withdrawal. They have discipline. Calling it, self-discipline, is redundant. Directly related to this meaning is discipline as a profession. The discipline of the athlete is high jump, of the scholar, molecular biology. This discipline is also a verb. The microbiologist disciplines herself when she enters a rigorous experiment.

Another moment, discipline seems to mean punishment, structure, rigor imposed upon the unwilling. Parents who confine their children to their rooms on Saturday night are said to discipline their children. The department head who docks the pay of a scholar who did not follow rules for the use of the photocopy machine is said to discipline her staff. As a noun: "Children and scholars need discipline from their superiors or they will be irresponsible."

So, I chuckle when someone says, "There is a lack of discipline here," and everyone nods the head in agreement. They can agree about lack of discipline, yet they might have profound disagreement if pressed to elaborate their views.

Self financing issues no license for irresponsibility. Poor countries need discipline as much as rich countries. There is no special reason that discipline for poor countries must be imposed by the International Monetary Fund and international lenders. How do we prevent developing countries from acting irresponsibly if we let them print money rather than borrow it? Unfortunately, we cannot, with certainty, prevent countries from acting irresponsibly. Responsibility must be learned from the pain and reward that come after investment. We should not expect a country to borrow money it does not need and risk inflation it does not want so that it might acquire discipline.

To invest in the well being of a nation
requires good judgment.
To invest poorly
is to risk disaster.
Nations that invest well
do improve quality of life.
Those that invest poorly
do suffer.
Therein lies the lesson in responsibility.

The Lesson in Responsibility

:: Bob Komives, Fort Collins © 2006-2008 :: Plum Local IV :: 58. Former Debtor Nations ::
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57. Weak Argument For Reverse Foreign Debt

Weak Argument For Reverse Foreign Debt
Bob Komives
::

Despite some superficial differences, loans between national governments are reversible. I have tried to argue myself out of this conclusion, but I cannot. I find it difficulty to distinguish borrower from the lender in international loans to national governments -- that is in economic terms. Though common wisdom and common prejudice see them as very different, borrower is lender; lender is borrower. If you have trouble seeing the similarity, try to imagine a loan in the reverse direction.

I have a weak argument for reverse loans to support a troubled country. In a reverse loan, the helping country accepts a loan from the troubled one in the troubled country's currency. The loans have no true economic justification. However, they might have financial justification and could make a great topic to help you survive a dull cocktail party.

A reverse loan could grease international financial machinery for a troubled nation. The reverse-loan agreement gives the troubled lender an immediate asset with which to guarantee international purchases. Also, troubled currency that flows out as loan must come home to be cashed in.

If international lending were reversed, richer borrowing nations would have to buy goods and services from the poorer lending nation using the lender's troubled currency. Since rich nations tend to influence trends and styles, their purchases from a poor nation might foster international interest in the poor nation's goods and services. At least, international markets would have to grow accustomed to dealing in the troubled country's currency.

How would a reverse loan be set up? Instead of U.S. America lending Guatemala one million dollars, Guatemala could lend U.S. America an equal value in quetzales. In return for the loan, the USA will sign an agreement with Guatemala in which it promises that after it spends the quetzales it will forego domestic use of enough USA resources to round up the quetzales it will need to pay back the loan plus interest.

Once it receives borrowed quetzales, the USA can spend them to buy the same coffee, sesame seed, beef, and ornamental plants that Guatemala would have had to export to pay off a loan had it borrowed from the USA. Alternately, the USA could exchange the quetzales for Japanese radios so that Japan could buy the sesame seed.

So, Guatemala can finance the same project as lender that it could as borrower. The quetzales that it lends out are not lost. They will return directly or indirectly to Guatemala as the USA spends them. The loan agreement is an asset. It can serve as collateral to finance purchases or to issue new quetzales pending repayment by the USA of those that were lent out.

My strong argument is that a loan from Guatemala to the USA is fundamentally the same as a loan from the USA to Guatemala. Therefore, each is useless in economic terms. If Guatemala could just as well lend quetzales as borrow dollars it might as well lend the quetzales to itself.

My weak argument is that if international markets are sticky due to bad habits and irrational prejudice a reverse loan in quetzales from Guatemala to the USA might inject the needed grease. With well greased wheels, a caravan of reverse loans will parade brilliantly compared to the overheated squeak-buckets going in the traditional direction.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 57.Weak Argument For Reverse Foreign Debt ::
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56. Poor Countries Do Not Need Rich Money.

Poor Countries Do Not Need Rich Money.
Bob Komives
::

One said: The Guatemalan government does not seem to have extra quetzales.
Can it lend them to itself
or, for that matter, to anybody else?

said Two: Yes, the government in the United States of
America does not seem to have extra dollars.
(Its accounting sheets seem to show negatives
where extra dollars are supposed to be.)
Yet it lends new dollars to other nations
and invests them in its own.
It also uses them to wage war.

One said: I know such irresponsible practice is long since condemned.
Have not those United States long since prospered?

said Two: Yes. Meanwhile poor countries long since work
to avoid such irresponsible practice,
and those poor countries long since remain poor.

One said: So, if the United States of America
lends and profits,
invests and profits
with money that they are supposed not to have,
might Guatemala try to do the same?

said Two: Yes, and it should.

||

If you can accept that the system for lending to sovereign nations is invalid there is yet another practical question: do not poor countries need dollars or some other strong currency to participate in the international marketplace? Politics, tradition, and organizations such as the World Bank and the International Monetary Fund can prevent countries from using their currency easily in the world marketplace, but there is no economic justification. The beauty of marketplace is that it adjusts prices to allow trading in products of different value. Imagine a farmers' market in which tomatoes from many farmers --varying in quality and kind-- cannot be traded except by using as currency the prized tomatoes of a few powerful farmers. This is unnecessary and unacceptable.

Guatemala, Brazil, Mexico, the USA and any other country can finance good projects with their own currencies. Within the country, venders of goods and services must accept the national currency without question. Such is the history of money. For off-the-shelf international purchases, project managers can buy what they need using local money converted to the foreign seller's preferred money at the current exchange rate. For international orders and long-term contracts, project managers and sellers can agree to a price tied to some standard such as dollars, marks, francs, yen, or a composite index. They can still make payments in national currency in an amount adjusted according to that standard.

Wealthy as well as developing nations will experience setbacks that create prejudice against their currency in world markets. A crisis in Guatemala may cause most of the rest of the world to stop for awhile accepting the quetzal. Guatemala might flood the market with quetzales by making too many international purchases in too little time. The value of the quetzal could drop dramatically. However, trade will resume. The marketplace can establish an efficient exchange rate. If the USA or an international organization wishes to help, it could offer in-kind aid or political support. It should never lend money. A loan will reinforce prejudice against the borrower's currency. Why should we accept a troubled country's money when we know the country has just received more familiar currency from a rich country?

I saw them working in a field one day.
He was swinging his machete.
I only looked for a moment,
probably because I didn't really want to believe it's possible.
He swung his machete all that day and many days since--
his friend working beside him.
I would like to think
that the boy does a little more than his share,
but it's probably just the opposite.

They walk home looking no different than when they came.
The boy does not require conversation of his old companion.

The first time I passed,
the sound of a gringo-ish "a dios!"
caused him to turn his head to reply.
Now, salutations to me
are the same as to the other familiar voices on the road
--uttered quietly in the rhythm of the resigned pace.
On occasion, I have passed without saying anything
--an irrational form of sympathy.
But he passed giving no notice to me,
maybe a little relieved that his attention was not diverted
--his attention on the road just two paces away.
However, why should I walk by him in sympathy
when his companion walks with him in respect.
It takes a great man
to have worked that hard for that long.
Maybe, in reality,
he still can carry a good-sized load on his back.
And the boy too is looking just two paces ahead
--at that man he wants to emulate.

After all, you see him every day
on the road to work in El Rosario.
At least he was there yesterday.

Passing

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 56. Poor Countries Do Not Nee Rich Money ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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55. Foreign Debt: Don't Let False Analogy Fool You.

Foreign Debt: Don't Let False Analogy Fool You.
Bob Komives
::

I did not enjoy the story,
One opines;
it is much too artificial.

So it is,
Two reminds;
but such is the real world.

I suppose it is,
One resigns;
I suppose it is.

A Dialogue

I think most of us consider borrowing money to be serious business; we do not do it if we have in hand the money or resources to undertake our project; we borrow when we need money for good projects. A developing country would seemingly pay for its projects itself if it has the money to do so, borrow if it does not. As any individual, does not a country borrow because it needs the money? If it cannot collect the money at home it needs foreign money, right? No, wrong.

Clearly, the Guatemalan government borrows from foreign lenders because it believes it needs the foreign money, just as I believe I need a bank's money when I ask for a loan. But herein lies the great mistake --the false analogy behind loans to national governments. It is falsely assumed that the principles of private borrowing can be applied to borrowing by governments of sovereign nations that caretake their own currencies. This error built the international debt crisis.

When I borrow from a bank --in an unsecured loan-- paper passes in two directions. I hand the bank a signed paper that is my loan agreement. In return, I get paper money. I try to prosper. By prospering I can pay off the loan, maintain a good credit rating, and borrow more if needed. By managing well my financial affairs, I also manage the value of the paper that I issued to the bank, my loan agreement.

I control the value to the bank of my loan by the skill with which I manage my financial affairs, however the bank has almost no control over the value of the money that it gives to me. While the bank tries to prosper and manage well its financial affairs, it does not manage the value of the paper dollars that it passes out in loans. The effect on the value of money that comes from the actions of one bank is insignificant. Money fluctuates in value due to forces that neither bank nor borrower can manage. Our roles are not symmetrical. While we borrowers manage the value of the paper we issue, moneylenders cannot.

An international, intergovernmental loan is different: both borrower and lender manage the value of the paper they issue. When Guatemala borrows one million dollars from the USA its representative signs a piece of paper called a loan agreement and, in return, receives other paper called dollars. Each paper dollar gives Guatemala a claim to some resources in U.S. America. Although dollars may be used for transactions outside of the USA, their fundamental value lies in a guarantee by the government of the United States of America that this money can buy a million dollars worth of goods and services in the USA. The amount that each dollar can buy is not guaranteed; the right to participate in the USA marketplace is. During the period in which Guatemala uses the borrowed dollars, the government of the United States of America protects the value of the dollars as best it can. It manages the total number of dollars in circulation as well as the general flow of the USA economy. It tries to maintain a healthy dollar.

The loan agreement signed by Guatemala gives the USA claim to some of the resources of Guatemala. The fundamental value of the loan agreement lies in a guarantee by the government of Guatemala that it will forgo use of somewhat more than one million dollars worth of its future resources to repay the loan plus interest. The government of Guatemala protects the value of the loan agreement as best it can. It controls the number of loans that the country has outstanding as well as the general flow of the Guatemalan economy. It tries to maintain a healthy loan agreement.

This international loan is symmetrical. Paper dollars buy a paper loan. A paper loan buys paper dollars. U.S. America hands Guatemala paper dollars signed by its treasurer and continues to manage the dollar's value. Guatemala hands U.S. America a paper loan agreement signed by a comparable government official and continues to manage the loan's value. In economic terms, the roles of the USA as lender and Guatemala as the borrower are essentially the same.

Timing is one incidental difference, but not as significant as it might seem. Presumably the outflow of dollars would be an immediate drain on the USA, whereas the drain on Guatemalan resources gets delayed until project benefits flow. The timing of benefits should accordingly be just the opposite --early in Guatemala, delayed in the USA. However, both economies are likely to make short and long-term adjustments that dampen the effects of timing. Dollars that leave as a foreign loan do not necessarily come home quickly to the USA to be cashed in. Some will circulate for years internationally before returning to extract goods and services from the national economy. The loan agreement itself is a long-term national asset that will tend to uphold the short-term value of the dollar. A rapid drain on the economy of the USA is unlikely. In Guatemala, a loan agreement may affect domestic resource allocation long before the payments are due. Guatemala should gain in the short-term as it takes in money from the lender. However, the short-term drain felt by Guatemalans may be as great or greater than that experienced by citizens of the USA. Anticipating the debt payments, their government will tend to favor investments in export production, thereby altering local consumption. The citizenry of Guatemala may experience this extraction of customary goods and services from their economy almost immediately.

Don't let a false analogy fool you. Borrowing by national governments is not like borrowing by you and me.

:: Bob Komives, Fort Collins © 2006-2008 :: Plum Local IV :: 55. Foreign Debt: Don't Let False Analogy Fool You. ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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54. Money Works Better Than Debt.

Money Works Better Than Debt.
Bob Komives
::

Let's look at two graphs of possible outcomes from three hypothetical projects: A, B, and C. Project A is a resounding success. B is marginally successful. Project C is a failure. The graphs show the net national benefit or net national loss from each project. Where there is a net benefit, the wealth of the nation increases and the net-benefit line on the graph ends above the centerline. That is a successful project. Almost all projects will start out creating a net loss because resources are spent before benefits return. The project that never creates a net benefit is a failure.



Graph 1 assumes the three projects are paid for internally. Graph 2 assumes an international loan finances the same projects.



The two projects that bring net benefit without the loan (Graph 1) bring fewer benefits when financed by an international lender. Project B changes from a marginally successful project to a failure --producing a net loss. C is a failure in Graph 1 but worse in Graph 2. Why?

If U.S. America decides to lend U.S. dollars for a Guatemalan project, then Guatemala will have to pay back the principal plus interest (Graph 2). Guatemala will draw upon the project's benefits to pay back the principal --the one-time cost in resources of the project. Any benefits left over, less the amount needed to pay interest, are the project's net benefit or net loss. The interest is the price charged by the USA to Guatemala for the privilege of borrowing. The added charge reduces Guatemala's net benefit.

When, instead of seeking an international loan, Guatemala finances such projects internally (Graph 1), the entire excess of benefit over cost accrues to Guatemala. No extra national wealth is lost or exported.
Under internal financing, good projects are economically successful. Under external borrowing some very good projects are economically successful, but extra wealth must be exported to pay interest on the loan. They are less successful, less profitable, than projects financed internally. Projects that could be marginally beneficial when financed internally will likely become failures when financed with an international loan. For projects destined to fail, an international loan can turn mere failure into disaster.

