Economic Hegemony: Wealth of the Nation

Free enterprise provides the wealth to run our nation. It provides the private wealth capital, in the form of profits, to satisfy the needs of business and industry. It provides wages and returns on investments to satisfy individual wants. It provides the base for our system of taxation, and consequently supports all our governments: local, State, and Federal, and their activities. Free enterprise is the bulwark of a free society and forms the basis of a free market. The freedom to participate in free enterprise is a bedrock unalienable right. Not all members of society will participate in free enterprise by working for private industry since, at any given time, large numbers will work for our various governments, and many will be in the armed forces or in the clergy. However, all citizens of this nation will participate in the free enterprise system as consumers and investors.

Individuals, if they so choose, can start their own business with the knowledge that the only limitation to their success is the amount of capital they have and their ingenuity. In total, the participants in free enterprise will be responsible for the fundamental wealth of the nation.

Free enterprise requires an infrastructure of processes within which it functions. It requires an educational system, a system of justice, a banking and monetary system, systems of transportation and communication. In short, free enterprise requires the full working of our nation-civilization to work. Free enterprise is the outcome of a free people exercising their unalienable rights in the free society we call our republic.

Free enterprise is a system. It is. not one thing or a collection of things. Free enterprise is an interlocking system of processes and it has many analogies in the genetic world, where interlocking systems are linked by genetic information to form other systems: a tree, forest, or the deciduous forest biome. In the free enterprise world, the interconnections are made through various technologies designed for specific purposes, like the communication or the transportation systems. The free enterprise system is an ecosystem, composed of technotypes, (the equivalent of a biotype or a genotype, but in a technological ecosystem, driven by language not genetics), together with the tools that make the system work—language, plans, bank drafts, hand tools; industrial machinery, or transportation devices. The free enterprise system consists of humans and their tools in interlocking processes that produce the goods and services of our society. The system is free if the humans within, it are free to move about, enter or leave the system, or change their status within it.

The free enterprise system is not about jobs, but jobs are an integral part of, it. Free enterprise is not about profits, but without profits the system, will soon slow down, stop, and collapse. Free enterprise is doing creative things with capital, but capital is only one part of it, a very essential part to be sure, but only a part. Free enterprise uses capital to employ labor to design and build better mousetraps which, if successfully marketed, will produce profits which, in turn, will sustain livelihoods and provide additional capital to build other, still better mousetraps. Successful free enterprise is a growth process, but one that contains senescence and death as likely outcomes. Free enterprise is the main economic machine of our republican social order.

It is the function of the Federal Government to provide equal access to the processes that are the unalienable rights. It is the responsibility, of the Federal Government to see that each citizen sovereign of the general government also has equal access to due process of the law.

We have in our Federal Government the Commerce Department which has a potentially great function in fostering dynamic business, something the nation needs right now. Within the Commerce Department are a number of agencies that could aid in fulfilling this potentially great function. The Small Business Administration is one such agency, although it is misnamed since it considers a business to be small if it has only 500 employees. We need an agency—perhaps a Microbusiness Administration—that is willing to deal with businesses as small as one employee. The Patent Office of the Commerce Department could do wonders, but it needs to be modernized, brought into the real world, and given the task of spurring innovation. The Bureau of Standards plays an extremely vital role by establishing standards of weights and measures and standards for everything we do requiring them. This is the Bureau that plays the important role of establishing standards for industry.

We also have in our Federal Government the Labor Department whose role it is to look after the human side of the business and industry equation. The Treasury Department's role is to collect the custom duties and taxes that enable our Federal Government to function. The Federal Reserve Board hovers over the banking industry by regulating the money supply, setting basic interest rates, and acting as the clearinghouse for financial transactions. The Justice Department referees the disputes and, through its anti-trust divisions, provides a level playing field for American business. The Trade Negotiator protects the interests of American business in foreign trade by negotiating trade agreements with various foreign governments. All of these parts of the Federal Government are essential to our nation's vitality.

But back to industry and business. Profits are what a corporation has left after it subtracts the costs of doing business and taxes from its income. What a corporation does with its profits determines what its future livelihood and growth potential are. If the profits are squandered and the maintenance of the organization is neglected, as with other systems, the corpus of the corporation will deteriorate and die. If the profits are husbanded properly, the corporation will survive and thrive.

