Human Rights – Legal Rights
Moral human beings are confronted by a dilemma deep and ancient created by two paths, each way is based on one of two competing theories of rights; the dilemma is fundamental to the way business and government is run, the two paths create two forms of ownership distinct and irreconcilable the two paths impact morality and rationality and the nature of right and wrong, the division creates conflict and pits human rights against property rights, forms social costs and prevents economic rational exchanges from taking place, the division limits our right and ability to say no to costs we did not create and defines the nature of power as the ability to impose costs onto society and future generations; debt, unemployment, poverty and pollution are social costs that create risk and produce waste; to eliminate the division and social costs of this split requires a Reformation similar to that which divided Protestantism from Catholicism in 1517 and for much the same reason – to build a more ethical community.
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By Robert Burk
Freedom has been a desire of all persons since the first Stone Age man began chipping out arrowheads to make a living and wondered how to protect the fruits of his labour from the claims of community – at the juncture where property rights separated from human rights a moral dilemma was born.
In a small town in Muskoka in 2012, The Bracebridge Brand Leadership Team began the work of developing a new brand for the town. In 2013 they published their conclusions in .
The Art Of Muskoka Living promoted a new trend in recreation called ‘experiential tourism’. The study concluded the town ought to teach tourists the Muskoka Lifestyle. Bracebridge was to be ‘the heart and soul of Canada’s Cottage Country – steward of the famous Muskoka lifestyle’.
The Bracebridge Brand Leadership Team (BBLT) believed in the free market and private ownership but the residents believed in a higher morality and rose up and rallied against the proposals to defeat them.
The BBLT were bemused at the people’s reaction but not surprised – the uproar was dismissed as a sign of provincialism, a refusal of locals to face up to the reality that business development comes with a price tag and sacrifice. The town would have to adjust if it was to attract investments. Investors do not invest without some assurance of private gain regardless of the social cost.
Social costs include waste, pollution, unemployment, poverty and debt. Social costs are costs that the community and future generations pay. Putting costs onto community to create economic development does not produce a net positive economic impact. Social costs are not consistent with a culture that respects human rights. Social costs are not consistent with a humanely run workplace. Social costs do not promote community, or harmony and are not consistent with any reasonable business ethics.
Human rights ought not be sacrificed for market share. Yet this is the path history has put us on. The desire for the good life has sacrificed what is local in favour of the global; human rights have taken a back seat to property rights. Local business interests are pushed towards and into the global free market supposedly to lower costs and give consumers more purchasing power. Putting consumers first creates unsustainable costs for local businesses and communities. Grow or die means Globalize or be taken over. Social costs may benefit either the rich or the poor but they always harm community. Community is the place where human rights find their fullest expression.
Social costs are levied at the expense of local business interest and the community. Democracy does not function on a Global level; ideally Democracy is grassroots and local. Democracy is associated with the local community. If Globalization continues unchecked democracy will end in tyranny. Tyranny by definition is not pro community and not conducive to a culture that respects human rights.
The free market and the rights of private property are considered the engines of commerce. However it is local entrepreneurs who build community. Freedom exists only within community specifically freedom is manifested in the activity of local entrepreneurs.
Freedom cannot be bought but it is not free. Freedom is not a product we get as consumers Demand bread. Freedom as offered by the free market is an illusion. Freedom is not derived from the possession of property. Freedom comes with the possession of community.
Free markets tend to squeeze out local sources of goods and services in favour of suppliers with the ability to shift costs onto communities. This can mean unemployment in the consuming market and pollution and social disruption in the producing community. This is a cost of the supposedly free market. The free market is not free because it is not free of social costs.
The choices we have are about whose rights to protect and who’s to offend. The Right sacrifices human rights in favour of private enterprise and private enterprise in favour of international conglomerates. The Left sacrifices human rights to promote order both paths creates social costs and social costs are violations of our human rights. Social costs make local businesses less competitive and therefore susceptible to take-over by International Corporations or the State. These have lower per unit costs according to the free market. The real cost is higher but absorbed by local markets and local entrepreneurs who are then accused of being inefficient. Some of the costs of the free market are visible in the form of unemployment and other social costs but the greater mass of the socialist iceberg is submerged in the hidden costs of the Globalism (the erosion of local culture in favour of mass merchandising). When our human rights are compromised to gain market share entrepreneurism declines and community sustainability is lessened. Entrepreneurs produce local culture and this is made redundant by the mass merchandizing of international conglomerates. Globalization and the downloading of costs onto local markets ultimately harm local culture. A cost of the free market is Cultural Relativism the idea that all culture is relative and susceptible to cultural homogenization. Cultural homogenization is not consistent with entrepreneurism not the creation of local culture.
Empires fail because empires create social costs. Social costs eat away at the initiative of local entrepreneurs; no society is able to sustain the costs of empire indefinitely because entrepreneurs cannot pay the exactions of empire indefinitely. Local business is the engine of culture and community and when entrepreneurism is marginalized the whole culture is the poorer for it.
The more a culture is homogenized the more the local is being destroyed in favour of the global. This may continue until the civilization is an empty shell and implodes to be replaced by a more dynamic and heterogeneous society. An empire is a typological cousin to the free market. Empires qua empire creates a free market for those within the empire. Culture becomes a mass produced product for a mass market.
Globalization, which is another word for cultural homogenization, erodes business solvency at the local level. When local businesses are required to pay costs they did not create the tendency to avoid paying costs whether legitimate or not increases. Socialism transfers costs onto community. Bureaucracies are created with a mandate to care for the victims of ideological enslavement even as those who create these costs continue to pursue their economic best interests. This divorcement of the individual from the society in which he or she resides has social costs.
Regardless which sector or social class is favoured and which burdened the economic consequences of socialism are never positive. Socialism eventually brings down any civilization too weak to resist the costs imposed on its communities. Out of control social costs birthed by rampant Globalization (cultural homogenization) has caused the fall of every empire. At some point Empires fail to find sufficient resources to exploit. The cost of empire collapses the economics of local communities. Costs are shifted to a richer and usually younger economy with stronger local and social networks. Socialism is costs downloaded onto local communities. These costs ultimately create cultural homogenization as local culture is destroyed. The Haves and Have-Nots generated by markets is the division between those who are able to shift costs onto others whether rich or poor and adopt the global culture and local entrepreneurs who cannot resist the imposition of costs onto themselves nor successfully undergo the cultural shift.
Governments attempt to combat the social ills created by the free market and its compromised freedom but all they can do is create bureaucracy and more social costs. All Social Costs are paid for by society and future generations and in one guise or another harms human rights. The need for bureaucracy is a cost of the free market and our willingness to compromise human rights to promote property rights.
Social Costs are inherently corrosive of culture and breed tyranny simply because social costs are not consistent with the formation and promotion of community. Creating debt is never rational, never moral and never democratic and never pays though many think it does or can.
The Globalization of the economy by the Right requires governments to adopt the Socialist policies of the Left because Globalization increases bureaucracy and bureaucracies cannot generate income increasing the need for taxes Globalization and Socialism (Right and Left) are therefore by necessity inseparable and feed off one another. Keeping unrest down to a level where a full-scale revolution does not erupt requires the provision of social goods; another Social Cost and another levy on local markets.
At some point the local economy is rendered so destitute that the provision of social goods becomes impossible on the scale required to keep the peace and open rebellion happens as is happening in Greece.
The cost of Globalism not only reduces total disposable income and depresses economic activity it hinders the specialization that is the heart of all prosperity and productivity. Socialist transfers create unfair advantages for those communities globally positioned and penalize others more restricted by local factors. Bureaucracy favours big business because big business works on a scale that reflects the scale on which governments work, thus government in league with big business create a synergy that is inimical to the existence of local community. Social Costs always create debt in one form or another and social schisms between sectors globally positioned and those more sensitive to local needs. Debt is a measure of Globalization and Cultural Homogenization. Where Globalization has not made inroads debt is less in evidence. Only a strong local community can prevent Globalization and keep social costs down. Only a strong local community can protect itself from the costs created by Globalism. However everything in this world conspires to weaken the bonds of community. This is the assault on freedom. It is an assault on human rights. It is an assault on the ethics of a community.
Liberalizing the financial sector (a euphuism for freeing the financial markets from social responsibility) allowed a speculative boom we are still paying for. The costs created by financial speculation are Social Costs. All evil, crime and injustice are or create Social Costs (costs downloaded onto society and future generations) and erode the structure and sustainability of community.
Bureaucracies produce no goods or services. Governments pay for their social programs by transferring wealth from one sector to another. Government is inherently Socialist. Public financed programs push nations towards a society that is dependent on government intervention. This is not structurally sound; it is not economically rational. The dynamics of government inexorably push communities lemming-like along the same Socialist funded path toward cultural homogeneity. This is not freedom it does not create jobs it is human rights compromised for a bigger share of the global pie.
Robbing Peter to pay Paul is neither democratic, just or an effective way of creating economic development especially when Peter is a local merchant and Paul a bureaucrat or global conglomerate. Creating debt regardless of how or why it is done or the form it takes eliminates choice as surely as the most tyrannical dictator’s political dictates. Both actions take wealth from local markets to favour the Global free market; this does not create wealth it generates bureaucracy and destroys the roots of democracy. Tyrannies and social agencies pushing a global agenda create Social Costs and debt. Both harm the economy and weaken the local market for goods and services. Fascism is not compatible with cultural autonomy or entrepreneurism. Fascism is Globalist, expansive and centralizing and parasitic. Fascism ultimately means the collapse of freedom for it spells the death of human rights and with this a loss of community.
The free market favours Globalization and the mass-merchandizing of culture because a homogenized consumer can better be served. Because the free market is directed towards the elimination of all restrictions on trade and commerce and by default all restrictions against the creation of a single, global market the process demands Big Government. Globalization does not favour democracy or community because democracy requires locality.
