Origins of Organizations
All organizations have founders who had the vision and put up (or borrowed) the original capital. By virtue of their ambition, they become the key decision-makers. This is the case with businesses, non-profits and governments. In America, the two key decision-makers regarding money were Benjamin Franklin and Robert Morris Jr. They overthrew the old government and created their own. One was more thoughtful than his peers, and the other was richest among his peers. We will discuss them more deeply in Chapter 14: What is Modern Finance?
Rebellions often turn out badly. The rebel becomes like the fascist leader who was replaced. In America's case, neither of these men were politically powerful. They did what they believed was right and worked primarily behind the scenes. The money problem is hard to solve, and our two heroes did not solve it. They repeated a very old and flawed habit: issue currency through debt, and use taxes to collect it back. This choice kicks off an illogical vicious cycle based on percentages. They lacked the imagination and empirical evidence to choose otherwise. The new democracy had all the same fiscal failings as the monarchy that preceded it.
The rallying cry of liberty was really "taxation with representation.' Unfortunately, representation is not as critically important as the accuracy of the math. A government's act of taxation, at any percentage, for any purpose, has practical consequences. We can bring harm upon ourselves with a local decision just as easily as a decision from a far-away headquarters. Who, when, where and how a decision is made is not as important as the quality of that decision.
The world has had wise kings and foolish kings, and now we struggle with wise democracies and foolish democracies. The claim was that democracy limits corruption, which was generally defined as people getting rich by cheating. Democracy has not prevented corruption. Even if it did, the wealth would still be divided. The laws of mathematics are stronger than majority rule.
Economic problems cause political problems. It is not political power creating economic problems, as many assume. Replacing the leaders and changing the laws does not address the root of the problem: our assumptions about money are incorrect.
The Founding Fathers rested their hopes on egalitarianism. If the King's failure was greed, then how could greed be benign to inform checks and balances? Their approach was naive and contradictory. Egalitarianism cannot limit greed. One presumes the opposite. The problem cannot be the solution.
The Illusion of Choice
When Solon created democracy in Ancient Greece, Anarchus made two comments that continue to echo today. He said, "the law was like a spider web; it could only capture the weak, while the strong would break right through.' In other words, laws would allow the strong to constrain the weak, but the weak would not be able to constrain the strong. Laws work for the benefit of one against the other, not equally for all.
His second observation was that it is a system where "the wise speak and the fools decide.' Our electoral history would seem to bear that out. The undecided, who are usually the most confused, often determine the final victor. A large percentage do not vote at all.
People distrust the voter (voter ID laws), the clerks (rigged elections), and the process is partisan before it begins (party declaration is required). This highlights a larger issue: the wise do not need laws, and the unwise are incapable of making them or following them. The only way for democracy to work is for the majority to be wise. Dissonance, in all its forms, must be purged. When it comes to solving a problem, facts matter more than opinions.
Checks and Balances
Checks and balances have never worked because the strong players battle one another and ignore the weak. Survival of the fittest is survival of the most ruthless and merciless.
Solon was trying to solve an economic problem similar to what the colonies would experience at Benjamin Franklin's time. Solon failed, too. The local Chief of Police in a small city today is significantly more powerful than what the ancient Greeks regarded as a tyrant. We have more laws, and more fascism, than has ever existed in history. Progress comes from wisdom, not force.
Solon's example demonstrates that the best ideas of the wise can still be foolish. Economic history reveals that the problems are not greedy people, but a system that fails mathematically. There have always been people of goodwill, but egalitarianism is not a substitute for logic. There needs to be a better plan to put that goodwill into action.
Mathematical forces make some people rich and others poor. When we apply percentages, we take something from someone else, that they took from someone else, and so on. It is a very small edge that makes the world competitive rather than cooperative, but that small difference can compound to create a huge divide. A competitive system must have winners and losers. Only in a cooperative system can everyone win together.
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