Compendium

The following is a summary of the book and the theory in capsule. Each bolded title represents a part head while the italicized text represents chapter titles from the book.

I. Wealth
1. Mundus Novus | 2. The Origin of Wealth | 3. Laissez Faire, Morbleu! | 4. The Abstraction of Wealth | 5. Complexity

III. Government
1. The Great Switch | 2. New Feudalism | 3. The Costs of Transferring Wealth | 4. In Perpetuum | 5. The Moral Effect of the State

IV. Autarchy
1. Reassessment | 2. Working Within the System | 3. Fixing the System | 4. Transcending the System

I. Wealth

1. Mundus Novus – How the discovery of the New World precipitated a resurgence in the Natural Law (1492 – 1650)

The ability for men to rule themselves is based on their ability to sustain themselves. When a people are unable to survive and flourish on their own, they are incapable of self-rule and thus fall into a hierarchic system. When a people are able to survive and flourish on their own, self-rule becomes possible and the society forms into a democratic or autarchic system.

History gives us an illustration of this principle in the development of Western Civilization from 1500 to the present. Prior to 1500, the world was a closed system with its people highly dependent upon each other. It had been assumed that man was incapable of self-rule, that a system of hierarchy must be established for any semblance of order to prevail. After 1500, with the discovery of the New World, this fundamental assumption was challenged.

The key was the open of a frontier of free land. With an abundance of free land, men could reject the prevailing system and strike out on their own. The ability to provide for themselves led to the ability for them to rule themselves; self-sufficiency led to self-rule.

The development of self-rule was a long, complex process met with constant resistance from the start. Reactionary forces were able to maintain feudal systems well into the modern era and even bolstered them to stay relevant. The result was a trend that ran parallel to and countered self-rule, the oppression and destruction of native peoples Africa, the Americas, Southeast Asia, and Australia. This contradictory development was seen in the economic sphere in the dominant form of policy in the 16th and 17th centuries, Mercantilism, which could only be overcome after the power of the New World could be harnessed completely.

2. The Origin of Wealth – The establishment of private property, the profit motive, and a subjective value (1550 – 1675)

Where self-rule was able to flourish, economic strength grew as a result, making it an irresistible force in the progress of society. Economically, the development was witnessed in the establishment of property rights. Whereas land and goods had formerly been owned by the lord or king, now it was to be possessed and maintained by the individuals or groups who made use of them.

As individuals assumed ownership, so they assumed the ability to profit from their output, which naturally spurred greater production and, ultimately, greater aggregate wealth. The concept of wealth shifted from being dependent on others to being wholly dependent upon one’s own industry.

The stress placed on the individual ushered in the notion that value is subjective. Previous economic theory stated that goods and services had a ‘just price’ that was the same for all notwithstanding needs and wants. Now it was believed that value could change and that it was dependent on its supply and the consumer’s demand for the good or service.

3. Laissez Faire, Morbleu! – From the subjective value to specialism, labor division, and free trade (1600 – 1776)

Subjective value encourages trade, where two or more are willing to exchange goods they value less to acquire goods they value more. In this way, subjective value means that two or more can gain in a given exchange.

In effort to take full advantage of this mutual gain, Western cultures developed techniques that further exploited subjective value. These techniques rested primarily in specialism and the division of labor, in which individuals and groups focus on the production of one or a few goods in order to optimize output and so are able to offer more for an eventual trade. These techniques, coupled with machine industry and scientific management, increased wealth throughout the West to unprecedented degrees.

Trade also comes with costs, those being, most directly, the cost of trading and distributing the goods, the mental numbness caused by monotonous specialized tasks, and, most importantly, an interdependency that ties traders together. As long as trade is voluntary, an interdependent relationship can remain mutually beneficial.

4. The Abstraction of Wealth – The consequences of the widespread use of money (1600 – 1800)

In order to better facilitate trade and thus exploit production to its greatest capacity, societies have instated the widespread use of money. Because of its abstract nature, money distorts the economy and changes the notion of wealth altogether.

The widespread use of money democratizes wealth so that it is worth the same no matter who it comes from or what is done to earn it; money also allows for the practically infinite storage of wealth and the simultaneous possession of wealth by more than one party; and, most significantly, money condenses the pursuit of wealth into a single, objective endeavor, in which participants are all seeking the same thing.

Given its flexibility and usefulness, money is often rightly regarded as having value in itself and not unreasonably seen as the most important good in the economy.

5. Complexity – The introduction of credit, banking, investments, and insurance (1650 – present)

Once money is in wide use throughout an economy, institutions arise that seek to produce and augment it as with any other commodity. Through the use of banks, money is circulated, accumulated, and lent out in a process of fractional reserve banking, which grows the money supply and thus the amount of economic activity in a given society. Credit also further entrenches a given society in mutual dependence by uniting persons involved in the process of the multiplying money.