:: Bob Komives, Fort Collins © 2006-2008 :: Plum Local IV :: 54. Money Works Better Than Debt.
::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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53. Buy Good Projects.

Buy Good Projects.
Bob Komives
::

A good project is a good investment;
a bad project is a bad investment--
whether building life,
species,
family,
association,
or nation.

A good investment pays
yet bears no debt.
What would the biosphere owe
(and to whom?)
for the inter-galactic loans
that financed its development?
Did the Gulf of Mexico
ever repay its debt to the Mississippi River?
Who could tell Mahatma Gandhi
that he had repaid all investments in his life?

Good Projects Are Good Investments

A good project, a good program, raises the value of the nation. It can lead to deflation even if paid for with newly printed money. A bad project or program causes inflation even when paid for with money in hand. If the government of the United States of America happens to have a million excess dollars, to waste them on a failure would damage the economy and the value of the dollar. Even if the Guatemalan government happens to have four million excess quetzales, wasting them on a failure would damage both the value of the quetzal and the Guatemalan economy. A money-in-hand project puts no new money into circulation, it does use and alter resources and produce inflation as the old amount of money chases after reduced resources.

If failure is to be paid for with an international loan it will cause even more inflation. In order to pay off the loan the borrowing nation has to export resources equal in value to those invested in the project plus an additional amount to cover interest. The net reduction or alteration of resources is greater than if the same failure were paid for with money-in-hand; the value of national currency falls more.

Now, consider a good project. The Guatemalan government has plans for a four million quetzal project. All analyses indicate the social, moral, and environmental results will range from acceptable to beneficial. Analyses also show that the project should increase the wealth of the nation well beyond the four million quetzal investment. Unfortunately, the treasury does not have four million quetzales on hand.

This project should proceed. It will be deflationary even if Guatemala prints new money to pay for it. If analyses are close to correct, this good project raises the value of the nation beyond the current market value of the new money to be spent on it. That is deflation. If Guatemala were to borrow foreign money to pay for the project, the result might also be deflationary. However, the interest payments added to the project cost will lower net national worth below that achieved through the issuance of new money for the same project.

:: Bob Komives, Fort Collins © 2006-2008 :: Plum Local IV :: 53. Buy Good Projects. ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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52. The Unnecessary Burden of Foreign Debt

The Unnecessary Burden of Foreign Debt
Bob Komives
::

In Guatemala
they have a way to carry heavy loads
—primitive, simple, and efficient—
one or two loops of rope engage the load,
carry it to the forehead
where loop closes with strip of leather or cloth.

Body tilts,
bends forward to balance load:
perhaps a bulging sack
holding a quintal of maiz,
or small table
topped by seeming household of furniture,
or wooden frame
with pottery stacked five feet high by four feet wide.

From the bus windows
I watch men carry such loads
down,
up
steep mountain roads,
distant from past town and last house.

I see small loads
watching boys learn the art
under burdens cut to their size.
I enjoy their smiles spurts of speed.
Paces and decades ahead
I see burdens too-large,
postures too-bent,
leathery foreheads too-creased
under burdens saddled to a man.

In Guatemala,
they have a way to weed corn
—primitive, simple, and efficient—
with machete and stick.
The stick is narrowest where it fits the hand.
A subordinate branch makes a hook at the other end.
Though well-chosen and well-fashioned,
the stick may be left by the field to be recovered tomorrow
or replaced,
fashioned anew from branch of a living fence.
The stick gathers and supports grass and weeds
as the machete cuts them at the ground.
Machete strokes begin high from vertical.
Agile wrist and low body
take them quickly down to horizontal.
This smooth, rhythmic movement
fits and fills both the confines of tall corn
and the muscles of a short body.

I see an old man every day
on the road to El Rosario.
His machete and a boy are constant companions.
I know not where they live.
Seldom do I know in which of the fields they work.
I see them on the road between.

They come early
racing a day's work
against sun's rise to oppressive heat.
Yet, they come later than most.
They may start with others,
but in kilometers of walking
they fall behind.
The old man does not move fast.
The boy is in no hurry—
his walk seems youthful,
but two paces behind the old man.

I cannot know
if it is the years of work with the machete
or the carrying of heavy loads
that has bent that back and humped those shoulders.
But, as the man walks by me now,
his eyes focus on the ground
two paces in front of his feet.
Back is tilted;
head is bent
—as if to carry a load of corn.
I choose to believe he can no longer carry such loads.
The machete in one hand hangs as burden enough.

One, hot mid-day as suffered a long walk
I saw them at work in a field.
Old man and boy
propping unwanted growth with theirs sticks,
severing it from its roots with their machetes.
I wanted to believe that the boy does more than his share,

On their walk home
they look no different than when they came.
Neither requires conversation.

The first time I passed,
the sound of a gringo-ish “a dios!”
caused the old man to startle;
he turned his head to reply.
Now, salutations to me
are as those to other familiar voices
—uttered quietly in the rhythm of the resigned pace.
On occasion, I pass by, say nothing.
Neither old man nor boy give apparent notice.

Am I silent from sympathy or reverent from respect?
Have I passed a humble man who has worked too hard, too long?
Am I watching a great man who has long carried great loads?
I look for cues in the eyes of the boy
and choose to see reflections of a hero two paces ahead.

Every day on their walk to work in El Rosario.
—until yesterday.

Heavy Loads, 08

Good governments finance what they hope will be good projects and services --whatever the source of funds. Good projects and services are successful. They benefit society in excess of the resources that go into them. Even developing countries have experts with sophisticated training to evaluate the likelihood of success. Lenders who make loans to developing countries presumably have people with similar training to make the same evaluation. Experts do not know for certain whether a project will succeed or fail, but success is their goal.

International debt is a burden to the developing countries that carry it. I argue that it is unnecessary; the international lending structure need not exist. To illustrate and simplify my argument, I will name Guatemala as a representative developing country and the United States of America as a representative foreign lender.
Guatemala is a small country with a fairly large international debt. It is a wonderful and troubled country. In 1998 we hope that recent peace will hold. In March of 1986 I held high hopes for a new democratically elected government under president Venicio Cerezo which had launched an Economic and Social Reorganization Plan. Within 18 months, however, Cerezo's government acknowledged that the plan had failed. A key factor in the failure seems to have been under spending. Of the amount that it had budgeted for public investment, the Guatemalan government spent only about one third. The limited spending failed to stimulate the economy. Faced with ever decreasing living standards and continuing civil war, the government abandoned its first plan and began a new effort on August 1, 1987, The National Reorganization Plan. The new plan was less ambitious and at least as unsuccessful. The first Guatemalan plan had borrowed some ideas from the New Deal and U.S. America's recovery from the Great Depression. Public projects would help get things moving. However, national coffers went dry. International loans did not make up the difference.
When we hear of the suffering that afflicts many developing nations that have large foreign debt, we should pause to consider that in accumulating this debt their governments probably tried to follow norms of international finance.

Guatemala followed today's norms for responsible finance when it refused to undertake beneficial projects for which there was no money. The public projects that Guatemala proposed but did not undertake were designed by dedicated and well educated planners. It is reasonable to suppose that some of the projects could have stimulated the economy and reduced poverty. Cerezo's government refused to undertake projects for which it had no money. Under conventional wisdom, in failing to act the Guatemalan government acted responsibly. Did it act correctly? If they were good projects, no. Should international lenders have filled the gap and financed these good projects with loans? No. An international loan is never more economically feasible than is internal financing, and international debt is never less burdensome than internal debt.

:: Bob Komives, Fort Collins © 2006-2008 :: Plum Local IV :: 52. The Unnecessary Burden of Foreign Debt ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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51. Against Foreign Loans

Against Foreign Loans
Bob Komives
::

Poor countries continue to go into debt to other countries and international banks. They must repay their debt using one of the world's hard currencies --their own, considered too soft. Too often, some lucky citizens in the debtor nations manage to hoard hard currency that comes in through loans, while their governments hoard only the debt. Such problems hobble government and exacerbate the dichotomy between rich and poor in debtor nations, but damage is not restricted to debtors. The world suffers waste. Immense resources, including human effort and intellectual talent, pour into the system that supports international debt. Assume for a moment I can convince you that the system is invalid. Imagine the benefits we would reap if we divert this waste of resources into productive endeavor --endeavor that improves investment within nations and the trading of resources among nations.

As 1987's September turned to October. The members of the International Monetary Fund and World Bank met in Washington D.C. confronted by continuing crises in world finances. They started their meetings with little hope that they would devise a solution to the international debt problem. Their pessimism proved justified. By Christmas, banks in U.S. America had begun to write off large parts of their international loan portfolios as bad debt. If international debt gets less popular attention today than in 1987, perhaps the novelty is gone. International debt is an old problem that still stymies financial leaders.

Certainly some international debt comes from ill-conceived loans on bad projects, but other debt piles up from projects that were good-but-slow-to-prove-it. Money leant to enhance ecological, educational and social systems, for example, may return manifold profit in increased wealth, but the profit may come too slowly to cover the interest on the loan. Other projects may return profits quickly to society in general but too slowly to the marketplace. The market, not reflecting true benefit and detriment, declares the project a failure. Internal, national investment can accept some inflation as tradeoff for long-term and non-market benefits from good-but-slow projects. Instead of paying off the debt directly, the nation lets its money lose a little value --achieving the same end. An international loan, however, requires prompt payment to avoid geometrically escalating debt. Any country that embarks on good-but-slow projects by borrowing foreign money invites default --unnecessary default.

Much in life is unnecessary but quite acceptable, even enjoyable. International debt is unnecessary, but also harmful. I reach the same conclusion if the lender is a private bank or a multinational institution such as the World Bank or the Interamerican Development Bank. I reach the same conclusion even for projects that promise to be good-and-fast. I am against foreign loans.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 51. Against Foreign Loans ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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50 :: Investment Debate is Better Debate.

Investment Debate Is Better Debate.
Bob Komives
::

Neither a national government nor its agent banks can spend wealth that the nation does not have. Citizens expect reasonable balance between new money invested and new wealth produced. They expect monetary balance. It comes from prudent national investment, just as corporate stock balance comes from prudent corporate investment, and ecological balance comes from nature's tendency to invest prudently in itself. These are dynamic balances. Credits can more than balance debits as biosphere, species, nation, and family take dominion over a greater expanse of the inanimate universe.

We should hope to do better
than balance our budget.
We should hope to do better
than debate how best to limit spending.
We can save inferior debate
for the day the sun turns off
and the biosphere dies.

||

A nation that understands the economics of money and communal investment will debate whether proposed investments contribute to the long-term health of society and its economy. Liberals might point to the profitability of social programs. Conservatives might argue strongly for hardware. In U.S. America some debaters will point to the boom in computers and related paraphernalia as wealth that followed investment in the space program; others to the black and brown faces in media and business as economic return from investments in civil rights and social programs; others to the Works Progress Administration under the New Deal as argument for a nation putting its labor force to work when the marketplace fails to do so; others to examples of peace work bringing higher return than war work; and many to the peace and productivity of those people who choose to invest their efforts to enhance the natural environment that they rent from future generations. These will be a difficult debates. For a change, however, they will be meaningful.
Productive investment debate happens within a successful nation that has prudent government knowingly financed by paper money. Growth in this nation's supply of paper money balances itself through growth in national wealth --a collective wealth that incorporates local, international, and biospheric wealth.

Investment debate is better debate.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 50. Investment Debate is Better Debate ::
With attribution these words may be freely shared, but permission
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49. Banks Add Money and Investment.

Banks Add Money and Investment.
Bob Komives
::

Would you rather have a thousand dollars worth of stock or a thousand stocks worth of dollars? You might say, "That depends." Would you rather have a thousand potatoes worth of dollars, a thousand potatoes worth of stock, or a thousand stocks worth of other people's promissory notes? I suppose, "It still depends." With some creative logistics you can use any of these assets at the stock exchange to buy stock, at the bank to secure a loan, in your will to endow a university, or, in a pinch, most anywhere to trade for most anything. Why? Because there are secondary markets for potatoes, stock, loans and money. After the first transaction that puts them into the marketplace they can be sold again and again. The secondary markets for potatoes, stock, and loans are giant-but-tiny compared to the fluid markets for money. As the principal means of exchange, money is coveted by one side in most transactions. In modern economies we need a lot of money --so much that even free-spending governments can have trouble keeping up with the demand. They need assistance. While good-old General Motors would never allow anyone else to issue its stock (traders were stuck with the number of stock General Motors chose to issue), the demand for money is so great that most national governments let banks assist them in minting. The economy needs new money as enterprise brings forth new goods and services that the public wants. By choice or by default, governments in countries that emphasize the private marketplace let the banking system issue much of their money. Within the limits imposed on them by government, banks issue new money whenever they borrow from their depositors to issue new loans. If the banking system did not print more money there is no way that most bankers could cover their growing obligations to depositors --to return the deposits, with interest, on demand. Nor could borrowers pay their obligations to the banks.

Bank-printed money is easy to see if we consider the banking system as one bank. One day a man who is known to be reliable and productive takes 100 dollars out of his pocket and deposits them in the bank. A day later he borrows 80 dollars from the bank. The morning of day three he withdraws his initial deposit plus one day of earned interest. Now he has 180-plus real dollars in his pocket and an obligation to pay back his loan. He goes out and spends those dollars at stores that quickly send someone to the bank to deposit their earnings. By close of the business day the bank has assets of more than 180 dollars in deposits and more than $80 in good loans. As the cycle goes on, the amount of money in circulation and deposited in the bank continues to rise. Someone printed money, and, oh yes, during these three days government was on a holiday.

