Global rule of law and Economics: the necessity of new theory

Capitalism !

Hi all,

I wanted to say a word or two about the unique challenges one must consider when thinking through a global economic system defined under global rule of law.  Throughout this treatment I will freely move back and forth between special and general federalist systems, referring to the United States when considering special federalist systems.

Presently, as we shall see, there exists no economic system adequate for application within a global legal framework. This means that a whole cloth economic theory must be advanced to satisfy this need if durable, global rule of law is to attain. That is the focus of this discussion.

The first thing I want to examine is the durability of various existing economic schemes, both in the special and general cases. While I’ve talked about the durability of regimes as a whole, little has yet been said about the durability of various economic systems. I’ll start with Capitalism.

For more information on the economic durability of capitalism one can reference the voluminous literature on the role of limited government regulation employed as a means of regulating Capitalist organizations and labor. It is a well accepted mantra amongst capitalist economists that a healthy capitalist economy is  regulated by government to balance societal and purely economic interests; in effect the merit afforded both distributive justice of all and popular justice of faction. Without it, capitalism contains the seeds of its own destruction via a tendency to suppress the growth of a “middle class” and promote extremes of material wealth. Proceeding from this point of agreement, it is fairly elementary to show that the geometric progression of technology is creating conditions which are de facto, conditions of insufficient or non-existent government regulation. What begins as a relatively balanced admixture of expression in societal and economic interests evolves, in parallel and in proportion to technological change, ultimately to an expression disproportionately laden in economic, general interests. But how, and why does this happen?

What is changing is that the geometric progression of technology is making it easier to subvert regulation by outside entities; i.e. government, and that subversion has the powerful motive of profit to drive it. The relentless drive of capitalism can be found in the inherent, built-in motive of the capitalist to expand profit margins bound only by the force of prudent regulatory law and free market realities. This system works magic when government is able to adequately regulate it, but my proposition is that government is gradually losing that ability as the technological infrastructure grows more complex – and does so at a rate that policy-makers cannot match. I shall refer to this phenomenon as technological de-regulation and there is a simple test one can perform to validate it. Assume, for the sake of discussion, the technological infrastructure extant in the United States. Suppose that business x introduces a technological innovation, y, that, by design, effectively and legally circumvents regulatory law that prohibits, status quo ante, business practice z. But suppose further that y facilitates z. Then x is free to lawfully exercise z by y and the regulatory law is, in deed, null. Next, consider the minimum legislative or regulatory cycle time t1. If technological innovation is geometric in time and legislative or regulatory cycles are not then there exists some time t2 such that t2 < t1 and the business practice is technologically de-regulated without legal remedy. By extension, this applies to any business practice and in sufficient time, t, the entire industry, and ultimately the entire economy, is technologically de-regulated without legal remedy. In this thought experiment, z is the range, x the function and y is the domain. At t2 z and y are functionally asymmetric. The United   States has just now entered this period of asymmetry. It is unclear at present how long it will take for the entire economy to become functionally asymmetric. The only legal solution to this problem would be to enact ex post facto laws as a means of discouraging the rapid undermining of existing laws, something forbidden by the United States Constitution for good reason.

Technological de-regulation can be best illustrated with an example. In the 1970’s the USAsaw the growth and maturity of a technological innovation – the ability to track individual consumer behavior in such a way that projections of future consumer performance in the market could be realistically, albeit statistically, ascertained. Investors, seeing an opportunity to expand existing or create new profit margins, seized upon this and took the unprecedented act of commoditizing human beings. Specifically, they devised a system of investment speculation, exactly analogous to speculation in securities markets, in which they invested in ‘personal loans’ to consumers for which no security was provided other than the future performance of the consumer. By adjusting returns in the form of interest debt servicing, they compensated for that statistically projected minority of consumers who would inevitably fail to perform and speculated that, given a mathematically sound algorithm for calculating interest on debt, their net return would result in profit. That is, by definition, voluntary slavery. Why? Because the entire scheme is based on speculating on the future economic performance of a human being; i.e. it is predicated on commoditizing the human being. Under legal slavery (coerced) the same economic calculus exists: a batch of human beings is purchased with the investor speculating that a majority of these persons will perform economically in the future. Some won’t but by adjusting their scheme mathematically to compensate for that reality, they can insure a net profit margin through the labors (economic performance) of the slaves. One might understandably object that this is not the same because the current scheme is voluntary. I concur that it is not the same in every regard, but it is exactly identical in those aspects economically and morally material to the issue: Even voluntary slavery is morally unacceptable to me and I would venture to guess that it is morally unacceptable to most people. Whether voluntary or coerced, codified under social contract or a de facto economic reality, it doesn’t matter. Slavery in the United States, outlawed by Constitutional Law, has now been technologically de-regulated without legal remedy. It is a classic example, at least in this case, of economics suborning law. And this is just the tip of the iceberg. The complexities that technological innovation brings to the legislative environment, and the rapidity with which it is changing in time, guarantees that it will ultimately evolve to situations as just described…and in time, to circumstances potentially far worse. In a nutshell, given enough time, capitalism “wins out” and its general interests (strong economy, strong growth) prevail to the exclusion of more specialized interests. Next I’ll discuss how the Capitalist system is producing yet another asymmetry by popular justice of faction ex parte. In both cases, strong asymmetries are mounting quickly as technology rapidly changes.

Government founded at least in part on historical ‘look-back’ and prescient projection of future environments is the best guarantor of regime durability. If there is any social law that can be so esteemed it is that technological innovation is progressing at a geometric pace and that access to power (watts or joules per second) is becoming more and more decentralized and democratic. Consider, for example, the sub-orbital space flights of Burt Rutan’s private space-faring enterprise, a feat once confined to the vast coffers of the most materially and technologically capable nations. Or the commandeering of large, private aircraft to be utilized as weapons of mass destruction on 11 Sep, 2001 by individuals not supported by a nation-state. Or the development of nuclear weapons technology by dictatorial, non-durable third-world governments. Power and technology is becoming cheap and it is doing so at a geometric rate. The literature in this area is beginning to pile on, so I won’t add to it here.

