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More Background, Basic Problems and Hurdles
The industrialized nations, though they could be expected to lead the development,
have to a large extent not resolved for themselves how to set up an effective
socio-economic system and often still have within their own borders abundant
poverty and economic injustice. This is particularly so in the USA. In fact, the
USA lags in socio-economic development behind Western Europe and, as has been
pointed out, presently has a dominating group of people promoting and instituting
an unregulated free-for-all type socio-economic system, essentially going
backwards. However, as fate of history has made the USA the largest economic
entity on earth, it has great influence on economic activities elsewhere, and
actually exports poor practices to Western Europe and other countries. This
combined with the fact that Western Europe is politically divided, and has only a
partially developed unified economy, has caused stagnation there in making
progress with the development of better socio-economic systems.
Contrary to what some people are trying to make us believe, the relative success
of the Western European and North American socio-economic systems after World War
II, was not the result of free-for-all "capitalist" practices that are presently
promoted and instituted, but by regulations put in place by the mostly socialist
governments in Europe and by the democratic administrations of Franklin Delano
Roosevelt and Harry Truman in the USA during the Depression years of the 1930's
and after World War II, including the Marshall Plan, which was so influential in
rebuilding Western Europe after the war. These regulations were to a large extent
emergency type regulations, not designed socio-economic systems, but did
accomplish the immediate goal of stabilizing and resurrecting the economies. It
seems that other urgent matters, like dealing with the sick and undemocratic
application of communist ideas in Russia and other countries, then took attention
away from how to make these largely emergency type regulations into coherent
socio-economic systems.
It is our goal to complete those developments of the 1930's and 1940's towards
creating socio-economic systems which assure that basic human needs are met for
all people. We believe that this is not an utopian dream, but an evolution, which
can achieve the desired goals in not more than a few decades. What it takes is a
real concerted, intense effort, like the efforts made during war time or the
effort made to make the USA's space program catch up with the Russian one in the
1960's.
With such intensity, the USA, Western Europe and a number of other industrialized
nations around the globe, can achieve this in a matter of a few decades, as they
have already all the ingredients. They merely need to set up the organization and
get it to work, which will obviously require hard work, sacrifices and trial and
error.
With regard to the developing nations, it has been pointed out that one of the
hurdles in those countries is lack of education. However, there is an abundance
of knowledge available in the industrialized nations, which can be mobilized to
help those countries. We believe that with a concerted high-intensity effort the
education problems in the developing parts of the world can be overcome relatively
quickly.
We also have the impression that in many of the developing countries the status of
education is not as bad as it may seem and that it is more a lack of ability to
get organized, to get out of a pattern of passiveness and stagnation, and a lack
of guidance by the industrialized nations in that area.
Another hurdle that has been pointed out as a major problem is "overpopulation".
First of all it is hard to distinguish between dense population and
overpopulation. Dense population does create certain limitations, but, if the
basic needs of food, clothing, shelter and medical care are met, people can live
in harmony, and can as a next step take measures to reduce population. In some
cases there are faulty ethnic and religious thought patterns which promote
overpopulation, but when people are given a stable economic environment that
provides them with the basics, they will start to think logically and will set
aside those faulty thought patterns.
This brings us to the last major hurdle that has been brought up: Human insanity.
This is a very important one and will therefore be dealt with in a separate
section.
Human Insanity - a Special Hurdle
In the years after World War II, with the fresh memory of how a group of criminal
psychopaths was able to rule Germany, it was in Western Europe a common subject of
discussion, and if not discussed as much as it perhaps should have been in later
years, it must have gone through many people's minds when another irrational
massacre hit the news media.
Insanity is a very disturbing aspect of humanity, particularly since the
boundaries between sane and insane are often blurred and because so many seemingly
sane persons are involved in insane atrocities when they occur. Apparently sane
people can rationalize insane behavior. In fact, one can argue that every war is
in essence an outbreak of insanity.
The facts though are that human beings, if free of fear, particularly free of
worry on how to meet the daily needs, as a general rule act very rational. It is
remarkable to see, that when a group of worry-free humans, even of very different
backgrounds, is pulled together to pursue a common goal, how well they are able to
sort their thoughts and how well they are able to find the rational answers and to
make reasonable compromises.
A truly insane person is very unlikely to come into a position of power, if
surrounded by people who can, without fear, pursue a rational consensus or
majority vote approach.
As mentioned before, sometimes problems are created by obsolete thought patterns.
These obsolete thought patterns are often embedded in old traditions and religious
practices, but occasionally new ones surface.