Having once put new money into circulation by lending out money that they have guaranteed to hold for depositors, a bank cannot withdraw that money from the marketplace even when investments turn sour. Borrowers have spent the money. It disappeared into the marketplace --eventually returning to the bank, but with no tag to identify it with the initial loan. Where projects fail borrowers never get enough money back from the marketplace to return what they owe to the bank. New money spent on these bad projects stays out in the marketplace searching for goods and services. Since the projects did not produce their promised economic growth, new money competes with old money for old goods and services --forcing up prices. The value of all money declines. That is inflation. Whether bank or government issues money to finance bad projects the effect is the same: inflation. Whether bank or government issues money to finance good projects the effect is the same: economic growth.

Despite the inflation risk, a banking system can serve its country well. A diverse investment structure that includes banks of various sizes in different locations can develop diverse investment strategies. Local banks can help a nation develop the complex organization at all levels that typifies a robust ecosystem. Because government spending should reflect priorities set by the nation, national government spending is the most direct and understandable way to infuse the private investment market with the money it needs. Centralized investment, however, even if intelligently made, even if made by a giant private bank, tends to over simplify the needs and opportunities of a complex society. A complex system of local and regional banks is a complementary money pump to national investment. It fills investment niches that simpler national strategies cannot find.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 49 Banks Add Money and Investment ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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48. Efficacy Limits

Efficacy Limits
Bob Komives
::

There are limits to sensible, productive paper investment. They are efficacy limits. If some investment works but more investment does not work, then more is too much. At some point resources and society cannot respond efficiently to the competing demands. At that point some investments fail. They are good ideas that prove ineffective because they are poorly timed. Efficacy limits are not dollar limits. Money is sibling to unsecured loans and common stock. Like good borrowers and good corporate stock issuers, our national government will produce better budgets when it seeks to make good investments that are well timed. National government need not concern itself with the amount of money that it has on hand nor the amount expected to come in. It should rather consider what effect investment and non-investment will have on the wealth of the country and the international community of which it is a dependent.

The insidious implication of the balanced budget fantasy is that a national government would seem to never have to apologize for its expenditures if they do not exceed the amount of currency returning to its treasury:

"We ruined the country
and much of the rest of the biosphere,
but we never ran an unbalanced budget."

from: A War Rages

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 48. Efficacy Limits ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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47. Three Siblings: Loan, Stock and Money

Three Siblings: Loan, Stock and Money
Bob Komives
::

Every time I use my credit card to buy something I issue a piece of real or symbolic paper --paper which embodies a loan secured only by my promise to pay. A bank gladly accepts my new paper. Its accountant calls my paper promise, an asset. With that new asset my lender bank can invest more than it could lend yesterday. Every time a business buys something using its line of credit it issues a piece of real or symbolic paper --paper that embodies a loan secured only by the business's promise to pay. The lender bank gladly accepts the new paper as a new asset. Today's new asset makes the bank worth more to buyer or investor than it was worth yesterday. The paper loan --floated on nothing but a promise-- is an unsecured loan. This unsecured loan is a sibling of money.

Money has another sibling --a fraternal twin adopted by corporations. Common stock floated by corporations is the fraternal twin of money floated by national governments. Both are worthless paper with an initial value in the marketplace based only on speculation that proceeds from sale of the paper will be invested wisely.

Many corporate leaders and investors, and perhaps you, believe a national government should run like a business --claiming that a government is unbusinesslike if it spends more money than it collects. This dogma makes it difficult to see the family resemblance between stock, loans and money. Please prepare to suspend your belief for several paragraphs. If you hold this dogma the most I can ask is that you consider what you are about to read to be science fiction. Try to enjoy reading of a different world. Later, over a cup of your favorite drink, please ponder the possibility that this different world is our real world.

When good-old General Motors and I had good credit ratings we were allowed (often encouraged) to not balance our budgets --to paper the world with more credit than we can pay for immediately. Lender and investor wanted to hold our paper because they believed they would be well repaid for holding it.

Good-old General Motors issued paper called stock. Each new issue reorganized the investing public so that some of us gullible people played our assigned role and gave General Motors our money in exchange for the stock. If Jane had not been so induced she might have put a California hot tub on her back porch. Part of her wealth would have flowed to a small hot-tub company in California. Instead, it flowed to a giant in Michigan. Mary got laid off in California and moved to Michigan where her cousin, Sid, had just been hired for a new General Motors' project.

When good-old General Motors invested Jane's money poorly, it experienced inflation: Sid got laid off; Mary failed to find a job; Cadillac prices went up, or profits went down; the value of General Motors' common stock went down.

Jane and other stockholders took a risk for potential reward. Her risk and potential reward parallel those of a holder of national currency. If government invests well money holders will be well repaid.

Suppose good-old General Motors had required that anyone who wants to buy one share of its stock must pay for it with one share of Ford Motor Company stock. This may seem strange because General Motors normally asks for payment in money. However, if we suppose a time when one share of GM stock was equal to one share of Ford stock the stock-for-stock policy would be reasonable. It is as reasonable as holders of USA dollars exchanging their money for Canadian dollars of equal value. If General Motors had been trying to take over Ford it would have been quite reasonable to give Ford Stockholders new shares in General Motors in exchange for old shares in Ford. The newly issued General Motors stock would have been balanced by new corporate wealth --the assets of Ford. This is an understandable transaction with real balance.

Now, suppose good-old General Motors had been asked by its investors to achieve balance in the way advocates of balanced budgets say national governments should achieve balance. That is, General Motors had to receive one of its own shares before issuing a new one? Here is balance; nothing does balance nothing. Do you not agree that it is ridiculous balance? It would have been ridiculous to require that General Motors take in one share of its common stock for every new share that it issued. Such a requirement would invalidate accepted practice in corporate finance. It is equally ridiculous to ask the national government to take in one dollar for every one it issues.

A corporate stock issue should be balanced by an increase in corporate wealth coming from responsible investment of the proceeds from the stock issue. A national money issue should balance itself in the same way --through good investment. The public and private investment enabled by the expenditure of new money must create wealth to match the increase in money supply.

To review:

Sibling one, Unsecured Loan
We borrowers must invest the wealth of our lenders in productive ways that by choice or impossibility those lenders will not invest directly. We trade unsecured, paper promissory notes for a loan of investment resources. If we do not invest those resources well, we will fail to pay off loans, our credit rating will fall, our loans will lose value (inflation), and our lenders may rise in revolt to take over our remaining assets.

Sibling two, Common Stock
Corporate directors must invest the wealth of their stockholders in productive ways that would be difficult or impossible for individual stockholders to invest. The corporation trades paper stock for investment resources. If it does not invest those resources well its stock will lose value (inflation), and its stockholders may rise in revolt to install new directors for the corporation.

Sibling three, Money
Government must invest the wealth of its citizens in productive ways that by choice or impossibility will not to be private investment. National government trades paper money for investment resources. If it does not invest those resources well its money will lose value (inflation) and its money holders may rise in revolt to take control of the nation and its government.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 47. Three Siblings: Loan, Stock And Money ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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46. Money and Other Biospheric Taxes

Money and Other Biospheric Taxes
Bob Komives
::

Once in the marketplace, money simplifies the exchange of goods and services. This is the obvious effect that we all see. Less obvious is the tax-effect. Money is a mobile tax. Once government becomes a minter of money it engages in monetary taxation --inducing people with newly minted money to play roles they would not otherwise have played in the provision of goods and services. Light, portable, magical money shifts wealth flexibly from person to person and place to place --reorganizing society as it flows. True taxation occurs whenever a minting government spends its money.

Any country can invest in good projects using its own money. Within the country venders must accept national currency in exchange for their good or service. They will tend to do so voluntarily because good projects create wealth which new money lets them share. Thus, as good investment follows good investment, money becomes the common way to exchange wealth in the marketplace.

Money is a magical invention, but not a freak. It is but one invention by humankind in a chain of magical biospheric inventions that allow a whole to organize itself to be more than the sum of its parts. Whether several micro-organisms exchange energy, a family allocates chores, a culture defines roles and traditions, or a government mints money, the net effect is for the group to tax itself --to allocate resources in ways that individuals cannot or will not.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 46. Money and Other Biospheric Taxes ::
With attribution these words may be freely shared, but permission
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45. Money is Paper.

Money is Paper.
Bob Komives
::

I believe the study of national investment would be easier (and better) if we were to start with the assumption that money became a means of exchange when created by selfish rulers who spent it for their own good, and when their spending (by accident or by design) proved beneficial to many of the people under their rule. I do not guarantee the accuracy of this history, but it illustrates why money is still around --it works-- and why money is essentially paper even if minted from gold. No ruler ever paid the price of pressing a stack of gold bars into coins if the total face value of the new coins was not significantly greater than the value of the gold bars that he melted down to make the coins. That greater face value gave a handsome and easy profit to the ruler. If he spent that profit wisely many of his countrymen lauded him as noble for the national prosperity he caused. If he spent it unwisely he had trouble keeping his crown. The paper profit is the true value of the coin. While gold content may have made new coins more acceptable, eventually the precious metal would be needed only to make it difficult and expensive to counterfeit. As money became more common and counterfeiting became easier to control, the precious metal content of money could go down until the metal could be replaced by paper --and now by the vapor of electronic bookkeeping occasionally reported on paper. Paper money is more portable than metal coin and has been difficult to counterfeit. Inevitably, simple "I.O.U."s written on plain paper, paper checks and other plain-paper documents, electronic recordings, and verbal promises could circulate as means of exchange --as money. When people believe that they can exchange paper for goods and services, and when their experience supports this belief, they gladly accept the paper, use it, and call it money.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 45. Money is Paper ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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44. A Better Money Legend

A Better Money Legend
Bob Komives
::

Who Created Money?

Money is one of humankind's great inventions.
I was not around when it was invented,
but I do think I know how it happened.

In the third or fourth grade I was taught:
primitive people traded things for things;
we needed a better means of exchange;
we invented money.
What an image!
These hapless primitive people
dragging around elephants and chickens
to exchange for coconuts,
while their suave modern cousins
sit under a tree sipping coconut milk
passing a few coins back and forth.
I have since heard many adults and children
tell this same simple history.
My hair was turning white
when I found something missing--
Who?
Granted,
trading chickens for coconuts could be cumbersome
for the poor folks who walk to the marketplace,
but poor folks do not create money.
Kings, queens, emperors,
bankers, and empresses create money.
They always have plenty of burly helpers
to carry their chickens and coconuts.
Which one said:

"My poor subjects are so overburdened.
Trade is so bulky.
I, nice person that I am,
will give them a means of exchange."

Even if one leader were that smart and that good,
why did cruel and dim despots continue the practice?

Listen to this story.

Let us imagine that first money was made of gold,
and it was issued by an empress.
Before making her coins the empress needed gold. Whether she stole it,
got it through in-kind taxes,
inherited it,
or had it mined in her own mines,
she had a storehouse of gold.
Gold held great value in her empire.
She could buy armies, loyalty, roads, music, or whatever.

Now, suppose her artisan made her a radical proposal:

"Your highness,
you are so beautiful;
I am so skilled.
Let me melt your gold
and cast it into little disks
carrying my beautiful rendering
of your beautiful face."

She feels flattered and tempted.
But she says,"no,"
and puts the artisan in the dungeon for treason.
After all,
some gold would spill on the foundry floor.
The artisan could hide away bits of the gold--
making him a rich and disloyal man.
Many laborers would be needed.
The melting would use up many trees.
The dungeon was almost too little punishment.

Then there arises a great crisis in the empire.
In the east a horde of barbarians prepares to invade.
In the west, three princes want a good road to market.
Without it they may sever their lands from the empire.
The empress summons her advisers.
They report:

An army to defeat barbarians
costs 10,000 pounds of gold.
A good road over the mountains to the west
costs 10,000 pounds of gold.
In the empress's storehouse
are 10,000 pounds of gold.
The barbarian invasion by itself,
or the secession of the princes by itself
will bring destruction of the empire
and death to the empress.

Despair sets upon the empress and her advisers--
until she remembers the artisan.

"Free the artisan
Instruct him to melt all my gold
and mint me 20,000 gold coins carrying my image.
I proclaim,
each coin has a value of one pound of gold.
Spend these coins to raise an army.
Defeat the barbarians.
Build a road over the mountains to the west."

In her selfish interest the empress spends coins.
Her subjects must accept them at twice their value in gold.
Through this great and official hoax
she proposes to save her empire and her life.
To her own amazement,
the hoax works.

She builds the road.
The western provinces boom in productivity
as ever more commerce uses the new road.

She defeats the barbarians.
In the eastern provinces,
under peace and stability,
farmers and artisans produce as never before.

Once coerced to accept the coins,
citizens now covet them.
With more goods and services to buy
people welcome the new means to buy them.

The secret cannot be confined to one empire.
Kings, queens and emperors imitate the great hoax.
Some invest their coins wisely and prosper.
Their subjects revere and follow them.

Other rulers are less wise.
They spend their diluted gold coins
on pleasures that drain wealth rather than nourish it.
Drowning in a sea of over-valued coins,
their subjects resort to trading of a-good-for-a-good,
and they rise up to throw out their worthless rulers.

Who created money?
Someone powerful and selfish and a little wise.
Someone like the empress.

Who Created Money

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 44. A Better Money Legend ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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43. Community B And The Back Rub

Community B and The Back Rub
Bob Komives
::

Increased breadth in our community economy does not by itself make us feel more wealthy. However, increased depth and density can make us feel wealthier. To see this, imagine two isolated communities that have been stable, both in depth and breadth. Their populations hardly fluctuate; government and traditions are stable. They each have stable economies supported by the harvest of fruits from the forest, a few native crafts, and by entertainment that includes dance and dream interpretation. The two communities are identical, with one exception. Community B recently discovered the art of back rub. The back rub has become a desired service in Community B. Several skilled back rubbers stay busy.

While Community B harvests no more food or timber than before, some individuals do harvest extra so they can give it to the back rubbers in exchange for a rub. The back rubbers have been freed of their need to harvest. Having those needs satisfied and time to spare, they can be induced to give a back rub if others offer food, a dream interpretation, a dance, a party. Gradually, the interchange of all goods and services in the community has increased. Dream interpreters do more. There are more dances. More people get invited to more parties. To accommodate the newly desired good, the community has increased the density and speed of its distribution and recirculation. It has grown in depth and density.