Credit often leads to speculation in the form of lending money without collateral on the promise of future returns. This form of credit introduces money into the economy ex nihilo and so presents a unique form of risk. Speculation is profitable when the economy is eager for such investment, but it fails when the economy is not in want of the investment, typically causing economic distress and often panics and runs on banks.

The pattern witnessed in all investment and especially that of speculation is of boom, bubble, and bust, through which the economy has experienced severe swings in production. Particular instances of this boom and bust are seen in the various manias that have sprung up throughout the West, and the overall effect is seen in the Business Cycle.

II. Competition

1. The Close of the Economic System – The economic consequences of the close of the Western frontier (1800-1890)

After 400 years of economic development, the era’s central driving force had come to an end with the closing of the Western frontier in 1890. With this event, the notion of free land, available for anyone to assume had vanished, and so all were left to make do with the system that existed. This effectively brought to a halt and set into reverse many of the vital economic and cultural aspects of the previous centuries.

Economically, the close meant that independence was no longer possible and that to flourish or even survive, one would have to go through other people. This interdependency meant that wealth in general had become controlled and thus limited; the economy had closed.

This condition is best seen in the pressures put on money during the close. Because the people were dependent on each other, they could only achieve what they needed by obtaining and making use of money. The concepts of supply and demand were supplanted by that of effective supply and demand, or supply and demand with purchasing power, the only kind of supply and demand that would have an impact in the closed economy.

The ascent of money meant that everyone in the economy was striving for the same thing, which meant that the old thoughts of mutually advantageous trade had become obsolete, and that one could only gain at the expense of others.

2. Interdependency – From a closed economy to a mutually dependent society (1850 – present)

While mutual dependency had always been a consequence of modern economic constructs, it had always been optional. With the close of the frontier, it had become compulsory. As a result, the average Westerner’s life was growing more and more interdependent with those of others.

By 1900, interdependency was a fact of modern life, and no one could expect to survive without interacting, cooperating, and working with others. This phenomenon is seen in the rapid increase in the service sector and the decline of agricultural and industrial sectors of Western economies.

The psychological effects of interdependency can be summed up in the notion that one’s thoughts and actions are all contingent on other people, and that one’s personal will becomes secondary to that of the masses. Choices are no longer made of volition, but by the influence of peers, superiors, and society in general.

Interdependency can lead to cooperation and increased production, but, in instances of limited resources, it can also lead to competition and conflict.

3. The Transformation of Wealth – From interdependency to an objective value of wealth (1870 – present)

The more interdependent people are, the more they are reliant on the agreed means of exchange in their society–money. In the most extreme cases of interdependency, everything one wants to do is dependent on one form or another of an exchange of money. Though all humans desire real wealth in the end, the only way they can obtain that real wealth is by the acquisition and application of money, and so, for all practical purposes, wealth becomes money.

The transformation of wealth from real goods into money can be seen throughout the last century in the various ways in which goods and services have lost value. The introduction of use-and-throw-away goods, multitasking, and the decline of service in a service economy mark the widespread transformation. It can also be seen in the elevation of money as a status symbol and use of monetary statistics to gauge well-being.

Another piece of evidence is found in the shift in attitude toward the rich. With the belief that wealth is money, it is thought that no two parties can gain in a monetary exchange, and that the one who acquires more money is the only one who gains in wealth.

4. The Zero-Sum Problem – The strictly competitive condition and mutually exclusive gain (1850-1950)

The more desirable money has become in the pursuit of wealth, the more that pursuit has become a strictly competitive endeavor. When everyone is striving for the same thing, such as in a money economy where everyone is striving for money, one can only gain at the expense of another. The pursuit of money is a zero-sum game where one can only win if others lose.

Technically, since the pay-off can fluctuate, it is a non-zero-sum game, but, since the competition between contestants means gain by one necessarily means loss by another, the effect is the same as a technical zero-sum condition. In a money-based economy, all actions amount to part of a strategy in the effort to gain more money. Since all such goals are competitive, the corollary is that another must lose for one to be successful.

Competition has traditionally spurred creativity and encouraged participants to develop alternative and often more efficient and effective methods of production. The Survival of the Fittest applied to the economic realm has meant that only the best and most capable survive the contest. At the same time, competition has encouraged conniving and cheating as an alternative to creativity and innovation. The result has been in many cases dubious and outright unjust advantage of given parties over others.

5. Monopoly – From a competitive condition to the control of wealth (1870-present)

Competition is seen as positive from the perspective of those who do not have to compete, and negative from the perspective of those who do since the former can enjoy the rewards of the efforts from the latter. The strategy is to monopolize that which people must compete for, money in the modern economy.