An example of the latter was the South African "Apartheids Policy", a
segregationist way of dealing with their multi-ethnic and multi-racial society.
This policy was of fairly recent - early 1900's - origin and of course was
abandoned again, when it became clear that it did not make any sense and a lot of
external pressure was applied on the South African government as well. The
present movement in the USA to "deregulate" the economy, is in essence the same
kind of thing as the South African Apartheids Policy, resurrection of an
old-fashioned and faulty thought pattern, promoted by a group of people who derive
benefit from it. Promoters of these faulty thought patterns often work on
emotions that hinder the logic thinking.
Again, if a group of people can however discuss an issue free of fear,
particularly the fear of losing ones livelihood, the majority will, if given some
time to think it through, start to think logically and abandon those obsolete
thought patterns.
Thus a primary goal of any socio-economic system shall be to provide people with
economic stability and economic justice, the assurance that their basic livelihood
cannot be taken away from them.
Insanity is to a large extent created by a failure to make human values the first
priority, by deriving action patterns not from human values, but from faulty
thought patterns, often created or maintained by fears of survival. There is an
evolution process here that mankind is going through and we can hasten it on by
eliminating the fears of daily survival. Modern technology has given us the tools
to do so. We now have to muster the will to use those tools and make the intense
effort needed. Getting oneself to make an effort requires determination, the
willingness to make sacrifices and to sweat, but the rewards will be large too and
we will feel a lot better when we have accomplished the goal.
The Need for Stability
Stability is of extreme importance for a socio-economic system to work well.
Sufficient goods will have to be produced and sufficient services provided.
That means that there has to be efficiency in production and in delivery of goods
and services. Modern technology has given us a large array of tools to achieve
this, but they are not of much value if we do not have the people who can
efficiently use them and an effective system to pass those skills on to the next
generation. Particularly since modern technology gives us so many tools, there is
more complexity than before and it takes longer to develop "human skill networks"
for their efficient use. At the same time USA industrial management has gone more
and more towards a system of making frequent changes in organization and location
of manufacturing, including more subcontracting for short periods to the lowest
bidder, achieving small, short term improvements in profitability, but at the same
time damaging these "human skill networks". If an objective evaluation could be
made it would probably show that the damage caused by ignoring the importance of
stability in recent years has far outweighed the benefits and is a major
contributor to the present economic slow down in the USA.
It can be remarked that USA society has for a long time been plagued by
instability, more so than most West European countries. It has been a country of
"build, destroy and rebuild" for a large part of its history. Discussing the
history of this aspect of USA society is obviously beyond the scope of this
write-up, but it may go back to the founders of the country having been
pre-occupied with freedom issues and not with economic organization issues. Of
course, the founding of the USA as an independent country also pre-dated the
industrial revolution, which created the need for more sophisticated economic
organization. It appears also that there is in the USA a historically grown lack
of understanding that economic development has to be guided.
As a result, the economic development in the USA is left to largely uncontrolled
and chaotic competition and marketing forces. Some legislation to curb excesses
has of course been enacted, for instance anti-trust legislation,
rights-for-trade-unions legislation and consumer and environmental protection
laws. However, they are insufficient, partially obsolete and to make it worse, as
mentioned before, also in the process of being dismantled by a group of
economically dominating people, who seem to be mostly motivated by enriching
themselves.
The negative impact of the instability in USA society varies from industry to
industry. It is particularly bad in the capital goods sector. The reason is that
in an economic downturn every industry will try to save money on capital spending.
That is very logic. When demand for a certain kind of product or service is down,
there is no immediate need for new equipment, while it often is also possible to
postpone even needed replacements by running existing equipment longer hours, or
to spend more effort on repairing the old equipment. As a result it is not
uncommon for a capital goods business to see its business volume in a downturn
dwindle to less than one half, or even less than one quarter of its "normal"
volume. When the economy picks up again, there is of course then often a large
surge, which makes the next downturn even larger percentage wise.
The big losers in this instability are first of all the technical people, the
engineers and the skilled production workers in those capital goods companies.
Building equipment requires a lot of talent and skill. Many of the engineering
people in those industries did very well academically, and worked very hard on
honing their skills. When somebody is good at throwing a basketball, running or
throwing a football or hitting a baseball, that person gets paid very well,
usually well enough to be able to retire at age 30 or so. When a person is good
at designing or building equipment, he or she gets a modest salary and when the
job is done, is often told: "thank you, you did a great job, here is your lay-off
notice".
The results are that many of those people leave the profession, go into less
productive use of their talents, become withdrawn, don't put their heart in their
work anymore, escape into hobbies and early retirement and often develop
bitterness traits, which altogether hurts the teamwork on the job, the ability to
properly train the younger generation, and their family life.