While extraction has not increased, people have become more efficient in their use of the resources they extract. This is partially due to skill improvements that come with increased specialization. But it is mostly due to a new incentive to do more with less, to ephemeralize. Ephemeralization has occurred in the use of fruits of the forest. One way to get a back rub is for specialists to carve ten wooden bowls and leave less waste from a branch that would yield only eight using traditional methods. These two extra bowls might buy a back rub, or a dream interpretation, or a dance. Thus, while extraction has not increased, the amount of energy bound into the wealth system of the community at any one moment has increased.

Residents of Community B feel wealthier. To the residents of Community A they look wealthier. In real economic terms they are wealthier. Even by conventional measurement, the economic development is obvious. The gross community product shows a marked increase. How? Gross community product is calculated by counting the same energy several times as it appears in different places and forms. This redundant counting correctly reflects increased wealth in the community.

Of course, events did not have to come out this way. The back rub might instead have overburdened social and political systems. The resulting havoc or revolution might have made the community fall backward or apart. Such is the risk of change. Economic development must be imperfect or it will stop. Yet, the Community-B experience, economic development in depth and density, does happen.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 43. Community B and the Back Rub ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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42. One Dimension We Do Not Like

One Dimension We Do Not Like
Bob Komives
::

The more that science comes to know,
the more that we come to share it,
delegate it,
distribute it,
organize it,
teach it,
learn it,
build it,
keep it,
the better and the deeper
we develop our community.

||

Since we extract from nature the wood, food, fiber, space and energy to support our culture, we may see irreconcilable conflicts between our wish to increase wealth and the biosphere's need to flourish. Greater extraction by us means less biosphere for itself. That conclusion seems reasonable, but it is wrong. Increase in human wealth does not necessarily, or even usually, require that we rob the biosphere.

If we were a one-dimensional species that could increase wealth only by adding to our breadth, economic development and extraction would be bound tightly. We could capture one more unit of economic growth only if we add one more extracting unit to the perimeter of our broad field of extractors --facing into the biosphere and grabbing what we can. But this image does not fit reality. To be truly one-dimensional we could only increase wealth by increasing population. New families in the population would have to be just like all others, and independent of them. They would work at our perimeter just as older families do at our middle.

If we were but broad, one-dimension extractors,
we could have no specialized crafts,
no division of labor,
(for they require organization in depth)
no government,
no clan, nation, or fraternity.
This is not economic development as we see it.

||

We would not enjoy one-dimensional economic development. We would never feel better off. Our species might become wealthier as it gains survival insurance --a chance flood or disease would be less likely to destroy us all. However

We would be no more wealthy than our grandparents,
no less wealthy than our grandchildren.
A lifetime of hard work would bring
neither greater reward to ourselves
nor greater security for our children.
This is not economic development as we like it.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 42. One Dimension We Do Not Like ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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41. A Brief Note on Community Artifacts

A Brief Note on Community Artifacts
Bob Komives
::

We build artifacts: transportation and communications systems, schools, libraries, institutions and machinery. We call them public works, and support them by taxing ourselves to build them. As we move through an information age artifacts change. The library building will be less important than the means of access to its information. Safe and convenient routes to recreation facilities may become more important than routes to office or factory. As entrepreneurs have greater geographic flexibility in choosing locations for their operations, the civic, cultural, and governmental institutions that provide a healthy and stimulating environment for worker and family increase in importance. No matter the changes, we will continue to spend much time and energy to supply ourselves with public works --artifacts that sustain our community.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 41. A Brief Note on Community Artifacts ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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40. Baby and Student, Investment and Balance

Baby and Student, Investment and Balance
Bob Komives
::

If we measure economic relationships among nations by subtracting imports of trade goods and services from their complementary exports, we produce a figure that says something about trade surplus or deficit. It is a humble figure that has a secure place in the basement of accounting houses. Unfortunately, we often invite this figure to stride out of its basement nook, mount a dark horse, and ride off self-importantly into media and politics. If we fix our attention on this figure as it parades by with its precedents and successors in impressive curves and columns, we miss most of what is important about exchange of wealth.

Much wealth flows across time and international boundaries in ways that do not fit trade figures. If we climb above the parade and broaden our view, we can see that nations form just one layer among complex layers of overlapping, wealth-exchanging communities. We can see that the trade routes connecting nations are but a few conduits in the biosphere's complex network of wealth exchange.

We will see imbalance when we focus on isolated conduits. For trade to happen, local, temporal, item-specific imbalances must exist. There must be vacancies in a housing market; there must be imbalance in trade; there must be imbalance for there to be investment.

Notice, as baby and student come by.
Baby imports wealth
far in excess of export.
Student does more of same.
Do you see an obscure trade deficit
or an obvious good investment?

||

Imports have always exceeded exports in our biosphere. Otherwise, biosphere could not have grown and prospered. Biosphere, our prototype for economic development, does export byproducts to the inanimate universe, but never as requisite to an import. A community with trade imbalance may be investing well in children, education, quality of life, and survival. A business can be responsible while borrowing to invest in its future. So too, a community invests responsibly in its future using trade imbalance to borrow necessary resources from neighboring communities which voluntarily foster their own profitable, responsible imbalance.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 40. Baby and Student, Investment and Balance ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

39. Six Acts for Love of Wealth and Biosphere

Six Acts for Love of Wealth and Biosphere
Bob Komives
::

(1)
Capture broadly-
as leaf captures sun,
mill captures wind,
and gatherer gathers grain.

(2)
Distribute deeply-
as leaf sends oxygen,
mill delivers flour,
and parent feeds child
that teacher educates.

(3)
Recirculate densely-
as we bake for our miller,
who rewards our harvester,
who buries our excess
to reward the roots
who will feed new leaves.
to nourish grains of life.

Capture Broadly

Aid one another:

(4)
in capture,
(5)
in distribution,
(6)
in recirculation.

Mitochondrion helps newborn.
Child helps family.
Family helps village.
Village enhances ecosystem,
species,
culture.
In the best of worlds,
all enhance our biosphere.

||

As organisms grow wealth grows with them; communities and ecosystems grow. As organisms die wealth dies with them; species, nations, cultures disappear. We can consciously participate in disappearance or its prevention. Looking inward, we of this village and we of this species can capture, distribute and recirculate our wealth. Looking outward, we can aid biosphere and its parts to capture, distribute and recirculate their wealth --our wealth. We can act for love of our wealth while we act for love of our biosphere.

You of leg,
you of twig,
and you, of course, bacterium,
huddle broadly,
densely,
deeply.

Please capture geotherm and passing sun.
Please distribute.
Please recirculate.

For love of wealth
and of biosphere one,
huddle densely,
deeply,
broadly,
you of wing,
you of wheel,
and you, of course, bacterium.

Quick Note To Roommates

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 39.Six Acts for Love of Wealth and Biosphere ::
With attribution these words may be freely shared, but permission
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38. There Are New People In Upper Forest.

There Are New People In Upper Forest.
Bob Komives
::

I return to a diagram I used earlier to portray wealth development in the biosphere. Our biosphere is the largest organization of life, sitting astride part of the inanimate universe, isolated from any other biospheres that might exist. Energy flows into the biosphere; or, better, the biosphere invades the inanimate universe and captures energy. Organisms within the biosphere distribute and recirculate the energy among themselves, thus sustaining and expanding the biosphere. Energy eventually flows or is cast back into the energy streams of the inanimate universe as biospheric waste products.



The biosphere is an organism. It's components are sub-organisms. However unruly we seem, we components organize by rules known to the biosphere. We may participate actively or passively in our organization; we may participate in ignorance or with knowledge; but we participate. Fate is uncertain. Biosphere may expand its share of universal energy or it may collapse into poverty or death --so too, our species. The process is essentially imperfect, allowing disorganization, reorganization, flawed reproduction, new forms and levels of organization. Such is the biosphere and its economic development as portrayed in the diagram.



Now instead of seeing the diagram as the biosphere at work in an inanimate universe, I will change scales and describe it as a developing culture in a place called Upper Forest. A pioneer family enters a well developed forest ecosystem whose energy (- - ->) flows from plant to animal and back, ever mixed with new inanimate energy from the sun. Used energy flows either into the inanimate atmosphere or into a neighboring ecosystem.

Upper Forest is a complex organism, containing millions of sub-organisms operating at hundreds of levels. Yet from the viewpoint of the pioneer family, Uppermost G, none of the wealth of the forest is human wealth until the family enters the forest to harvest its resources. The Uppermost G's remove trees, feed piglets, extract food and materials, build structures, and leave waste to rot or otherwise reënter the forest ecosystem.

The Uppermost G's are reasonably successful. Children are born. They increase consumption but eventually increase the family's capacity to capture and use the wealth of the forest. However, the G population expands even faster, because the Uppermost G's welcome another family of relatives, the Nextmost G's, who quickly take up the same lifestyle. An ever-more organized community forms as, over time, the Thirdmost, Fourthmost, and Bottommost G's move into farm the Upper Forest.

Some of the older children of these families see an opportunity to deepen this simple community and change from farming generalists to horse-and-buggy transportation specialists. Ever dependent on the farming output to pay them, they are proud to be the C'people who take goods and passengers to and from market and around the community. Eventually, others see the opportunity for leather working. The O'ers begin to craft useful goods from the hides of farm and wild animals harvested by the G's and C's and trade the products back to the G's and C's for food and transportation. Two O'ers and two C'people developed such a close working relationship that they formed the C-O Transport and Leather company.

The Upper Forest human community has expanded its farming activity five-fold from the time that the first G'family established itself in the forest. However, community wealth has expanded more than five-fold. Due to the specializations of the C'people, O'ers, and C-O Co, much of what had gone directly to outside markets or had rotted quickly back into the forest stays in the community to enrich the lives of everyone from the Uppermost G's to the Bottommost O's. The Upper Forest Community sees that it has achieved significant economic development. These people might say their success comes from hard work. If Upper Forest Ecosystem had a voice it would likely protest. It did most of the work while the human residents just played around. As the impartial critic, I would try to calm the argument with, "So far so good. Whatever you all have done here together seems, for now, to have worked." Then, with a little diagrammatic cut-and-paste, I would point out that they are not alone.

Lower in the forest lies another community much like Upper Forest. Lower Forest inhabitants depend on Upper Forest because their river starts up there. Directly and indirectly the human community and ecosystem of Lower Forest depend on resources provided by Upper Forest. Even much of their valley soil has come over millennia from gradual erosion in the hills above. Waste products of Upper Forest community become energy inflow, wanted or unwanted, to Lower Forest.



Upper Forest community may for a while see the clearing of trees for agriculture on steep hills as economic development. Lower Forest community sees dramatic changes in the flows of water and sediment into their valley. Floods become more frequent. Siltation makes their irrigation structures and their potable water system unusable.

Lower Forest community may retaliate: close roads, take political action, resort to violence, or end the intercommunity trading that has been profitable to Upper Forest community. Perhaps both communities will find the wisdom to see that they interdepend. They are parts of a larger watershed community, a higher level organism. Each part sees economic development at the local community level and inward but should also see it from the local community outward to the watershed community.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 38. There Are New People In Upper Forest. ::
With attribution these words may be freely shared, but permission
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37. Organize For Economic Development.

Organize For Economic Development
Bob Komives
::

Economist, please try to define
why our wealth (1) can grow and (2) decline.

Please Try To Define

Life had to learn how to work for itself. It had to learn to sustain and expand itself in its home, the biosphere. It now knows how to organize itself to capture and expend energy with purpose, and to produce results that function. As life expands, it learns more ways to organize. Life's library of workable knowledge sustains it during tranquillity and changes it during crisis. The library grows larger and more diverse, even as it loses some works --species and ecosystems that have disappeared.

Knowledge is the wealth of the biosphere, the product of good work and good fortune. It organizes biospheric development, human development, human culture. Biological knowledge encoded in genetic libraries sustains the complex processes that mold inanimate energy into animate energy and animate energy into complex patterns. Brain knowledge adds real-time, real-life learning to the library. Artifacts, artifactual knowledge, organize and maintain energy in ways that genes and minds cannot.

In ancient Egypt, farmers who knew little of engineering drew upon the greater engineering knowledge stored in irrigation structures, systems, and administration to increase food and fiber production from their work. As they learned which plants did best, they stored their improving knowledge in each generation of seeds --selecting seed from superior plants. The improved varieties were their living artifacts, storing knowledge for children who used that knowledge without relearning it. They simply planted seeds of the improved varieties. Brain knowledge also passed from one generation to the next through written and spoken words and diagrams. And, of course, this knowledgeable culture could not have survived if men and women had not known to reproduce themselves and nurture their offspring into adulthood. Complex biological, brain, and artifactual knowledge were both essence and cause of a productive culture --not perfect knowledge, not perfect culture, but alive and long-lived.

Economics should explain how our species organizes itself for work that produces and sustains well-being. It should explain why "prosperity" is not "well-being" unless it works to promote likelihood of survival in our species and our biosphere. In short, the economist should describe the rules of organization for economic development.

Wealth is our preoccupation--
it is not our invention.

Economic development is an organized invasion--
life invades the universe.

Do not try to create economic development.
Be, instead, a knowledgeable partner.
Practice stewardship and equity.
Learn more.
Share knowledge.
Know to organize to foster the biosphere.

Know that wealth can disappear--
species, ecosystems, and cultures become extinct.
Guard against
the natural disaster,
nuclear war,
and revolution
that can destroy knowledge--
leaving machines that no one can use,
books no one can read,
science no one can remember.

Guard against the disappearance of life,
for the biosphere knows how to become wealthier.

Prevent the destruction of our species,
for we can learn to partake of that increasing wealth.

Stop exploiting one another,
for then we can partake of more wealth more quickly.

Bring our understanding of the world into harmony
with the knowledge embedded in the universe.

