Saturday, February 23, 2013

In It for the Poor

These posts have focused more on the rich than the poor.  The reason is that the rich lead the way:  they have the resources to do so.  We need the rich so that they can lead the way on multiple exclusive currencies.  We have already listed some of the advantages for the rich in the In It for the Rich post.

However, we also need the poor to participate.  Our criticisms of the rich are all well and good, but so far there has been little said about the poor.  The poor will also ask what is in it for them.

Similar to the case of the rich, the solution will allow the poor to remain poor and socially justified.  As it is, the rich use "scarlet letter" methods in the attempt to make the poor poorer.  Not only do the rich label the poor as whiny and lazy, they seem to believe that the poor are really not even worth the money they are paid.  See our No Sauce for the Gander post and the quotes from Australian billionaire Gina Rinehart.

The United States is unusual partly because the population does not realize how poor it really is.  No matter what your income, you are poor if you cannot protect yourself against financial attacks. does not believe that there was a giant conspiracy among the rich to bring on the Great Recession.  We believe instead that the crisis was brought on in the usual course of business by the rich defending themselves against the results of their own mistakes and excesses.

If the strong do not provide the means to stabilize the economy, then the weak are forced to pay.  The defenseless poor have ended up paying almost all the costs of the crisis simply because it is easier and cheaper to take their money and property away from them.  In this case, most of us in the U.S. had something important taken from us in the crisis -- a job or a house, for example. sees this as proof that most of us are really quite poor.  Our wealth is really mostly smoke and mirrors and can be easily taken from us.  We imagine ourselves wealthy because we only compare ourselves to those who are even poorer.

It works like this.  In a financial crisis, lay off a million people, wait a while, then foreclose on their houses.  Convince the government that you are too big to fail and make it borrow on the backs of the poor to keep you in business.  When times improve, sell the poor back their houses at high prices.  The rich get richer.

Then wait a decade or two, and repeat.  This is the exploitation cycle.  It should be easy to see its relationship to the business cycle.

We believe that the exploitation cycles must be stopped.  The way to do that is to provide a measure of economic protection to the poor.  Everyone should have the basics:  food, clothing, and shelter.  The way to do that is have the government buy these in bulk and drive hard bargains.  Anyone who wants can join this plan voluntarily.  There will also be ways to exit the plan for those who prove themselves competitive enough to deal with the rich directly.

There will be no unemployment, no foreclosures, and no bankruptcies for those in this basic plan.  However, those who prove themselves competitive by profiting too much will either have to return their excess to the government or exit the plan.  Their choice.

Those who join this plan will also be given work through government-run agencies and contract out to private businesses.  One way to think of the agencies is as unions.  As well as matching workers to jobs and handling other personnel issues, the agencies will assure adequate working conditions.

The government will charge the businesses for labor and the businesses will charge the government to supply food, clothing, and shelter.  This is where's idea of multiple exclusive currencies comes into play.  External businesses will be billed and paid in an external currency.  Internal businesses will be billed and paid in an internal currency.  The government will set policies for all currencies.  The purpose of these policies is to assure that the agencies of the government can operate at a profit in all markets as needed.  This means that the government itself can never be overwhelmed by its own debt.

The rich might complain about coddling the poor, as if beating the poor with economic sticks is helpful.  Their arguments will not hold when one considers that they offer economic security to their own even if it is not earned by work -- their relatives and close friends.  That is economic tribalism, nothing more.  Their notion of what one must do to deserve economic security is self-serving and hypocritical.  To the extent that we, the poor, buy into these notions, we are not intelligent enough to defend ourselves against the rich. intends to be intelligent enough, and at the same time, help defend those who cannot defend themselves.

We at want to rid the world of the idea that basic economic insecurity is the best whip to use to drive laborers to work.  The rich who support this idea cannot justify it except by creating class distinctions and economic tribalism -- at the same time that they decry class warfare by those who resist the whip.

Instead we need to create a world where the economically defenseless still have the security of food, clothing, and shelter.  A world where they cannot be bankrupted or foreclosed or fired without recourse. sees the common currency as the chain that works with the whip.  Without the chains to hold us down, the whip is almost useless.  Get rid of the chains and we can deal with the whips.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism

Saturday, February 16, 2013

In It for the Rich

We at hope that we have been clear in previous posts that a superior economic system requires a broad tolerance that includes the rich. We propose a system based on multiple exclusive currencies that allows a higher degree of economic separation between the rich and the poor, in order to protect the poor (and the rich from themselves). This may be an interesting idea to the rich, but no one has any real-life experience with it, so the rich might just ask themselves what is in it for them.