So it is not a surprise that when a capital goods company tries to rebuild its
capability after a major downturn, it often does not work. In some industries in
the USA the results have been devastating. We will summarize a few examples
below. Some people may remark that other factors were involved too, particularly
lower wages overseas. Indeed, the legislation protecting unions in the USA,
combined with poor communication between industry management and union
management, lead to sometimes too high wages in the industrial sector. So those
jobs are gone, and a lot of skilled American workers have now low paying
telemarketing and envelope stuffing jobs. Nevertheless, skilled workers overseas
are also paid quite well and we believe that the lack of stability is the main
factor.
The USA once had a large and very capable machine tool industry. Most of it is
gone. Both Germany and Japan each produce by far more machine tools than the USA,
and they pay their workers also good wages. Present machine tool production in
the USA is approximately the size of that of Switzerland, a small country with a
population of approximately 1/50th of the USA.
Likewise the USA once had a large shipbuilding industry. Except for the Navy work
it is for all practical purposes gone.
One of the latest victims is the Commercial Airplane Division of The Boeing
Company, which cannot compete anymore with Airbus in Europe. (The company may be
kept alive with military contracts.) More than 40 years of hiring and firing the
best engineers and other technical workers in the country, and from abroad as
well, has taken its toll on a company that once had everything going for it. One
of the main problems appears to be that a large part of the "human skill networks"
needed is gone, particularly depth of understanding of the business as a whole,
and replaced with a non-effective bureaucracy. The irony is that their management
knew already more than 10 years ago that they were approximately 25% more costly
than Airbus, but their senior management seemed not to be able to deal with it and
"escaped" with an expensive move to Chicago. There they seem to live now in more
isolation than ever before, in what appears to be a make-believe world of
addressing stock value issues and a continuous short term shifting of production
around the world, "to the lowest bidder", instead of coming to grips with the real
problems. Perhaps it is not too late yet to salvage this company for the USA.
The economic development picture may look very complicated, but as is often the
case with complex situations, there are overriding factors. These overriding
factors are often difficult to measure, because the measurement methods used are
not addressing them. There is very little doubt in our mind that if an objective
measurement method would be available, it would show that the USA economy is close
to a complete collapse, like it was in 1929, simply due to a LACK OF STABILITY.
Just like there is no justification for not being able to use our ample technical
tools to provide everybody with the basics for life, there is no excuse for the
instability which presently plagues the earth, and particularly the USA. We live
on a blessed planet with the sun giving us a surprisingly stable overall climate.
There may be a drought in one part of the world, but at the same time there is a
good harvest elsewhere, and we have the means for low cost transportation of
everything around the globe. We also have the means to store food for substantial
periods of time and can this way also compensate for the minor fluctuations in
climate. Non-food items we can all produce in ample volumes and store enough
reserves of them to be able to deal quickly and effectively with natural disasters
like wind storms and earthquakes.
We can create stability if we want to. All it takes is the will to develop the
needed organizational structures.
The Starting Point - Human Values
It seems to be obvious that human values should be the starting point for all our
actions, yet they are often violated in the socio-economic area.
One of the reasons for this is that in the socio-economic arena many people follow
certain thought patterns that are standard for the socio-economic group they
belong to, which may be all right for certain situations, but also under certain
other circumstances lead to violating human values. Then, instead of correcting
the thought patterns, those who are advantaged by the situation often create
additional rationales to justify the violations as being caused by other things or
other peoples' faults, or as being an unavoidable side effect. In the extreme
case they may donate money to charity to help those who are the victims of the
violation, rather than correcting the violation. Again, as has come up before,
these erroneous thought patterns and the associated behavior patterns are often
driven by fear of losing one's own livelihood or standard of living.
The basic human values in the socio-economic area are:
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1. |
Do not do to others what one does not want to be done to oneself. |
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2. |
Everybody has a right to enjoy life, as long as it does not occur at the
expense of others. |
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3. |
Everybody has a right to make a living using the talents the person has. |
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4. |
Everybody has a right to have some extra benefit from special talents, hard
work, luck and combinations of these. |
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5. |
Everybody has a right to entrepreneurship. |
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6. |
Everybody has an obligation to help those who experience bad luck, such as
the results of an accident, a natural disaster, a fluke of nature affecting
health, etc., to the extent reasonably possible without jeopardizing one's
own situation. |
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7. |
There shall be a fair distribution of wealth. |
In a simple setting, say a small farm community, or a small company with a steady
business and long term employees, these basic principles are often adhered to
quite well. The people know each other well and have a personal relationship,
thus care about each other's well being, and therefore will let the harmony in the
group be the overriding factor.