Thus,
we shall act as consistent development partners--
in our human sphere
in our biosphere.

A More Knowledgeable Partner

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 37. Organize For Economic Development. ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

36. Work For Economic Development.

Work For Economic Development
Bob Komives
::

Why get a new brick
if I can dig up an old one?
This brick has lane three places in twenty years.
I dug it up twice,
laid it down twice--
each time thinking the brick work was done--
each time pleased with my work.
Even today, it did not displease me,
but it will please me more over here.

Why Get A New Brick?

Economic development is the work of life. My father liked to quote his Hungarian father: "Nincsen munka, nincsen sonka;" "No work; no ham." Perhaps a less literal but better translation is: "No work, no live." Both my grandfather, who repaired street cars, and my father, who repaired railroad cars, were speaking of physical, often-unpleasant work, the purposeful expenditure of energy. They were speaking of labor, the human effort that economists say turns capital into productive wealth. Yet, "work" has another meaning that I am sure was familiar even to my grandfather who spoke English as a second language and only outside his home. If brakes he had repaired were to show signs of failure on the street car taking his family down a steep hill to a Sunday picnic, "work" would have had the other obvious meaning: "If these brakes don't work, we die."

Work is function, effect, and, in physics, the application of force over a distance. Work is not brute labor. It does things. Most good students work hard to learn, but excellent teachers and parents know that much is taught through play. Play is every bit as good as work --if it works. I look around at nature and see much of it at play, yet I do not hesitate to describe an interesting flower or phenomenon as "nature at work." Science, art, and the Sunday picnic are human nature at work. I like to think that they have done as much for our economic development as have Monday in the office, Tuesday in the factory, or Wednesday on the farm. If you think not, I hope you will at least agree that they do work for our economic development.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 36. Work For Economic Development. ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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35. To Suggest a Framework

To Suggest a Framework
Bob Komives
::

What I have worked
is just forgotten.
What I have wrought
is but forgot.

Ought To The Participle

I end Part I suggesting that we might re-subdivide the science of economics. In the first Plum Local, I saw a need for a new name to cover an expanded economics -perhaps, "biosphere economics" or "world economics." Change in name, however, is less important than change in substance. The substantial changes I describe rely on distinctions between abundance and scarcity, between centers and edges. Here, I propose a framework to accommodate these distinctions. I propose to unite similar areas of study within economics and to help economics connect itself with the rest of science through a redefined macroeconomics.

Macroeconomics covers the broad scope of economics, its important connections with the rest of science, and the interrelationships among the centers and edges of microeconomics. It describes the work by nature and humankind that creates wealth. It describes the general rules of abundance and economic development. Some traditional macro and microeconomics belongs here, as does economic history. For the most part it is a new economic umbrella synthesized from other parts of science.

Microeconomics describes the work of wealth distribution and maintenance. It describes the special rules of scarcity. Microeconomics can be divided into two parts:

• Central Economics covers socialism, law, tradition, treaty, peaceful cooperation, money, stock issues, internal borrowing, corruption, and like subjects. Most of traditional macroeconomics belongs here, together with studies that have not traditionally fallen under economics.

• Edge Economics covers marketplace, trade, war, peaceful isolation, external borrowing, thievery, and like subjects. Most of traditional microeconomics belongs here, together with work from other social sciences.

War and marketplace are moral near-opposites. However, both belong under edge economics because they try to bring wealth across the friction of the edge between groups. A treaty does the same, however a treaty usually belongs under central economics because it can form the core of a new group. It is the center of a higher level communal system.

Corruption and thievery are moral kin. But corruption is central while thievery is edge. In corruption, a small group at the center of a larger group finds its communal way to subvert the larger communal wealth ethic. In thievery, an individual or group imports wealth snatched from others.

Socialism and marketplace fall in different divisions of microeconomics, not because they are rivals, but because they solve different problems in the way hub and rim of a bicycle wheel solve different problems.

I prefer this framework, but I believe that names and frameworks can be both problem and solution. I seek a framework that works better, but we should avoid excess concentration on the classification of fields of study. After all, subdivisions are artificial; there is only one science. We need only make sure that economics be an integral part.

I trim my beard;
you notice my hair.
You cut your hair;
I ask, "since when the beard?"
On sight of a dirty bath,
together we throw out the baby.
My,
what able eyes for change
and lame brains for attribution
have you and I, sir,
and Little Red Ridinghood.

You and I, Sir

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 35. To Suggest a Framework ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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34. Sell Fish on a Cherry Table.

Sell Fish on a Cherry Table.
Bob Komives
::

Robert Reich argued that, in order to arrive at a consensus for progress, we must acknowledge that the social and economic components of our national well-being are linked powerfully together. We must search for the right mixture of socialism and marketplace. This search is basic to resolving problems of food production and distribution. Frances Moore Lappe and Joseph Collins of the Institute for Food and Development Policy have done an excellent job of pointing this out. While small, individually owned and operated farms tend to be the most productive, nations increasingly look to large, corporate farms (or in the case of some communist countries, communal farms). In poor countries with little industry, governments promote agricultural exports in exchange for foreign goods and services. In the process, self-sufficient farmers become undernourished wards of the state. In U.S. America the family farm seems endangered as more farmers go bankrupt and corporate farming expands. These are complex issues from which I will draw only a couple of points.

The socialized ethic that says everyone should have enough to eat comes in a heritage older than our own species. In our enthusiasm for marketplace, we should never forget that only more recently in the biosphere's evolution did we socialize the market into our culture. It is no more inconsistent for a nation that values the dynamics of its marketplaces to make sure that every citizen has enough to eat, than it is for a family to feed all of its members -even if some produce nothing for the marketplace.

Similarly, a nation should never forget that if it fosters either corporation or commune it fosters delegated socialism. There is nothing especially natural or inevitable about either. They exist through communal law and policy.

Where individual families produce enough food
..... (for themselves and nation)
..... and have not wrought havoc with the landscape, why substitute larger,
..... less efficient,
..... private corporations and state communes?
Since corporations are socialized creations of government,
..... there would be nothing un-American
..... in keeping them out of farming in the USA.
Since families are communes,
..... there was nothing uncommunistic
..... in reverting to family farms
..... in countries leaving the Soviet.
Of course,
..... the complement too is true.
..... Corporate,
..... communal,
..... and cooperative farms may be useful
..... where family farms cannot achieve
..... marketplace, social, and environmental goals.
There is irony in U.S. America
..... (and nations that follow its example)
..... where, in the name of free enterprise,
..... the most free of enterprises
..... (the productive family)
..... gets displaced by less efficient groups
..... that socialize risk and profit.
Communist countries displayed similar irony
..... imposing communal structure
..... that more mimics impersonal corporation
..... than traditional communism of family.

||

We can see human culture as an arena of continuously overlapping organizations, ranging from small families up to associations among nations. Each organization is itself an organ of others. Each has a communal core where it determines how to distribute its wealth internally. Our arena can also be seen as an intricate web of edges through which organizations exchange wealth. At these edges, a marketplace can facilitate interchange. Core socialism and edge marketplace complement one another. The world and its nations need not choose between them. The world and its nations cannot choose between them. Rather, they can organize themselves so that both socialism and marketplace help to capture wealth nondestructively, distribute it fairly, and recirculate it repeatedly.

I sell fish.
You sell fish.
He sell fish.

We sell fish.
She sell fish.
They sell fish.

Upon a Cherry Table

Upon a Cherry Table

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 34. Sell Fish on a Cherry Table. ::
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33. Ignorance and Confession

Ignorance and Confession
Bob Komives
::

A society that emphasizes marketplace will tend not to see the socialism that makes marketplace possible. A socialist society will tend not to see the adaptive potential of marketplace. I believe what I see: we can have neither a socialist nor a capitalist world.

We cannot survive without socialism; it evolved with our species. It is at the center of everything living. Theoretically, we could have a world without marketplace; it is a relatively new product of evolution.

There are alternatives to marketplace in edge economics. To organize the exchange of wealth at their edges, groups can compete through war, thievery, conquest, or isolation; they can cooperate through peace, contracts, treaties, compatible but independent traditions, or through intergroup (international) law. Contracts, treaties, traditions, and intergroup law can control interchange. Thievery can also bring in wealth (such as when an immigrant smuggled the secrets of England's looms to the American continent, or when a Native American stole from another group the first horses for his own group). Conquest can bring in all the wealth of another group. Isolation can put up real or de facto walls that prohibit interchange. However, humankind's accelerating introduction of new forms of wealth makes marketplaces almost inevitable, even if illegal in an avowed communal state. We can foster the marketplace, as we do in avowed capitalist nations, but let us remember that fostering is a communal activity.

We can neither totally delegate to individuals nor totally socialize to a group the means to produce and maintain humankind's wealth. If the Soviet Union had believed that the state should own the means of production, it should not have gone into the international marketplace to buy computers and wheat. It should have bought Nebraska and IBM -people included. If U.S. America believes that people should individually own the means of production, it should eliminate the state of Nebraska and the IBM corporation because these are strictly communal structures.

I make these absurd proposals only to point out the absurdity of labeling political and economic rivalries as a dichotomy of capitalism versus socialism. The wealth production potential of the USA suffers when it ignores the fundamental dependence of marketplace on communal control over the policies of wealth distribution. Because in the last twenty years of the twentieth century marketplace was in political ascendance, so was our ignorance of our communal center. Socialism was descendent. During these twenty years, socialist leaders tended to confess that their nations suffer when they ignore the vitality, flexibility, and healthy complexity that marketplace can bring to an economy. As times change so will the loci of ignorance and confession.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 33. Ignorance and Confession ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

32. The Difference: How Outcome Is Determined

The Difference: How Outcome Is Determined
Bob Komives
::

Ideas, people, and products compete intensively-both within a corporation and within the markets where the corporation buys and sells. Competition is often mistakenly equated with marketplace and free enterprise. Socialism fosters and tolerates every bit as much competition as does marketplace. Where they differ is in how results of competition get determined. In a marketplace, price (or value-per-price) is the arbiter. In a socialist system, the group or its authority figures decide based on merit, not price. Merit is judged according to criteria socialized into the system.

We uncovered certain socialist acts
perpetrated to settle competitive dispute.

Our Central Committee named a general secretary in
..... the old Soviet Union.
Our board of directors promoted a manager
..... at good-old General Motors.
Our boss sent one among us
..... to the workshop in Hawaii.
Our parents chose one among us
..... to finish the three-layer cake.

We Uncovered Certain Socialist Acts

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 32. The Difference: How Outcome is Determined ::
With attribution these words may be freely shared, but permission
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::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

31. Marketplace or Socialism: a Dynamic Choice

Marketplace or Socialism: a Dynamic Choice
Bob Komives
::

If a good or service is to be traded in a marketplace, its supply must be limited. The good or service must be identifiable. It must be unique or divisible so that buyer and seller believe they know exactly what they are transferring. We cannot trade most wealth in a marketplace because we cannot easily identify or divide it, or because it is too abundant. Neither the oxygen produced by the world's flora nor the bile working in our livers is apt wealth for trading under most circumstances.

Some wealth that we can identify and divide does not make it into our marketplaces simply because our communal tradition says it does not belong there. We do find wood-burning heating stoves and firewood in the marketplace. A well-designed stove is a storehouse of functional and aesthetic knowledge. We can buy it and its fuel. Yet, we tend to give away the heat they produce.

My stove knows how to burn its firewood,
how to respond
to me who knows so little of what it knows,
to me who does not know how to make a stove.
My stove knows how to send smoke up its chimney
and warmth into my room.
Its warmth can please,
or it can save a half-frozen life.
Such is its success and popularity
that I could sell tickets to my stove's proximity.
But, I do not.
I share its warm knowledge freely
according to communal tradition
among family, neighbors, and kindred strangers.
Those whom my stove knows to please,
those whom my stove knows to save
give back nothing in trade
-except,
to carry forward in common tradition
what we and a stove
must in-common know.

My Common Stove

No scientific standard tells us which identifiable goods and services should be owned and traded in the marketplace. During the Civil War in the United States of America many young men bought up their obligation to serve in the army. Government had made this military obligation a commodity, making such purchases perfectly legal. During later wars many people found legal ways to avoid military service and combat, but it became illegal and immoral to try to buy one's way out. Military service had become a duty; it was no longer a commodity.

Voting is a right in some countries, a duty in others. Individuals possess this right or duty. They could sell it, but law and tradition say we can neither sell nor buy a vote. Law and tradition try to keep votes out of the marketplace.

Law and tradition make businessmen criminals and criminals businessmen. Traders in alcohol went through these metamorphoses when U.S. America entered and later left Prohibition -when alcohol sales were made illegal and then again legal.

Necessity and changing styles can move goods and services into and out of the marketplace. A corporation chooses a new combination of socialism and marketplace when it discontinues the internal manufacturing of certain components in favor of buying them in the marketplace from independent suppliers. At one time, perhaps, there was a real advantage to socializing the production within the corporation. Back in the late-twentieth century, when automobile makers Chrysler, General Motors, and Ford recognized some of the hints that they had become uncompetitive because of their aging technology and stodgy managers, they transferred some design and production from their center economies to their edge economies. There they hope to take advantage of the technological and price competitiveness of independent suppliers in a dynamic marketplace.

A family faces similar dynamic choices. After rearing children under loving socialism many parents request economic support from adult children who work for outside income but stay at home. While this is not a pure marketplace transaction, food and shelter, once distributed to the child under central traditions, now get distributed under a family-socialized form of edge economics. The change recognizes new conditions which call for a new economic mix. The added income helps the parents care for the younger children or enjoy a little luxury. The working child learns the pride and responsibility of adulthood, gaining some independence from his parents. It is as if the edges of a new household (like a new cell) begin to form before it separates from the old. If the adult child becomes sick and unable to work, however, his family will reverse itself without hesitation. "Don't pay room and board now. We are your family; we want to help you recover." They return to pure socialism.