But we can’t understate how broad a topic this turns out to be: individual consumer access to power, via consumer technology, is the common denominator of economics itself. While efficiency[1] plays a technical role in this relationship, here we are only concerned with the power aspect. Even investment capital, in its most natural state, has a qualitative, and some would argue quantitative, relationship to the power and energy expended to locate and recover it. Indeed, it might not be entirely non-sensible to associate a fixed wattage with a variable unit of currency as the truest valuation of an economy. The more power to which we have access the more useful work we can accomplish, the greater our individual financial productivity, regardless of our own metabolic input, and the more damage, harm and inefficiency with which an individual possessing it can jeopardize civilization itself. This latter point represents the flip-side of power: Entropy is the result of the release of energy into an environment; the greater and more rapid the energy release, the greater the entropy. But entropy is the currency of destruction and the more power possessed per capita the more potential for entropy, and hence, for destruction that exists. It is the fact that technological ‘progression’ drives per capita increases in wattage, and hence the economy, that completes the motif. As time rolls forward, the colors of this motif will grow stronger. Examples of this subtle but crucial connection can be seen in the fact that technological progression is now a well-recognized, dominant factor in national financial productivity levels, which, in turn, are now seen to be the main drivers of economies. It is worth the readers effort to read this paragraph a few times until the ineluctable danger of technological progression not sufficiently regulated and monitored by a social contract is clear. Perhaps upon doing so, the politically conservative reader will better appreciate why I shall shortly introduce and promote the idea of a “Fiduciary”. General Federalism is the key to containing this beast while retaining the values of democracy. While there are undoubtedly several ongoing phenomenon that will shape the future environment of governance whose presence we cannot now detect, the geometric ‘progression’ of technology, and its potential for catastrophic effects on humanity, is, at least in more sophisticated dialogue, one of the most widely recognized, discussed and written about phenomenon of our age.

Still in its infancy as a historical force with which to reckon, any projection of a future environment, especially in the most technologically developed society on earth, is almost certainly incomplete without a recognition of the changing technological environment. It is the classic question raised by both Albert Einstein and Stephen Hawking. Can humanity survive without destroying itself? They seemed to think not. I shall posit in what follows that, in all likelihood, humanity can survive if and only if a very serious, sobered and careful re-evaluation of the social contract is undertaken. I believe this one issue represents the greatest challenge to civilized governance in human history. So, I here juxtapose the role of a technological infrastructure undergoing geometric rates of change with “a”; to wit, we not only seek “a” but also aver that this is a dire matter of the long-term survival of civilization itself. To my countrymen I submit to you that it is time to grow up and contemplate a world larger than ourselves; to dispense with ideological faction and think originally. This fork in the road for humanity is clear and will soon be present.

The ability to regulate the proliferation of both the tools and end-products that increase per capita entropy potential is a general interest; something in the better interest of the nation as a whole. The ability to do this effectively outside of a command economy, or the economic system I will introduce shortly called a Fiducial Economy, is highly doubtful. In a free market economy decisions about what to sale are based solely on demand as a means to increasing profit margin with little thought given to “alternative” uses. Even if it is acknowledged that Capitalists might conceivably have the wherewithal and desire to self-regulate their own technologies, the development and marketing of a motley collection of seemingly disparate retail technologies may have expedient fabrication forms that, in the absence of a centralized, shared decision process throughout the Capitalist economy, could materialize well before any stakeholders realize it soon enough. Stakeholders in these scenarios include government. But in a Capitalist economy, government is not a central planner on the macro-economic scale and couldn’t possibly adequately regulate such a complex interplay of disparate manufacturing, supply-chain, marketing and retail interests – all conceivably converging on some novel, as yet unknown expedient combination of disparate products. Of course, at present we are probably safe from such a nightmare scenario as the economy is not yet so complex or technologically sophisticated. But therein lay the concern about the inevitable. If technological innovation is progressing at a geometric rate it is unclear just how far off such a scenario as I’ve described really is – and just how rational it is to ignore the inevitable outcome. It is inescapable that at some point, whenever that may be, technological innovation will be sufficiently complex such that a centralized regulatory process will be absolutely necessary for the effective proliferation of technology to the citizenry for their benefit and use that effectively excludes dissemination of those components detrimental to general interests – components useful for the assembly of any novel weapon of mass destruction some of which we haven’t even yet thought of. This is the second economic asymmetry of Capitalism which I shall refer to as entropic asymmetry.

Capitalist economics evaluated as a functional relation between influences (domain) and outcomes (range) reveals the underlying cause of the asymmetry it produces. Since economic fundamentals affect the citizenry by market action and inaction in like manner as public law, and thus effectively redounding to justice, it seems reasonable to treat the economy as a part of the social contract. Whether economic fundamentals are an explicit legal component of the social contract – by lex generalis – is not at issue, merely that a natural contract, forced or voluntary, exists unto which the citizenry is bound. In this sense, Capitalism consists of a geographically and operationally disparate set of semi-autonomous autocracies bound together by market and trade forces as well as the regulatory constraints and liberties placed on it by legal bodies. An autocracy as we’ve discussed is inherently non-durable and functionally asymmetric, so the only remaining question is what to make of legal efforts to regulate Capitalism, and to what extent does that alter its autocratic nature. But we need not examine this too deeply for, regardless of the type and depth of regulation, an economy that operates on the basis of the freedom to incorporate and transact business by the general public, and which establishes in law the basis of incorporation as an autocratic institution, cannot, if it retain the nature of what it is, be regulated or constrained in law to be anything other than an autocratic institution, with varying degrees of fidelity. Various regimes have attempted to diffuse the natural authority of the corporation amongst a broader body of stakeholders and thus to alter the autocratic nature of the corporation. This has been particularly popular inEurope in which the influences of popular faction, by virtue of their parliamentary forms of government, have reacted to the Capitalist asymmetry of general interests in an attempt to moderate it with special interests. While a notable phenomenon, it cannot attain functional symmetry since the autocratic authority is gradually being replaced with that of the regnant social contract here, the parliamentary forms of government which are also functionally asymmetric. In other words, the curious phenomenon in Europe is that, economically speaking, they are attempting to swing a pendulum from one end of asymmetry to the other, unable to settle at the center because of the inherent nature of the representative systems – parliamentary systems – that are driving the process. Not only wills this lead from general interests functional asymmetry to special interests functional asymmetry, it is also non-durable.

Having identified Capitalism as a functionally asymmetric economic system I seek a substitute economic system that is functionally symmetric; one which has a better chance of accommodating rapid technological change – and is thus durable. But before proceeding I would like to note that both technological de-regulation and entropic asymmetry are in fact fundamentally linked on a deeper level to their cause; technological change. Thus generally speaking both are a more specific manifestation of Capitalist functional asymmetry via technological change and both producing opposite types of functional asymmetry. I shall submit that there are probably more specific manifestations not yet identified and will thus describe the functional asymmetry of Capitalism as an economic functional asymmetry based in technological change whose asymmetric type is random.

Having demonstrated that economics is a legitimate part of the social contract, and having identified the economy of the United States as a functionally asymmetric system, I will now attempt to assess how an economy can be placed in its proper, fuller context in the social contract in such a manner as to make the economic relations within the social contract functionally symmetric. Though the exponent of Federalism itself, Alexander Hamilton, recognized as I do that economics is a legitimate object of the social contract[2], the only example to which history admits of an economy explicitly and comprehensively bound by a social contract is that of a “command economy”. Unfortunately, this history is not all positive so I will need to begin by understanding its infamous pratfalls.