Many "primitive" societies also have developed quite good systems for these human
value related socio-economic aspects, and as long as the hunt and/or the harvest
are good, and they are not ravaged by a disease, they often enjoy a quite good
standard of living, if measured in terms of being able to enjoy life.
However, modern industrialized society requires large organizations for many
tasks, and thus industry leaders cannot pursue things on the basis of personal
relationships anymore, but have to use general principles. Nevertheless, they
still also have the obligation to assure that human values are respected and
adhered to and they have to correct things when the general principles they apply
do not accomplish that. This has often been overlooked, particularly in the 19th
century, when large scale industrialization developed.
The neglect of human values was remedied to some extent by the advent of the trade
unions, but in many cases the company and union managements created polarized
situations, which did not lead to good solutions, not for the union members, not
for the companies and not for society as a whole. Unionization is basically a bad
concept, because it degrades the relationship between company management and
workers to a fight about money, instead of discussion about how to run the
business as well as possible and how to fairly distribute the income of the
business. It may have been the most practical solution for the circumstances of
the late 1800's and early 1900's, but today it is an obsolete concept.
We will come back later on the issue how a company can be better organized.
Some Basic Observations on Property, Ownership and Money
We almost automatically attribute to ownership of property the right to do with it
as one pleases, including senseless destruction. When it concerns clothing, toys,
a car or other things whose use, benefits and effects are limited to one person,
generally consumables, that is not an unreasonable right. However, when a person
owns property that is also used by other people, whose use affects other people,
or whose poor maintenance affects other people, that is not the case any more.
There are situations where limitations on what an owner can do with his/her
property have already been clearly written into the law.
For instance, when somebody owns a piece of land, that person does not have the
right to put on it any kind of building or business, because it affects at least
the neighbors. For instance, a shopping center will attract a lot of people and
thus create traffic, which the adjacent roads may not be able to handle, and thus
a city or county may not give a building permit for it.
The strange thing though is that in the USA and many other countries there are for
all practical purposes no restrictions on what an owner of industrial or other
commercial property can do with it, even though its manufacturing and/or service
providing capability may be very important and sometimes crucial to a community or
society as a whole.
Another aspect of the ownership of companies is that we are talking about means of
production, and that the ability of a company to efficiently provide goods and/or
services consists not only of having the equipment to do so, but also a team of
people who have the skills to use that equipment effectively. Thus the value of a
company is embodied to a large extent in its team of people, with modern
technology probably more so than ever before. These people often made a large
investment in developing those skills and are depending on them to make a living.
Thus it is unfair that the owner of the equipment they use can at a whim decide to
liquidate the operation. It is equally unfair that the future of a company can be
dependent on stock market gambles, some of which nobody has control over, a
chaotic situation created by a lack of regulation.
Thus it would be logic for purposes of socio-economic treatment to clearly
distinguish between "Consumables", whose loss does not cause any damage beyond the
value of the item itself, and "Means of Production", which do have value beyond
that, and control the ownership of means of production in a different way.
It would also be logic to give the people who use the means of production in
larger companies, thus the employees, the majority ownership of those means of
production, thus the majority ownership of the company. It would assure better
quality stewardship than majority ownership in the hands of absentee investors,
and it would also lead to more stability, and associated with that more
efficiency, also benefiting the non-employee investors in the company.
Money is a trading tool and a bookkeeping tool for company management. As company
management has the task to assure that expenditures are in line with income, it
needs the tools to control expenditures, including the salary level of the
employees.
Money is also a tool to control the economy for the government, typically assigned
to a government agency, the Federal Reserve Board in the USA. This task is made a
lot easier if there is stability in the economy and there are no large
fluctuations in the money supply due to fluctuations on the stock market.
Draft for Socio-Economic Restructuring
Basic Principles
Following are a list of principles, designed to provide in combination with each
other a simple and stable socio-economic system.