The ownership of money can lead to the acquisition of more money. The more desperate one is to obtain money, the more effort one is willing to give in return for it. If, on the other hand, one is able to secure a large amount of money and withhold it from others, one will be able to demand more for the money. Thus, it can be profitable to be rich, even if one is not making use of the wealth.

In a closed system, wealth becomes a matter of relative power over others. Large fortunes and industrial conglomerates are formed to this end. The decades after the close of the frontier saw an exponential growth in the number of conglomerates and trusts.

6. Exploitation – From the consolidation of wealth to the exploitation of the disadvantaged (1880 – present)

In a closed economy, individuals and companies had become capable of controlling large sums of wealth and thus dictating the terms of contracts with those who did not have similar stockpiles of wealth. Given its altered composition, the economy of the twentieth century could no longer be called a Capitalism, but rather a Vulgar Capitalism.

Exploitation comes in two main forms: pricing consumer goods higher than they are worth, and paying employees less than they are worth. Both are conducted extensively throughout the world, though the latter is more noticeable and reprehensible. A third form of exploitation is pollution or reckless use of natural resources at the expense of the public.

Since contracts are technically based under free terms, consumers, workers, and the public are responsible for their own exploitation. Producers and owners are no more malicious than their victims; they are simply in a better position to take advantage of others. Since consumers, workers, and the public seek the same ultimate goal of wealth, they serve as engines to further entrench themselves in their plight.

III. Government

1. The Great Switch – The argument for large-scale governmental control of wealth (1910 – 1940)

The monopoly of wealth and resultant exploitation experienced in the Vulgar Capitalism of the turn of the century led reformers to conclude that the laissez-faire form of society was no longer sufficient in providing the people with life, liberty, and the pursuit of property. It was established that an external party must step in and conduct affairs in the economy so as to protect against exploitation and ensure everyone had necessities.

As a result, Western countries shifted focus from negative freedoms, in the form of what government cannot do, to positive freedoms, in the form of what people should be able to do. Taxes were imposed and welfare instruments were established to provide these positive freedoms.

A major aspect of this process in America was the introduction of a central bank, which had been designed to control the money supply and reduce the effects of the Business Cycle. Turmoil partially caused by central bank actions led to the Great Depression in which the Welfare State’s role in the economy grew exponentially and became irreversible.

2. New Feudalism – The structure of state government (1920 – 1970)

Perceived early success of state governments ingrained their place in Western Civilization. The form of state governments differed throughout the West, though all attempted to combine the entire economy into a single enterprise conducted by government officials. This was to bring monopoly to its farthest extent.

The success of state government relied on two premises: that productivity could improve boundlessly with increased scope and that the planned economy could operate as well as the free market. The first has been shown to be false by the unproductive effects of bureaucracy. The second has been shown to be false by inherent deficiencies in planned economies. The deficiencies take two forms: that economies planned by state governments necessarily eliminate the price system and thereby cannot gauge demand and so cannot adjust supply appropriately, and that public officials are not able to put aside personal interests in order to govern the economy justly.

Public officials are like all other humans with needs and wants as well as the potential for errors in judgment. Thus, they are liable like anyone else to succumb to mistakes and corruption. They are also motivated to reward supporters and special interests even when it comes at the expense of their constituents as a whole. The consequences of this are seen throughout Western economies over the course of the last hundred years.

3. The Costs of Transferring Wealth – The constitution of government actions (1930 – present)

The fundamental action of state governments is to transfer wealth, a process which comes with it many costs, some seen and some unseen. Government transfers wealth in three ways: fiscal policy (taxes and spending), regulation, and monetary policy (control of the money supply through the central bank).

The first cost is to the parties from which government transfers the wealth, which is presumably the rich, though it can easily be deferred to the poor. The second cost comes in the amount of time and resources dedicated to the transfer process and governmental infrastructure. The third cost comes in the form of the distorted economy and the convoluted efforts individuals and companies must make to accommodate the governmental interference.

Evidence of the last is seen in the effects on supply and demand that price controls have, which produce shortages and surpluses of goods and services and ultimately the waste of otherwise useful resources. Government intervention is thought to increase wealth by accelerating the circulation of money, but often ends up directed at the destruction of real wealth.

State control of the economy by means of monetary policy is particularly powerful since it affects the supply and demand of all goods and services. Monetary policy also tends to harm those who are farthest from the government because the benefits of increases in the money supply are experienced incrementally from most connected to least connected to the government.

4. In Perpetuum – The perpetuity innate in a wealth-transferring system (1950 – 2000)

The process of transferring wealth attracts individuals and groups that seek to gain from the process by influencing state action in their favor. The more money government transfers, the more interest lobbyists take in the government’s action, and compels more transfers. Since each transfer necessarily costs others, they are encouraged to join in the lobbying, creating a self-perpetuating cycle of ever-expanding government intervention. Factions within the system work together to generate interest and secure higher contributions.