The institution of command economies has occurred only within a very specific kind of ideological framework; that broad framework of Marxist thought. So, I will begin there. There are numerous theoretical and practical problems with both Marxism and Marxism-Leninism; so I shall briefly sample a few here. Lest the reader think I’m enamored I would remind them of the second great lesson of political sophistication: “verbose, drawn-out ideologies are a reliable tocsin that the ideology is either a tool of thugs or is not practicable in application”:

1.) Marxism is implicitly predicated on the proposition that reciprocal altruism, as evidenced in human behavior, is the exact reverse of what the present state of the art in Sociobiology now tells us; to wit, that rather than claiming that an organism will suffer small losses for potentially large future gains Marxism requires us to accept the erroneous conclusion that an organism can be expected to find large losses for potentially small or even non-existent future gains an attractive survival option. This flaw is fatal to Marxism in whole cloth. It speaks directly to the financial productivity issues we shall shortly enjoin.

2.) An independent variable in the domain of the function S, which Marx called Surplus Value, was ignored by Marx. That variable is the labor and intellectual contribution of the Capitalists. Part of the value of a commodity is due to the efforts of the Capitalist. Marx didn’t agree. All the ‘math’ and ‘deduction’ Marx does after that is meaningless. You can trace his steps by referencing the hundreds of pages of Das Kapital, Grundrisse and Wage, Labor, and Capital.

3.) Marxism-Leninism, the ‘cool’ version of Marxism, proposes a violent, revolutionary model for spreading Communism internationally. The problem with this is that history has repeatedly shown that regimes of this nature are not durable.

Again, we are living in a fortunate age where vast amounts of ‘new’ data are available that allow us to more closely examine, on a performance basis, what happened in the great ideological experiments of the USSR and the PRC, not to mention other nation-states that traveled similar roads. Scholars are now beginning to better understand more precisely why the economy of the USSRfailed based on the release of economic data from that country. What has been found is nothing short of incredible and earth-shattering: the truth lies somewhere between the Cold War propaganda and rhetoric pedaled by the two sides of that age. First, the data does not support the notion that a command economy, in and of itself, is a failure. On the contrary, it was found that the Soviet economy under Stalin grew faster than any economy in human history. Curiously, after Stalin’s death the economy went into free-fall. It is this historical cusp that warrants our closest attention. Individual worker financial productivity levels were more or less typical under Stalin; not especially good or bad. After Stalin’s death financial productivity levels plummeted. A consensus is emerging that the cause of the economic decline is theUSSR was, by far, mostly attributed to a dramatic change in financial productivity levels. The same phenomenon was observed in the PRC. But what this means is that the failure of the command economy of theUSSR was probably not due to any of the several other culprits advanced by Cold War capitalists such as:

1.) Lack of investment to create new employment by dint of no profit incentive.

In fact, massive investments on an unprecedented scale were made by the State.

2.) Determination of supply and demand in a command economy is unnatural.

In fact, the State adjusted price controls to match demand. Supply problems were caused by consumer hoarding which was, in turn, caused by the slowing economy.

3.) Excessive complexity in managing an entire nation’s economy centrally.

In fact, the State delegated this authority nationwide and it was no more complicated than it is in a capitalist system. Though national economic interests were promulgated centrally, these goals were broad, generic and easy to understand and communicate.

Inter alia.

But lets not get ahead of ourselves. To more deeply understand what was going on in command economies we need to turn to the numbers and then see if it matches our qualitative descriptions.

Reputable, serious, academic researchers have in fact found something tantalizing in the data? Well, first, numbers before 1950 must, unfortunately, be discarded. There is little we can do with them. We can thank Stalin (and to a lesser degree, later with Kruschev) for this lacunae of vital historical import. There was simply too much “cooking of the books” to have any solid idea of what was going on from 1917 to about 1950.

But, after 1950 we see one of those rare, silver bullet numerical phenomenon showing up. It is rare because seldom does one factor play such a singularly important role. Here is what was found.

Oddly, the Soviet economy was schizophrenic. On the one hand, massive new wealth was in fact being created. The economy was performing remarkably well in that regard. Communism worked as far as producing capital. Curiously, though, the capital was not being converted into productivity gains. In other words, the capital was not improving output. Normally, when capital is produced that capital gets recycled back into the economy and results in greater gains in wealth due to its investment in the future. The great capital gains were leaking out of the productive economy like a sieve. Where it was going is conjecture, and some of the semantics cited above might explain it, but I am going to work in the numbers and stay out of the ideological debate as much as possible. In hindsight, to correct the problem the Soviets might have been better off if they could have found a way to make this newly created capital more productive.

To illustrate what we’re talking about, imagine what happens if the State orders the production of vast military resources that cannot be used in the civilian economy. Or imagine the effect of produucing billions of pairs of shoes all of one size. This is the kind of “sieve” I’m talking about. And don’t think this fact didn’t have a major impact on how I addressed economics in General Federalism. I specifically created a “Public Trust” in which all commercial assets are owned by the people at large and controlled by democractically elected “Fiduciaries”, an entirely separate branch of the government Constitutionally firewalled from the Treasury. In this scheme, currency is used to buy, sell and trade capital between organizations in an open market ruled by valuable consideration. In other words, the market is free to take capital and apply it to its “best use”, something economists will often speak of when speaking of the capital problems of the USSR.

Thus, the key historical lesson is this:

don’t pretend to let the State control the means of production, but let them influence how much is produced.

The latter attribute allows the economy to produce vast amounts of capital at will, just like the USSR was so good at doing. In a deliberate, planned manner, capital of various kinds can be produced in whatever quantities are needed but the means by which this is done is left to the markets to control. Let the public genuinely own the means and let them, as market forces in their inscrutable design dictate, determine best use.

And when we speak of the means of prodcution versus “how much” to produce, we’re alluding to the breakdown of three key economic characteristics:

What to produce – this is what we mean by “how much”. Both what and how much is produced falls under this rubric. General Federalism suggests this is the area conducive to economic planning through a representative body of Fiduciaries.

How – the means of production. This is where the data shows that the Soviet Union failed. But this topical area is a large rubric under which many causes can be identified. We’ll discuss them infra. Under General Federalism this is treated with the broad stroke of laissez-faire policy. Having said this, generally speaking, in General Federalism general equity still applies here (see below).

Who – this is the area of supply chain economics, price controls, etc. This area was also extensively planned in the Soviet Union and also led to bad use of capital. General Federalism is laissez-faire in this regard. Having said this, generally speaking, in General Federalism general equity still applies here (see below).