The free market penalizes small local commerce and favours Multinationals. The worst and most destructive tendencies of the most ruthless men and woman cannot and will not lead to a Free Community nor lower costs. Globalization of the economy creates a bureaucracy that is more sensitive to global issues than local needs – arms before schools. The Invisible Hand allocates goods and services according to who has the most disposable income but it does not listen to what ought to be – it has no vision, no morality no sense of locality. Local businesses create local communities but the free market favours Globalization. Governments represent the greatest Demand and constitute the largest pool of disposable income. This at least partly explains the Arms Race and the market for arms generally (at the expense of schools and hospitals). Nor can the free market be tweaked so as to not produce debt and waste. These are the consequence of the free market that trades freedom for property. Free markets promote economic freedom but economic freedom favours Globalization and Globalization does not generate freedom.
The last thing we need is an abstraction deciding who shall eat and who will starve. The free market cannot serve as the source of human values and the arbitrator of public policy. The free market cannot replace human minds and rational choice. Free Markets are not capable of appreciating what ought to be. Free markets are not sensitive to the needs of local entrepreneurs. Free markets are not free not for those subject to its social costs.
Moral choice is possible only in a community. Moral choice is meaningful only in community. The fundamentals of moral choice are not compatible with Globalization or the free market. Free markets are not compatible with the needs of moral human beings for moral human beings make their own choices not choices dictated to them by the mass culture of multinationals. Organizations are not built by random events nor do invisible engineers build bridges and stable civilizations cannot be formed by chance. A free market governed by an invisible hand does not recognize human values or moral virtues. Social issues are best dealt with on the level of a local community. We cannot rationally expect a market that is geared to ensuring the security of property to respect or promote human values. The free market cannot provide the world with democracy or human rights only products and services. Community cannot be produced as a market item. The free market trumpets freedom but it is a freedom without responsibility or accountability a freedom with social costs – it is the freedom of rogues, pirates and sociopaths that is those who do not play well with others.
According to the precepts of the free market no social obligation or human consideration ought to stand between businesses and its ability to turn a profit using the resources/capital of the business. The free market says freedom is a reward of economic success – the acquisition of assets. This is a corruption of entrepreneurism. Can a business geared to making a profit be compatible with the diverse needs of human beings? Does profitability create the most freedom? If a human being were to tell you that he or she has no other interests and no other purpose than to earn money would you think this person free? The free market is not human scaled and businesses that compromise freedom for the security they think that comes from operating within it are not orientated toward providing what a community needs. Human values cannot be weighted against the cost of a battleship. Hunger cannot be given a price tag and marketed. To make profits more significant than human dignity cannot be rationally or economically justified yet millions of business people daily forget their humanity and act as if the only concern they have is to generate profits. That is a high price for a solid Bottom Line.
Community is about the inherent worth of human beings. Who we are is not encompassed by our identity as a consumer. An economic system focused on the cost of goods and services cannot be made consistent with democracy or human rights and values. The free market will never be made compatible with the needs of a community – the needs of mankind and community are not reconcilable with what is considered important by the free market model. Community needs an economic system that understands values as well as costs. Globalism has made workers appear to be a liability and social concerns at best a luxury. Yet, the worker is the consumer this fact seems to have been lost on our economic and business models.
Business values ought to reflect the importance of human and social values. This is not possible on a global level the scale is wrong. Globalism requires businesses focus on costs for it is in the control of costs that profits come about, but costs are not relevant when human values are considered as for example in a search for a lost child. Human concerns may wake people up and at some point make them realize free market ideology has to be put aside if they are to retain their humanity. At some point the profit motive needs be rejected in favour of human values. During times of trial and hardship a human face emerges from behind the mask of even the most dedicated market apologist. The Fear Of Others is pushed aside for a moment and the individual cost forgotten in the desire to express our humanity. It’s a time when we do what is right in the eyes of the community.
Debt is the measure of how much business has compromised ethical principles in seeking money. Today Greece the birthplace of our Democratic Freedoms may go bankrupt. The financial sector may well cut off its access to capital. If the nation escapes bankruptcy by giving into the demands of the Financial Free Market it will mean the end of democracy in that country. Greece has been given the choice of accepting international servitude to a Global Bureaucracy (represented by the IMF and EU) or exercising its democratic freedoms at a cost of being a pariah in the eyes of the international community. Freedom has become an unaffordable luxury.
Why is feeding hungry people believed to create debt, why does creating jobs for the unemployed create costs that the free market cannot justify; why is the promotion of human rights dependent on charity and volunteers? Why is society embedded in a system that treats human needs as luxury items? Why is health care unaffordable for so many? What are we living and working for if we cannot afford to live a healthy life? Nations that cannot provide adequate health care to its citizens routinely send money to assist in medical emergencies elsewhere. What agenda is being pursued here? Can we not in an economic sense, walk to the store to buy groceries; must we be Olympian athletes able to outrun the rest of the world to put food on the table? Ought not the creation of jobs be a natural part of any local economy? Can only volunteers and charity be used to feed those who cannot keep up the pace set by the Global Rat Race? What is the Global Market that it has no contingency for feeding the starving? The struggle for profits in the melee of free enterprise precludes human sentiment. There is no place for compassion in the operation of business. This is supposed to be a good thing. Competition it is said makes business efficient, efficient at what?
Rationalism is the belief mankind has inherent wisdom. Rationalists believe all people have an understanding of value and the intrinsic ability to choose. Humans think in terms of what we value and what we will give up to gain what we value more. We all know right from wrong and can discern the difference. When we act in the right way we gain what we value at the cost of what we value less. This is rationality applied. Rationalism is a philosophy that explains the world from a human perspective. Rationalists believe there is logic to the world and a right and wrong way to live if this was not true all choices would be relative and it would not be possible to make a rational choice. In such a world the free market would make sense. Everything could be given a price and sold to the highest bidder. The world would be a market where all choices were just market choices.
Rationalists believe there is a way of life that makes sense. We believe human values make sense because they produce the results we want. Rational Exchange believes in community values and that peace can be achieved in an objective, measurable and universal way. We must each choose right by choosing what is ethically valid. Ethics require we each must pay the cost of our choices. There is a right way to do business. There is a right way to live; there is a right way that builds community and nurtures creativity. Rationalists believe reason is an activity that can be measured and defined in economic terms. We each must choose what has value. We need to choose what makes sense to us in a consistent way. If we do not choose what has value we compromise our ability to choose. To choose what does not have value for us cannot make sense to an ethical human being. The only choice for an ethical human being is to live in an ethically rational way. Rationality is best expressed in community. The building of community is not consistent with the waste of the resources on which communities depend. This means that to live rationally we need to live in a community that understands human rights. Rejecting the rights of man cannot be justified by a desire to get rich. Human rights give us a sovereign claim to where we live and the resources on which we are all dependent. Our choices cannot be limited or dictated by others. Subjugation does not produce good results. Being subjugated to the will of others even the state creates social costs and this means a loss of what we value and this is the definition of waste. The state of the world is an objective measure of rationality and freedom for the state of the planet is a direct reflection of the ethical validity of our choices. The greatest barrier to peace and human rights is a way of doing business that does not respect the ethics on which businesses operate.
The State exists because of an outdated and indeed primitive conception of ownership based on fear. Debt exists because of this conception of ownership. The fear and sense of risk created by a mistrust of others led to the creation of Double Entry Bookkeeping. Legal Rights are descended from the Divine Right of Kings and not consistent with human rights or the ethics of community. Legal entitlements conflict with ethical rights for ultimately they devalue labour and our ability to build community. This incompatibility cannot be resolved.
The only way for governments to reduce social costs is by creating other Social Costs. For example increasing unemployment lowers inflation; debt is countered with business retrenchment and economic downturns with lowered interest rates. Governments can only change the mix of Social Costs they cannot eliminate them. This process of implementing social programs and changing the mix of social costs increases the need for bureaucracy and this increases the social costs communities must pay.
Capitalism and Socialism are different pools of social costs promoting two paths defined by two forms of entitlement, and a fear that is two faced. Socialist tyranny and free markets are two ends or extremes of the same political spectrum. There is no separation between Left and Right the division is an legal fiction and illusion.
The sort of government one gets depends on the mix of Social Costs we pay. The kind of Social Costs we pay depends on the kind of entitlements the community subsidizes. Peace is not possible so long as the world is burdened with Social Costs. A Globalist Democracy is not possible there is only global tyranny. Democracy is always local and based on community. Cooperation does not happen in an environment of economic dependency or moral degeneracy. The moral ought cannot be fully realized in a society that compromises human rights because of an erroneous conception of ownership.
This book is explains a new way to think about ethics. Morality is ultimately about having the capacity to make rational economic choices. Morality requires we eliminate conflicts and social division. Rationality requires an end to the fear that divides us from one another. Rationality is about ending a way of thinking that consistently values profits over people and property rights over human rights and things over souls. Ethical Rationalists need to reaffirm the value of place and people and the moral ought in a new way to do business. Ethical Communities must adopt a new form of ownership not based on legal entitlements and the concept of Legal Rights. The Law cannot create ethical ownership because The Law is ultimately based on fear and the presence of a perceived risk. The State cannot replace reason or eliminate waste or risk. The Law cannot build community on which a reasonable ethics is based. Property Rights are not a sustainable platform on which to build or sustain the ethics of a community.
5th edition July 2015
Published by Rational Exchange Publishing
© All rights reserved March 2014
© All Rights Reserved November 2015
A Short History 19
Need For Change 27
Rebranding exercise is misguided and undemocratic Huntsville Forester; April 04, 2012 Bruce C. Kruger is the franchisee of Swiss Chalet/Harvey’s and the owner of Kruger’s Muskoka River B&B. He can be reached at [email protected] or 705-706-2834. 30
Environmentalism And The Market 49
Social Goods 71
Private Enterprise 88
The Market 94
Social Capital 98
Rationality And Morality 109
Ends And Means 110
Control of the money supply: 115
Alternative Currencies 128
Local Economics 153
Moral Living 157
Government Services 171
Tragedy Of The Commons 181
Friedman on Freedom 199
Adam Smith 202
Freedom and Order 205
Cultural Relativity 212
Absolute Reason 215
Money And Gold 218
Real And Nominal Costs 223
Is King Canute misunderstood? By Kathryn Westcott BBC News Magazine26 May 2011 224
The Bible 228
Positive And Negative Morality 235
Freedom Of Choice 244
An Ethical Peace 245
Barter Updated 246
Social Costs 248
Labour Rights 254
The Labour Theory Of Value 256
Consolidating The Community Accounts 265
Preferred Shares 268
Scenario One 269
Starting An Exchange 271
Making Money 275
Scenario Two 280
Debt As Equity 289
The 2008 Crash 293
The Freedom/Control Schematic 298
The Bracebridge Exchange 299
Economic development comes hard to many places. Bracebridge, a small town in Muskoka has been hard hit by outsourcing, offshore manufactures and consolidation. In an effort to revive local business a study ‘The Art Of Muskoka Living’ was commissioned. It sought to provide Bracebridge a New Brand – a new image.