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1. |
The goal of a socio-economic system is to provide goods and services in an
efficient and socially acceptable manner. Socially acceptable means that in
all actions the human values are the overriding consideration. This can
best be done by defining the FUNCTION of each organization in society and by
focusing in the operation of those organizations on fulfilling that function
in an optimum and fiscally responsible manner, rather than on creating
profits. |
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2. |
To be effective a socio-economic system has to allow and stimulate
individual entrepreneurship and small organizations, to address the many
special needs and to develop methods to deal with new situations, while at
the same time regulating activities to provide a level playing field for
competition and to prevent and correct abuses. |
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3. |
To be able to use the full potential of modern technology, a number of
relatively large enterprises are needed as well, which need to be structured
and controlled in a different manner than individuals and small
organizations. To be effective in doing so the governmental organizations
structuring and regulating large enterprises have to be relatively large in
size as well. This means that small countries, to be effective in the
socio-economic area, will have to join forces in federations, or align
themselves with a larger country, which can provide the socio-economic
framework for this aspect. |
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4. |
Money is a trading tool for goods and services. Money representing means of
production shall be treated differently than money representing consumable
goods. When a decision to invest in means of production has been made, it
generally cannot be reversed to instead create consumable products or
services. Means of production are also of a much more crucial nature to
society and thus money representing those has to be treated also with more
care, and in some cases with special incentives for investors, than money
representing consumables. |
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5. |
The value of an enterprise, as a generator of goods and/or services, is
embodied to a large extent in its team of people, usually its employees, who
have the skills to efficiently use the means of production of the
enterprise. Thus it is logic to give this team significant ownership in the
enterprise, and also, since most knowledgeable about its operation,
significant say in control of the enterprise. In smaller enterprises, the
unique talents of the team members play a major role in the relationships
between them and therefore it is virtually impossible to give generalized
rules for their ownership and control. The best solution in most cases is
to let the founders of the enterprise work out a structure for the
enterprise, which can then be adjusted through consensus and negotiation
when new team members are brought in. However, for larger enterprises a
legal structure is needed, which gives majority ownership and control to the
employees, which prescribes how the employees elect a management team for
the enterprise, and which defines the responsibilities of this management
team, including responsibilities to society as a whole. |
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6. |
A society is not a stationary item, but a living entity that changes over
time. These changes have to be guided, so that the potential benefits of
new technologies are used as well as possible and so that changes do not
endanger human values, but enhance them. The complexity of modern
technology makes it necessary to provide an organizational structure for
guiding change, which is not driven by commercial interests, but by the
public interest and which enhances with logic the commercial supply and
demand effects. Therefore a government shall create development commissions
for each major industry and service group in a country, with representatives
of professional and commercial organizations in the field, as well as
government officials, to prepare planning outlines for guiding change in
society. These commissions shall also be given the task to create the
opportunity for everybody to be heard, through series of public hearings and
other suitable methods. |
We will next describe applications of these principles, first for the USA, then
for Western Europe and finally for developing nations. Most of the discussion
will be about the USA situation, because it needs the reforms most urgently. That
is, a collapse of the socio-economic system in the USA will be the most
devastating to the world. The changes proposed for the USA will also be quite
easy to adapt to other countries.
Proposed Solution for the USA
This is a first outline and obviously will need a lot more work.
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1. |
Create a single Federal Corporations Law that covers all public corporations
and decrees that all companies with more than 500 employees operating in the
country have to be public corporations under that law. The number of 500
employees is somewhat arbitrary - it is used here because the Federal
Government presently uses it as a dividing line between small and large
businesses and because it appears to be a reasonable size for that purpose.
Smaller companies would be given the option to incorporate under the Federal
Corporations Law. |
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2. |
Give these federally incorporated companies the option to trade their stock
on a stock market or not. Thus previously private companies would
essentially be allowed to stay "private", except that they would have to
meet the same organizational and disclosure requirements as the companies
which do trade their stock on the stock market. |
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3. |
These federally incorporated companies would have to formulate a goal stated
in the articles of incorporation, which would have to be in the form of a
FUNCTION they fulfill in society. To make a profit would not be an
acceptable goal anymore, and the terminology "for profit corporation" would
disappear. The function definition would consist of providing specific
goods and/or services, but could also include a statement that other goods
and services not conflicting with the main function can be provided. In a
prescribed general section of the articles of incorporation it would be
stipulated that this would have to be done in a fiscally responsible manner,
providing a fair distribution of the benefits of the company's efforts
between customers, employees and shareholders, with the burden of making
reasoned decisions in these manners on the management of the corporation.