Before we go further, I should explain what I mean by “general equity” in economics. This simply means that all remuneration for labor is by individual, financial productivity and that the Courts of the Federation are empowered to rule on such matters. The gravamen of consideration of the court is whether or not the actual remuneration is in proportion to the productivity. This is a slight technical innaccuracy because I’ve left out one other thing it means that doesn’t have particular relevance here. General equity also means that any Individual can demand an increase in the currency in circulation (M1) upon successful merit based criteria examination and that it cannot depend on association with faction, such as oligarchy alone. The Courts of the Federation are also empowered to rule on these matters as well (every print increase request evaluation is authorized by both the Constitution and a Fiduciary Act or Acts) since any Act of the House of the Fiduciary can technically be litigated in civil court. In any case, general equity would apply by default in the case of “how” and “who” as described supra.

General Federalism specifices that all commercial assets are held jus publicum as well as jus praesens (it is both public and private) in an irrevocable Trust supported by the full faith and credit of rule of law. All public aspects of the Trust are not controlled by a central party, but by an elected body of Fiduciaries who are, in all practical terms, the chief executive and operations officers of the entire economy. The key difference is that the public elects them … and can send them packing. Officers of individual companies come up through the ranks as they do here in the United States and are limited Fiduciaries, called intrapreneurs. They stand to profit considerably from their productivity contributions but ultimately the Fiduciaries are responsible for ensuring that their compensation is not only reasonable but based on a predictable, market driven determinant. Pay is not determined by ideology or opinion … or corruption.

But more importantly, the Fiduciaries can influence “national” (read global) objectives. For example, suppose we really, really need to develop fusion power for the sake of humanity’s future. The Fiduciaries can encourage this, though not control it, by promoting investment in those areas. Let me say that again. They influence national objectives not by controlling the means of production, but by having a systematic, predictable means in rule of law for influencing investment. Nothing more. And yes, there is a check valve. If the proposition doesn’t make market sense it fails. There is a lengthy article on how this works here here, but the idea is based on Zero-Zero banking, a clever substitute for fractional reserve banking that I believe would substantially outperform an economy operating on the basis of reserve lending. It also grandfathers capitalists into the system, so if you feel a little closer to Bill Gates than Mother Theresa, don’t worry, no one is mad at you.

Under Zero-Zero banking loans are made with zero interest obligation and zero required reserves. This is what Alexander Hamlton called an aggressive economy. And the math is sound because currency prints are pegged directly to wealth in an actuarially sound formulation. Anyone with the right resume and risk profile can start a new business, no oligarchical background required. Not only that, but critical national objectives can be pursued without wrecking the economy. As we progress, we’ll see in more detail how this works.

But why and how was capital misused in the Soviet Union, for example?

One of the causes under the larger tent of capital misuse and a common augury of future decline in command economies can be empirically shown to be the dogmatically dictated evisceration of individual, human financial productivity. This is a direct result of the first theoretical problem with Marxism aforementioned. The oft-cited reasons generally rely on the obvious fact that guaranteed employment and wages, in the absence of either effective reward or punishment, guarantees a willful effort on the part of the citizenry to decrease their financial productivity as much as possible. A worker who is productive under a command economy suffers large losses now for small or non-existent gain at some future time; but sociobiology tells us that this productive worker under a command economy doesn’t likely exist, or does so only under very special conditions. Under the communist model in the Soviet Union, propaganda was supposed to control this problem by convincing people that they need to be, well, pseudo-recriprocally altruistic. I say “pseudo” because it defies what we know from Sociobiology, as already noted supra. Clearly, simply paying on the basis of financial productivity will not produce the same incentives as seen in capitalist countries either if the people we’re talking about are the oligarchs creating businesses (though it will better incentivize workers themselves). This can be overcome, to some extent, with a sound public service campaign to educate the populace on the value of genuine reciprocal altruism with something well short of propaganda.

The second, another primary cause, under the larger tent of capital misuse, has been the absence of valuable consideration in the exchange of capital for production. In Soviet Russia government agencies simply told factories what to produce, then ordered their product transported to the next factory for further processing. There was no monetary exchange, no valuable consideration in an open market. This led to gross misuse of capital. Factories, or productive organizations generally, were not free to consult the open market and make the best decisions based on their own production needs. In Soviet Russia valuable consideration was almost totally truncated to the interface between the retailer and the consumer (and price controls tended to truncate that as well).

Third, vast sums of capital were flowing to dead ends, such as the military. Toward the dying days of the Soviet Union something like 70% of the USSR’s GDP was channeled to military use. This is grossly unsustainable and had the immediate effect of sending valuable new wealth, new capital, to a dead end in the military where it could not be recylced back into the economy for future use. An example of this might be a factory that builds assembly-line robots. Use of robotics dramatically improves individual, financial productivity and is a capital investment. But if virtually everything you can produce is being diverted to the military, the military has little use for factory robotics and the capital generated is not put to best use (and the robotics never got built).

Statistical and anecdotal data from the USSR, PRC, and other command economies supports these views.

But because of ideological zealotry, the command economies of available historical record did not respond to this fact by inducing financial productivity directly by remuneration on the basis of financial productivity –  the only effective positive reward available to them but, alas, contrary to Marxist-Leninist dogma.

As we noted above, the specific dogmatic objection is itself invalid. This now appears to have been the fatal mistake of all the command economies that have, hitherto, been attempted. For example, the stabilization of financial productivity under Stalin that allowed the massive economic surge during his time has mostly been attributed to moderately effective punishment. Stalin was a dictator who controlled a powerful secret police, used millions of political prisoners as slaves (and consequently the economy was partly slave based at that time), and who used a constant barrage of propaganda and manipulation to encourage results. He artificially held the floor on national financial productivity levels. But his regime was not durable. Kruschev, immediately upon taking the reigns after Stalin’s death, dramatically weakened the effectiveness of the punishment in place. Punishment is contrary to “a”, not durable, and I thus discard that as an option. If we are to consider a novel option to produce economic functional symmetry, our goal in “a” requires the application of reward to promote financial productivity.

Similar results were found in the PRC. Again, the magic of understanding command economies, and whether they will succeed or fail, depends heavily on financial productivity and democratic representation. As the PRC began to withdraw punishment in the 1970’s, their financial productivity also began to free-fall. The difference with the PRC however was that they responded by applying free market principles which immediately boosted financial productivity levels. The floor held. Indeed, the ceiling was shattered. Now, the PRC enjoys a thirty year track record of average annual GDP growth of around 10%, a stunning achievement. But let us point out that, even without reward in State industries, this growth was occurring in a State that was still, up until 1990, largely a command economy. This parallels the remarkable growth seen under Stalin, with nominal financial productivity levels, under his command economy in theUSSR- an economy with average annual GDP growth of around 20%! Admittedly, some of the productivity success Stalin had may have been disproportionately loaded as performance productivity, as opposed to financial productivity. This historical record now provides a reasonable basis for supposing that a command economy with remuneration based on individual financial productivity, while perhaps not achieving annual growth rates of 20%, should at least be able to exceed the paltry 3% annual GDP growth rates now seen in theUSAunder capitalism. There is simply no empirical basis, based on measured performance, for asserting that capitalism will outperform a command economy with remuneration based on financial productivity. But conversely, and this is important to understand, there is overwhelming evidence that a command economy without reward for economic financial productivity will either fail outright or be a dictatorship (which, due to severe asymmetry, will also eventually fail). Thus, any consideration of command economies must take this dichotomy into account and no compromise on positive financial productivity reinforcement can be made.