Certain conditions are required to enable corporations to survive and thrive just as surely as certain conditions are necessary. for individuals to survive in the society. The manner in which profit is hand led is one of those conditions. The main use of profit is to make more profit. However, the exponential growth curve is just as applicable for corporations as it is for biological organisms. Companies can grow very quickly and they can collapse very quickly. This phenomenon is seen in unemployment numbers. As people are laid off, more and more people are laid off because people affect each others' jobs. Manufacturing and industry can collapse as they did in the Great Depression because of the linked effect of jobs in the various parts of the economy.

A thriving growth is the desired outcome of corporate activity, otherwise there is senescence and death. As a ploy to avoid paying taxes, some companies' profits have been used to fatten their organizations. Their fat-cat condition has made these overvalued companies the targets of take-over outfits that capture and then dismember them for the profit (fat) that can be extracted from them. This would not happen if the companies in question paid their profits out in the form of dividends to their stockholders. The fact that companies do not, as a rule, count their stockholders first in the division of wealth makes stocks poor investments for ordinary people. Unfortunately, this condition will persist as long as companies favor the strategy of sequestering the profits of their large stockholders from taxation. Publicly held companies should pay no corporate income tax if they paid out their profits to their stockholders, and have held back only as much as they and the Internal Revenue Service agreed to be necessary for the company to survive and thrive. Which brings us to the question of taxes.

It is necessary to discuss taxes when discussing free enterprise as (1) so much of what happens in business depends upon taxes, and (2) businesses today spend so much time trying to avoid taxes that this activity has become a major subject of the practice of law. Without taxes we have no means to perform the public good. Taxes are what we pay for government and the public sector of our economic activity. Schools, libraries, public safety, roads, water service, sewage, et al., are paid from taxes. At the national level, taxes pay for justice, domestic tranquility, the common defense, and the general welfare. Taxes are what we all pay for the common good as defined by the Declaration of Independence, the U.S. Constitution, and the Constitutions of the States.

There is a logic to taxes similar to the logic of profits. Profits are used to make profits. Businesses, by cleverly investing profits make more profits. Income that is used for other than overhead, depreciation, reduction of debt, payment of dividends, or investment in future profit is wasted income. Profit that is used for the entertainment of top management, inflated salaries, corporate jets, vacation homes, etc., which figure so prominently in companies, that are take-overs, is a waste of income—income that could be making more profit. The same can be said for taxes. Taxes have to pay for the overhead of government. Beyond that, taxes pay for services rendered by government to people according to one or more of our governing documents: city charter, State Constitution, Federal Constitution, etc. Prominent among the services that the Federal, government should provide are the unalienable rights. In no instance should taxes be used to enrich individuals or corporations. Taxes, like profits, should be invested to produce more taxes.

One such investment of taxes should be in health care, as it is. However, health care prevention saves even more money than health care provision, so our nation should be investing more in health prevention.

Another investment of taxes should be in education. The more the government pays for education the more income tax it can expect to collect from educated people. We need to look at our education system as a crime and social welfare prevention system. If the schools are successful in teaching young people, the youth will graduate, get jobs, and pay taxes. If not, some of these young people will go into crime at great cost to themselves, their families, and society. The cost is great while they are criminals and the cost is great when they are caught, convicted, and incarcerated. A young person can be sent to any good college for a fraction of the cost of maintaining him/her in a prison facility. Some young people who are failures in school end up in the social welfare system where it costs more to sustain them, particularly young women with children, than to have them in school. Education should be seen for what it is—an investment opportunity in the growth of the nation as a corporate entity. Within the education process all children and young people should be educated about the benefits of free enterprise, and about how to survive and thrive in the modern State with its high development of science, and technology. All students should be literate and have the ability to read, write, speak, and listen well, as well as have the ability to form a corporation, for profit or not for profit.