The law and government regulations would of course provide guidelines for
these decisions, which by nature would vary quite a bit between industry
groups. The management then of course would also need to get the tools and
powers to do this, as will be discussed in the next section. |
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4. |
Describe in detail how the governing body or bodies of the corporation are
elected and give the company executives a set of public responsibilities and
rights. Their main responsibility will be to assure that the company
fulfills the function defined in its articles of incorporation. They will
be given substantial rights to assure that they can handle a large variety
of circumstances, including the right to adjust salaries of all company
employees in a systematic across the board manner, downward if needed to
keep the company solvent and upward if profits allow to do so, independent
of any union contracts. Thus they would have the right to set aside union
contracts. |
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5. |
Require that all these companies with more than 500 employees are 60% or
more owned by the employees, but also regulate how company stock by
employees is administered and how they vote when electing executives. The
rationale here consists of two parts. The first part is that most of the
value of a corporation is not in the equipment, but in the team that is able
to produce goods and services with that equipment. The second part of the
rationale is that the executives will have to be elected by and be
responsible to people who are most likely to understand their tasks, can
support them constructively in their tasks, and can also be expected to give
the function of the company in society, and the associated human values, the
number one priority. This may not always be the case and there will
therefore have to be a mechanism for the government to intervene if really
needed. What would probably help is to require a 60% majority vote of
shareholders or shareholder representatives to fire the management of the
company. Putting a responsibility burden on management will also require
giving them a strong enough position to perform those duties, even when the
decisions they have to make are not very popular. |
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6. |
Following Basic Principle 4, recognize that money is merely a tool for trade
and that it merely represents goods and services available for trade.
Recognize also that goods and services invested in means of production are
different in nature than goods and services for consumption, and that the
money representing those two different categories therefore has to be
treated differently. Money representing means of production would not be
taxed as income when accumulated by individuals as company owners or when
given to employees as payment or part payment for their services to the
company. It would only be taxed when converted into money for consumption
purposes. This would allow doing away completely with all the complicated
stock option legislation, which has done more harm than good and was
apparently only created as a way to get around the IRS's idea that shares
received for services to a company are taxable income. Restrictions on the
extent to which money that represents means of production can be converted
to consumable money will be needed. This is fair, because when a person
invests into means of production the person who does that has to realize
that once a decision has been made to use the money to build a means of
production, that decision cannot be reversed, and finding somebody else then
to trade that piece of equipment with for consumables may not be so easy.
It would not prevent that a path for conversion to consumable money can be
created for investors who need money for medical care and other emergency
situations, as well as other purposes on a limited basis, possibly with a
penalty payment. |
The requirement that all companies with more than 500 employees are at least 60%
employee owned, combined with restrictions on converting money representing means
of production into money for consumption, will significantly reduce the influence
of the stock market and stock market gambling on stock values. The fact that all
large companies will have to adhere to the same organizational model will also
help create a level and stable playing field for competition. It will motivate
companies to invest in means that allow them to compete better, because they will
have a lot more assurance that their investments will pay of for a long time to
come. Real, healthy competition is promoted by strict, clear regulation that
creates a level and stable playing field and by having government agencies work
with industry groups on planning for introduction of and standardization of new
technology before it is put into the market place.
Transition Issues
One of the proposals made was to have all companies with more than 500 employees
at least 60% employee owned. How can this be achieved in a manner that is fair to
the existing shareholders? The following arrangement (or something similar to it)
can accomplish this. Where not already the case, mandate the issue of additional
stock to employees, until they own 60%. This will dilute the stock holdings of
the existing stock holders, but the negative effect on their return on investment
can be corrected by requiring that at least a certain percentage of sales for each
industry group is used to pay dividends equal to the average dividend paid for
that industry group in a past period, for instance five years. Since the
management of the companies has under the new system the right to adjust employee
salaries they can adjust those such that they can pay these dividends. And since
the percentages are calculated per industry group they will be the same for all
companies in the industry group and thus not distort the competitive picture.
Dividends to new investors and to employees would be determined by company
management independent of the dividends to old stock holders. The law should
specify that after a certain period, perhaps 20 years, the separate treatment of
old stock holders will end.
Money Supply Issues
As previously mentioned, the Federal Reserve Board tries to control the economy by
controlling the money supply, mostly through interest rate changes, and presently
has a hard time doing so. This control mechanism will work much better if the
money supply is not disturbed by large fluctuations on the stock markets. The
proposed reforms will reduce those fluctuations to small ones and thus will enable
much better control of the economy by the Federal Reserve Board.
In addition the money supply can be increased and thus the economy stimulated by
creating "new money" (essentially printing it). This has been done in the past,
and is by some people frowned upon because it has an inflationary effect, if done
in excess. However, if done carefully, only in return for goods and/or services
provided by people entering, or re-entering the economy, and directly to those
people, not to intermediaries who may use it for other purposes, it will not be
inflationary, but stimulate the economy, because it will enlarge the economy.
This mechanism can help sections of society where unemployment is high quite
quickly, if properly executed. The key to making this work is to combine it with
a training and guidance program for the people who are entering the market. Thus
some of the "new money" would be paid to those who provide this training and
guidance, who would however typically also be people re-entering the economy.