Hamilton, Madison and Jay did not discuss these kinds of issues because at the time they lived such concepts were inconceivable to them; save for Hamilton’s prescient insight that National Banking was a legitimate object of the social contract. They alluded to the economic relation to the social contract with oblique terminology such as “the general welfare…” of the people. In particular, there was a clear understanding that the Constitution afforded both enumerated powers and implied powers over that general welfare. But they had no theoretical or experiential basis for examining it any further than that. Today, we have the benefit of observing in action both the system they created and various command economy systems. Based on the dismal record of command economies of the past, then, we are enjoined to produce a viable solution de novo, and the solution appears to be to impute the element of direct remuneration on the basis of financial productivity into the calculus of economics in a democratically controlled economy called a Fiduciary.

Those with a sophisticated sense of the sometimes strange and dark world of Machiavellian reality will quickly note that Communism had the unfortunate primary quality of being an enabler for dictators. This gives new meaning to the famous phrase “useful idiots”. This is unfortunate, not just for the obvious reasons, but because command economies were nothing more than tools in the communist enabler tool set. As with any concept, a command economy can be used for ill gain. But to thus conclude that all predicates of a command economy are of no value is a non sequitir. And it does create problems for those of us who seek truth, and who seek real solutions if and when, even in the darkest closets of dictatorial rule, we find a kernel of truth; a predicate worthy of our gander. The sophistication in separating wheat from chaff in a command economy is achieved by extracting only those predicates for which past performance can be demonstrated (the wheat) and discarding the remainder (the chaff); assembling the result into a functional symmetric federal system. The performance elements identified above are:

1.) A functionally symmetric, federal command of the economy, otherwise known as a Fiducial Economy

2.) A system of remuneration based solely on financial productivity

That is, we seek the attainment of “a” by placing our collective commercial assets in a Public Trust in the care of qualified and elected Fiduciaries – and to their qualified fiduciary delegates as they deem fit, their governance and authority over the same being constrained by the principle of functionally symmetric Federalism. More generally speaking, we seek the durable attainment of “a” by establishing both legal and economic functional symmetry into the social contract.

For the purposes of definitional clarity, a Fiducial Economy has the following attributes:

1.) A Discretionary, Irrevocable, Public Trust that has sole and exclusive rights of ownership to all commercial assets, held jus publicum by the Supreme Fiduciary

2.) A Fiduciary that is:

An entity bound by the social contract in the form of a Functionally Symmetric Federalist government in which assets are dispersed in ownership to semi-sovereign States

Subject to limited review, oversight and over-rule by the Executive, Judiciary, and Legislative organs

A Supreme body in Public Trust Law of individual Fiduciaries elected by The People

A limited legislative body and legal entity that is the sole Trustee and entity of Legal Title of the Public Trust, exercised jus fiduciarium.

Named with a strongly limited Power of Appointment that is non-transferable (limited for import/export) for the exercise of jus commercii.

3.) Limited Equitable Ownership of the Public Trust by The People of the United States, held jus praesens by citizenship.

4.) Remuneration for and in the Public Trust by Law issues solely in proportion to objectively measured financial productivity.

Thus, in a Public Trust the Supreme Fiduciary might “plan” an economy by influencing which industries the State wishes to invest in through authorization of business plans (start ups)  in the Public Trust (or by simply making law to commission particular projects), but a key difference is that it does not “plan” by telling a factory to produce x number of widgets and order them delivered to another factory for further processing with no exchange of currency. Rather, all exchange within the Public Trust is by valuable consideration upon the vehicle of currency. This allows market forces to determine the most efficient means of production, even if what is being produced is still influenced by the Fiduciary. This allows the furtherance of national objectives filtered by what the market can bear and accept.

Thus, when the Fiduciary sees, for example, a national need to construct a new interstate highway system, it identifies a Principal by bidding (as is done currently in the United States) and the Principal sub-contracts all its constituent parts by internal decision-making and valuable consideration with other vendors within the larger Public Trust.

This also allows the Supreme Legislator to focus on matters of law and avoid economic legislation; for if the Fiduciary’s constituency demands a new interstate system the Fiduciary hopefully responds (or is voted out) by initiating the project rather than it being initiated by the Supreme Legislator. This also ironically further firewalls lawmakers from the Treasury. As we walk through examples we see that what is really being described here is something more or less status quo with the added elements of public ownership of the means of production, remuneration that is more tightly pegged to individual contributions (and tends less to excess compensation) and the ability of government to more intelligently plan an economic future.

Property and ownership are legal concepts in which a person is legally entitled to exercise a set of defined rights over a definable piece of property. Multiple, unrelated entities can exercise a mixed set of rights on the same property. Easements on real estate are a good example. Since we place no premium on pre-existing ideological constraints, we may freely ask “does a Fiducial Economy require the surrender of any and all sets of rights exactable on property?” Economic representation cannot, a priori, be influenced by property rights of a non-economic nature. Since the purpose of creating a Fiduciary is to provide greater symmetry of economic representation a Fiducial Economy requires no more and no less than a restriction on the set of rights exactable on all property such that no such set may contain an economic right of ownership. In other words, any property that is for personal use, non-profit use and/or otherwise non-commercial interests is outside the purview of the social contract and all such rights are fully exactable by or for the private citizen on all properties real or otherwise. This also provides for the transference of properties between the Public Trust and private hands; something that will become important later. A set of private property rights may be transferred to the Public Trust, and the Fiduciary would have legal authority to purchase commercial easements to that property. In addition, private property rights may be retained on a property and easements to the Public Trust, and to a designated Fiduciary, may be sold as such should the private property owner so desire. This preserves durability by presumption of John Locke’s property basis of liberty.