First and foremost, it allows them to remain rich and socially justified. This is an issue because all significant socialist systems see wealth as a sign of shame if not evidence of criminal behavior. They use "scarlet letter" tactics at the very least in the attempt to make the rich poorer. They justify this because it helps "level" society.

No one who believes in evolution can believe that society can be "level," at least in the sense that all members can be made equally competitive in all areas. Evolutionary principles convince us at tosoc that we should work with the reality of inequality rather than try to deny it. We also believe that diversity and tolerance in the human population should be the goal, not uniformity and intolerance, and that diversity leads not just to greater wealth, but to a richer social life.

Using marine biology as a loose metaphor, we want to create economic tidal pools and coral reefs to separate the "whales" from the little fish. (Recall the JP Morgan trader Bruno Iksil who was nicknamed the "London Whale.") wants to create richly diverse economic environments in which many kinds of economic persons can thrive, from the whales to the little fish.

Another metaphor is the educational system, where younger students are not required to compete against older students, and the purpose of the system is to educate and strengthen children in stages instead of destroying them with advanced challenges that they cannot meet. At tosoc we believe that multiple exclusive currencies can be used to create a set of markets similar to grade levels in schools, from lower to greater difficulty levels. As individuals become more and more economically capable, they can "graduate" to more and more competitive economic markets.

As a contrasting metaphor, think of wolves and sheep, where the rich are the wolves and the poor are the sheep. We at tosoc think that using animal models to justify human behavior (and the reverse) is questionable at best, and this one strikes us as particularly misleading and harmful. Real sheep do not resent wolves and the relationship is not adversarial in the human sense. No sheep plans to become a wolf, or even to take revenge on a wolf, and the wolves do not plot how to fully exploit the sheep.

Translated into human terms, the wolf and sheep model implies that the rich and the poor are at war with one another – a permanent war, since economic equality is an illusion. This is an all too common interpretation of the relationship between the rich and the poor, one that leaves out the possibility of social cooperation for mutual gain.

Instead, we should let the rich feel that they are on top, so long as they are not allowed to prove it to themselves by abusing, oppressing, or exploiting those of us who do not want to play their games. They will not lack for underlings, however. Even if we implement multiple exclusive currencies properly, there will be plenty of those who will voluntarily endure exploitation in return for the opportunity to participate in the "top" markets and in what they see as the "highest" levels of society. Not all the rich feel the need for such things, but some do. The rich will have to give up only their most grandiose, megalomaniacal, and unrealistic visions, such as "dominating the world."

On the other side of capitalism, we understand and value rich people and their role. They will be encouraged to exercise their wealth-generating talents and use their wealth to demonstrate to the rest of us what wealth is and how to live "better." Even without meaning to, they will teach the rest of us the things we need to do in order to create wealth and make progress ourselves.

There will no longer be any need for an adversarial relationship between rich and poor. Multiple exclusive currencies and government intervention will protect the poor from the exploitation of the rich, and the exclusion of the rich from the currencies of the poor will help prevent them from attempting any exploitation. The rich will not have to fear the revenge of the poor any more.

Finally, it may be possible to release the rich from the constant regulatory and legal attacks by democratic governments in search of revenue. The need for ever-increasing taxes will diminish if not disappear because the central government will be able to adjust gross domestic consumption to be less than gross domestic product. Then the government can fund itself on the difference. It may be that no one will have to pay taxes in such a system.

A system of multiple exclusive currencies and markets would have great advantages for the rich. It gives philosophical and practical support for their state of wealth and removes the issues that create an adversarial relationship between rich and poor. The role of the rich is assured and valued, and it seems possible to reduce democratic government tendencies to pursue regulatory and tax policies that single out and hurt the rich.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism

Sunday, February 10, 2013

Tosoc Update

We do not believe we have adequately sustained the flow of ideas on  It has been difficult to produce thoughtful and creative posts on a regular basis.  Sometimes a month or more has gone by without any post at all, much less one that advances the cause.  After giving this issue some thought, we decided that developing the idea of multiple exclusive currencies will take as long as it takes.  We will not try to post new progress on a regular basis.