Proposed Solution for Western Europe
In general terms the solution for Western Europe will be the same as for the USA.
To be effective the socio-economic restructuring will have to be applied to the
European Community as a whole.
To be able to implement and enforce a major restructuring, the European Community
will need a strong central government. The reason is that during implementation
surprises may occur and quick adaptation to changing circumstances may be needed.
Such quick response capability will also be needed to deal effectively with
outside occurrences.
One such possible occurrence is a complete collapse of the socio-economic system
in the USA, similar to the one that occurred in 1929 and caused the Great
Depression. The founder of the Modern Society Association, based on his extensive
knowledge of the thought patterns in the world of executives in the USA, believes
that the USA is much closer to such a disaster than many people realize. Of course
it is always somewhat unpredictable when a "card house" will collapse. Is it
possible that the USA fixes its instability problems in time? Yes, but
unfortunately this is unlikely, because major changes in the USA are usually only
made when a "public outcry" occurs, which will probably not happen until AFTER the
disaster. The reason for this again is that the political system of the USA is
dominated by people who provide money to the politicians to run their election
campaigns. Many of these people represent companies and other organizations which
have an "agenda", special interest groups which are trying to get specific
benefits for their constituents. These people usually do not see the big picture,
are not trying to work for the general good and are not trying to educate their
constituents on what should be done, if they see it. The politicians can usually
only shake off those shackles when a "public outcry" occurs. Many Americans see
this problem, but their attempts to change the system have not had much effect
yet.
It is crucial for the world that Western Europe gets its act together and forms a
true political union and does so fast. It is not that difficult to do. Key is
direct election of a European Parliament and creation of a Federal Government that
has full authority over the economy, defense and foreign policy.
To elect a representative parliament, the best appears to be to have a combination
district and proportional representation system. Dividing Europe into Federal
Districts, each with between 5 and 20 million people can achieve that. Each
district could elect once every 4 years an upper chamber consisting of two
representatives for each district, with the two candidates with the largest number
of votes being elected, and elect every 4 years, shifted two years from the upper
chamber elections, a number of representatives for a lower chamber, at one
representative for each million population, with the number of representatives for
each party being proportional to the number of votes. This would assure that
representation for all population groups would be present without block forming by
nation.
The individual states would still continue to exist, govern all aspects besides
the economy, the defense and the foreign policy, and in certain cases be the
executive branches for the Federal programs, as in the United States. The fact
that the Federal Government would handle the foreign policy would not prevent that
individual states could have representation in foreign nations. In fact some
states in the USA also have for instance trade offices in foreign countries. Such
a Federal government would change very little for the individual lives of
Europeans, but create a tremendous relief in that the eternal national bickering
would end and the European bureaucracy could be quickly streamlined. More
resources would then be available for Europe to pursue helping the rest of the
world to reach their socio-economic goals.
Proposed Solution for Developing Nations
Many "primitive" societies have developed quite good systems for the
socio-economic aspects of their culture, particularly in the area of human values
and relationships. This is why it should not be so hard to take these people into
the modern world. The basics of human relationships they usually have figured out
already quite well, be it that there may still be erroneous thought patterns
rooted in obsolete ethnic and religious traditions.
The key to helping those people is to provide modern infrastructure and knowledge
to allow them to overcome the effects of a bad harvest, and other flukes of
nature, mostly a matter of communication and transportation tools, and to help
them develop a modern medical care system. To do this well, it will often also be
necessary to help them build better shelter, with decent utilities like water,
sewer and electricity. Better shelter is also needed to allow them to properly
store and operate the equipment needed for a modern society and to provide space
to learn and to store the tools of learning, like books, personal writings and
files, electronic media, etc.
Setting up the same type of organizational structure as outlined for the
industrialized nations can work, if carefully matched to their traditional
organizational structures, possibly with temporary arrangements along traditional
ethnic divisions, so that smaller groups of people who can work together well are
formed. The organizational structure for a complete modern society can then be
put in put in place gradually, with guidance from people familiar with such
organization.
They will need help from people in the industrialized nations where it comes to
adapting modern technology to their specific situations. Having representatives
of their people do short apprenticeships in industrialized nations would also
help, in many cases probably more than full university educations. The focus
should be on learning as fast as possible to operate certain types of equipment,
to provide certain services or to perform certain organizational duties.
As mentioned before, payment, as for stimulation efforts in industrialized
nations, can be with "new money", if it represents new goods and/or services
provided and the hourly rates are carefully adjusted to the local circumstances.
There is no question that there is a large challenge here, but starting with the
right organizational structure, and making the human values the number one
priority, as in the industrialized nations, can lead to results quite fast.