From the perspective of private capital Bracebridge is a town with limited options. The BBLT saw tourism, as the sector in which an investor would most likely invest. The Triumvirate of taxation, profiteering and debt has pushed Bracebridge and many other small towns down an economic cul de sac in which there seems to many only one way out. We have become reliant on The State and the economics it supports but this system has not been kind to small towns.
Bracebridge was once a major manufacturing centre and remains the District Capital. Big Box Stores carrying a cornucopia of cheap goods and discardable merchandise shipped in from distant sources now offer part time low paying service sector, seasonal jobs, which grow and shrink along with the wax and wane of the tourist trade.
The ecology of the natural world knows nothing about leveraging capital or compound interest or debt and risk. Liabilities are the invention and convention of a competition-obsessed market. A fox does not incur a debt when it hunts a rabbit. A deer does not create liabilities when it forages. Investment is not a zero sum game. Goods produced in Bracebridge do not need to compete with those produced elsewhere nor must our artisans compete with unskilled cheaper labour based overseas. The industrial might of China and the attractiveness of low wage havens does not mean Bracebridge must abandon the ability to feed and clothe itself. Our economic development need not reflect the costs and needs of the Canadian banking establishment or the regulatory controls that encourage global investment.
The experts and the pundits and those with the wherewithal to leverage economic means into political policy want to see Bracebridge become a “premiere tourist destination”. Local response has been less than enthusiastic. Most residents do not want their income tied to the whims of a visiting clientele.
If economic development is about the costs and needs of the global financial system, the reason for development seems to have been lost. Some may look with chagrin at the rise in NIMBYism; at the repetitious chants of naïve protesters but there is a message in the waving placards; communities believe in the primacy of human rights.
Where we live means something more to us than a place to invest surplus capital. Economic development means more than responding to global trends, life is about building a place to live and a home in which our children will raise their families free of the constraints of the market and of globally sensitive politicians. Economic Development is about human values not what suits an abstraction called the free market.
Economic development is about the kind of life our economic activity produces and the quality of life our money buys. Economic development is not about how efficient our industries are compared to international conglomerates. What matters is what is being produced and why. Money itself has no value if the cost of borrowing dictates the choices we have. The demands of investors ought not to have veto power over the needs and priorities of the town.
Life is not about competing for investment dollars it is about what has value for us. No matter how much money an investment generates if it destroys what is important to us the investment made no sense. Production can move elsewhere lives are less easily uprooted.
If the Rebranding Initiative is about rebuilding the town then the Initiative ought to have looked at what is important to those who make up the town, the residents. Bracebridge is its people and their values, not a pool of assets to be exploited then abandoned.
If the Rebranding Initiative requires us to embroil our children and ourselves in a global free-for-all where cost governs the direction of development and profitability determines if we shall eat or starve we are better off if Chartered Bank debt goes elsewhere. If tourism makes us dependent on a market that is unstable, unmanageable and prone to periodic collapse then better global investors pass us by.
It is not the financial sector or the free market and not an invisible hand that ought to dictate what has value to us. Mankind ought not be enslaved to a monetary system run by bankers or a business system designed solely to justify unfettered greed. Human beings have always striven towards economic and political freedom and have found its greatest expression in entrepreneurial activity that is work done to create community. Human beings have an innate capacity to be entrepreneurs. No one is wired to develop international organizations. Working together in small groups for the benefit of the group happens without supervision with lower costs and risks. All we need to do is find a way to eliminate the fear that divides and creates a need for The Law. People can work together when they learn to trust one another. We can build a real and reason based community. It is possible to create a local sustainable community if we focus on building an ethical community.
“The political problem of mankind is to combine three things: economic efficiency, social justice and individual liberty.”
― John Maynard Keynes
Bracebridge is not a natural structure birthed along with the granite outcrops that made it famous. It is a human fabrication, a product of human hands and minds focused on accumulating material wealth. The men who built factories and paid starvation wages then shut up the doors and moved away when times were no longer good were not evil. They were merely acting in their own selfish best interests according to the best thinking of the time. They were practical men not moral philosophers. They were guided by the rules of business. If anything they were accidents of history men of their time not visionaries and they knew little about community and less about the inherent problems of the free market.
Capitalism has been the philosophy of business throughout the eons and that capital markets are inherently flawed. This work will also demonstrate that Globalism is a continuation and outgrowth of free market economics but combines both Left and Right components.
The experts and professionals who generated the Rebranding Initiative were economists and business leaders trained to think in terms of the free market and property rights and were in this sense but one step away from their Right thinking Stone Age ancestor. The result of their work was a monstrosity of groupthink.^^1^^
This work will look at the Rebranding Initiative and at the larger issue of economic development as a problem of one group trying to download costs onto society and future generations. In this case the Right attempted to shift costs onto the community. In a larger context one side of a duality tries to achieve peace by pushing the costs of the peace onto the opposition.
This work argues the free market always produces Social Costs. The free market lowers costs by shifting them onto local markets meaning entrepreneurs. Entrepreneurism is local and small scale and focused on building community. Entrepreneurs create fewer social costs simply because of the scale and location of their operations but this puts them at a disadvantage compared with those who operate through the global free market.
Free markets require the support of a bureaucracy and bureaucracies generate no income. By definition bureaucracy is a source of social costs. Rising social costs are responsible for the impoverished state of our communities. The social costs of the Left/Right divide do not just include debt, unemployment and poverty but the cost of war, empires and the decline of civilization. Social costs are the costs of no one wishing to take responsibility for peace.
The free market is an irresolvable paradox that is patched up by the inefficient workings of the state. Together they create a system that cannot be fixed. The free market is the economic equivalent of a Perpetual Motion Machine. It has to get its energy elsewhere or stop working. Bureaucracy is similarly parasitic. Both feed off the economic energy of local entrepreneurs.
Adam Smith more than most realized the free market he helped conceive was an illusion and the invisible hand simply an abstraction. Yet, the concept of the free market remains central to the philosophy of economists. Free market ideology makes the most abhorrent events seem almost natural because they are the result of an invisible hand. Unemployment is packaged as a natural phenomenon. However it is a wilful choice made by wilful persons. Pointing to the Invisible Hand makes poverty seem less like a deliberate choice of deliberate men. There is less cause to rebel if social costs are considered to be the implacable workings of natural economic law rather than the deliberate act of hard-nosed business people implementing a specific agenda for Right-Wing ends. The ideology of the market makes protests against job losses appear as futile as Don Quixote battling the wind.
Yet the etherealness of the free market creates as many problems as it solves. It diverts attention from the real issue and sanctifies anything done in its name but those who would will it into existence look increasingly like the Emperor With No Clothes. Without government regulation (the antithesis of the free market) the Invisible Hand would blow away as the conceptual vapour it is.
Libertarians dislike regulation because they do not want restriction put on business activity but they cannot figure out how to eliminate government interference without also removing the regulatory apparatus that allows free enterprise to function. Without government support the free market is not even a myth. The free market needs the force of arms on its side if capitalists are to be free to amass capital.
To encourage delayed gratification and the accumulation of capital governments need to reduce the risk that accumulated capital will be lost. For Far Right capital this means governments ought to remove as much regulatory controls on how capital is deployed and accumulated as is feasible. But at the same time governments must protect private property from depredation by the masses and unruly elements.
The Right sees governments as a tool of the Left but their fear of the Left compels them to demand the protection of government.
The demand for governments to reduce their oversight on the market is self-defeating. Without government regulatory powers there is no market and there are no investments. It is government that make markets exist. Governments define the market and give it shape and substance. Eliminate all legislation and the free market wafts away into oblivion.
But this creates a dilemma for the market. Governments can at best only reduce risk within their boarders; reducing global risk requires a global regulatory body. This resurrects the original dilemma of Right and Left who hate each other but cannot live without one another. The free market cannot exist without the regulatory framework created by national governments, but there is no free market at the international level except insofar as national governments create an international framework for it to exist within.
Ownership is simply a legal fiction invented by governments. International ownership requires a global agent to maintain the global fiction of global ownership. Capitalism is a house of cards maintained by the very agent free market proponents despise the most, bureaucrats.
Free enterprise cannot go to nature and find a precedent. The free market is an invention of powerful men and given existence by their collective will in a structure called government. The free market is an abstraction and legal fabrication. It people with money and property using every device and tactic they can to gain market share. If the Right were to wake up and realize the free market is an abstraction and free enterprise a legal fabrication they would need to explain why poverty exists and so many people have no jobs as it is they can shrug off these things as due to the workings of the market.
The world has come to believe that the only way a region can develop is to further embed itself into the Global Economy. Deregulation creates an economic cocoon in which investors are not held accountable for the collateral damage their investments produce locally. Deregulation is tantamount to government agreement that the local community (the local economy) will cover the costs created by Globalization. This is the reality of the free market; it is a conscious decision by governments to allow costs to be downloaded onto local markets. Deregulation is akin to the State putting its citizens in bondage to free enterprise. Deregulation is a key element in the Globalist Agenda. Why are business values more important than human values? Oughtn’t we all to pay costs we create? It seems the morally right thing to do and the very least that ought to be done. At the same time we ought to be protected from costs created by someone else. But to prevent costs from being imposed onto society by the market conscious and rational and indeed moral oversight needs to be present. If businesses are not accountable for they costs they create they will prosper at the global level but local communities will not do well.
What is society but a system of accountability that makes or ought to make people accountable to each other? Without this accountability society descends into economic and political chaos the anarchy that is unfettered competition and the anarchy that makes capital accumulation impossible without armed intervention and the rise of fascism.
The free market cannot exist in a free market environment, because the ensuing chaos would make business and private ownership impossible.
