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Introducing the Rationist Papers

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This is the first in a series of essays by Tim Ferguson, founder of the Anacyclosis Institute, arguing in favour of Rationism, a middle class-oriented political theory that advocates benchmarking the national economy against the national median household net worth. Izabella Kaminska has also described Rationism as Vitruvian Capitalism, based on its promotion of the values of proportion and balance. The series emulates the Federalist Papers and is written under the pen name of Gracchus, a reformer of the Roman Republic.

Note: The purpose of this series is to enable readers to engage an interesting thought experiment through a series of essays defending a hypothetical constitutional amendment. The hypothetical constitutional amendment considered in these essays has not been officially proposed or introduced in any legislative assembly, and The Blind Spot does not engage in lobbying or legislative advocacy or present these essays for such purposes. It is all merely an exercise in the interest of stimulating debate.

Rationist No. 1: No Gains For the Middle, No Gains For the Top.

To the People of the United States of America:

Property monopolised, or in the possession of a few is a curse to mankind. We should preserve not an absolute equality – this is unnecessary, but preserve all from extreme poverty, and all others from extravagant riches.

– John Adams

After an unequivocal failure of our political and business leadership to protect our middle class, thereby jeopardising the democratic-republican model of government, you are called upon to deliberate a proposed amendment to the constitution of the United States.

The founders tolerated America’s defective provisional government fewer than 10 years before establishing the present constitution. But we have laboured under a defective economic system for at least 50 years; one that has deprived our middle class of its due share of prosperity and narrowed avenues of upward mobility for those below, trapping millions of diligent Americans in financial insecurity, patronage, and debt. Many plans have been proposed to alleviate the public distress, but none to cure the habit causing the underlying disease: preferring indiscriminate capital accumulation over middle class prosperity in measuring economic success.

Our Constitution is exceptional, but the erosion of our founding egalitarianism reveals that it only guaranteed the legal form of our democratic republic. It must now be empowered to guarantee its political substance. That political substance resides only in a moderate and independent middle class, continually refreshed by upward mobility. We can save our middle class, but not by means of political faction. We will not find salvation in any charismatic political leader, the alternating conquests of one political party over another, or the absolute dominion of a benevolent custodian. Instead:

America’s middle class shall be restored by the dutiful enforcement of an impartial and incorruptible mathematical ratio benchmarked against the national median household net worth.

Where the middle class prevails, the middling virtues of modesty, industry, and equity create a temperate social ambience. In this atmosphere of civic moderation, the tenor of legislation, sphere of regulation, and burden of taxation are moderate, as the demands upon government are modest. Meanwhile, an industrious people secure in their occupations, engrossed in the applications of their surplus wealth, is unbeguiled by sensationalism and adventurism, their steady opinions unshaken by false narratives for which their busy lives permit little notice. The specific institutions and functionaries of government are thus far less important to liberty and prosperity than the pre-eminence of the middle class. Authentic democracy, free enterprise, and a responsible press attach to every society that is accountable to the middle class and flee from all which are not.

Alongside the anxieties produced by middle class decline, slavery’s economic consequences persist. The median Black household net worth is less than one-tenth that of Whites, testifying to the tremendous patience of those who have long waited and watched as newer grievances have been faster redressed. Though none alive today is responsible for slavery, these continuing disparities – more than ordinary inequality – daily pour fresh salt into the open wound still felt by the slaves’ descendants. Yet these disparities can be mitigated by the same ratio that would benefit the slaveowners’ descendants, without prejudice to the interests of either.

America and the world will profit if we succeed: we can restore the middle-class foundation upon which the democratic-republican model of government rests. We can protect capitalism from an insatiable few whose immoderation would destroy it. We can win every argument against communism and socialism, converting the authoritarian nations that follow them into democratic republics. We can again lead mankind in advancing freedom, democracy, and constitutional innovation. Perhaps in time we can even help reduce its appetite for war as powerful nations – America included – discover that domestic tranquillity can be as far advanced by median-indexed equilibrium as by global hegemony.

America was born middle class.

The Constitution is no less an economic instrument than a political charter. It transformed America into a free trade zone. It secures property rights, protects the obligations of contract, establishes a single currency, standardises bankruptcies, promotes the arts and sciences, and authorises Congress to regulate commerce. Along with customs and markets inherited from Great Britain, it supplied every tool America needed to grow into the wealthy capitalist superpower it has become. But it did not furnish the soil in which productive enterprise flourished. This came from the middle class.