Short Biography of the Founder
My name is Peter Hammerschlag, and I was born in February 1940, in the City of
Rotterdam in The Netherlands, a few months before German bombers flattened the
downtown area. The photographs of the smoking city looked just like the ones of
the World Trade Center in New York on September 11, 2001. I was a "war child",
and in my mind still am. In addition to the first 5 years of my life being in a
war torn country, my father was Jewish. He survived the Holocaust, but some 30 or
so of our relatives, including some close ones, died in the German concentration
camps. I still remember the fear that was all around us. I could write a lot
more about growing up in a traumatized environment, but for the purposes of this
bio, I would like to just summarize it by saying that the impact on children is
profound and the damage done to their personality development often very difficult
to overcome.
When I was a preschool age child it was already noticed that I was building so
neatly with blocks. Later "Meccano" became my favorite for building things. In
high school I had good grades, particularly in math and physics, but also enjoyed
classes in governmental organisation and economics. Obviously I had inherited some
talents from my father, who was a mechanical engineer, and so I decided to also
study in that field and earned an engineering degree, including an extension
directed towards research and development, at the Technical University in Delft,
The Netherlands.
In 1967 I emigrated to the USA where I have worked mostly in the product
development field, initially for The Boeing Co. (airplane design), later for
Ingersoll-Rand (mining machinery), and since 1979 with my own engineering firm,
which also involved a large amount of "entrepreneurial" activity, the past 6 years
with a partner. Though millions of dollars of equipment designed by me or under
my supervision are doing an excellent job around the world, and I have been able
to prove myself as an engineer many times over, my 36-year career as a product
development engineer in the USA has been extremely frustrating. I could have done
a lot more and enjoyed life a lot more, if my "career" had not been marred by
constant upheavals caused by the instability of the USA economy, which hits
particularly hard in the capital goods industry, and the fact that it is next to
impossible to find financing for down-to-earth product development ventures which
address real people needs. The only undertakings that generally are financed in
the USA are fad-of-the-day ventures that create opportunities to make a killing on
the stock market. A few of those, for instance in the medical field, are also
adding value to society, but an estimated 90% of the discretionary funding
available in the USA for new ventures is wasted. This, together with the economic
instability in the USA (discussed in more detail in another section of this web
site), are at the root of the present recession in the USA.
The only good thing that came out of being exposed to these aspects of USA society
has been that I accumulated a large variety of experience, technical,
entrepreneurial and in dealing with various forms of organization. This combined
with having lived the first 27 years of my life in Europe, thus being familiar
with another socio-economic system, and involvement in the establishment of several
non-profit corporations, as well as a vivid interest in how we could create a
better world, that started in college, has gradually given me the insights to put
it all together, to embark on designing better socio-economic systems and now on
establishing the Modern Society Association.
Organizational Structure of the Modern Society Association
The Modern Society Association is an action oriented organization, and thus will
need a strong action oriented management team. Although it is not the primary
goal, a substantial amount of study will of course be needed as well, to arrive at
well thought through action plans. In addition it will be necessary to get
feed-back from the people who will be affected by the association's actions,
before, during and after execution of the plans.
To accomplish this, the Modern Society Association will be organized as a
nonprofit corporation, under Washington State law, WITHOUT tax exemption, as that
will give maximum ability to engage in political activity in the USA. (Washington
State is located in the North Western corner of the USA.)
The Association will be governed by a Board of Directors, which will appoint a
management team for its day-to-day operation. The management team will consist of
a President, Vice-President, Secretary and Treasurer.
The Association will have Contributing Members, Consulting Members, Action members
and Policy Members.
Contributing members will make contributions in the $1.00 to $99.00 per year
range. The present planning is to poll the contributing members once per year on
their thoughts regarding main issues that the Association is, has been or is
planning to be active in. Such a poll, if properly done, is quite expensive, and
therefore we suggest that contributing members, if possible, try to donate at
least $20.00 per year.
Consulting Members will make contributions in the $100.00 to $999.00 per year
range. They will be consulted more frequently than the contributing members and
also more in the early stages of the planning.
Action Members will contribute in the $1000.00 to $9,999.00 per year range and
will be kept more informed about the day-to-day activities of the Association.
Policy Members will contribute $10,000.00 per year or more. They will be
consulted on matters of policy of the Association and be given in addition
opportunities to meet in person with the staff for more in depth interaction.
Working out the details of creating and implementing effective socio-economic
systems will require a lot of work. Therefore we are soliciting herewith actively
contributions to this effort.
Please
contact us
if there are any questions.
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