An example of the mediation of property issues might be in order. Suppose that a religious organization, X, which is non-profit, determines a need to purchase 5,000 acres of a particular tract of land, located at a designated place and thus properly identified. The title holder, a private citizen, transfers by deed of conveyance the tract to X. But all that has been transferred are whatever rights the seller owned excepting commercial rights. Suppose now that X, in need of some additional income, decides that it would like to allow a commercial easement on its property by deed of lease and release. They propose the sale or let to their local Fiduciary (and may also make the same proposal to all levels of Fiduciary; city, county, state and federal). The Fiduciary agrees and pays rent on a portion of this tract which in turn let this portion of the tract to commercial tractor-trailer carriers who need a place to park their trucks. Conversely, X could transfer by conveyance an easement and sell that portion of their tract. It would be up to the parties involved, X and the Fiduciary, which rights shall be in consideration for valuable exchange. The key point of this example is that, the Fiduciary compensates X only for the set of rights that commercial use would require that are non-commercial. In other words, commercial use of the property will deny certain private uses. It is the private usage for which the Fiduciary is paying, not the commercial because X never owned a commercial right in the tract.

Under a Fiduciary the usual capitalist securities markets continue but with important differences. Individual fiduciaries are the brokers. Investment by the citizenry is in the form of a bond that has variable market performance and the risk is wholly owned by the investor. If a stock performs well, the return on the bond is adjusted upward to reflect that. If it performs poorly the return on the bond is adjusted downward to reflect that. In any case, a private investment in a market is a bond investment in the Public Trust, and the stocks that represent the bond are transacted by Fiduciaries, but upon the puts and calls of the private investor. By paying variable interest on public bonds, the issue of commercial property ownership is side-stepped.

Up to this point I have, for ease of discussion, side-stepped a significant issue regarding the structural aspects of a Public Trust. In the foregoing I have implicitly assumed that a Public Trust would exist at a national level however, in reality, this presents certain difficulties. The more complete picture I wish to draw for the reader is that of a Federalist view: the national Public Trust of which I wrote was in fact a part interest in each States Public Trust; a proportion of national ownership rights I’ve set here at 1/5 of total market value. The reasons for this are slippery, but it is based on the issue of “firewalling” the Public Trust from the Public Treasury and consistency with a Federal system. I shall examine each in turn.

A crucial consideration in devising a functionally symmetric Federalist economic system is in how might the general interest (national economic planning and overall economic productivity) be best balanced with respect to the special interests (protection of the Public Trust from usurpation and corruption). The notional mechanism I devised for this was a “firewall” that is placed between the Public Trust and the Public Treasury, thus preventing imprudent access to the Public Trust by the Congress and vice versa. Thus far this has been explicated thusly:

1.) The Public Trust is managed by a body of representative Fiduciaries

The probity of the Public Trust is enhanced by being beholden to a constituency

2.) The Public Trust is institutionally separate from the Congress

The perfidy of the Public Trust is diminished, even if the word of Law is suborned, by the difficulty of the act.

3.) The Public Trust is barred by fundamental Law from intercourse with the Public Treasury.

A pro forma constraint invokes the organically separate powers of the Judiciary

But this still leaves a loophole. The Public Treasury, by its productive nature, must necessarily become an economic consumer. If only one Public Trust exists then there can be only one provider for market exchange. That, in turn, provides indirect but effective access by the Public Trust to the Public Treasury through price adjusting. The simplest solution appears to be to provide other Trusts in mutual competition. Under a Federal system the natural bray of a unified Public Trust crumbles along State lines. This notional concept, in contrast to the single Public Trust, leverages the natural economic competition of the various States energetically redounding to cost control. Unlike the purely legal scenario, the economic lines of jurisdiction between the general and special interests are much more difficult to locate with confidence. The best alternative then, is to simply divide the Trusts along fractional lines between State and Federal control according to market value. If 1/5 should be an excessively poor judgment, an amendment can be passed to adjust it.

An example of how this might work in practice is as follows. Let us suppose that the Supreme Fiduciary determines that it is in the national interest to assemble an aeronautics company to provide aircraft for the military. The Supreme Fiduciary may then assemble such a company, called an organization, by utilizing up to 1/5 interests of each of the Public Trusts of any combination of States in theUnion. This allows for a truly national company and allows the Supreme Fiduciary access to the most favorable locations for factories, testing facilities, assembly locations, etc. After some time the organization begins selling aircraft to the military. In the inevitable perfidy from which safety cannot be assumed, the organization dramatically inflates the unit price of its aircraft in order to gouge the Treasury. The Fiduciary of the State of Colorado takes notice and forms a competing organization that is essentially identical. They, too, may locate in any State in the Union as they see fit. The Colorado organization then sells the same product to theU.S.military at a drastically reduced price and either corners the market or forces the national organization to respond by lowering prices to more competitive rates. On each side of this competitive gambit the top leadership in the two organizations, which have the greatest potential for achieving the highest financial productivity levels of anyone in the organization, are strongly induced by the substantial compensation they will receive if their organization is successful. Competition has ended the gouging of the Treasury.

This leads me to provide some final comments on the measurement of financial productivity. First, I should point out that should financial productivity in a given profession not be measurable, whether for technical, technological or inherent reasons, approximations or alternatives must be found. In today’s modern market economy I can think of no profession in which financial productivity cannot be individually measured and few if any that aren’t now. Most enterprises have significant vested interest in knowing and tracking their employee’s financial productivity and the investment to comply with a Trust Economies financial productivity metric would be marginal. Even were they not, the current technological state is such that devising the method and procedures for doing so is readily practicable. Having noted that, it is probably worth our time to ponder the alternatives should a particular measure of financial productivity simply prove impracticable. In such cases, two options in order of preference lend themselves as ‘best-case’ solutions:

1.) Financial productivity measured on the basis of the smallest group practicably attainable; in which the individual productivities within the group are imputed from said group average.

2.) A panel of not less than 3 persons with appropriate supervisory authority over the Office or Title in question shall assess the financial productivity of that Office or Title as they, in their estimation, may best estimate.

In any Public Trust where the inability to measure financial productivity individually, accurately and objectively exists, due effort to find a practicable metric to replace methods 1 and 2 should be found.

There is a distinction to be made between ‘workers’ and supervisors, managers, and leaders. Both are compensated on the basis of individually measured financial productivity. But for the latter group the proposition of such a measurement is more complicated. I propose the following basic rule:

Financial productivity of the “management” category – to include any Office or Title of the Public Trust in a supervisory, management or leadership role – shall be calculated on the basis of the average financial productivity of the Offices and Titles for which responsibility is assigned to the Office or Title in question, plus financial productivity compensation received for services in addition to so-called management duties. This financial productivity is then adjusted by a factor derived of the number of Offices and Titles for which responsibility is assigned to the Office or Title in question; the factor and number of Offices and Titles inferior to the Office or Title in question being positively correlated. This factor shall, in turn, be algorithmically calculated from profit minus re-investment into the Public Trust.

Number of Offices and Titles under supervision inferior      to the Office or Title; the rank of a management Office or Title

Management

Productivity => earnings

Average productivity of inferior Offices or Titles      under supervision of Office or Title.

