The Millennials’ Money (part 3)

By J.D. Alt

Commentary on part 2, again, was extremely helpful and much appreciated. Especially useful were suggestions from readers who “didn’t recognize” my description of the Boomers ideological obsession. This got me to substantially rethink the framing, and I hope that is now fixed. What I realized—and looking back on my own experience, it seems obvious in retrospect—was that what the Boomers were focused on had little to do with the idea of “competition” and much to do with rebelling against (and distrusting) institutional power—especially the institutional power of the federal government. It became natural for them to want to starve that government to keep it from interfering with the individualism the Boomers championed. As I said in my comment to the post, “Do your own thing” seems to have morphed seamlessly into the “trickle-down” economics of federal austerity.

Draft of the next section is as follows:

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Debunking the BGX Mantra

To restate our case, the reason Millennials will want to change the “golden” rules of sovereign money creation is to enable themselves to more effectively create the collective goods and services they will need to address the many dilemmas they’ll face as a governing generation. As they come to power and move to make these changes, however, the Millennials can expect a willful pushback from the waning ideology of the BGX generations. The indignant and strident protests will likely fall along the following lines:

Ending money scarcity at the level of federal spending is unthinkable and naïve because:

  • The economy will collapse due to hyper-inflation.
  • Opening the sovereign spending spigot will result in the creation of a socialist “nanny” state in which people will stop taking responsibility for their own prosperity and well-being, and become dependent, instead, on government hand-outs.
  • Expanding federal spending programs will undermine market-based competition and subvert the motivation of merit-based rewards and entrepreneurship that our free-enterprise system depends on.
  • Massive federal spending will create massive government programs and bureaucracies that will waste money and resources.

Each one of these protests, however, contains an unstated assumption which represents a single choice (the worst one available) out of many possible choices. It is not difficult to make the case that other choices are not only more rational, they are more likely to actually support the inferred values the BGXers claim they are trying to protect. Let’s look at each of these protests in turn, and the unspoken assumptions and choices they represent.

Hyper-inflation.

The unstated assumption here is that the sovereign spending of new fiat dollars will simply pump additional money into the Private Sector economy without creating new goods and services that people can buy with the additional injected dollars. This certainly is a choice that could be made—to simply “give” people dollars for doing nothing at all. And doing so very likely would, after a period of time, begin to significantly devalue the dollars everyone is using.

We’ve already seen and understood that the value of fiat money, relative to the actual goods and services available in the Private Sector markets, is something that needs to be monitored and controlled. What is important to keep up front in the inflation argument, however, is that as long as sovereign spending actually creates real public goods and services the new fiat dollars will not be inflationary. This is especially true if the particular public goods and services created are the kind that enable more people to subsequently participate in the creation of private goods and services as well. (This is something we’ll discuss further on in part 4.) Sovereign spending directed in such a way will, instead of creating inflation, grow the economy, raising employment and wages toward the goal where every able citizen is comfortably supporting themselves and their family either with their labor, their talent, and/or by their entrepreneurial efforts.

Only when full employment is truly reached—that is to say, when virtually every able citizen is earning at least a living-wage performing some task that is useful to or entertaining for others—would we expect that additional sovereign spending might bring inflationary pressures on the money system. No BGXer could argue that we do not have a long way to go before reaching that happy moment—or deny that the goal-line, in fact, is continuously being moved ahead by technology advances which eliminate the need for human participation in the production of goods and services. (This is one of the major Millennial dilemmas we’ll discuss in Part 4.)

Socialist “Nanny” State.

This protest contains several unstated assumptions. First and foremost is the assumption that sovereign spending equates to the federal government doing something for the people—or giving something to the people which they have not earned. From this perspective, sovereign spending is seen simply as a hand-out that relieves people from the responsibility for managing their own lives and well-being.

While this perspective represents one possible choice—the choice of creating a welfare state—it should be clear from our earlier discussion of the diagrams that sovereign spending can also be directed toward enabling people to do something useful for themselves—in which case what is created is very much something they have “earned”. To take one of the most obvious examples (one which we’ll explore further in Part 4) sovereign spending could easily pay citizens to build the facilities and provide the educating services required to provide free lifetime instruction and/or technical training to every American citizen—from birth to retirement.