The Rebranding Initiative was Globalism applied to one local town. The town’s assets were looked at from the perspective of what we had that was valuable within the context of the Global Economy. The Rebranding Initiative assumed the town had to compete globally if it was to be economically successful. The study considered hard assets, the town’s tangible assets. Intangibles such as good will are difficult to analyze. The value of the place and the density of the town’s social networks important in a local context are unimportant Globally. Good will cannot be exported.
The Initiative was then a well-intentioned effort by well-intentioned men and woman to fit the town into the Global Economy – as system of entitlements. It was an attempt to rationalize our tangible assets and make the town globally competitive. Bracebridge to compete needs so went the thinking an exportable product something people can come in and take away. Citizens were expected to be or become part of the town’s tangible assets and the delivery vehicle by which a product called “Muskoka Living” could be packaged and distributed to the Global Consumer. If anything the initiative became not a blueprint for the future but a demonstration of the bankruptcy of free market economics.
The beauty of Muskoka is famous the world over but scenery does not grow an economy. Despite its popularity as a tourist destination – or perhaps because of it – Muskoka is in 2012 an economically depressed area.
The cod fishery brought the first Europeans offshore. The need to dry their catch required the salt-poor north Europeans to land and set up camp. The south Europeans had access to cheap salt and remained to their detriment, offshore. The on-shore camps with their steel pots, knives and cotton goods attracted natives who began to trade furs with the new arrivals. The dangers and competitiveness of fishing the Grand Banks was soon phased out, as trade for native furs became an increasingly lucrative option. But the north European traders, the French and British, were soon forced to leave the comfort of their shore-based camps and push further inland. The local supplies of furs had been consumed by the growing demand for the trinkets bought by the white traders. Eventually the search for more and better grades of fur brought them into the region now called Muskoka.
By 1830 the demand had peaked and the volume of furs traded had begun to decline. By 1870 furs were no longer of economic significance. The once ubiquitous beaver, over-harvested and nearly driven to extinction by the introduction of modern firearms, was being replaced. European men had come to prefer the lighter and cooler silk hat. The loss of the market for felted beaver pelts is the earliest recorded case of a ‘Made in Canada’ product being replaced by a cheaper version made in China.
Napoleon’s Blockade in 1806 hindered Britain’s access to European sources of timber. Subsequently, Britain’s demand for Canadian timber increased. Logging was the regions major industry by 1830. Lumber licences began to be issued in 1866 partly to increase settlement in Muskoka. Logging brought people to the area and the cleared land could be settled and used for agriculture.
The Muskoka Colonization Road was begun in 1858. Surfaced by logs, it linked Washago, which at that time was the northern most settlement, to the interior of Muskoka. Settlement in Muskoka began soon after.
The earliest resident at North Falls was John Beal in 1859 and the first tourists visited a year later, in 1860. Bracebridge was reached by this corduroy road in 1861. By1862 a stagecoach was running along the route. The building of Rosseau House in 1870 was the first major attempt to encourage tourism. Windemere House was built in 1869 to house visiting sportsmen. By 1890 it could accommodate 200 guests at $1.50 a day. By the 1880s these and other developments had made tourism into a major source of income.
The Free Grants and Homesteading Act of 1868 promoted both homesteading and logging. Free land was provided to those committed to clearing 8-15 acres of land and build a cabin.
By 1882, the best of the hardwood had been logged. The area was still harvested for white oak, black and white ash, red pine, spruce, tamarack and hemlock. By 1900 logging reached its peak in Muskoka and by 1920 Muskoka had been stripped of the best trees. At its peak the mill at Rousseau point turned out 1.5 million board feet of lumber per annum but was closed by 1930.
Settlers soon discovered Muskoka’s heavy clay and Precambrian rock was not suitable for farming. The difficult conditions at first discouraged settlement but the beauty of the area continued to encourage visitors. Farmers began to convert their struggling farms into boarding houses.
Muskoka grew from 190 in 1860 to 743 in 1862, and then rapidly to over 5,000 in 1871 and over 20,000 by 1901. The increase at least partially due to fanciful descriptions of its investment potential: “The proportion of good land is said to be sixty per cent of the whole; the soil for the most part being a sandy loam with clay subsoil; and in extensive tracts lying back of the lakes, generally free from stone. The root crops are unusually large; … Potatoes yield some three hundred bushels to the acre, and turnips from six to nine hundred bushels. Oats, rye, barley, and Indian corn are the chief cereals.”^^2^^
Leather tanning developed from but did not outlast, the logging boom. Tannin obtained from the bark of hemlock trees, was purchased from the settlers and barged to riverside tanneries. Tanning was established in Bracebridge in 1877. By the 1930’s the last tannery had closed.
The railroad arrived in Muskoka in 1875 mostly to serve the needs of the logging companies. The Canadian National Line started in Gravenhurst, reached Bracebridge in 1885 and Huntsville in 1886. Where the tracks stopped at the water’s edge steamships took over to connect the businesses and hamlets to the west and north.
The Canadian Pacific Railroad constructed a line through west Muskoka in 1906.
The first steamship to sail the lakes of Muskoka was the Wenonah. Built in 1886 by Alexander Cockburn. He convinced the provincial government to build a lock at Port Carling and a canal at Port Sanfield. The Muskoka Navigation Company became the largest fleet of its kind in Canada. ‘By 1900, 10 passenger and freight steamships plied the Huntsville chain of lakes. On the Muskoka Lakes, a steamship fleet operated with about 15 ships in service at the peak of business. A unique narrow gauge railroad traversed the steep divide between Peninsula Lake and Lake of Bays, connecting the steamship service of both lake communities.’^^3^^
The Muskoka Navigation Company morphed into the Muskoka Lakes Navigation and Hotel Company Limited when in 1903 the Royal Muskoka Hotel was built. By the 40-50’s business was in decline. When the hotel burned down in 1958 the company dissolved and steamship travel came to an end. The Muskoka Heritage Society revived the name in 1891 when it began to operate the Segwin.
North Falls prevented steamships from going further up the Muskoka River and served as a natural source of power for mill owners. In 1872 Henry Bird harnessed the power of the falls and opened the first woollen mill. In 1894 Bracebridge became the first municipality to operate its own hydroelectric generating station. In 2004, Bracebridge Generation upgraded the High Falls plant to increase generation capacity and in 2010 $21 million in upgrades were made at Wilson’s Falls and Bracebridge Falls.
An independent bank was set up in the 1880s. Robbed in 1897 after 6 years in operation the financial burdens following the act forced its closure the following year (1898). Its proprietor, Alfred Hunt had come to Bracebridge in 1871 and built up a retail business the operation of which had taken him into banking.
The coming of the car and paved roads brought an end to steamship travel. But the arrival of reliable personal transport was a boon to the tourism for which Muskoka remains famous.
Between 1958 and 1970 several manufacturers selected Bracebridge as a place to produce goods. These companies included Corning Glass, Alcan Wire and Cable, Alcan Foil and Canadian Motorlamps. It is reported that these companies were offered tax-free incentives through the Federal Government.
In the mid-80’s Alcan Foil closed their plant on Keith Road. The building is now the home of the Bracebridge division of Fanotech. Alcan Wire and Cable closed the plant in 2002 and the building now houses a number of businesses including Gravenhurst Plastics, Muskoka Brewery and the Habitat for Humanity Re-store. The Dura Automotive business that operated in the original Canadian Motorlamps building ceased operations in 2007. The building is now the home of Premiere Office and Storage Solutions with car rental firms and a number of small professional offices occupying space.
The Bird Mill Mews, which was one of the storage buildings used by Birds Mill was renovated in the mid-1990s and now houses Riverwalk Restaurant, the town’s Visitor Information Centre and the Chamber of Commerce office.
In a free market businesses start up and close down all the time. This is natural to the economics of the Right but for the community in which the closure takes place, for the worker’s who lose their jobs and for the owner forced into bankruptcy, the event can be devastating.
Tourism has created an economy in Muskoka that is seasonal and dependent on the prosperity of Ontario, the U.S. and to some extent the world. Economic downturns cascade into Muskoka more than other municipalities with broader based economies. As disposable income decreases tourists increasingly choose to stay home. Without the income generated by tourism stores in Muskoka close and do not always open again. The Federal government provides assistance to corporations to set up shop in Muskoka but a region dependent on subsidies and the good graces of international corporations remains as exposed to economic shock as when dependent on tourists. Economic conditions elsewhere prompt corporations to close their doors here. Reduced demand for auto parts in the States resulted in the bankruptcy of Dura Automotive. Built in 1957 by Canadian Motolamps the plant was expanded to 100,000 sq feet in 1996, was purchased by Dura in 1999 and closed in 2007.
A people cannot depend on foreign or distant regions and develop a resilient economy. Sustainability is built by and for communities. Britain, by virtue of its navy and Canadian colony was able to weather Napoleon’s barricade. Canada is relatively self-sufficient in oil but tied itself to the world price of oil. By so doing it exposed itself to the oil shocks of 1973 and the 1980’s^^4^^. Muskoka tied to the vagaries of tourism is even more impacted by the price of oil than other regions, a fact neither the advocates for the Knowledge Network or the supporters of Santa’s Village seem to appreciate.
Rebranding Bracebridge has been an issue and topic of discussion for some years now. However, arguments about the kind of town Bracebridge should be have always existed. In 1895 Bracebridge issued a bylaw prohibiting the riding of bicycles on sidewalks and in the same year determined it was no longer in the public interest to have cows running free. These laws did not dramatically impact most residents but they changed the character of Bracebridge. Priority was given to shoppers and pedestrians. Cows and people who choose to ride bicycles were made less welcome. Many believe we need to make the town more attractive to visitors. But change always favours some established elements of a community over others.
The advent of steamships, rail travel and later the car must have been a welcome innovation for many but these inventions dislocated the lives of many others. They made travel to Muskoka less onerous but at the expense of those who had invested in earlier systems. Even at this late date (2012) the widening of Highway 11 has benefited travellers along the North/South corridor but the reduction in access points has made reaching some businesses difficult. The road widening was a decision made provincially. It represents the government’s commitment to make the North more accessible. Not everyone shares this goal but many do.