On the other hand, we do need to let readers know regularly that we are still working on these ideas.  Also, the subject is difficult enough that it would not hurt to direct readers to previous posts that they may not have seen, or add some detail to ideas that have already been presented.  The result is that we will attempt to post a Tosoc Update every week with any news and with a link to a previous post of interest.  This is the first of those updates.

Here is an update on our work.  There are reasons why both the rich and the poor should like's concept of multiple exclusive currencies.  We plan posts on both of those topics.  First we want to post the reasons why the rich should like it.  The rich may not recognize the advantages of this system for themselves by reading previous posts on, so we want to spell out those advantages.

In this update, we refer you to the very first posting on at "On the Other Side of Capitalism".  This one lays out all the major elements of our proposal in brief.  We recommend that all readers read this one first before reading the more recent postings.  It will be easier to understand the later posts if one has read the first one.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism

Sunday, February 3, 2013

Consumers of the World Unite!

Those from socialist-leaning cultures frequently complain about the wastefulness and lack of culture in the consumer-oriented US economy. It is almost as if their egalitarian vision of the future is of equally-refined individuals living in equal poverty.

Such a gray and uninspiring vision of the future perhaps explains the failure of leadership that ultimately strikes these cultures. For example, the old Soviet Union sought to take advantage of the economies of scale in manufacturing automobiles. There were only a few styles and one color: black. This was supposed to lead to an abundance of cars due to the reduction of costs on a national scale, but the real result was utter economic failure compared to the auto industries in the capitalist West.

Socialism generally fails to recognize that wealth and the economy are not fundamentally driven by economics, but by human psychology. Capitalism is more about leadership than economics. It is about how to inspire large numbers of people to work collectively and productively.

The capitalist Henry Ford, founder of Ford Motor Company and a consumerist, approached the auto industry differently. He priced his vehicles to sell in a free market, and the people inspired themselves and others to get the money to buy one. Note that he also used economies of scale, and the first Ford autos also had only one color: black. The real difference between Ford and the communists of the Soviet Union at roughly the same period of time was that he was trying to please the people, not command them.

In the Soviet Union, it was seen as a waste of resources to provide a car to someone who did not need it (in the socialist sense). Public transportation is less expensive than the auto, after all. Very few were excited about cars in the Soviet Union because the psychology was about scarcity and conserving collective resources rather than abundance and individual choice.

People everywhere are the same in their drive to be different and to distinguish themselves. In some ways it is the very purpose of socialist and communist systems to frustrate this drive. Capitalist economies eventually overwhelm communist and socialist economies because capitalism encourages this drive and puts it to economic use.

Socialist systems are still popular in part, however, because they answer several basic questions. People want to know how their children will be educated, what will happen if they or their children get sick, and how they will be taken care of when they are old. Capitalism and individualism are for the rich and for strong, healthy, and childless young people. We all cease to be individualists when we are sick enough or old enough, and when we have to raise children.

The US is bankrupting itself right now because of student loans, Social Security, and Medicare. Capitalism at first could ignore these issues because life was tough for everyone. Even the rich suffered from disease and accident in roughly the same ways as the poor, and education was not thought necessary. Things are different now. Now everyone knows differently and capitalism has not yet changed enough to meet these challenges.

The reason why capitalism has a problem with these issues is the idea that the money with which to buy education, health care, and retirement only goes to deserving individuals, where "deserving" is narrowly defined. The most narrow definition of "deserving" in this context is Rudyard Kipling's "If you don't work you die." Paraphrasing this in the early capitalist and communist social contexts: If you don't work, we will let you die – if we do not kill you ourselves.

These views are too simplistic, however, because there have always been those who did not have to work in order to live (and be educated, have health care, and retire). These include at least the children and spouses of the rich, and even the rich themselves after they have made their fortunes. In order to create a society that is always improving, providing the most and best it can for the most people, we try not to let anyone die any more because of lack of money. That is, we slowly are adapting capitalism to take care of everyone, but if we are to achieve this vision of the future, more will need to be done. That is why the US is taking the risk of bankrupting itself over these issues – we still believe that we can achieve an even better society.