The marketplace always has and always will be adjusted by communal decisions, especially when the public finds a market to be distorted from what is just or sensible. If modified law and tradition do not correct such distortions, correction may come from war, or revolution, or massive government spending. During the depression of the 1930s the marketplace behaved as if there were little wealth to invest. Nevertheless, under the New Deal of President Franklin D. Roosevelt the Congress of the United States of America made massive communal investments to fight poverty, and then even greater expenditures to fight World War II.

While choices are dynamic, our leaders often choose to be dogmatic. From a great war and a great depression much of the world (winners and losers) emerged wealthier than before. Perhaps, if our politicians were less dogmatic and our economists more instructive about government's communal intervention in the marketplace, we could avoid great depression and great war.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 31. Marketplace or Socialism: a Dynamic Choice ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

30. Corporation: Delegated Socialism

Corporation: Delegated Socialism
Bob Komives
::

I ask you to think back to when the Soviet Union had the archetypal large communist government and good-old General Motors was the archetypal large corporation. Though they symbolized competing ideologies, these large organizations were in many ways similar.

When it dealt with countries in a peaceful interchange of wealth, the Soviet Union competed and cooperated in many of the same ways that General Motors competed and cooperated with other businesses. At their edges they both competed with corporations, individuals, partnerships, and governments that sold similar goods and services, that wanted the same resources, and that recruited similar personnel. The marketplace determined the price they would pay or receive. At their edges, then, looking outward, capitalist corporation and communist country practice marketplace.

When General Motors looked inward to its own resources, it acted--and still acts--very much like the old Soviet Union. Executives allocated resources under policy set by a central committee or board of directors. Executives and board lead in the directions that they believe will most benefit their constituents--whether shareholder or proletariat. At their centers, looking inward, both capitalist corporation and communist country practice socialism.

The United States of America operates the same way. When we look inward, we set communal rules for wealth distribution, be they liberal or conservative. Our country allows more internal marketplaces than either the good-old Soviet Union or good-old General Motors. However, "allows" is the important word. Communally we create, enforce, and administer rules that foster and allow private marketplaces. Without communal enterprise private enterprise could not work.

General Motors would not allow the level of internal property and private enterprise allowed in U.S. America, or even the old Soviet Union. The very purpose for incorporation is to socialize risk among investors. Corporations require public charters. They seek such charters because a charter will protect their investors. Individual liability is allowed by charter to be socialized into corporate liability. Individuals can profit and recover their investment severalfold, but their liability for loss cannot exceed onefold -their investment.

Corporate employees experience socialism. Until hired, a job candidate at General Motors is an independent competitor-cooperator for the corporation to bargain with at its edge. Corporate resources and individual talents get weighed and bargained. General Motors can reject the applicant or make an offer. The applicant can accept, reject, or haggle over the offer. Once hired, however, she becomes an employee. General Motors tells her what to do and limits her discretion in making decisions. She is expected to work for the common good, which she hopes coincides with her own. General Motors pays her the same for Tuesday as for Wednesday, no matter her production on each day. Even if the company offers pay incentives or lavish bonuses based on her performance, higher officers of the corporation set the incentives. General Motors also supplies her work space and the tools of her trade. This would not be the case if somehow her employment were marketplace based rather than communally based. Her promotions would come from her own success at marketing her talents or products to several buyers. Her status today would not ensure tomorrow's employment.

In the corporation the employee is likely to strive to maintain her secure employment and climb the corporate ladder. Among those who wish to climb that ladder, competition is fierce, but promotions and salary increases come from corporate decision makers above. There are rules that govern job security and procedures which define the role of each worker. The corporate authority structure distributes corporate wealth among workers and share holders. Authority figures also decide whose ideas will carry the greatest weight. Corporations tend to prefer employees who accept this system rather than collective bargaining or individualism. This top-down decision and wealth distribution structure mimics family tradition, socialist tradition.

None of this is bad. We should expect a private corporation, like any organization, to be socialist at its core. What is bad and misleading is to champion corporations as the epitome of free enterprise. They are not. They epitomize delegated socialism -a societal attempt to organize centers of socialism where free enterprise or national enterprise might do poorly. If we have reason to look for the epitome of free enterprise, we do better to look among industrious individuals, sole proprietors and partnerships that owe less of their existence to delegated socialism.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 30. Corporation: Delegated Socialism ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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29. From Amoeba to Market

From Amoeba to Market
Bob Komives
::

We can, I suppose,

think of a chemical reaction
at the nucleus of a tiny amoeba
as but one reaction
in
.... a
........chain
..................that
..........................extends
from this amoebic nucleus
to the farthest reach of the biosphere.

We should rather, I propose,

notice this amoeba has a surface,
its working edge,
where universe divides in two;
where biosphere divides into
what-is-this-amoeba
---and-----------
what-this-amoeba-is-not.

Where Universe Divides In Two

Early creatures had centers and edges. Evolution gave them ways to move energy around the center, from edge to center and from center to edge. Communal biological wealth in the amoeba keeps its primitive power and control systems functioning. At its edges, the amoeba uses genetically coded knowledge to capture food. However, one amoeba has no control over the likelihood that food will be there to capture.

There is friction. One amoeba may find itself in competition for food with other amoeba, other creatures. Lacking the sophistication to sign treaties or to create a marketplace the amoeba relies on programmed gathering techniques to bring fuel into itself. At its edge the amoeba competes and cooperates with its surroundings to overcome friction, to transfer wealth from the larger biosphere into its one-cell body.

As life forms become more complex, so do the options for wealth transfer at edges, and for wealth distribution and recirculation at centers. Humankind has experimented with a variety of methods to organize its centers. At some scale we call these experiments family. At other scales we call them government. We have a propensity to form governments and never seem satisfied with our results.

As family met family, group met group, and nation met nation, we experimented with government-type solutions at our edges also. As alternative to war, raids, walls, and moats, the marketplace was such an experiment. Participants agreed upon marketplace rules in order to minimize risk to themselves and their goods. These rules and their enforcement were the government of the moment, the communal base for marketplace.

Fringe trading deals with new goods and services more readily than does communal tradition. We need only a willing buyer, a willing seller, a place to bargain, and security for the individuals, their goods and services. Traditional distribution may create successful investment, but that same tradition may be inadequate to guide the distribution of new types and quantities of wealth produced by the investment. With or without the sanction of traditional leaders, individuals might resort to edge-type trading to distribute these new goods and services.

Some governments came to approve of this internal trading, but also took control -setting and enforcing the rules. Thus, government became communal sponsor of free enterprise. Internal edge-economies became important. Marketplace society was born.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 29. From Amoeba to Market ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

28. Center and Edge

Center and Edge
Bob Komives
::

Socialism is the part of our economy in which our group distributes wealth according to values set communally. The process need not resemble consensus. The group may be active, passive, enthusiastic or bitter about delegating the distribution authority. Marketplace is the part of our economy in which we trade wealth according to values set by many people responding to supply and demand. Marketplace and socialism are distinct, but they help each other. Neither can replace the other. Neither can manage all of our capital. Socialism flourishes at our centers. Marketplace flourishes at our edges.

I hold these truths to be self-evident:
Lake without shore is no lake;
Lake-shore without lake is no shore.

||

In the zealots for socialism and the zealots for marketplace we have among us those whose views of economics are akin to saying: "My sacred lake shall have no shore;" and " my sacred shore shall have no lake."

Socialism and marketplace differ because of the societal space each occupies. We organize ourselves into overlapping groups. Each group has edges. At the edge it must interact with other groups and with its natural environment. Among other options at the edge, it may trade wealth according to rules of marketplace. Each group has a center. There it distributes wealth through a communal system that may include tradition and rules.

A typical family administers its resources communally. Children do not buy food from parents. Tradition says that children have a right to food, clothing and shelter. They have a right to be wealth consumers. Wealth producers in the family pool their resources to support the family. Authority figures establish and enforce codes of conduct. The family typically divides tasks among members according to tradition, authority and volunteerism. There may be great competition among family members, but ultimately the traditional communal authority structure decides who wins and who loses.

At its edges, a family competes and cooperates in a larger society with other families, individuals, and institutions. As a producer in modern marketplace economies, the family may compete against the rest of the community for jobs and sales. As consumer, the family probably enters the marketplace to bargain for the goods and services that it does not produce internally. The marketplace, not a communal system of decision and authority, decides the prices the family will pay and receive.

Family members find themselves at the center of other institutions -a club, a church, a government, a corporation, a school, a clan, a tribe. At these higher-level centers interactions are communal, because larger institutions also practice socialism. Many participate in marketplace at their edges as well.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 28. Center and Edge ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

27. Confusion Over Capital and Ownership

Confusion Over Capital and Ownership
Bob Komives
::

During the Cold War which pitted U. S. America and its capitalist allies against the Soviet Union and its communist allies, capitalists confused economic communism with totalitarianism, egalitarianism, and atheism. Communists confused economic capitalism with colonialism, elitism, and self-righteous exploitation. Each group confused itself with values such as freedom, hope, and progress. Both relied, in part, on the classic definition that makes socialism the opposite of capitalism.

According to this classic definition, under socialism society should own the means of production (that is capital); under capitalism, private individuals and companies should own the means of production. Means of production usually include resources such as fuel, minerals, and lumber, as well as key industries that process and transport these resources. The definitions seem simple and intuitive, but only if we ignore some obvious questions.

How about eyesight and the opposable thumb? Where would most human production be without them?

How about the mind, the body, libraries, air, organization, and rights-of-way across space we do not own? We cannot produce without them.

We cannot produce without many forms of knowledge found in biology, brain, and artifact. Necessary resources get ignored in lists of means of production. Society cannot own mind or eyesight. Yet, to practice socialism under the classic definition, it must. For society to be truly capitalistic, private enterprise must own my body and our air.

Knowledge is our means of production.
Woven into nature, ourselves, and our creations,
knowledge converts energy of the universe
into nature's wealth,
our wealth.
Much knowledge cannot be grasped
or held by monopoly,
be it public,
be it private.
Yes, socialism and capitalism differ.
No, we cannot have one without the other.
Our "means of production" is nothing less
than the knowledge which helps us maintain our species —to survive.
Art and government belong in the lists of means.
What do we say in saying:
own them?
socialize them?
capitalize them?
We say only confusion.

||

We should not mistake capital in an ephemeral industry for fundamental means of wealth production in our biosphere, species, and society. The petroleum industry combines petroleum (the energy knowledge it contains) with some capital (knowledge of how to find and process the petroleum). In a socialist country, government should operate this industry; under capitalism, a private company should. However, neither government nor private company can hope to take total ownership of our knowledge of how to use petroleum, including cruising downtown on Saturday night, beauty treatments, ... , pyrotechnics. Without society's use-knowledge, the petroleum industry produces no wealth. Humankind had wealth before the petroleum industry came into existence, and it should have more wealth after the industry fades in importance. A change in human knowledge made petroleum part of wealth. Further changes in knowledge can reduce its importance long before we exhaust the supply.

In this dynamic world we often raise questions as to who has and who should have the knowledge and the tools for change. The answers vary and may often confuse. Yet, fixed commitments to the traditional dichotomy between socialism and capitalism are worse. They compound confusion by pretending it does not exist.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 27. Confusion Over Capital and Ownership ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

26. Capital and Social Isms

Capital and Social Isms
Bob Komives
::

Civilizations have disappeared almost overnight when a governmental structure collapsed into the hands of people who could not or would not hold and propagate the communal knowledge nurtured by the government. The overthrow may have been justified by the abuses inflicted by those in power. Unfortunately, knowledge stored (possibly hoarded) by the abusers often got lost to future generations.

When a species or ecosystem disappears, an organ of the biosphere dies; wealth disappears. The biosphere no longer knows how to do some things that it had known. Wealth also disappears when a flourishing society dies.

Societies that we choose to call "primitive" survived with little change in technology or in their systems of government. Across the breadth of the species, however, somewhat unstable groups, "advanced" societies, experiment with ways to organize family, to invest group wealth, and to govern. Using our blessed curses, imperfect mind and imperfect reproduction, they extend evolution out of our bodies into society, to our family and government, to our social-isms and our capital-isms.

Ism-Capitál
Ism-Commún
Ism-Sociál

Planned Economy
Marketplace
Private Enterprise
Free Enterprise
Government Enterprise

How can I speak or write
these terms that have
economic meanings
political overtones
historic undercurrents
redundant redundancies
stark contrasts
subtle distinctions, and
apparent similarities?

I want two of them to stand for all,
to enter the ring, and then
to do battle.

At the edge of the ring paces Marketplace with
free enterprise in her soul
capitalism in her limbs, and
private enterprise in her brain.

In the center of the ring
revolves Socialism with
communism for his soul,
government enterprise
for his body, and
planned economy in his mind.

They spar but seem stuck in their zones.

They jab,
but their gloves barely clash
in the large space between.
(or do they exchange something
that I cannot see?)

She lunges to the center.
He feints and dances to the edge,
barely brushing
as they pass each other by.

Now, she occupies the center
while he patrols the edge.
But, somehow,
in making their moves
they have quick-changed costumes.

She now revolves
in the cloak of socialism
He, an equal transvestite,
paces in the dress of marketplace.
I don't need X-ray vision to see
that they have also interchanged their
bodies
minds
limbs, and
souls.

Apparently, some such parts
work well only at the edge
while others work well only at the center.

I had hoped to see a fight in the ring.

I moved ever higher and farther away in the arena
only to see it filled with rings of many sizes and shapes -the edge of each one sharing the ropes of several others.

Each had its chief of the center
and one or more others
holding forth along the ropes,
where activity ebbed and flowed,
sometimes frantically.

What folly,
to think I could put both transvestites
into the same clothing.
Tragic were the fates of many rings
that did remove marketplace
from their edges,
as peaceful sport erupted into
thievery or war,
or disrupted into
wall or crevasse.

Extinct are the rings
that poisoned their communal centers-
their centerless edges
(having lost all definition)
rewoven with indifference into
the
ropes
of
other
rings.