Mechanisms designed to alleviate strains on the system can only increase government action and thus further this self-perpetuating problem. Attempts at solving the problem add to it and end up making matters worse.

The extent of this process can be seen in the exponential growth of rules and regulations that the government has imposed on its people.

5. The Moral Effect of the State – From government intervention to the incapacity for self-rule (1960 – present)

As government wealth transfers had increased abstract wealth throughout the economy during the mid-twentieth century, the social fabric of the country was degrading. Government action intended to provide for those in need tends to weaken moral capacity and make people more needy of government action. Government agencies tend to create the need that they seek to satisfy.

This is seen in the perpetual status of most government programs, which are implemented to support needy individuals and groups and end up altering their behavior such that they can no longer subsist without the government assistance.

Individuals and companies change their approach in earning income from producing real wealth to becoming too big for the government to allow to fail. Recent financial catastrophes show the effects of an economy infused with state-sponsored moral hazard.

Under control of a planned economy, individuals and groups are given incentive to free ride on the work of others. The goal of social cohesion is replaced by the reality of increased social tension and selfishness marked by the reduction of voluntary charity. Government action renders the society incapable of self-rule and in need of protection by the state.

IV. Autarchy

1. Reassessment – From a closed to an open system (present)

Proposed solutions to problems rely on the system as it stands, and so tend to add to the problem and thus make it worse. The system is organized in a way in which one can only gain if others lose. A real solution would transcend this zero-sum condition and enable all actions to be mutually beneficial.

Opening the economy would require all those involved to be able to reject the current system as it stands, which means that all must be self-sufficient or capable of providing for oneself. The prospect of self-sufficiency issues three central concerns in an interdependent age which hinge on the likelihood that the modern standard of living will diminish, the improbability of finding a means to transcend the system, and the logistical difficulties of such an endeavor.

2. Working within the System – Relief from the confines of the modern system (present – 2020)

Relief from the ills of the system must take the form of drawing away from rather than participating in it. So too must these actions be economically sound for participants to justify them.

Efforts that meet these criteria can be listed from most basic to most intricate: simplifying and removing unnecessary clutter from one’s life, prioritizing the elements in one’s life and designating them as either essential or superfluous, rejecting the call to act in the interest of society and social responsibility, shifting focus on one’s economic activities from the spread-out and distant to the local arena, buying from producers that are independent from large conglomerate firms, using one’s buying power to create leverage against outsized organizations, storing wealth in the interest of building capital, initiating a business to alleviate bureaucracy, and exercising one’s ability to engineer sound leadership by voting.

3. Fixing the System – The process of dismantling the system (present – 2050)

Reform measures have traditionally relied upon aspects of the system to fix the system, and have thus tended to add to the system they intend to correct. True reform can only come from outside of the system and must take the form of removing obstacles to free enterprise within the system. This process will focus on eliminating governmental barriers primarily because government poses the greatest and most concentrated threat to self-sufficiency. Other threats that have existed in the past can be dealt with better in the absence of government interference.

The reform process begins with the central aspect of all economic action, money. In order to diminish barriers and allow for self-sufficiency, the production, distribution, and possession of money must be unrestricted, which means that no laws should be established against the free administration of money and that the national currency should be abolished to ensure viable alternatives. The Federal Reserve should be dismantled in a five-part procedure that carries the economy from strict dependence on the national currency to private currencies backed primarily by specie.

Regulation should be assumed by local, polycentric organizations as opposed to the distant, central government, the process of which can already be seen in various organizations across the country. State fiscal policy should be streamlined by downsizing and eliminating programs that are economically unsound and counterproductive. Finally, the government should be brought up to date with the use of modern technology.

4. Transcending the System – The possibility of pursuing alternatives to the current system (present – 2300)

The modern system can be seen as a dual force which has brought both unprecedented standard of living and unprecedented interdependency. In effort to diminish the difficulties posed by the latter, guards must be established to prevent diminishing the former. Using modern technical advances, self-sufficiency can be attained without giving up the benefits of interdependent life.

The Internet provides the key resource in this endeavor in its ability to grant access to a practically infinite source of information, which is the most essential aspect of self-sufficiency. The Internet also allows for individuals and groups to keep in contact with society from afar by enabling telecommuting, merchantry, and socializing.

Other advances have made do-it-yourself projects more reasonable and cost-effective, including securing a water supply, gardening, creating clothing, building shelter, conducting sanitation, and generating power locally. Future technical advances promise to extend the power of individuals by use of autonomous machines.

Self-sufficiency can be bolstered by the introduction of a new frontier. This is possible by means of diversifying existing sovereign states to the extent that all alternatives are made available, the denial of national and international hegemony, and the exploration and settling of new territories beyond the confines of land and the terrestrial planet.