When the United States was young its citizens thought that agriculture would be our main business, at least for many centuries. As the vast majority of Americans lived or worked on farms, we established a complete support system for agriculture as an industry. The Land Grant Colleges and Universities were established to educate Americans to be farmers and mechanics. An Extension Service was established to acquaint farmers with the relevant advances in agricultural science and technology. The commodity support programs came along later to regulate prices in the agricultural market. The pay-off? The agricultural programs were so successful that the number of Americans involved directly with agriculture dropped from something like 45% in 1910 to less than 2% in 1990.

We need to emulate this success in business and industry. We have to look at the prospects of each American and consider that he/she has a right to participate in free enterprise, not just as an employee, but as an owner of capital as well. Americans should be able to look for the opportunity to earn wages and earn dividends, to be workers and owners at the same time. We need a system of free enterprise where every American can and should be a capitalist.

We have to revamp our grade and high school curricula to place a greater emphasis on business and industrial America. We need to look at colleges and wonder if they could not be improved so as to serve not only the typical business college graduate who expects to join middle management of a Fortune 500 company, but also those people who would like to run a "mom and pop" company. People who, for all their lives, will work for someone else have to understand about employee stock ownership. And employee stock ownership plans should be modified to give the owners a real say in the management of the company, rather than permitted to simply remain another tax gimmick for the company, as most employee stock ownership plans are now. We also need to teach people what to do with money they win in lotteries.

We need to teach athletes who may have trouble reading what to do with multimillion dollar salaries they will earn as sports superstars. (Joe Louis, the greatest heavyweight fighter of all time, some would say, died a poor man after having the internal Revenue Service hounding him for every penny he made in his later life because no one taught him how to manage money.) The drama schools turn out future millionaires in the form of actors and actresses, and the college athletic departments turn out more millionaires in the form of sports superstars. We have an obligation to prepare these people for the future shock of wealth.

We need a business and industry extension service run out of the business colleges of the local universities. They need vigorous research programs to study the dynamics of success in micro business. We need more than the business incubators that are now being run by some real estate companies and universities. What is being offered now is not adequate and, in some instances, may be, destructive. For instance, a major university in the Southwest willingly assisted an inventor develop and market his invention However, when all was said and done, the university owned the inventor's patents and presumably his business as well. One could get as much help standing on a busy street corner. Universities should receive appropriations to assist in technology transference, and to give advice and counsel to small and micro businesses.

To put a sharp research edge in the business schools we need a National Business Foundation patterned exactly after the National Science Foundation. Congress would have to appropriate the money to fund this agency of government that would operate like any other research organization, but would provide the information that we as a nation need in order to be able to compete and thrive in the national and international world of business, commerce, and trade. The National Business Foundation would need to promote a vast, interlocking network of people in the business information management business, and the CIA should be at the center of that network, providing evaluations of current knowledge and technology as well as the technological advances to make the network efficient and productive for us as a nation.

Somewhere in the Commerce Department, probably associated with the Bureau of Standards, there needs to be erected the National Institutes for Manufacturing, Industrial Science, and Technology (NIMIST). Every major sector of our manufacturing and industrial economy should be represented in these institutes, which would be modeled on the National Institutes of Health. NIMIST needs to be a major research force in the basic workings of our various industrial and manufacturing technologies, as well as a supplier of the Federal share of research input into the national economic hegemony. The Federal share is the representative input of the people. We the People would have to be part of our manufacturing and industrial technology, and the Federal government would need to represent us with various Federal inputs. Here the input would be research, and We the People would have to be represented in that effort as it could well make the big difference between full employment and unemployment, a prosperous and valued way of life or declining middle class material and psychological values. NIMIST should in no way replace any presently ongoing corporate research along the same lines. NIMIST should do the generic research particularly in systems and systems integration that makes the operation of existing or new industry understandable and improvable within the context of our social environment. And NIMIST should do the research that banishes obsolescence and promotes renewal, change, adaptation, innovation, and creativity. We should never again go through the equivalent of the obsolescence of the steel industry, with its enormous human and social cost. As a nation we were asleep at the switch when this occurred, and we allowed the national interest to repose in the hands of a relatively few industrial leaders who were not capable of understanding the process that was enveloping them. Three hundred thousand people (300,000) left Pittsburgh as a result of that gross mismanagement. The mismanagement was on the part of industry, of course, but it was also on the part of the Federal government for paying so little attention and having so little concern for a major portion of the industrial infrastructure. NIMIST, if run by competence persons, would not let such a debacle occur. Although it would not be able to do it all, NIMIST could do a lot. It could be and industrial bellweather. Needless to say all the engineering schools in the United States would have to be in the NIMIST network. While NIMIST would sit at one nexus of the largest computer network in the world, the CIA would sit at the hub of that network and be the network manager.