Increasing the number of lanes on Highway 11 also betrays a deep and unresolved conflict in our long-term planning. Even as the price of oil climbs, real wages decrease and the cost of living makes it harder to afford a vehicle to get one to work, never mind afford weekend trips to the cottage; even as the cries to conserve energy, reduce pollution and save oil grow louder we continue to widen roads and make travel by car easier.
At the same time bus and rail travel to and through Bracebridge is reduced or eliminated altogether.
In 1971, a chapter of Bracebridge’s history ended when the train station was torn down. For more than 20 years – between the early ’80s and 2004 – trains continued to travel between Toronto and Cochrane, but they no longer stopped in Bracebridge.
On the eve of Ontario Northland’s 100th anniversary of passenger rail service in 2005, the company decided the train should stop again in this historic area. On Aug. 9, 2004, the Northlander stopped at a temporary train station in Bracebridge. The station, built by town council volunteers, sits close to the site of the original stop.^^5^^
On average each ticket requires a $400 subsidy from the Federal government. Funding for the Northlander train was $28 million in 2003-4 but increased to $103 million 2012. 320,000 rides are taken yearly.^^6^^
In 2012 passenger rail service to Bracebridge ended once again.
It is possible that the next change to the future of Bracebridge is being conceived of ten thousand miles away. Events in which we have no interest and as yet no awareness may yet impact us, governments make and change programs; corporations make and change investment decisions; people change their travel destinations; communities rise and fall as a consequence of choices made elsewhere.
The ghost towns of Ontario were created by a seemingly insatiable demand for newsprint. The demand for soft wood came primarily from American paper mills. Before that logging had focused on providing masts and squared timber for Her Majesty’s ships. The growing demand for pulpwood increased the number and size of mills in the region. Demand for lumber and pulp and the glut of mills built as a result caused the exhaustion of what was theoretically a renewable resource. As cheap sources of lumber declined prices rose encouraging a more determined reaping until there was no more trees within reach of the mills. If prices had remained low perhaps fewer trees would have been cut and the mills could have remained in operation and more towns would have survived. As it was without sufficient trees to feed their insatiable appetite the mills closed. When the business on which their existence depended expired the towns had no reason to exist.
The investment was lost and the social equity built up was left to rot where it stood a testament to greed and short sightedness. It also bespeaks of communities that had no sense of themselves or their future except as agents of a distant demand for timber. Lumbering has returned once more to the north woods but the economics of the business makes it feasible to truck logs to giant mills often many miles from where the logging takes place.
Will Muskoka die if the price of oil increases to the level where tourists can no longer afford to travel the rebuilt North/South corridor? What will sustain our communities if logs can no longer be moved economically to the mills and from the mills to the users of dimensional lumber and pulp wood? Will we who live in Muskoka be forced to move en masse to Toronto and other major metropolitan areas? Already our young people move away because the choices available to them in their hometowns are not attractive.
Tourism is not able to absorb economic shocks and is more likely to exacerbate them. Any town dependent on a single industry is victimized by anything that sends shocks through the industry. When the rifled barrel was invented in early 1800’s it spelled disaster for beaver colonies and non-industrialized peoples alike, but European and North American nations rapidly adopted the new technology. The invention of steam power ‘Far from “striking a fatal blow at the naval supremacy of the Empire” as some feared … allowed Britain to exercise power effectively at unprecedented distances.’^^7^^ A well-developed economy can absorb shocks that overwhelm communities based on a single industry. The collapse of steel in the U.S. turned the Midwest States into what is known as the Rust Belt.
The Americans, as well suited for arms production as they are, have also become a victim of their own success. World peace could spell disaster for the U.S. economy. The elimination of the arms trade would usher in years of forced restructuring. But what does the continued reliance of the U.S. on arms sales mean to the world?
The Allies used ‘Shock and Awe’ in Desert Storm to overwhelm the enemy. France, Poland and other European nations prepared to fight a conventional war – the war they had previously fought on horseback. The technical advances of the German Wehrmacht overwhelmed them. The Germans had a different vision of war. Hydrogen explosions energize stellar bodies and generate unimaginable amounts of power but the mass that forms the basis of the atomic reaction also contains the force of the reaction. The earth absorbs the energy that reaches it as sunlight and uses it to power all life on earth. When St Helens exploded in 1980 large canyons were carved in the sides of the mountain and large areas of forest were destroyed. Ultimately this devastation is what served to absorb, localize and contain the blast.
Economic shocks can stem from simple and from the perspective of when and where they originate rational self-interest. It seemed to make sense to exploit the cod fisheries, the Canadian Rodent, the abundant stores of pulp wood timber and our abundant supplies of oil but perhaps a more restrained and less exploitive use would have made even more sense. Years of logging the best timber allowed sub-standard species and varieties to proliferate. Over-fishing the Grand Banks has rendered what was once unequalled abundance into an ecology so shocked it may never recover. How much tourism can Bracebridge specifically and Muskoka generally absorb before it ruins the very things that attract people to the area?
The Tragedy of the Commons is a story concerning a common piece of land, a commons, on which the villagers graze their cattle. Its carrying capacity permitted each villager to graze one animal. However, one villager adds another animal to the herd so he has two cows. The land becomes stressed by the addition of the one animal. None of the animals fare as well as before but the villager with two cows still gets double the output of the villagers with just one cow. Market theory says that if the land had been privately owned the carrying capacity of the land would not have been stressed.
The history of the fur trade and logging in Muskoka and the existence of deserts and dust bowls the world over demonstrates that market mechanisms do not prevent the exploitation of resources. The market allows short-term gain even at the expense of long-term loss. It benefited logging companies to exploit the old-growth forest and move on. It was cheaper to exploit other areas than pay the costs of replanting trees. It was more profitable for Alcan to close its plants in Bracebridge than to keep them open. In economic terms the company experienced a loss but for Bracebridge the loss is harder to absorb or recover from.
Alcan had a legal right to negatively impact Muskoka by closing down its business here. The large number of people to whom it paid wages represented a liability it no longer wish to carry. However, the liability did not disappear when Alcan divested itself of this responsibility. The cost was transferred to Bracebridge and to society.
This same scenario is played out the world over. In the Rust Belt (the mid-western states) cheaper Japanese imports and a recalcitrant labour force destroyed the steel industry. It is often cheaper for a company to cut its losses and close down than to restructure, retool and reinvent itself.
Big is not always better. Two teenagers working out of their respective parents home eclipsed IBM. Bill Gates operating system fed off but eventually outgrew IBM. Dell in 1984, the brainchild of a 19 year old with $1,000 of capital working in his parent’s garage, became in 13 years the worlds leading provider of PCs. IBM eventually sold its operations to a Chinese company.
Of the 100 largest companies in the U.S. in 1917, 61 had ceased to exist; only 18 were still in the top 100 and of these only 2 outperformed the market as of 1987.^^8^^
If Dura Automotive Systems could not justify keeping its doors open does this mean the only or best option was to close the plant and fire 400 workers (258 in 2006, 175 Oct 2007)? Muskoka estimated that the company was the source of some $60 millions of dollars of economic activity per year.^^9^^ Figures released by the Town of Bracebridge indicate that in 2007, 245 people were laid off and 30 found work. In Ontario 160,000 high paying manufacturing jobs have been lost since 2002 – 8. High-energy costs and the climbing value of the dollar are listed as causes. These are only valid reasons when we consider the problem from the perspective of private enterprise. It makes sense for a corporation to shut up doors and move elsewhere when a commons is no longer needed to feed its cow or when the grass becomes less plentiful in one location compared to another. This is less true of individuals and not true at all of communities. The commons is where we live.
People must still eat and be housed when inflation is high and regardless of the cost of energy. If energy costs have doubled and the dollar has lost half its value from a year ago do we give up trying to create jobs? People must still live no matter what macroeconomic indicators say or is life a privilege to be possessed only by those who have the means to meet the current price? Does the history of Bracebridge not suggest that self-interest does not always serve the public interest? That the perspective of business does not always encompass the perspective of the rest of us or in other words what is good for GM is not always the same as what is good for the nation.
If Bracebridge had owned Dura Automotive perhaps the plant would not have closed down. Council might have decided to have shoes made at the plant. These shoes of course might have been of poor quality or too expensive to sell – council not knowing anything about the shoe business. Shoes might have been produced that no one wanted and this might have happened at the expense of the taxpayer. The changeover from making automotive seats to shoes may have and probably would have resulted in higher property taxes and losses all around. Nationalization centralizes power in the hands of a few people but in the end this serves only to take power from a few private hands to put it into a few bureaucratic hands and the bureaucracy cannot be relied on to make better choices than those made by private individuals.
If bureaucrats cannot be relied on to make the best use of our resources, private owners make mistakes similar to those made by Communists. The effects however are usually on a more limited scale. Losing the number of jobs Bracebridge has lost recently reduces the amount spent on products and services. This may cause other businesses to close. Fields, in business since 1948, closed its Bracebridge store in 2012. This may not have been a direct result of the Dura closure but it suggests Bracebridge is not the only town that does not or cannot support its local businesses.
Upon hearing that the last independent bookseller in Bracebridge was closing its doors a bookstore owner writes: ‘What I think is interesting is that both Huntsville and Bracebridge are much bigger towns than Parry Sound and yet they could not support their independent bookstores. Those towns must have the same sort of summer business from tourists and summer residents that we have here. What they must not have is the customers I have – Parry Sounders!’^^10^^
Many towns including Bracebridge have a buy local program. How well these programs work is hard to tell. People on a limited income buy the cheaper product regardless of country of origin. Only when the prices are comparable do other factors come into play.
The buy local program also requires local business to participate. If local businesses do not invest in the local economy the buy local program serves no purpose. A dynamic economy is a closed economy in the sense that the planet is a closed biosphere, inputs equal outputs. The output of one sector or organism creates inputs for some other sector or creature. In reality accounts always tend towards zero.
Merchants may source foreign suppliers for goods to sell. Many stores import goods that could be made in Bracebridge. Foreign made goods are usually cheaper than those made in Canada, let alone Muskoka. The consumer is trying to save money and the merchant is trying to please the consumer. But if importing goods means a loss of local jobs and higher taxes how much money is saved?