The principal fact of America’s founding is that despite slavery, it was born middle class. America commenced as a rural nation of middling farmers facing no immediate prospect of wealth concentration. At Independence, the top household held perhaps 1,000x the national median household net worth. Today, however, America’s top household exceeds 2,000,000x the national median, surpassing the wealth of 2m ordinary American families. America is no longer an egalitarian republic enjoying the social pressure-release valve of westward expansion, but a stratified republic more than eighty percent urbanised.

If the founders returned, they would say that in wealth concentration, America now more resembles the stratified aristocracies they repudiated than the hopeful egalitarian republic they established. They may well go further, pronouncing the United States the sequel to the Roman Republic. Rome’s own historians blamed wealth concentration for the death of that ancient republic. The destruction of Rome’s middling farmer class fuelled a tournament of demagogues that culminated in the imperial monarchy of the Caesars, cancelling any serious experiments in democracy for nearly two thousand years.

Given its middling origins, it is no surprise that the experiment resumed in earnest in America. Mankind has enjoyed only two great waves of democracy, spanning less than one-tenth of recorded history. The first appeared in the Mediterranean Basin. The second along the North Atlantic. The emergence of an independent middle class preceded its arrival in each case. And it was only their independence that enabled the middle classes to summon democracy. The authority of government resides in the powers of sword and purse. The ability to withhold an indispensable contribution to either is therefore the basis of political agency. Any claim to a share of government is thus enforced not by the fantasy that consent is given, but in the possibility that it be withheld. Ancient democracy accordingly originated in military labour strikes; America’s experiment in a tax revolt. In all of history, only the independent middle classes held the power to sustain such a challenge to the elite status quo.

The Founders drew upon the lessons of Classical Antiquity when designing the Constitution. While they feared unbridled democracy for the reasons experienced by the ancient Greeks, they praised our founding egalitarianism without qualification, warning against extreme wealth concentration. But aside from issuing vague admonitions about wealth and faction, they bequeathed to us no specific technique by which to preserve the middling substance of an urbanised commercial republic such as we have become.

How for instance should we implement John Adams’ advice that we “preserve all from extreme Poverty, and all others from extravagant Riches”? What legislation satisfies Thomas Jefferson’s assurance that “legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind”? How can we peacefully and permanently promote the wide diffusion of wealth against elite recalcitrance, given James Madison’s observation that “the most common and durable source of factions has been the various and unequal distribution of property”? And how do we solve for household precariousness, without simultaneously aggravating household dependency, heeding Alexander Hamilton’s caution that “a power over a man’s subsistence amounts to a power over his will”?  The question is, how can government maintain an independent middle class rather than a dependent under class?

The answer is, with our Amendment. It comes not a moment too soon. Just as middle-class ascent summons democracy, its decline heralds its destruction. When the people become financially precarious, their independence melts before the bellows of electoral patronage. Inflamed by the propaganda of unscrupulous parties and press, they divide into factions according to the assignment of blame for their diminishing status. Those on the right accuse foreigners and the poor, those on the left the moneyed interest. Popular leaders exploit these animosities and dependencies, dragging the people by their hopes along a closed loop of hollow promises. Addicted to patronage, they lose their ability to withdraw their consent and withhold their contributions, obliterating democracy’s rationale and authenticity. Democracy finally sheds its legitimacy when the plutocracy no longer conceals the theft of its public and private organs, eliminating all hope for escape other than through barbarism and authoritarianism.

America’s present decline reveals that its past fortune is due less to its political genius than to the peculiar advantages favouring its middle class. The full weight of history counsels that the fate of the middle classes is a thing too important to be left to the corruption, intrigue, accidents, and compromises of ordinary politics. Our destiny is not a prize to be snatched by the cleverest, fastest, luckiest, wealthiest, or strongest. America must guarantee the preservation of its middle class by constitutional provision, lest it suffer its own tournament of demagogues in the Roman style. This is the purpose of the Amendment.

To preserve the middle class.

Faithful to our founding principles, the Amendment would anchor America’s top households to a prescribed multiple of the national median household net worth, such that the fortunes of the top households rise and fall lockstep in mathematical proportion to the median. Properly administered, covered households – which collectively exert the greatest market influence – must cause the median to increase in order to raise their own outcomes. No gains for the middle, no gains for the top.

The initial multiple would be 10,000, rolling back America’s social aspect ratio from 2,000,000:1 to 10,000:1. At 10,000:1, the $120,000 median sets the cap at $1.2bn (a limit presently surpassed by about 650 households). Every $1 increase to the median lifts the cap by $10,000; every $10,000 by $100m; every $100,000 by $1bn.