Meanwhile, the Patent Office would be completely restructured to aid and abet inventors, not inhibit or discourage them. The present system of issuing patents for a fee should be abandoned at once. The present system of charging filing and "maintenance" fees for patents is unjustified if not criminal. Patents are guaranteed by the Constitution. No one should have to pay a fee for a Constitutional right. The Congress is empowered by the Constitution to levy and raise taxes to run the government. The mere existence of patents in the real world generates great revenue in the form of profit which is taxed. If the Federal Government does not have enough tax money to run the Patent Office and grant patents under the Constitution, the Administration should resign and let others who understand the Constitution run the government. Ditto for the Congress. As patents are granted to individuals under the aegis of the Constitution, there should be no impediments to the granting of them, unless it can be proved that the application is for other than original work. We should quit fooling around with the patent library. The CIA should be given the job of producing a sensible, useful, patent claim system, fully automated and easy to use, just like a library card catalogue. While they are at it, the CIA can make a useful contribution to the nation by providing assessments of science and technology, as evidenced by the patent files, and make predictions, assessments and recommendations on the trends and importance of science and technology in the national interest. In addition to charging no fees, the Patent Office should have an R&D function in the form of a small grants program to assist inventors. The grants should be based on the merits of the invention, not on the academic credentials of the inventors, to help bring the patent to market. In many cases the inventors need just a few hundred dollars to build their machine. In other cases, thousands of dollars may be needed to test various methodologies in order to choose a winning one. If the Executive Departments want to support R&D to the tune of millions to develop special technology of interest to them that's fine, but there should be someplace in government where the citizen sovereign can find support for a good idea that occurs at the quantum level of our society. We have a grave misconception if we think all the good, orderly, formalized, acceptable thinking is in academia. Ordinary individuals will account for as much if not more creative thinking if they are given half a chance and some encouragement.

Capital should not be distributed by taking it away from one group in the form of taxes and giving it to another group in the form of subsidized business and industry. This is what we do in the defense industries and it is not very efficient. A relatively few people in government and industry decide what the defense needs are and then assess them under pain of being called unpatriotic if they do not adopt them. The defense of the nation should not rest on people's patriotism but on cold, hard science, technology, and business management. Patriotism should come into play only after troops are committed to the national defense. To not support a decision of the Congress, particularly the House of Representatives, to go to war, is indeed unpatriotic. No one (or corporation) should profit from taxes. Your immediate reaction might be, "But what about the defense industries?" In the old days, even the fairly recent past of the 1940's, the government itself ran the defense, industries and did very well. All our battleships were built in U.S. Navy Yards by GS 5's and, 7's in the Civil Service. They were and are great ships. We had our own armories as, well. There is no need for the government to go back into the business but, on the other hand, there is no reason why the companies doing the work could not be non-profit corporations. Why should selected stockholders be enriched from the need to provide for a common defense? It's not fair and it's a misuse of tax dollars. Workers and managers in defense industries should be paid well, since the defense of the nation is in their hands. However, since in all cases the work is performed with government funds and, in most cases, in government owned facilities and with government furnished tools, there seems little reason for someone to profit just because they own stock in a management company.

The defense budget is often touted as an employment budget. This should not be the case. Defense expenditures to support employment are a waste of taxpayers' money. If employment is the object of Federal expenditure, it would be much better to put the money in things like the National Park Service (NPS) since public service organizations like the NPS hire many more people per million dollars than do the military. Defense should be what it says it is and it should do what it is supposed to do. It's far too expensive to serve any other function in government. NASA is also guilty of defending its budgets by claiming all the spin-off from its space research. If the spin-offs are that important they should be funded separately, maybe in the Bureau of Standards or in the Bureau of Mines or some other such Federal system.