Would such a program make America a socialist “nanny” state? I would argue the opposite: Do you really want people to take responsibility for their lives?  Do you really want every American child to grow up to become the most productive and successful adult they can be? Do you really want to make America’s free-enterprise system an equitable and prosperous example for other nations to emulate? There could be no more effective first step than to create the collective platform that enables every child to begin supervised reading experiences in pre-k or day-care; that enables every adolescent with an interest to learn marketable technology skills in high-school; that enables every high-school graduate to pursue a college or technology degree without incurring a single dollar of personal debt; that would enable any middle-aged citizen, whose job has been displaced, to reeducate themselves for a new avocation—again, without having to spend their life savings or go into debt to do it.

This is just one example of how powerful sovereign spending programs, far from creating a socialist “nanny” state, could help establish a society of highly motivated and self-directed people who are, in fact, enabled to take responsibility for making their lives a success.

Free-Markets Undermined.

Warnings that expanded sovereign spending will undermine free-markets and America’s private enterprise system can only be based, logically, on the unstated assumption that what the new sovereign spending will undertake to accomplish—what it will pay people to do—will be something that competes with private, for-profit businesses. This reasoning, in turn, includes the idea that whatever the government is hiring people to do could be done better, and more efficiently, by a profit-oriented business operating in a competitive market.

These assumptions, however, overlook or choose to ignore two critical realities of America’s free-market economy: First, there are many goods and services which, if available, would create significant collective benefits—and even spur new levels of market-based competition—but which profit-oriented businesses have no interest in providing for the simple reason that they don’t generate “profits” in the capitalist sense of the term.

Here is an example from my personal experience as an architect and urban designer. More than a decade ago, I designed and patented a downtown people-mover (SMRTram) that would accomplished something every busy, congested, downtown business district desperately needs to accomplish: it would extend the distance people are willing to “walk” after they park their car. Right now that distance is not very far: 1000 feet, on average, is how far most people will walk before they’ll return to their car and move it. This rather short parking-pedestrian-access distance has huge ramifications for the livability and prosperity of downtown business districts. It means everyone is trying to park in the most congested areas—which dramatically increases the congestion. It also means that the number of customers any given business can expect to attract is limited by the number of parking spaces within 1000 feet of their front door. If you could increase that parking-pedestrian-access distance from 1000 feet to, say, one mile, the results would be dramatic:

  1. People could park further out, where spaces are easier to find and less expensive (maybe even free.)
  2. Traffic congestion in the business core would be dramatically reduced.
  3. The number of customers who could access any given business location would increase by 500% or more.

The people-mover I designed could be retrofitted into any existing commercial street without impacting traffic flow. Using it, pedestrians could move, virtually at will, up or down the street without having to wait more than two minutes for a ride going in either direction. Travel time for any given “ride” was so short riders would not even need to sit down. Every business along the street would be within 1000 feet of a people-mover stop. Given the huge benefits an entire commercial corridor would collectively gain, I was certain SMRTram was going to be a big success.

It turned out, however, to have one fatal flaw: In order to properly function, my people-mover had to be free to ride. Just like an elevator in a building. In spite of several years of effort, I could not get any profit-oriented business interested in building it. And even though several cities were substantially intrigued, none of them could imagine a politically viable way to pay for a local transit system that couldn’t charge a fare.

This example also illustrates a second reality about America’s free-enterprise system: Its competitive effectiveness depends, in fact, upon an expansive cooperative infrastructure, most of which cannot be built or operated as a for-profit business venture. Expanding, improving, and modernizing this collective infrastructure—and actually redefining, in fact, what logically should be included in its realm—could increase the effectiveness of free-market competition far beyond anything the BGXers’ “money scarcity” has ever imagined.

Massive Government.

Dire warnings about the massive government programs and bureaucracies that would be created by opening the sovereign spending spigot could well be the most justified fear the BGXers will have. There is no denying that America’s federal bureaucracies today are ponderously inefficient and overburdened with regulatory frameworks that make it difficult—if not outright impossible—to actually get anything done. Even worse, the “top-down” bureaucratic process of making decisions and allocating funds makes federal spending programs extremely vulnerable to the lobbying efforts of powerful interest groups who, in effect, become the final arbiters of what collective goods and services get created—and who gets paid for the doing of them.