Tethering covered households to the median net worth anchors our economy to the middle class because, unlike income, net worth factors the cumulative household effects of all economic activity. Net worth accounts for taxes, debt, inflation, layoffs, racial disparities, valuation bubbles, offshoring, immigration, and every machine, robot, and algorithm used to reduce the wages and wealth of a flesh-and-blood American worker.  Beware the selective use of income data intended to conceal the condition of the middle class.

The ratio would be enforced by means of a household tax. Pre-existing fortunes located within our territory would generally be grandfathered. Foreign investors could be exempted to the extent not acting as surrogates for American households. The value of any wealth wilfully located outside our territory above the cap would generally be taxed. Exile and expatriation would not defeat the ratio, leaving no lawful means of evasion.

All proceeds raised thereby – likely trillions of dollars – would be allocated to no special interest, but only in equal shares to each State timely ratifying the Amendment, whose university endowments and pension funds could make efficient use thereof. The Amendment thus benefits our students, retirees, teachers, and police. By distributing all proceeds to States, it also shields appropriations from electoral patronage and Congressional discretion, while elevating the relative importance and independence of the States, strengthening the principles of federalism.

The Amendment creates incentives to ensure that capital doesn’t abuse labour, and a failsafe if it does: whatever the top takes from the middle would be taxed right back from the top by enforcement of the ratio. Yet the Amendment imposes no mandates, taxes, or regulations upon enterprise. It lets the market decide how to raise the median via negotiation between enterprise and covered households. To the extent the market succeeds, it will raise the median productively through wages, diminishing demands upon the social safety net. If the market fails, covered households share the expense of failure with everyone else, contributing revenues to ameliorate the general distress. If covered households do not bother to raise the median, none should bother to raise their cap. In any event, if the market fails to raise the median with a ratio in force, its behaviour in the last half-century proves it would do no better without one.

If the Amendment is vigilantly enforced, however, the market will not fail to raise the median. So long as men continue to pursue wealth and status, their ambition can be harnessed and deployed to promote the general welfare. The Amendment sets the cap sufficiently high to encourage and reward all useful entrepreneurial activity.  And once it is implemented, to back-solve for a middle class of any given size, future legislators must simply discover and apply the optimal ratio, covering the appropriate number of households, having adequate market power, producing the requisite market-generated distributive force.

Ultimately, the Amendment moderates capitalism by its own device – the incentive plan – scaling it from the level of enterprise to nation. It focuses capitalism by promoting unfettered capital accumulation for enterprises, while suppressing the vices of grotesque wealth concentration within households. Above all, it enlists capitalism to serve democracy. For while unlimited capital accumulation may be the whole point of capitalism, it was never the whole point of America.

Do not fear the difficulties of enforcement or the prospect of revolt by a few. It would not be the first time America’s aristocracy rebelled against the Republic. Indeed, given the stakes, if there are any with souls so cavernous, they cannot be filled by ten thousand American Dreams with half the nation in want of just one, we should like to know who they are so we can guard against their malignant influence. Because the true purpose of the Amendment is to contain the body politic within a democratic aspect ratio in order to restore and expand our middle class, rejuvenate the middling virtues, quell political faction, and preserve the democratic-republican model of government. To these ends, the pretensions of all must yield.

GRACCHUS.

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9 Responses

  1. Question: If you make existing fortunes > 10,000:1 exempt with a grandfather clause, then won’t the power remain with them? Or would you expect the new 10,000:1 crowd + the middle class to have more power?

  2. The study has been completed – https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/

    If you don’t agree with the actual accounting that takes place you have to show why ? So far nobody has been able to show why. So any analysis has to start from here. If the analysis doesn’t start from this starting point it will come to the wrong conclusions. The correct starting point will Open up new avenues for the Rationist Papers.

  3. The Job Guarantee wage is only paid to people working in Job Guarantee jobs. The more people on the scheme the more government spending. When they move to private sector jobs that payment stops — which automatically reduces government spending.

    It is an ‘auto-stabiliser’. Spending goes up when the economy is down, and spending goes down when the economy is up.

    So because it is carefully targeted at only the people that need it, and it automatically self-adjusts based upon need, there is no requirement to correct any over spend via taxation on the other side.

    The result of that is straightforward. The low tax rates can stay.

    Not only is it a brilliant automatic stabiliser it is a fantastic price anchor also.

    A crucial point is that the JG does not rely on the government spending at market prices and then exploiting multipliers to achieve full employment which characterises traditional Keynesian pump-priming.

    It works like any Monopoly price setter you set the price and let it float.

    Full employment, brilliant automatic stabiliser and a fantastic price anchor and putting it altogether.

    https://new-wayland.com/blog/running-a-modern-money-economy/

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