Equal Transvestites

I find it difficult to write about our "isms": capitalism and socialism. Political and religious groups of divergent persuasions have usurped and shaded the key vocabulary. A simple sentence gets translated by the reader into his own language, which may or may not coincide with my own. True to some degree of all communication, I think the reader-as-writer difficulty is a serious problem when exploring marketplace and socialism, or capitalism and communism. I believe that part of the reason why these words have become burdened with emotion-filled connotation is that the economic definitions are themselves inaccurate.

I choose to discuss marketplace and socialism. "Marketplace," as I use it, includes the general concepts of capitalism, free enterprise, private enterprise, and other near synonyms. Of the choices, "marketplace" says the most and carries the least emotional baggage. For the other half of the discussion I choose "socialism." I use socialism to include communism, planned economy, government enterprise, and several other terms that express communal activity. However, the choice is not easy, so I use a mixture. "Community" and "society" are equally good words. I prefer the "common" and "communal" from "communism" to the "social of socialism," but I prefer the economic meaning of "socialize" over "communize."

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 26. Capital and Social Isms ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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25. Back In 1978: A Myth

Back In 1978: A Myth
Bob Komives
::

Exclusive Report on the Minnehaha Conclave

As the 1980 elections approach I can't believe that I am the first to break the seal of secrecy over the events of Halloween, 1978 -the last days before the last national election. I hope that by revealing what happened that night I can save others the tragic disillusionment from which I am now almost recovered.

There were so many conservative Republican candidates,conservative Democratic candidates,
and "don't-tread-on-me" independent candidates trying to get elected and dismantle the government that I decided to seize the opportunity.

I awoke in a sweat. I was trying to get over a nightmare about having a secure government job to turn to if all else failed. It was then I decided to put out a call to a secret conclave.

I jotted down some brief but detailed instructions, telegraphed them to the politically astute friends we have left in the wake of our peregrinations across the country, and took off to make preparations at the conclave site.

Taking a hint from the College of Cardinals, I ordered up a ton of Ritz crackers and a thousand bottles of mineral water. These would serve as our only sustenance until the conclave had done its thing.

Then it began. While kids across the country were home getting sick over candy they had been collecting all evening, while voters who had taken one night off from eagerly attending political rallies were relishing the tricks they had played on the little pests in their neighborhood, while all this was happening, the disguised candidates began arriving in procession to my conclave -each with one lighted candle in hand and an attaché case filled with extras.

Anti-government candidates are to-a-man and to-a-woman punctual. Thus it was, that by 11:33 p.m. central standard time, in the freezing cold confines of the narrow canyon formed by Minnehaha Falls in Minneapolis, 315 conclavers were assembled. Like choir boys in down parkas and Lone-Ranger-type Halloween masks, they were ready to go to work.

I took 27 minutes for my opening remarks. In sum, I told them of the inevitable victory of their cause. It would soon be within the power of this esteemed group to create a utopian country that had neither government nor bureaucrats. The people of the country were speaking. These 315 men and women were the best listeners.

Only two necessary elements for the ultimate victory
were missing.

One missing element was their own combined conviction that the holy mission on which each had individually embarked could be accomplished if the conclavers were willing to march as one in a crusade. "Are you ready for the crusade?" I whispered emphatically. My question was answered by four minutes of delirious shouting, embracing, hand shaking, and the chant: Hit'em again, hit'em again, harder! harder!

After joyfully raising my arms to restore calm, I told them that the second element missing was a simple program for implementation. It could be a simple program, because all that is necessary is to ease the bureaucrats out of their offices and let private enterprise bid on the vacant facilities. A few other details in the program needed to be worked out, but it could all be planned by sunrise -in time for everyone to get back to the campaign.

After all, the program wasn't so terribly necessary in itself. We would just have to be ready with good information and public relations to head off the self-serving attacks that would be organized by the old guard and the socialists.

It was now midnight. The conclave set about its task.

Each of twelve sub-conclaves, whose members were chosen by lot, was to produce one paragraph for our program and one for our proclamation.

I passed out Ritz crackers and fielded general questions from the various sub-conclaves.
...

"Hey, our group decided to keep our armed forces and the police. Otherwise, anarchists and communists would run roughshod over us. Is that all right?"
"Sure, but figure out how to administer them without bureaucrats."

"We're not sure whether Greyhound, Brinks, or General Motors is capable of taking over the street and highway system. Does anyone have any ideas? ... O.K. We'll keep working on it."

"Some of us westerners were wondering if it would be possible to rewrite some of the history books our kids are forced to read in school. That bit about the government dividing up land, giving it to our grandfathers, and building water projects, and subsidizing our production doesn't sound too good for our cause."
"Don't worry. Group 7 is doing away with the schools. You'll be able to keep your kids at home and teach them what you want."

"We're a little worried about the possibilities of revolution if we eliminate all of the health, welfare and civil rights programs at once. Do you think it's all right to increase the army a little to keep everyone in check, or to phase programs out slowly so no demagogue can come along and incite riots?"
"Hmmm, well I'm afraid that if we did the latter, our own supporters would call us the Wishy Washy Conclave, rather than the Minnehaha Conclave."

"Hey, if anyone objects to having a cell in the basement of each home to handle convicted criminals on a rotating basis let us know. That's the way we are thinking."

The Ritz crackers were consumed by two o'clock. The questions ceased by 2:30. The rumble-rumble of their voices put me to sleep.

I awoke with the first rays of sunrise to find the whole conclave standing over me. They looked tired. They also looked a little discouraged. Yet, many seemed ready to burst into a smile. Then, one of my southern conclavers drawled,
"He'ah it is."

I was puzzled. The piece of paper he gave me in the dim light was clearly a page torn from a book. He and each of the other conclavers patted me on the back as they filed up and out of the little canyon. Each said something to me like:
"We did it," or, "That's just the first dozen lines, but you can fill in the rest."

I began to get the idea. When I glanced down at the page I was given my suspicions were confirmed. The light was now just bright enough for me to read the small printed words:
"We the people of the United States, in order to form a more perfect union, establish justice ..."

The next thing I remember is my wife reviving me in a pleasant cell at a Minneapolis police station.They had called her in from Colorado. This Halloween goblin, who appeared to be her husband, had been found skipping merrily through Minnehaha Park singing,
Kinky Commie Copouts!
Kinky Commie Copouts!
Kinky Commie Copouts! ...

Back In 1978

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 25. Back In 1978: A Myth ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

24. Property is Acknowledgement.

Property is Acknowledgement.
Bob Komives
::

I have a complaint and a confession. Complaint: when we talk about "private property rights," we show that we do not know what we talk about. Confession: I am guilty of having used this puffed up phrase. I hope I have cured myself. Let me try to cure you.

Why does the phrase, "private property rights" show ignorance? That term is twice redundant -long-winded. Property is not land, it is not a book. Property is a right to be private, to priváte, to deprive others of access and use. So, to speak of "private property," of "property rights," or of "private property rights" is to speak only of property. If we can argue without this redundancy perhaps we will be short-winded. Perhaps we will better understand property.

Ah, you may say, but what about "public property," the opposite of private property? It is no opposite, but rather an oxymoron. If you insist on using the term, its only meaning can be "non-property" -nobody has the right to restrict our access and use. A sunset is beautiful public property; better, it is a "public good" in the "public domain." Your county land fill is not public property; it is county property. The county has rights over access and use of the land fill as would an individual owner.

Are these rights absolute? Whether held by you or the county, property is within a higher domain, a pre-eminent domain, an eminent domain. "Eminent domain," as we use the term in U.S. America, includes the obligation by government to pay justly for property, but it is also a self-evident declaration that property is a guest within the higher domain of society. Complaint over!

We can discuss individual wealth because individuals can control and trade goods and services. However, this power to control and trade is always delegated by a larger group. Property is group acknowledgment that an individual can restrict access to something -a by-group-acknowledged right to be private, to priváte, to deprive others of access and use.

Acknowledgment may be given grudgingly to someone who has taken by force; property is not necessarily untainted. If the group refuses to acknowledge ownership, and the possessor must continually defend her possessions against others, she has booty -not property. She cannot freely share, trade, sell, give, or lend her booty. If the group were to choose to acknowledge her possessions as property she could take them to the marketplace or leave them at home and expect community assistance if someone tries to steal them.

The marketplace is a group sanctioned center of activity. We can say that people go there to trade property. In a marketplace, operating under rules established by the group, people trade group-acknowledged rights of restricted access. An individual restricts access to her possessions until someone else gives her the right to restrict access to items that she believes to be at least of equal value. When those rights are exchanged, property is exchanged. The exchange is complete when society acknowledges that property has changed hands.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 24. Property is Acknowledgement. ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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23. We Tax Ourselves When We Play Our Roles.

We Tax Ourselves When We Play Our Roles
Bob Komives
::

We cooperate; we compete. In both modes we exhibit freedom. At least, that is a view we can choose. In another view, we just play our inherited roles. "Role playing," "role differentiation," these are terms frequently heard among social scientists. They are also better and more general terms for what we and our economists call "taxation."

Role playing (1) distributes wealth among individuals, and (2) creates wealth when the roles are mutually beneficial. Number one is well understood by both charitable and exploitive people, by our tax collectors, and by other species -the more I get from you, the better off I am. Attribute number two is at the frontier of our understanding of macroeconomics.

During the dawn of life separate organisms that were accidentally different accidentally contributed to each other's chances for survival. Some produced offspring that had a tendency to organize themselves to reënact the ritual. As they did, role playing became part of the biosphere; taxation became part of the biosphere.

Each particle of DNA, each species, each individual, each group depends upon and is depended upon by other elements of the biosphere. Each taxes others and is taxed in turn within an intricately organized web of roles. On occasion, the quantity of life traumatically decreased. Despite such setbacks, life incorporated an increasing portion of universal energy into itself and into its complex support systems. As life grew, so did the complexity of the roles played by the organs and organisms that sustained it. Had we been there, at some point the complexity would have become too much for our great brains to comprehend. We would have to develop concepts of freedom, intention, randomness, in our attempt to understand cause-and-effect in what we saw. We would find words for cooperation and competition. In some order (perhaps simultaneously) science, pseudoscience, religion, and philosophy would follow.

As life flourished, new roles emerged, old roles changed. Through its organized role playing the biosphere learned not only how to prevent a net loss of biological energy (absent great trauma), but also how to capture more energy. In terms of biosphere economics, wealth steadily increased. While some species lost all wealth and became extinct, humankind prospered. Human economic history, when read from a distance, records changing patterns of roles that were adequate to keep us around and increase our wealth.

Role playing works because it distributes resources among individuals to the benefit of the group. An infant needs nurture, so it taxes its family to supply energy and skills to survive. Given survival, the infant can go on to contribute to the welfare of the family and to help produce another generation. Our tendency to nurture others lets us help individuals become scholars, artists, scientists and administrators. It causes us to make an effort to preserve life and opportunities for less fortunate people even when we seem to loose wealth in the process. We harvest and create food, education and security. Then we tax ourselves. We cooperate and compete so that we distribute these products and services among us. History is too full of examples of exploitation and persecution. We live with the guilt that comes with our unfortunately large margin for error. Nevertheless, so far, we tend to tax ourselves well enough to survive and occasionally flourish.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 23. We Tax Ourselves When We Play Our Roles ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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22. Communal Commitment, Private Flourish

Communal Commitment, Private Flourish
Bob Komives
::

Government organizes group knowledge in ways that individuals cannot or wish not.

Government can create a system of defense that is more effective and occupies fewer people than if everyone were to try to defend himself. Without this system the group might be vulnerable to attack. Productivity could suffer because too much time is spent on defense and fear.

Government can guarantee food and shelter to someone who wishes to experiment with a new system for food production -a system that could benefit the whole group. Government induces a temporary flow of wealth away from the rest of the group to the experimenter. If the experiment succeeds, that wealth that had flowed away from most of the individuals in the group will return to them with dividends.

If in our family
we lack communal decision and commitment,
private life does not flourish.
If in our government,
we lack communal decision and commitment
private enterprise does not flourish.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 22. Communal Commitment, Private Flourish ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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21. From Family to Government

From Family to Government
Bob Komives
::

Parents in our nuclear family, our elders in our clan, our council in our city, our nation's government -each makes decisions for the benefit of one of our groups. National government differs in scale and organizational complexity from a family council, but not in function. Each represents an organized effort to promote role playing by group members. Members, citizens, hope that roles are played well enough to improve group and individual well-being. We are members of several groups; several decision-making bodies represent us. As we invent and join new groups many old ones persist. We happen to call a class of broad-reaching groups, or their representatives, government.

We have such propensity to form government in our groups that among our deeply embedded cultural patterns there must be one that causes us to produce and reproduce government. Provided we remember that all genetic action must occur within our true cellular genes, we can think of cultural genes for government.

These genes are persistent yet imperfect. Some stable societies evolved with stable forms for government. Yet, as our species flourished and spread its influence around the globe, new circumstances tested old forms of organization. Changes had higher likelihood of survival if they enabled the group to better invest group knowledge. Government gains respect among constituents and also among rival groups if it enables the group to organize itself to produce and protect more knowledge than it invests. Such successful government is likely to be imitated -just as successful biological parents are imitated.

Pick any important company in a marketplace country such as the USA. Do a thought problem. Consider the impacts on the nation if we eliminate that company.

Pick any whole sector of a market economy and do the same thought problem. Choose the farming sector, for example. Eliminate it -a disastrous thought.

Now do the same thought problem, but eliminate only government. If that is too difficult to imagine, eliminate only governmental protection of property, and governmental guarantees of public rights-of-way.

Government is family,
the industry we cannot do without.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 21. .From Family to Government ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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20. Family is Our Minimum.

Family is Our Minimum.

Bob Komives
::

There are no true rugged individuals.
Either they died
for lack of nurturers after birth,
or they were never born
for lack of lovers before conception.