If a store opens in Bracebridge that sells imported goods cheaper than can be made in Canada the residents of Bracebridge may benefit especially if none of these products can be produced in Bracebridge. But if this scenario is played out all over Ontario and employment declines Ontarians may not be able to take holidays in Muskoka, then Bracebridge will be adversely affected.
Change can be gradual or cataclysmic. Most of us prefer change to be gradual and positive restricted to a few select niches. Most of us want to get richer, healthier and happier. We want the environment to become more pleasant and clean; we would like shops to carry more of the stuff we like at prices we can pay. We do not like change when it upsets our routine. We object to potholes and the hindrance caused by their repair.
Most of us are against large housing developments and mega projects because they have potentially large impacts. The world needs change but more importantly it needs a way to manage the change.
Increased tourism is change that is unlikely to be managed. Roads will be clogged and the pace frantic, some low-paying and seasonal jobs will be created but the economy of Bracebridge will not change in its fundamentals. Indeed the accent on seasonal employment only makes it harder for businesses that offer full time jobs to find and retain workers. The fluctuations in demand created by the extensive seasonal employment will create fluctuations in their ability to employ people full time.
Cataclysms create sudden change. A flood is a cataclysm that leaves behind a lot of destruction. A tide is a flood of a more ordered kind. Because tides are predictable they create less damage. Electricity has been harvested from the ebb and flow of tides because they are a predictable event and source of power.
Explosions also create disorder but the explosions that happen within an internal combustion engine are contained and able to produce work. Technology has created engines that make these explosions produce a predictable event. Explosions that demolish buildings make way for new structures to emerge. They are destructive but still predictable in their destructiveness and can be harnessed to creative ends. Cataclysms always release large amounts of energy. Untapped this energy creates disorder but cataclysms may also usher in a new and higher order.
Innovations are economic cataclysms. Entrepreneurs are people who harness the energy contained within an idea. Like all cataclysms economic revolutions are ignited with a spark – an idea. But ideas never come from out of nowhere. Innovations are innovative ways to reorganize ideas that already exist. Reality cannot be invented only reorganized. The greatest of earthquakes are produced by gradual pressure within the earth’s crust. One plate pushes against another until the pressure is released with a sudden upheaval. The question is whether Bracebridge can contain and absorb the change it is subject to or if it will collapse?
The Industrial Revolution was predated by many small and scattered events. But the event itself was ignited by Sir Richard Arkwright’s water frame invented 1769. The sudden explosive growth of the cotton industry was based on the cheap calicos birthed in Arkwright’s mills. The Protestant Reformation had many preludes also but it was Martin Luther’s 95 Theses nailed to the Cathedral door of Wittenberg, 1517 that brought all the pressure for change together and ignited the Reformation. Despite all the signs that predated these events no one could predict them. They were perturbations in the unfolding of world history immanent but not imminent until the great wave actually hit and rolled over established practices. Even then few understood what was happening. It was not until people looked back they began to understand what had taken place. It is when we look back at what happened; at the changed landscape that we understand the significance of the history we were perhaps unwilling witnesses to.
It was Adam Smith’s 1775 work, The Wealth Of Nations that prompted the worldwide adoption of Capitalism. The Wealth Of Nation did not originate the ideas it so neatly described. Nor was Smiths ideas adopted slavishly. Many of Smiths concerns and qualifications have largely been ignored by his peers in the West while Marxism, Communism and the communist revolutions of Russia, China and elsewhere served as an outright rejection of Smiths arguments or at least in the way the West adopted them.
Adam Smith was primarily a moral philosopher who thought the inherent goodness of man would modify the greed required by his market model. But it proved easier to open the Pandora’s Box of unfettered greed than close it again with the doctrine of social obligation. This misjudgement on his part has for the most part been studiously overlooked. Indeed Libertarians have consistently rejected Smiths belief in the need for Capitalists to have a social conscience.
The Hegelian dialectic assumes a progression of antithetical ideas. Thesis is made compatible with its antithesis by a higher synthesis. Unfettered greed is not compatible with democracy but there is no higher synthesis. The conflict between greed and the centralization of wealth that the free market produces and Democracy and the devolution of power that is integral to Democracy cannot be resolved. The greed of some requires the exploitation of others and this produces a power relationship incompatible with the ideals of freedom and equality and as such the formation of teams.
The ownership of the means of production cannot be reconciled with freedom from regulation any more than can the power of the State be reconciled with the idea of an unfettered Free Market. This is the dilemma of the R/L dichotomy.
Capitalism is composed of a free market, free enterprise and money and by implication the state. Capitalism is often juxtaposed to tyranny as if Capitalists were all grandmotherly types and the Left composed of antisocial misfits. In fact the Right and Left both exist on the same political continuum as fascism and neither are far from adopting this political form. We will look at why this is so further on.
The collapse of tyranny is usually due to the failure of the ruler to learn the basic rules of economics. A government that no longer has the support of the people soon finds it is unable pay its bills. Tyrannies collapse because they failed to satisfy their creditors.
More absolutist governments have fallen because of bankruptcy than any other cause. Wars are won by the nation that can find the money to wage it. The survival of a government requires the cost of government not exceed the cost of revolution. Funding war with debt may ease cash flow problems but the benefits are short lived and illusory.
Yet, money is not the ultimate source of power. All the money in the world cannot overcome a good idea and an unworkable idea cannot be made to work regardless of the amount of money spent on it. The amount of money spent on developing Artificial Intelligence is enormous but not even ten times or a hundred times the amount would make the idea work. Innovation forms the ultimate basis of all empires – not access to credit. Ideas are the foundation of all wealth. Without the idea to harness fire, cooking, heating and the internal combustion engine would not have also been discovered.
Conquerors understand the value of a new idea. When Genghis Khan, Napoleon, Alexander the Great and Hitler dreamed their conquests their dreams were not based solely on the application of brute force or even on military skill. They realized the value of new weapons and tactics. Empires are founded on better ways of killing competitors. The Zulu empire rose on Shaka’s development of the short spear used for infighting whereas others retained the traditional throwing spear. It was the technology that produced the dream. It was the invention that made the dream believable otherwise the dream would have died with the dreamer.
But even the most farsighted men, the most audacious dreamer, cannot predict the unpredictable or foresee the unforeseeable.
Genghis Khan did not foresee his herds of horses on which his advance depended becoming depleted and exhausted. Napoleon did not plan for the Duke of Wellington or for the way his tactics and lines of communication would fail him at the Battle of Waterloo. Alexander the Great did not plan a fatal illness at the age of 32. Hitler did not fully appreciate how vulnerable a mobile army short of fuel was. The blitzkrieg worked against armies waging conventional war but war machines are just masses of scrap metal without fuel. Wars are won because one army is able to sustain their losses and lost because the other cannot sustain the attrition. War is about the best management of resources.
When Bill Gates began Microsoft he had no idea IBM would settle on DOS as an operating system. The use of Windows exploded because IBM produced the standard business machine for many years and populated it with Windows. Without IBM would Microsoft exist today? The success of Microsoft, deserved or not, has swept away the competition and made moot any speculation as to what the industry would look like had Gary Kildall not decided to go hot-air ballooning rather than meet with IBM executives.
When Santa Claus Village was established in 1954 there was no guarantee it would last or grow into an international attraction. It has created many spin-offs and hundreds of jobs. But has it created the future of Bracebridge? Is it in the best interests of the town to promote a private business that exists for private ends? Is it enough to promote its central location as: The Heart Of Muskoka.
The Santa Claus village is a successful business venture. As Bruce C. Kruger remarked ‘For 56 years, Bracebridge has been “Santa’s Summer Home” on the 45th parallel, …’.^^11^^ Santa Claus Village was started as a private enterprise and remains in private hands but many residents and visitors have come to view the village as the iconic symbol of Bracebridge. Despite claims that the adoption of the Santa Claus brand will stimulate economic activity it is unlikely sizable investments will be made based on images of a jolly elf. Tourists come with many undesirable elements such as increased traffic, policing costs, environmental damage and unreliability. Tourism does not produce sustainable and resilient economies.
The Heart of Muskoka theme was a broader based initiative. But the natural beauty of Muskoka as iconic and unrivalled as it is does not seem a strong basis on which to build a community. Its success also relies the ability of Muskoka generally and Bracebridge specifically to attract tourists.
“Bracebridge: The Learning Capital of Muskoka for the Arts, Cottage Country Cuisine and Muskoka Lifestyle” is the latest offering. The slogan is cumbersome, unimaginative and probably targets a type of tourist who does not even exist. Indeed the slogan may present a negative image to a tourist not looking to consume anything more than sights, leisure and some beer – goals not necessarily consistent with a learning experience. The Learning Capital is not a phrase that would excite someone seeking a vacation away from the stresses of life.
It is not a phrase that is likely to become a catch phrase in the way “Where’s The Beef” captured people’s imaginations.
Why did Barrie grow though Orillia, once a major transhipment point, lapsed moribund into a community for retirees? Why has the image of Bracebridge as the summer home of Santa Claus excited the popular imagination but Bracebridge as the learning capital of Muskoka thought uninspired even insipid?
Would an image that evolves out of individual initiatives such as those that produced Tembec and Muskoka Breweries produce better results? Does Bracebridge need more government initiatives such as Northern Lights? The latest rebranding effort relied on an expert hired from our southern neighbour in consultation with a handful of picked local opinion makers. But would have a more open forum produced better results? What is the best way to change community and indeed to create community?
According to one observer: “This rebranding process has been appalling. The marketing guru Roger Brooks, a consultant from Seattle, Washington, led a committee that consisted of four town representatives, four downtown BIA members, one chamber member, (whom we, as members, never heard from), two additional businesses and one representative from the Ministry of Tourism.
The three mall regions were not represented, nor was any tourism or hospitality businesses. Did the organizers not realize that 57 per cent of the GDP dollars coming into Muskoka is from tourism? We were allegedly represented by a Ministry of Tourism representative from Toronto. Disgraceful!
Insultingly, the guru advised that “naysayers” should be disregarded regardless of their opposition; the rebranding committee is to forge ahead at all costs. Nonsense!”^^12^^
The citizens of Muskoka have demanded to be heard. The issue has not died out as yet. A general meeting could still be called in which everyone would be given the chance to provide input into how Bracebridge should be marketed. But would this produce a consensus?