Once again, however, the stated fear is based on an unspoken assumption—namely, that the only channel for increased sovereign spending is one that goes through the piping systems of the existing federal bureaucracies, and that adding significantly to that flow will, of necessity, require the expansion of that piping system, adding valves and pressure gauges, elbows and Ts, not to mention tens of thousands new government workers to monitor and manage the flow. But this is just one choice of how to manage and direct a new level of sovereign spending—and it is not the choice I believe the Millennials, given their cooperative instincts and interest in achieving real, pragmatic outcomes, will want to pursue.

Instead, my hope is that the Millennials will implement a completely new way to appropriate and distribute sovereign spending—one that will bypass federal bureaucracies completely and enable cooperative groups at the level of local communities to petition for, and receive, sovereign funding for their collective projects. We’ll discuss this further in Part 4. For now, I’d just like to point out that if something like this had been in place a decade ago, there are many North American cities I can think of that might now have downtown business corridors running along smoothly and prosperously with free-to-ride SMRTram people-movers!

5 responses to “The Millennials’ Money (part 3)

  1. Funding for SMRTram: The city builds it, and when it is completed, charges a sales “surtax” of 1% on all sales in the area served in excess of the sales in the year before the SMRTram began service. If the businesses see no impact, they pay nothing, and the project is a failure, but at no cost to them. If sales increase 500%, the city gets 5% of the base year’s sales every year thereafter, more than enough to fund the SMRTram, one would hope.

  2. Your new thoughts on boomers are much better, especially the part about distrust of government. The only remaining problem with your arguments is that we’ve heard it all before. You need to add an iron-clad guarantee that the new programs will work, or be abolished. We’ve seen the War on Poverty dump $Trillions into the economy with no impact at all on the poverty rate. Obamacare has raised the number of insured people by 3%, nothing more than noise in the statistic. The Great Stimulus Program spent $800B on a flock of Solyndras and U6 is still 11% 6 years later. If that sort of thing happens again, then you must agree to stop your program and go away. And it has to be written into the law in a way that the slimy lawyers can’t get around it. Then maybe the boomers will give you a shot at something. Take a good one the first time, it could be your last.

    Good luck.

    • Jonathon, thanks very much for these comments. We tried an approach similar to what you suggest for SMRTram. We even created a fairly elaborate modeling program that enabled cities to quickly “design” a system and project how it would impact downtown business sales under different assumptions. The difficulty is that in order to find out if the projections are accurate (or not) and able to pay for the system (or not), real dollars have to be spent first to build the system and operate it for a period of time. Players in the Private Sector—being oriented, of necessity, toward the making of profits (since they are the users of fiat money and not the issuers of it)—are not willing to risk the spending of those dollars on a venture that has unproven revenues. The point of my whole argument is that a fiat-issuing sovereign government is the only entity capable of rationally taking that risk—and “profiting” from it even if the venture is a failure.

      You mention the example of Solyndra as this kind of “failure”. However, from the perspective of a fiat currency system, every federal dollar that was spent to assist Solyndra ended up in the pocket book or bank account of a Solyndra employee or contractor—and subsequently ended up in the pockets of car dealers, grocery operators, shoe salesmen, etc. And even though Solyndra ended up a “failure”, I have no doubt that people involved in it learned useful things about how—and how not—to build and market solar energy products—lessons that will eventually be applied, in some fashion or another, to bringing solar into the mainstream of America’s energy mix. From the perspective of collective society, that’s not a failure but a success.

  3. Marvin Sussman

    Excellent analysis and convincing arguments. There is another approach that you may find useful: think of the public as shoppers. Example:

    Very young children create a need for reliable day care. Parents have to shop for reliability at a feasible cost. Since government has the marketing power to create the best system at the least cost, why not have government create a nation-wide chain with local facilities in close contact with police, fire, school, and hospital services. There could be play facilities that encourage learning and socialization and a built-in clinic. All that at a reasonable price. That’s what good shoppers want. How could private enterprise compete with that while absorbing the insurance costs, litigation risks, etc.

    Make it a matter of consumer satisfaction.

  4. I guess that conservatives would wonder how all this government activity would interfere with economy’s role in evaluating, rewarding and punishing human behavior.

    It is seen that present economic system rewards virtuous people: hard-working, sociable, goal oriented, those taking responsibility etc, while it punishes those with bad characteristics: lazy, anti-social, drifters, drug users. If government helps all people to succeed then all this is lost and justice is not served.