Financial productivity of the “worker” category – which I take to include any Office or Title of the Public Trust not within the “management” category – shall be calculated on the basis of the financial productivity of that Office or Title, as numerically determined by a percentage of the retail cost of the commodity or service produced and/or the components of the commodity or service produced by said Office or Title. Said percentage shall be algorithmically determined on the basis of the organization’s profits minus re-investment into the Public Trust.

Generally speaking the distinction between the management and worker categories is that the financial productivity of the former is calculated on the basis of the former’s financial productivity relation to the latter while the financial productivity of the latter is calculated on the basis of the relation to the service or commodity that the latter produced.

IV. A choice to make based on performance

Having offered an executive summary of my performance-based observations of the social contract, I can now assemble the essential elements for approaching our initial goal of “a”. My findings are:

1.) Federalism offers the most functionally symmetric means of popular representation

2.) Of the Federalist models, Hamilton’s was the closest to functional symmetry

3.) Hamilton was a “strong” Federalist in that he envisioned the following in fundamental Law[3]:

a.) The President shall be elected by a two-tiered electoral college for a term of 7 years

b.) Governors of the various States shall be “appointed under authority of the United States” (effectively; nominated by the President)

c.) The Senators shall be appointed by the legislatures of their respective States (modified to popular vote by 17th Amendment)

d.) Affirmed right of States’ Governors to veto their State Legislature, and gave Congress power to restrict manner of veto.

Based on the performance of the Madisonian Federal system since 1776, we can observe Hamilton’s propositions in a more informed light. 3c. was demolished by a Constitutional amendment which made the current federal system even more asymmetric than it was in 1776. Also, it would be prudent to note that 3d has been converted by political opportunists opposed toHamiltonto a criticism of Hamiltonian Federalism – see the footnote for 3.

The following are the minimum changes in the U.S. Constitution extant that the historic record suggests are necessary to attain functional symmetry of influence:

1.) The President shall have the sole power to nominate the Governors of the various States; subject to confirmation by the Congress.

2.) The Constitution shall affirm and guarantee the right of States Governors to veto their legislature; subject to Congressional limits

3.) The Senators shall be appointed by the legislatures of their respective States.

4.) A sunset clause of fifty (50) years shall be in place for all Constitutional amendments; which clause itself is not amenable

5.) Senators and Trustees shall serve a term of eight (8) years in four rotating Classes

6.) Powers expressly enumerated or limited shall include a provision regarding State Secrets (see Article IX Section 11)

7.) A Supreme Fiduciary, modeled on the Congress, shall constitute a fourth branch of government acting as one component of a “firewall” between the Congress and the Public Trust

8.) A fourth branch of government, being difficult to administer, shall be tightly integrated into the Federal form byHamilton’s “energetic” Executive herein provided. The approval of bills shall work the same way as with Congress, giving the Executive a strong influencing hand in the Fiduciary.

9.) The President shall be elected by a single-tier electoral college for one and only one 8 year term.

V. Functionally Symmetric Federalism – Canon for General Federalism

Sophistication, that complex combination of academic knowledge and valuable experience informed by a strong, skilled intellect, is a quality not often found in the general public. But this is not irreversible; it grows with quality education and that is the primary end of hortatory in General Federalism. While this paper is a canonical presentation I will offer some thoughts on some hopefully appropriate responses to the kinds of objections most likely to issue from the general public which others may, in their Machiavellian wisdom, alter or modify as their audience indicates. As for my own response, I am not interested in objections without alternatives as that serves no constructive end.

1.) When you speak of Justice, to whose Justice are you referring?

This is classic. It implies something mystically untoward, but makes no assertion of fact. Section II answers this question provided it is carefully read. Justice deals with the application of law and equity and the question is answered by explaining from whence these laws came. In an ideal democracy in which every interest in society is fully represented – which cannot exist – justice is the justice of the governed (because the governed makes the laws). My goal here has been to approximate that ideal as nearly as possible with a functionally symmetric social contract. In other words, General Federalism is, by definition, the closest approximation to ideal democracy that is practicably attainable. Thus, under General Federalism, justice is the justice of the governed to the greatest extent practicability allows. This fact is independent of who the governed happens to be; it may change without altering the fact.

2.) Doesn’t Federalism, especially General Federalism, lead to tyranny and centralize too much power inWashington?

This is a common concern born of the populist mentality formalized by Andrew Jackson in the early 1800’s. This concern is greatest in the southeastern United Statesbut remains a common concern nationally. Hiding in the question and revealed when explicated is the faulty premise that the interests of the person asking the question is all a government need consider. It’s not that simple. A better way to form the question is, “does General Federalism really balance the interests of the governed in a way that is fair and just without leaving society vulnerable to tyranny”? Upon explication the former question usually represents, sadly, an almost irresponsible attitude toward the larger community and a developmentally stunted understanding of collective human need. The latter represents the most noble of all human pursuits in that it gracefully seeks liberty and justice for all, to use a buzz-phrase. So, I will address the second form. Though it was already explicitly addressed in part II, I will shape the response to the specific concern dealing with why more “centralization of power” is needed to achieve functional symmetry. First, it is not “centralization of power”; which is the first point to get across. It is an attempt to balance, and provide checks, for centralized powers that already exist. The bliss founded on the naïve belief that these powers are not already centralized must be addressed to get the point across. The opposite corollary to tyranny is Democracy.

Democracy is not defined by the factional perceptions of the moment, but by the durable and just outcome of the act.

It is by the failure to acknowledge this simple axiom that populism gains favor by attempting to eradicate or ignore certain kinds of influence in favor of, and by appeal to, self-interests. What too many Americans miss in history classes is that the founders were not just concerned about balance of power between bodies of government, but balance of power between influences in government. John Kennedy’s famous quote “ask not what your country can do for you but what you can do for your country” is also silly by virtue of taking the opposite end of the spectrum (in all fairness, Kennedy’s comment was astutely Machiavellian). Democracy does not seek one influence over all others, but the fair and just representation of all those interests that naturally exist in society.

What I demonstrated in Sections II and III is that popular faction has now historically demonstrated a disproportionate influence in government; the evidence for it overwhelming but a fact most don’t want to discuss. They don’t want to discuss it because it points ineluctably to General Federalism and confirms Alexander Hamilton’s similar understanding of Federalism. Madison was wrong, Hamilton was right. Jeffersonwas out to lunch. We couldn’t have known that 200 years ago, but with experience gained we can clearly see it now; the proverbial elephant in the living room, the in-law no one admits of relation. It is the hideous dropping of the veil of special interests wreaking havoc on government and inducing some of the stupidest, most ignorant, ill-informed, socially harmful, wasteful and redundantly ineffective public policies imaginable. August statesmen and thoughtful citizens are rendered silent in an orgy of self-interested public policy while the durability of civil society gradually wears razor thin.

3.) Related to the second question, what about State’s rights?