The news media attempts to create a dialogue in published letters and Opinion pieces. They keep the issue alive. They help give voice to a community who otherwise has felt excluded from the process.
The Rebranding was faulted for being a top-down process. But would a bottom-up consensus making process have achieved better results? Does the town even need a consensus to achieve the goals of the Rebranding Initiative? The town simply needs an economic development program that works this may not be dependent on everyone supporting the idea.
By starting from a base of like minds the process was better assured of achieving an agreement but it also tended to limit the solutions that might be tabled. This was perhaps the objective behind the creation of a crafted panel of experts but then was it reasonable to expect everyone else to applaud the result?
Council has considered giving grants or tax incentives to those willing to invest in the town. The hope is that private investment will produce economic growth. This belief also energized the panel of experts behind the Rebranding strategy. John Maynard Keynes has said, “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone”. We need not agree with this assessment to realize investors are not likely to want the same things a resident wants. Raising families requires earning a decent income this is not compatible with increasing ROI.
Few people seem to fully appreciate that the Rebranding Initiative was principally about making the economy of Bracebridge fit in with the Global free market. Bracebridge is from the perspective of the free market a business asset that must be marketed to the world.
This world believes in the power of money. Most communities are of the opinion that if sufficient money is invested in the local economy it will grow. The reality is that money has little or nothing to do with either poverty or prosperity and almost nothing to do with job creation. Anyone who has been through the United States, one of the richest nations in the world knows that gross earnings do not translate into high levels of personal income. Ultimately what matters is the way the resources of a location are used.
The problem is the fixation and mental dependence on money prevents people from seeing solutions that are not linked with financial investments. Perhaps this tendency to equate prosperity with money is a holdover from the mercantile era. However the evidence is not encouraging. A flood of species pilfered from the New World did not drive economic development in 17th Century Spain (quite the opposite)^^13^^ and a large influx of investment dollars is not likely to generate the economic activity Bracebridge needs. Las Vegas attracts a great deal of money but produces little that has lasting value. There is in fact enough money and assets in every nation and town in the world to create prosperity however the market has or is an agenda governed by those who create and control the nations money supply.
The financial markets exist to make money for those with money. If a proposal does not appear to make money for those with money the proposal will not be backed.
Bracebridge, like so many other places, is a small community with limited resources. The Rebranding Initiative thought it was necessary to do whatever would attract investment but simply removing barriers to investment may not produce the results desired. Opening the town up to investment may result in a casino instead of a camping ground for families or more prostitution or more scam artists. Attracting investment may mean making concessions and these may not be in our long-term best interests. Why go to the expense of attracting investment if the investment destroys what we value?
Tourists based investments would increase if the town eliminated all restrictions on tourists and tourist based businesses. For example development fees could be eliminated for all tourism-based businesses. Tourists could be made exempt from the town’s by-laws. This would give Bracebridge a tourist friendly image. Cuba used be a place friendly to gamblers and those in the sex trade. It was open to many kinds of investment Bracebridge is closed to, some would say for good reason.
The town could allow tourists to herd cows along Main Street if they so desired. Bracebridge could remove restrictions on skateboarders and ATVs so tourists might skate board on Manitoba Street and drive their ATV’s up to High Falls. These and similar steps would bring tourists to the area. But would we still wish to live here? If the tourists drive out the residents how is the investment justified?
This raises the question as to what Bracebridge is to us – its residents? Is the town a resource or asset that can be sold to the highest bidder, townsfolk included, as was the case with the towns in ancient Britain? Many villages though not the villagers are still the property of large landowners in Britain to this day.
Bracebridge is not its residents. These change from year to year. We are all passing through. No one has a permanent claim on the future of Bracebridge just as no one has any claim on its past.
Ownership is always ephemeral. It comes and goes with the wind. Bracebridge is not its hard assets.
Bracebridge is not the businesses that have set up shop within the town’s limits, nor is Bracebridge the public bodies that run the infrastructure and public facilities. Bracebridge possesses a pool of assets but the assets, the houses and businesses and infrastructure are not Bracebridge anymore than people are the physical body. Bracebridge is its capital, or equity or the value that we residents place on it.
A house can be sold and owner’s change but the equity remains.
Marketing Bracebridge is a question as to what we value or in fact what our values are. Our values determine our priorities and how we manage what we have and determine how they should be used but our values cannot be determined by looking at our assets. A house for example is worth what someone is willing to pay for it. A house does not have intrinsic value neither does Bracebridge. Values are something people assign to assets and it is this volitional act that gives things value.
The assets of Bracebridge minus its liabilities form the capital of Bracebridge. This gives us values we can work with. Bracebridge is an economy within the world economy. It has a value in the purpose of those who own the wealth of Bracebridge. It is up to the residents of Bracebridge to discern how best to utilize the capital at our disposal.
A tool is an asset because it has value and can be sold. But it also has equity in that it represents value to those who use it or would like to use it. An asset is a thing with value and this value may or may not be realized. Assets have market value and are things with market value equity can be thought of as value given to an asset by the owner but this can be given a monetary value but this is not necessarily the same as its market value. There are things we value more than their market value.
A tool has value but this value is only realized in its use or in it’s selling. It has equity when this value is given a monetary value. This valuation shaves off any liabilities owing. The equity in a house is the balance remaining after the mortgage is liquidated. The asset may be worth $230,000 but the equity only $80,000 the rest being a liability.
Bracebridge is assets managed by residents to produce equity. Equity management or the management of values serves as the basis of economic activity. Increasing tourism may increase the town’s assets (its tourist businesses) but create so many liabilities that the town ceases to have any value as a place to live.
In this sense the town’s existence may owe more to a devoted visitor who comes and supports the town on a regular basis than a hermit who lives within the limits of Bracebridge but contributes nothing to its support. The town owes something to those who have created the assets from which it is composed and which forms the basis of its equity.
A property may be valued at $5 million but if the owner will not pay his taxes, does not work or shop in the town the owner and his property produce no equity i.e. no value the town can use. The town has the asset, it has market value but the equity the usable capital is close to zero it is to all intents and purposes a liability on the town.
If a community can be viewed as a local economy based on the resources that tie residents together as a team then poverty and a lack of team building activity goes hand in hand in the sense where there is no equity there is no economic activity no matter how many assets are owned by individuals in the area. There may be billions of dollars tied up in cottage properties lakeside but this capital is only worth to Bracebridge what it contributes to Bracebridge’s economic viability. There may be a billions of dollars worth of gold or uranium locked away in the rock of the Precambrian Shield but if no one is extracting it the wealth is more conjectural than real. Assets have to be transformed into equity. This needs to be managed and management must reflect the values and priorities that determine equity formation. Equity does not grow if assets are so poorly managed that the liability portion grows faster than the equity.
Even if half the property owners in Bracebridge are millionaires the contribution they make to Bracebridge is low if their assets do not contribute to the economy of Bracebridge. Indeed, if they vacated their property and sold out to someone who participated in the town’s economic life they would do the town a favour. Even if the asset price declined the economic value or equity would increase so far as the towns economic life is concerned.
It is economic activity or rational exchanges that define a community. This requires transforming assets into working capital or equity. Branding is an effort to define what our economy is built on or is able to produce but it approaches the problem of economic development from the wrong perspective and comes to the wrong conclusions. The town needs to be able to distinguish liabilities from equity.
Bracebridge does not exist to pander to visitors. They may be or become more of a liability than a generator of equity. Our priority is not to make Bracebridge a nice place to visit. Visitors do not constitute equity. Expecting residents to live in a specific Muskoka way expects too much. If visitors do not want to know us as we are then what are we selling? Tourists do not build community. To make Bracebridge a destination for tourists does not address the reason for why tourists come to Bracebridge it also fails to address the reason residents stay.
The rebranding effort looked for Bracebridge’s most significant value in terms of the market. The market was the court of final appeal. The expert and a few consultants did not as if residents considered tourism a source of equity or a potential liability. Instead residents were told to go with whatever the market thought best.
The conclusions reached may have validity from a market perspective but be incorrect in its conclusions if a community is not simply its marketable assets.
History is not a reliable guide to what the future holds. It may be true that those who do not know history are condemned to repeat it but to assume the past will continue unchanged betrays a poor understanding of history. Those who wrote the study surmised that since tourism was important to the economy of Bracebridge it would continue to be important. But other sectors have been significant also and even if manufacturing is on the decline do we really wish to continue being primarily a tourist destination?
Even if the conclusions of the Rebranding Initiative were correct even if promoting tourism is the most cost effective way to create economic development is it true as more dollars are invested in tourism more tourists will come? Is there a fixed ratio of investing dollars to earned tourist dollars? If the scenario holds good and more tourists come will the increased traffic encourage more attractions to open to create an upward self-reinforcing spiral of growth? Nothing grows exponentially indefinitely; there is a saturation point where further investment will fail to earn sufficient returns. Did the authors consider the possibility that more investment will reduce the dollars earned?
The argument for increased investment in tourism sounds convincing if only because the other options seem less promising but the future is never certain. The Rebranding Initiative assumed more tourist business will lead to other related businesses being started. This tends to put all the towns eggs into the one tourist basket.
Creating new experiences for tourists is of course important if Bracebridge is about tourism. But will all these new businesses and tourists create a town that is stronger? Will it create the team spirit that is the heart of community? A business that is not engaged in the economic life of the community is not part of the community and does not contribute to the economic life of the community. The fur trade, logging and many of the other industries that set up shop here were not about Bracebridge. They were about exploiting resources and when the resource was exhausted they left. This kind of exploitative relationship still happens. Companies come to a region solely to exploit a specific economic condition perhaps a grant or tax rebate scheme and when the benefit runs out the company packs up and moves on.
Exploiting the tranquil beauty of Muskoka will ultimately ruin it. The fur trade has gone, the logging has all but disappeared, are we then to consume and ruin the environment on which our tourism depends? Hitching our future to Santa’s Village makes no more sense than relying on any single resource whether it be logging, uranium or water power. If people tire of Santa will Bracebridge fold as the tourist attractions lose clientele?