The defense, industries, however, are not all that bad. There is quite a bit to commend them, especially, in addressing the national interest. The national interest comes in two parts (1) political hegemony, and (2) economic hegemony. Political hegemony has to do with defining ourselves as a sovereign nation and defending that sovereignty against all comers. The economic hegemony has to do with our ability to establish ourselves as an economic entity, and to survive and thrive in the world markets, as a nation. One can readily see that the money to operate at the political level comes from success at the economic level. It should also be obvious that we use the military to advance and defend our political hegemony and, in particular, to provide a favorable environment for our economic hegemony which, in turn, provides the coin to support the military. As our interests turn more and more to manufacturing and, trade, as they should in a modern nation, we will have more reason to balance our military needs against our need to be an economically productive nation. In today's spirit of democratization of the world, we have to trim the sails of the defense establishment and look to our own industrial base to maintain our place in world markets. Because of our obsession with the use of the military to achieve our purposes, we have lost quite a bit of our edge to Japan and Europe. We could be inundated and brought to ruin if we do not understand the economic threats we face, even from our friends. We have to quit fooling a round with trying to change the government without the consent of the people, (Antifederalists and Federalists, We the People, April 1991), and get back to the business of business. Our military (political hegemony) should balance our commerce and trade (economic hegemony) and we should abandon our so-called role as the "world's policeman". We can have a far greater effect on the course of world events by being a well run nation than by being an over-aged, overweight pug with a bar bill, willing to take on all comers, particularly if they are small.

The only reason we can throw our weight around today, with our huge debt and the losses of our industries to overseas producers, is that the President(s) and the Congress(es) have chosen to sell the country to finance our political hegemony. We are paying a huge price to maintain Japan as a suzerain, that is to say, a sovereign dependent upon us. We have agreed to provide a defense establishment for Japan, if it remains one, of our subordinate buddies. We have allowed Japan to ravage our domestic markets in electronics, steel, and automobiles, if it agrees, to be a member of our gang, under our leadership. We have allowed the Japanese free access to our financial markets, if they will sit at our lunch table. I don't blame the Japanese for this situation. They are the beneficiaries of a policy we invented; they did not force themselves upon us. (Had they done so, and over the same situations, we would have gone to war with them long since). We have invited Japan to dinner. Some time soon we should recognize Japan's ability to say "NO, thank you," to our invitation and treat it as we would any other friendly competitor, say as we do Germany.

The extravagance of our defense establishment, because of CIA misinformation about the USSR, has cost us untold billions and trillions of dollars, and it has left us a debt ridden country with a shaky economy. We need to redirect our efforts, including the redirecting of the CIA to be the nation's lead agency for information management. We need to recognize certain industries as national interest Industries and husband them the same way we husbanded the agriculture and then the defense industries.

We have to set as our goal the objective of every American sharing the American dream of living the good life, making a contribution to our national life, and providing a place where our children can be more than we have been. We can not banish poverty by transfer payments to the poor. We have to banish poverty by providing all our people access to those processes that make the middle class: the unalienable rights. We have to encourage people to exercise their unalienable rights and elevate themselves in our society. Racism and discrimination are factors in our American life style because they represent a claim on scarce resources. If we have an economy of scarcity we will have discrimination and racism. If we have an economy of abundance where there is opportunity for all, discrimination and racism will diminish. It's tragic to be without support for one's self and one's family. The tragedy is no less because some uneducated person and family are suffering deprivation instead of some well educated person and family. Deprivation is deprivation and it can only be solved by a vigorous economy in a society where all the citizens enjoy their unalienable rights. Anything less is unmerited discrimination for greedy and selfish purposes.

A government, based as ours is on the Declaration of Independence, that does not provide its citizens access to the unalienable rights does them grave injustice. Imagine the Jesse Helms campaign ad with the white hand and the voice-over saying, "You're not going to get the job just because of the color of your skin." Imagine that voice-over saying instead, "Because we live in a land where everybody has their unalienable rights, and where the free enterprise system runs full bore, we're going to need you, all of you, to keep this great nation of ours going. So stay in school; keep your health, and help us be number one in the world."

There is hope for our nation, but only if the citizens sovereign demand and receive their unalienable rights among which is the right to participate in free enterprise.

...Ted Sudia...

© Copyright 1991
Institute for domestic Tranquility