The common belief that the various stages of Federalism reflect varying degrees of sovereignty to the States is based on a misunderstanding of what Federalism is. This misunderstanding stems from the days when Confederalism was in serious contention as a system of governance, both in the mid 18th and mid 19th Centuries. A Confederal system reserves greater sovereignty to the States than does a Federalist system. But it does not then follow that a weaker Federalism also reserves greater State sovereignty than a stronger Federalism. Rather, General Federalism is so esteemed because it conforms to a greater degree of functional symmetry – which is a completely different concept. Any Federalist system will, canonically speaking, specify a particular sovereign relation to the States that, for any truly Federalist system, is constant (academics call this legal pluralism). As the answer to question two suggests, what I’m proposing is a functionally symmetric Federalist system which means that my concern lay with the balance of influence within government, not the balance of power between institutions of government. It is easy to confuse the two but a distinction has to be made to clearly communicate that this is, in fact, not a State’s right issue. Ex proposito, a Federalist system lends a certain degree of sovereign power to the States and this overall balance I do not propose to alter. If I did my proposal would not be for Federalism. It might be useful to specifically summarize what General Federalism proposes as it might relate to the issue of State’s rights. I have posited that functional asymmetry has been introduced into the governance of theUnited States partly through the commingling of Federal and State Treasuries. For that reason I’ve proposed a Constitutional “firewall” on government Treasuries to both restore functional symmetry and to end the Federal manipulation of State sovereignty through purse strings – which violates Federalist principles and illustrates the diminishing durability of the regnant system. Juxtaposing that with Presidential nomination of State’s Governors, who retain their traditional right to veto State legislation, works to the status quo in State’s rights, if not providing slightly greater sovereignty to the States due to the very strong influence that funding has on overall State sovereignty versus the relatively weak impact qualified Presidential choice of Governors might have (Supreme Court Justices are seated using the exact same procedure). Indeed, and consistent with concerns of functional symmetry, Presidential nomination of Governors redounds more to the issue of functional symmetry than State’s rights – precisely the reason for advocating it. So, it can’t be said that General Federalism vis-à-vis the Weak Federalism in place today reduces State sovereignty but, if anything, restores it.


[1] See the “Carnot Cycle”

[2] In 1791 Alexander Hamilton argued strongly for the creation of a National Banking system on the basis of the implied powers of the Constitution, clearly indicating, as he did in this quote, that economics is a valid object of the social contract.

“It is not denied that there are implied as well as express powers, and that the former are as effectually delegated as the latter. And for the sake of accuracy it shall be mentioned, that there is another class of powers, which may be properly denominated resulting powers. It will not be doubted, that if the Untied States should make a conquest of any of the territories of its neighbors, they would possess sovereign jurisdiction over the conquered territory. This would be rather a result from the whole mass of the powers of the government, and from the nature of political society, than a consequence of either of the powers specially enumerated….

It is conceded that implied powers are to be considered as delegated equally with express ones. Then it follows, that as a power of erecting a corporation [such as a bank] may as well be implied as any other thing, it may as well be employed as an instrument or means of carrying into execution any of the specified powers, as any other instrument or means whatever. The only question must be, in this, as in every other case, whether the means to be employed, or, in this instance, the corporation to be erected, has a natural relation to any of the acknowledged object or lawful ends of the government. Thus a corporation may not be erected by Congress for superintending the police of the city ofPhiladelphia, because they are not authorized to regulate the police of that city. But one may be erected in relation to the trade with foreign countries, or to the trade between the States, or with the Indian tribes; because it is the province of the federal government to regulate those objects, and because it is incident to a general sovereign or legislative power to regulated a thing, to employ all the means which relate to its regulation to the best and greatest advantage.”

[3] The Confederal mythology surroundingHamilton’s platform at the Constitutional Convention is staggering in it’s scope and inaccuracy. A brief historical overview is in order. AfterHamilton’s death the country rapidly moved toward a populist style of government which weakened the Federalist system in place. Andrew Jackson, a ‘states rights’ advocate and, by definition, anti-federalist, was the first to propose an amendment to change State appointment of Senators to appointment by popular election, thus undermining the federalist system. Since this time a barrage of distortions, disinformation and inaccuracies have been pedaled regardingHamilton’s platform. Some of the myths include:

a.)Hamiltonadvocated the dissolution of the States and a rejection of State sovereignty

FALSE: there was no such provision in the Constitution he wrote, presented at the Constitutional Convention, and proposed for ratification. To have wholly rejected State sovereignty would have madeHamilton, by definition, an anti-federalist, which he clearly was not. He was the father of Federalism.

b.)Hamiltonadvocated Congressional power to veto State legislatures.

FALSE: there was no such provision in the Constitution he wrote, presented at the Constitutional Convention, and proposed for ratification. This myth probably derives from a political interpretation of his clause referring to the Governors of the States being “appointed under the authority of theUnited States” in which he re-affirmed the Governors right to veto their legislature (a universal power in all 50 States today).

c.)Hamiltonadvocated direct appointment by the President of the States Governors.

FALSE: there was no such provision in the Constitution he wrote, presented at the Constitutional Convention, and proposed for ratification. Hamiltonsimply stated that Governors were to be appointed under the “authority of the United States” which does not, by itself, specify the exact mechanism. It is true that he did not believe that they should be appointed by direct vote, and he probably intended that Congress would establish Law for the Presidential nomination of Governors for approval by Congress, exactly as is done with the Supreme Court. The President does not today “directly appoint” Justices; he nominates them. Further fueling the myth was Hamilton’s wording that allowed the Congress to restrict the Governor’s power to veto, not enhance it. This was done to limit, not expand, Federal influence in States due to the manner of appointing the Governor. The guarantee of a right to veto was put in place precisely becauseHamilton saw the potential for asymmetry: States wishing to undermine the Constitution could revoke veto power of their Governors, turning them into figureheads.

In a nutshell, the victors in both war and politics write history. With the demise of the Federalist Party, all the other parties (all of them anti-federalist) could say whatever they wished and get away with it. So far, they have. These blatantly politically motivated distortions of fact have still not been adequately corrected in the historical record.

– kk

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4 comments
  1. archaeopteryx1 said:

    RE your statement regarding, “Federal manipulation of State sovereignty through purse strings”

    Clearly John F. Kennedy concurred, when he said: “That which the government subsidizes, to that same extent, it also controls.”

    pax vobiscum,
    archaeopteryx

    • absolutely, and even the u.s. supreme court is beginning to acknowledge that the states sold their sovereignty.

  2. I’m extremely inspired with your writing skills as smartly as with the layout on your blog. Is this a paid subject matter or did you customize it your self? Either way keep up the excellent high quality writing, it is rare to peer a great blog like this one nowadays..

    • Wow – thanks. It’s just my thoughts. A friend helped me with the technical aspects but most of the content is mine – kk

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