The narrow communist focus on labor turned out to be insufficient. Under capitalist leadership, economies jumped ahead of their communist counterparts without the need for gulags and starvation tactics to get people to work. Capitalist economies have been able to provide more and more for those who are able to labor less and less. As it turns out, "From each according to his ability, to each according to his need," works better in the capitalist system than in the communist system.

Perhaps it is time to throw away another vestige of the communist system, and that is "Workers of the world, unite!" This is no longer necessary. We want to change this (for the time being, at least) to "Consumers of the world, unite!"

With its emphasis on labor and production, communist theory never devoted enough thought to the consumption side of economics and its relationship to productivity. That may be the primary reason why the people of China are still relatively poor. Satisfying individual needs at the minimum level while demanding maximum individual productivity will only inspire an individual so far, and the vision of a future utopia will inspire extra individual sacrifice only for a short time.

To put it another way, the problem with communism is that there are not enough buyers. Output means nothing if no one will buy it. The genius of capitalism and men like Henry Ford is to inspire consumption to match productivity in the free market. People will work hard for a bowl of rice and harder for a boring black vehicle to drive. People will work hardest to earn enough to buy that red sports car that they have their eye on. Perhaps it boils down to this: communism is boring and capitalism is exciting.

However, despite the superiority of capitalism over communism, we cannot depend on capitalism as it is today to lead us to a better future. The days and vision of Henry Ford are gone. The rich today do not necessarily support capitalism even though they are perceived as "capitalists," and they are trying harder and harder to squeeze ever more money out of the economy. They can do this now because they have enough money and political power to distort the markets in their own favor. Instead of creating and spreading wealth, they are concentrating it in their own hands. They are leading us to a system that will not be capitalist any more.

The rich are net producers (sellers) and therefore they always seek advantages over net consumers (buyers). Since the rich can withstand economic downturns far better than the poor, rich producers can use (or create) poor economic times to take advantage of poor consumers. Also, since there are relatively few producers compared to the number of consumers, the producers can use divide-and-conquer tactics against the consumers.

This suggests that today, successful defense against the concentration of wealth and production among the wealthy will require "collective bargaining" by unified consumers. An early example of this is Walmart, always demanding higher quantities and better quality from its suppliers for less money.

US consumers make up seventy percent of the US economy and about seventeen percent of the world economy. It is not our exports that drive the world economy, but our imports. All nations produce, but our real advantage is in our consumption. Yet we still do not get the best deals because we enter the market as individual buyers rather than as a collective of buyers. Companies like Walmart fill that gap to a certain extent, but it is not enough.

Furthermore, the financial system supports production, not consumption. Even capitalist economies for the most part see production as superior to consumption. Consumption is seen as a reward for production, not as an equal partner in the economy. It is equal, and the failure to recognize this has caused slow economic growth in many nations.

A primary problem is that a single currency cannot support both consumption and production. Monetary policy supports lending to increase production and (hopefully) income. Public borrowing purely to support consumption is problematic because it nearly always ends up collectively in bankruptcy. See Greece as an example. The reason has already been described. It is the mismatch between the power of rich producers compared to poor consumers in the markets.

At the very least, we need to divide economic activity into a rich market and a poor market, where the rich cannot participate in the poor market, but the poor consumers pool their economic power to participate collectively in the rich market. Production is now so efficient that we should be able to take care of everyone without taking on enormous debts. What really happens instead is that individuals take public money and then can find only bad deals in the markets, spending too much for too little. Only collective consumer power can demand good deals in the markets.

A simpler way to say all this is that capitalism makes good use of the human drive to be different and distinguish oneself, and therefore encourages increased buying to match the selling of increased production. This usually grows economies in good ways. However, when borrowing is in the same currency for both production and consumption, a growing economy dictates that these different kinds of borrowing compete with one another in the same credit markets. Borrowing for production competes with borrowing for consumption and vice versa, until everyone borrows too much and at too high a cost. Both production and consumption crash at the same time, within the same business cycle.

Breaking the connection using multiple currencies, and therefore multiple credit markets, seems a straightforward way to mitigate this problem and reduce economic volatility. If either production or consumption seems too "frothy," steps can be taken to settle the one market without directly disturbing the other. Just because we believe that production and consumption are equal in the markets does not mean we believe that they are the same and that they both should be regulated by a single set of policies.

Socialism for the socialists and capitalism for the capitalists.
TheOtherSideOfCapitalism (

Copyright © 2013 TheOtherSideOfCapitalism