Ruggedless

The science of ecology tells us how we share biospheric wealth with other species, often to our mutual benefit. We must share. No element of life is self-sufficient. We must tax other individuals and species; they must tax us. Humankind has no self-sufficient individuals. From Lewis Thomas in Lives Of A Cell, I learned that the mitochondria in our cells are but one of several kinds of creatures with their own genetic structures that live symbiotically with us, within us. We tax them for their knowledge in order that we might survive; human genes alone do not know enough to keep us alive.

Even if I were to refuse to recognize mitochondria as anything other than "me," I could not ignore the two people who had to undergo bisexual reproduction for me to arrive in this world. Then I cannot ignore that once I got here, during infancy and well beyond, I continued to depend upon adult nurturers for my survival and well-being.

To support bisexual reproduction and to solve the challenge of infant dependency we organize ourselves into families. Family is the minimum biological unit of organization for species survival. Many of us do more than survive. We depend upon our families and their particular patterns of role playing to do more than reproduce and nurture hunks of genes and protoplasm. Adults carry brain knowledge and have artifacts that they wish to distribute to their children and others. Family is the convenient minimum to carry out this complex wealth distribution. Through family we receive and pass along culture and experience. Thus, our adopted children -who carry none of our genes but carry knowledge that we acquired during life- may inherit and pass along more of what we are than do our biological children.

Family is the minimum -the macroeconomic minimum- the smallest organ that our species knows can capture, distribute, and recirculate knowledge we need to survive and prosper. Since reproduction requires two people and produces a dependent, over time there must be at least three individuals in a family. The minimum number of roles to play, however, is four: father, mother, dependent, and nurturer. There are no maxima.

Beyond the biological minimum necessary for survival, our species has unique flexibility in choosing the family form through which one generation can pass biological, brain and artifactual knowledge on to the next. Adjectives such as matrilineal, patrilineal, extended, monogamous, and polygamous each describe a family pattern that has proved useful. Nouns such as nucleus, band, clan, tribe, chiefdom, city, federation, and even nation, describe scales at which family-type roles can operate.

Microeconomics is important because it helps us understand the dynamics of individuals (or even families acting as individual entities) who buy and sell goods and services in a marketplace. Some of these individuals may be close to rugged, but, here at least, we do not give a damn. What does it profit a man to control a market but suffer a dearth of things to trade? We cannot look to microeconomics to understand the dynamics that produced the market goods and services in the first place -nor the greater wealth that never goes to market. To gain that understanding we should be able to turn to macroeconomics and its minimum economic unit, the family, in all its forms. There we can hope to find out how our species reproduces, expands and nurtures its wealth.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV ::20. Family is Our Minimum ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

19. We are Cursed And Blessed.

We are Cursed and Blessed.
Bob Komives
::

Life reproduces itself, but imperfectly. This imperfection creates an intricate, diverse biosphere.

Humankind has two traits that distinguish us from other species. I believe these traits contribute to our unique role in the biosphere.

We have a brain that has somewhat independent hemispheres in which we process information in at least two different ways at the same time. We have social systems that tend toward stability, but in which we often and inevitably undergo instability.

We seem cursed by the anguish of war between the conscious and subconscious and between the logical and intuitive factions in our brain. We seem cursed by bloody and bloodless wars between factions in our society.

Other species evolved with greater social order. Compared to our own, their brain parts seem to work in harmony. Our unstable society may well be a curse brought on by our unstable brain. Yet, our creative ability to explore the workings of the universe through art, science, engineering and fantasy is a blessing that we also owe to that curse. If there is to be a utopia, we must find it in how we manage our continuing instability.

All species can perceive scarcity in resources, and they see an apparent need to manage scarcity by preventing any change that instability will bring. We, alone, have the blind management power, at this tick in the evolutionary clock, to destroy life and its biosphere of change.

It is also only we who can hope to notice, midst war and destruction, the wealth that instability and change have wrought within our biosphere. Only we can hope to see that beneath the apparent rules of scarcity and competition lie more general rules for us to follow-
rules for abundance, and rules for cooperation.

Blessed Curses

Humankind seems cursed by its heritage of imperfection in ways that other species are not. Yet, we are blessed with a preeminent role in the biosphere. Richard Restak described well how our semi-independent brain hemispheres process two ways of thinking that are generally coordinated but often conflicting. This duality is mirrored in our culture. We experiment with: democracy, dictatorship, republic; polygamy, polyandry, monogamy; matriarchy, patriarchy; monarchy, anarchy. Only the human species has a restless urge to understand and perfect.

Competition seeks instability.
One individual,
one group
tries to gain advantage over another.
When too successful,
competition fails.
It can produce a stable dictatorship,
monopoly,
slavery.
Cooperation seeks stability.
It too can fail
if it is perfectly successful.
Stable wealth stops evolving.
Rebels appear.
Feeling stifled,
they promote instability.
We play hopscotch
through patterns of opposites:
cooperation or competition,
with
stability or instability.
War -unstable competition.
The marketplace -stable competition.
Tradition and rules -stable cooperation.
Invention and information,
though often spawned by cooperation,
bring change -instability.
Each pattern brings the other.
The market creates incentive for invention:
a better mouse trap,
a five-cent cigar.
Invention produces new traditions:
stay home
to watch a ball game at the park,
go to the park
to get away from my computer-cottage office.
A stifling tradition brings revolution and war.
We are special
because we can notice these patterns,
seek to understand them,
and decide to participate.

What Makes Us Special

If an objective visitor from outer space had arrived on Earth a few hundred thousand years ago she would have had to stay around to notice that we naked apes were in any way special. Today, she would quickly pick us out of the crowd. We have made ourselves quite noticeable. Electric hair dryers, tennis shoes, oil spills, and political conventions make us stand out clearly in the crowd of earthly creatures.

We see correctly that we are special, but we have tended to think incorrectly that we are special because we are better. "Better" is a subjective evaluation, but if we equate it with "more perfect" we are wrong. We are special because we are less perfect. We are cursed with imperfections that bless us with flourishing culture. Individually and in groups we play dynamic roles that never allow our species to settle into a comfortable niche.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 19. We are Cursed and Blessed ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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18. Exploitation's Deceitful Attraction

Exploitation's Deceitful Attraction
Bob Komives
::

We know from experience that, despite all the good it does for us, at times Adam Smith's "invisible
hand" needs to be slapped. We rise again and again in fits of moral outrage to knock down those
who sacrifice common good to disparity —promote our loss for their gain. Do we do so often
enough? We discuss that question frequently. Here is another question that we should discuss: do
such struggles and knock downs pit morality against economics? To this second question I answer,
no. Morality need not fight economics unless you equate economics with pursuit of personal gain.
You should not. I do see these struggles as contests between good and bad; but between (good)
morality and bad economics, between common good and bad science. Great disparity is a great clot
in the arteries of development.

Great disparity between us,
great impediment among us.
Moral justice asserts
that our wealthy must distribute wealth
onward to our poor.
Economic development just begs
that wealthy just act
knowing their dependence upon the poor
—and upon more.
More wealth distributed
brings back more wealth recirculated;
today distributed,
tomorrow shared.
In abstract we speak
of wealthy and poor.
In concrete we speak
of butcher, baker, banker,
slave, master,
pitcher, raker, candlestick maker.
We distribute,
recirculate,
compete,
cooperate,
evolve,
to survive
to prosper
together.

||

Consider the economics of exploitation. Take an extreme example; consider the economics of
slavery. As species, as group, our wealth grows biologically with each birth; it decreases with each
death —usually. Simply having more people may decrease our group wealth. Our increased
population may overwhelm brain knowledge and artifactual knowledge that we use to harness
resources. While this negative outcome may not be as likely as doomsayers often say, more people
do not by their presence alone make the individuals in their group more wealthy. Yet, mistaken
actions by fellow humans seem to stem from a belief that greater population brings wealth —if it is
more of the right kind of population. When powerful individuals and groups enslave other people
they increase the population that works at their service. A slaveholder feels wealthier holding more
slaves.

We can exploit others in ways more subtle than slavery, but in all ways exploiters believe (if they
are honest with themselves) that they become wealthier if they subjugate more people. Usually they
do not try to increase overall population, just their controlled population. Unfortunately, history
shows that from their narrow and short-sighted viewpoints they are usually right. Since we see our
world having static resources, we find it selfishly attractive to exploit the minds and bodies of our
brothers and sisters. These harnessed minds and bodies know how to gather wealth for us.
From the broad viewpoint of humankind exploitation is not attractive. It reduces opportunities for
the exploited. That reduction inhibits the growth of brain knowledge and artifactual knowledge for
our species, reducing species wealth and average per-person wealth. To the exploited it is painfully
obvious that they suffer the burden of their exploiters. Unfortunately, exploiters are painfully
ignorant that they suffer under the burden of their exploitation. This becomes tragically obvious
when a lethal microbe flourishes in the impoverished ecology of the exploited and surges forth to
kill exploited and exploiter alike. Yet the lesson is not learned. Here, economics has, first, much to
learn and, second, much to teach.

Exploiter dreads that exploited would self-organize.
Old culture that slave might keep,
and new culture that slave might create,
destroyed, discouraged, undone.
Exploiter simplifies—
in
simple
organization
finds
control.
Biosphere complicates—
for in our complexity, it finds resilience;
for in its resilience, we find wealth.

||

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 18. Exploitation's Deceitful Attraction ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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17. Culture: Patterned to Cooperate and Compete

Culture: Patterned to Cooperate and Compete
Bob Komives
::

Energy begat matter.
Matter begat life.
Life begat knowledge.
Knowledge begat culture.
Then culture begat.

Begat

Life is a nearly inevitable pattern that emerges from changing interactions among inanimate forms of energy. Adaptive evolution is a nearly inevitable pattern that emerges from life interacting with itself and a changing inanimate environment under an imperfect system of reproduction. Culture is a nearly inevitable layer of patterns that emerges from adaptive evolution interacting with itself. Complex patterns of life emerge and get tested by adversity and diversity. The more durable patterns survive and retain knowledge as to how groups of species and groups of individuals can organize to exploit the inanimate and animate forms of energy in the environment. This group knowledge is still stored inside individual chromosomal genes, but it may be used in patterns across the genes of several individuals and even multiple species. It may be used in patterns alive in places that range from virus to atmosphere.

Richard Dawkins calls the patterned and mutually beneficial relationship among individuals of one or more species, the "Extended Phenotype" I think of it as the larger body. Congress is a lawmaking body. The actions of its members are hard enough to explain when we know the role of Congress. Certainly, we would have no idea what single acts of individual congressmen mean if we did not see the larger body.
Dawkins argues that the selfish genes that drive evolution do not just affect the creatures in which they reside. Behavior will tend to maximize survival of genes that foster the behavior, whether the genes are in the animal behaving or in some other creature that affects its behavior. Whenever cooperation or competition increases the survivability of genes (in separate species, separate individuals in the same species, or separate organs within the individual) such behavior is reinforced.

Evolution creates not only diverse species that fit diverse habitats, but also creates diverse extended phenotypes, relationships and cultures that fit diverse circumstances. Humankind competes with the cold virus, yet Dawkins asks whether it is we or the virus who has manipulated the evolution of our sneeze in response to a cold. The sneeze provides us some relief, but clearly the virus is given a free ride toward other victims. We and the cold virus have a special relationship.

Thus, the distinction between cooperation and competition becomes fuzzy. While individuals act out serious competition to improve their well-being, they may play compatible roles in a cooperative effort, a cultural effort, to survive. Economics should be one of the sciences that try to understand culture -to understand how we use patterns of cooperation and competition to improve well-being for individuals and increase likelihood of survival for our species.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 17. Culture: Patterned to Cooperate and Compete ::
With attribution these words may be freely shared, but permission
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16. Biology, Brain, Artifact: Our Wealth Stores

Biology, Brain, Artifact: Our Wealth Stores
Bob Komives
::

Where do we store our wealth of knowledge?
Evolution gave us a nervous system,
a brain, wherein we learn our environment
and attempt to respond to change.
Our brain holds memory
wherein we store our learning for later use.
We learned to create artifacts,
utilitarian and coded,
that, once made,
hold our knowledge.
Nests and tools,
paintings and hearths,
books and buildings
may survive our death
to be inherited by following generations
that may use and build upon this heritage.
Our life-time learning,
our artifacts,
and our biological heritage
combine to organize our culture.

||

We can classify human knowledge by where we store it. Carl Sagan wrote of genetic and extragenetic locations.

Genetic knowledge is written in the nucleotides in the chromosomal DNA molecules. As life evolved its forms became ever more complex. Genetic code had to contain more information. Humankind has more genetic information than most other mammals, which have more than amphibians, which have more than protozoa. Depending on mutations and natural selection, this genetic form of knowledge grows slowly and is limited by its container, the chromosome.

Extragenetic knowledge resides outside of our chromosomes. Much is written during our lifetime in the memory of our brain. Because we can learn and be taught, our species can adapt quickly to problems and opportunities presented by our environment. But brain knowledge dies with each individual unless she has somehow passed it on to someone else. It is still sharply limited by the capacity of a brain to learn and apply information during one lifetime.

Some extragenetic knowledge, however, is also extrasomatic; it is stored in artifacts outside our bodies. Utilitarian objects and coded messages augment our ability to capture and use energy. Humankind does not have exclusive access to such knowledge, but we are the experts. Libraries are obvious examples, but tools, houses, and other useful objects contain knowledge. These inanimate objects may have a usefulness that is independent of the life span of the people who create them. The objects tend to accumulate, offering each successive generation an opportunity to be more knowledgeable (wealthier) than the previous one. Nor is it necessary for the user to know as much as the creator.


To use our hammer of steel and wood
we must know to grow and manage arm and hand.
We must learn how and why to wield our hammer.
Yet, we need not know how
to make or shape steel,
to select wood
nor make a handle.
Someone put this into our hammer,
so we can use without knowing.

Someone Put This Into Our Hammer

I classify knowledge by location as: biological knowledge, brain knowledge, and artifactual knowledge.

Biological Knowledge. It includes the genetic codes, most of the living tissue of each living creature, and any energy immediately at the disposal of this knowledge. For an earthworm it includes himself,