The foundation on which Bracebridge and all other communities exist is the team this is a reality that cannot be brokered, bargained with or bribed. Reality cannot be customized to suit our needs it is a fixed quantity. We can waste and destroy what we have or we can build on it. That is we can take the assets of Bracebridge and create equity in varying degrees or consume what the past bequeathed to us. How well or poorly we do this is ultimately up to us. Most successful economies were not built on an endless supply of natural resources. Britain, Japan and Singapore became economic powerhouses because of ingenuity not an overstocked warehouse of assets provided by nature.
The world is not a never-ending, ever-restocked buffet. Focusing on tourism and tourists encourages Bracebridge to become a service centre, producing nothing with real value forcing us to remain reliant on the productivity of others. The Rebranding Initiative appears unconcerned that tourism puts the economic success and viability of Bracebridge at the mercy and disposable income of a fickle consumer. The concept of sustainability is not consistent with a service economy. No matter how much tourism is expanded it will leave us with a mess of liabilities if the price of gas doubles. Economic viability is not compatible with tourism. Bracebridge ought not exist to serve Muskoka up to visitors – we exist neither to be gawked at nor learned from. If people come for a visit it is a bonus and as much as we value visitors to our area tourists are not the reason Bracebridge exists.
The cod fisheries, the beaver and the forests were all treated as inexhaustible goods to be consumed without restraint or thought for tomorrow. Bracebridge asks how it can sell its natural beauty to the world but it cannot do so without to some extent consuming and ultimately destroying it. Muskoka is not a resource to be consumed. It is not visitors coming to Bracebridge that makes Bracebridge what it is. Bracebridge is residents spending money earned in Bracebridge, in the stores of Bracebridge on things made in Bracebridge. If we do not have this we do not have a town worthy of the name – we are not engaged in each other’s lives. We are not individually and collectively engaged in team building activities. It is this that serves as the foundation of community.
Our community should be shared with visitors. But at the core Bracebridge is its residents helping one another. Until Bracebridge exists as a place that puts its residents first and rewards community building activities it is subject to risk. Until Bracebridge develops a true team mentality it will remain as ephemeral and prone to extinction as the tourism so many have pinned their future on.
16,000 people sitting in kiosks adorned with blinking brightly coloured lights, powered by our 22 waterfalls is not a community though it be the ‘waterfall capital of Canada’. Until we build a Bracebridge that is a community of people working together for their mutual benefit Bracebridge though ‘once discovered not forgotten’ will not be the type of tourist attraction tourists will come back to.
Bracebridge has stumbled along for decades tied to tourism. Santa Claus village, the Knowledge Network concept and the earlier effort to exploit Bracebridge’s scenic beauty and centrality in Muskoka, ‘Bracebridge, the heart of Muskoka’ reflect in different ways an effort to capitalize on and potentially expand the 57% of Muskoka’s GDP that is from tourism. But does this mean tourism is a success story? Is the tourist business a dynamic investment opportunity? If so why is it difficult to attract investment? If tourism is a success story why is Bracebridge considered economically depressed? Should not investors be fighting to claim a piece of the tourist action? How much more income can be generated from Santa Claus spin offs? Hasn’t this idea been exploited as fully as it can be – has it not been exploited to the point where further investment cannot be justified by the potential payoff, the ROI (Return On Investment)? With an aging population more attracted to golf the Santa concept appears unlikely to attract more visitors. Promoting the waterfalls and scenic beauty of Bracebridge is also a good idea but scenic tours do not easily translate into a prosperous economy.
The needs of tourists are not the needs of residents. The needs and desires of consumers are not the products that necessarily sustain residents. The stores and attractions that cater to tourists are not the stores and attractions that create community. Glitzy arcades and casinos may bring people in but they are not likely to encourage them to stay. The opposite is a real possibility. A downtown dedicated to the tourist trade is not a downtown that will reflect the needs of fulltime residents. Nor are tourists always decent, middle class folks looking for a little diversion. Las Vegas is a tourist destination and so are the brothels of Thailand.
Those who are passionate about turning Bracebridge into a tourist destination need to visit Niagara Falls or Las Vegas and consider if this is what they wish to see in place of what we have now. To some extent these are towns that have sold out their residents and perhaps their future.
The Knowledge Networks commitment to expanding the Creative Economy is the most solid of the ideas offered. It has the advantage of being focused on information and art – low users of energy. While the idea still tends to rely on tourism it also encourages the production of real products with real value based on the Creative Economy idea. There is a greater potential for residents to work together. A slogan that would reflect this idea is “Bracebridge: The Heart Of The Muskoka Community”.
But can a local economy compete on price against the economics of mass production? All else being equal, a buyer faced with competing choices will pick the lower cost option. Services cost less to provide than manufactured goods but services pay lower wages. So, service based economies have lower amounts of money circulating which means there is less money to pay for higher value goods and services that is those things produced by the producers of hard goods.
Businesses strive to satisfy consumer demand. A common theme or a feature common to all consumers is the desire to save money. So, virtually all businesses constantly look for ways to produce a lower cost product or service. One of the advantages of a tourist-based economy is that tourist’s attractions often have lower set-up costs. The downside is that as a service they also pay lower wages and contribute less to the local economy.
One of the major costs businesses have is wages. Companies consistently seek to lower the cost of labour as a unit cost of what they produce. But consumers are also workers and as people earn less there is less they can afford. This drives them to look for the best bargains and to buy on price. This puts pressure on companies to reduce their costs further, if possible by hiring cheaper labour or contracting out production to overseas suppliers. As income drops the trend is to favour the lower cost product and service; hence the trend to lower quality goods.
Consumers want to save money in the same way businesses want to lower the cost of their products and services. Bracebridge being an economically depressed area is particularly susceptible to bargain shopping. Bracebridge competes with China and the rest of the world for consumer and investor dollars. Manufacturers in Bracebridge compete with manufacturers the world over. A consumer in Bracebridge who needs a new table picks one with the lowest price with the lowest acceptable quality. Country of origin is just one factor considered as regards minimal quality. Quality of manufacture, colour and style all matter when making a purchase but concerns about price puts a limit on how much quality the consumer expects.
If a consumer will purchase a table made in China rather than one made in Bracebridge because the one made in China saved her a hundred dollars then an investor with ten million dollars to invest will likely decide that building a factory to make tables in Bracebridge is not as good an idea as investing in China. Tables made in Bracebridge cannot compete on price with tables made in Asia and investors know this.
The more businesses we lose and the fewer people working the higher the risk is of investing in Bracebridge. If people are not working people are not buying and if they are buying they are buying lower end goods more readily available from offshore manufacturers. This creates a downward spiral in prices and this creates downward pressure on wages. Lower priced goods create a dynamic that favours businesses producing services and lower wages. Lower wages puts a downward pressure on prices favouring locations where costs are at their lowest. The history of Bracebridge as a tourist destination has lowered wages to the point that putting in businesses selling high-end goods makes no economic sense unless the business caters to a more affluent tourist. This means that the study discussed above witnessed the impact relying on tourism has had on the local economy and decided the best option was to increase the impact by increasing the town’s reliance on tourism. What the town needs are higher end jobs paying better wages so that businesses producing high-end goods can survive when they set up shop in Bracebridge.
Cities are generally seen as better places to invest than small communities. Economic downturns in large population centres still leave large numbers of people working. A small town hit by a large number of layoffs has a ripple effect that is noticeable throughout the community. A few years after Dura closed its doors ex-employees started to lose their homes. No doubt stores selling luxury items found it much harder to stay in business.
A community that cannot maintain existing businesses is less likely to provide a low risk environment for future businesses. Unless a high level of economic activity exists it is not likely new businesses will be started. Even if the business is not looking for local customers high levels of unemployment increases the taxes a company may be expected to pay and it may be harder to attract highly skilled people to a company located in a depressed area.
As money leaves an area and people look to save money it becomes increasingly more desirable to invest in the service sector rather than in the manufacture of high-end goods. If Bracebridge were doing well economically its residents would be more prone to purchase local goods built by local artisans. If residents purchased local goods though they were higher priced it would be doing better economically. As it is stores here have become a type of service business that sources and sells goods made elsewhere.
Individually we are better off when we buy the lower priced import collectively we are worse off. Doing what is in our personal best interest is what has harmed the economy of Bracebridge.
The rebranding initiative attempts to convince investors that tourism is a good investment. If the residents of Bracebridge were sold on the idea it would make it more likely investments would succeed. The town’s participation would absorb some of the costs that would otherwise have to be paid for by private enterprise. If residents oppose the investment in increases the possibility the investment will fail.
Risk is always associated with the possibility of a loss. Without something of value to lose there is no risk.
If an investor uses accumulated savings risk is contained in the length of time taken to accumulate the savings. To lose the investment is to lose the time it took to accumulate it.
If the money is borrowed risk is created by the liability – the payments due the lender. Money can be lost, stolen, or burnt. It is never totally secure. With money there is always the risk of loss.
The experience of those who have already invested in Bracebridge speaks to those considering investing here. By focusing on tourism Bracebridge puts the attention of investors on a historically strong sector. But past performance is not a guarantee of future results and investors know this. If investors are not convinced that tourism is a growth sector putting all our economic development eggs in the tourist basket may have negative consequences. Potential investors may even view Bracebridge as high-risk because it has linked its economic viability to a sector (tourism) in decline. Investors may prefer to take their money to a place focused on manufacturing and technology such as the not distant town of Barrie.
Investors cannot make money off of Bracebridge’s history. Investors look at the future of Bracebridge not its past. This future includes gas price hikes, taxes, zoning regulations, pollution and financial collapses. It is not enough for Bracebridge to put out a “Welcome Investors” sign to lower risk. If a decline in disposable income occurs Bracebridge’s encouragement of tourism may be moot.
To lower risk for investors the town could eliminate building charges or forgive property taxes for a number of years. But the more risk the town absorbs the fewer benefits it gains. Should Bracebridge pay to outfit a private bus company to drive tourists around Muskoka? The town needs to consider that if private capital is not willing to absorb the risk there may be little value in the venture.
Investments are of course inherently risky. It is why business owners expect to make a profit. It counterbalances the risk. But if the risk is too high to attract private capital is it ethical to risk taxpayer’s money? How much risk should government absorb to provide low-risk investing to private enterprise?
The future always contains risk. Demand can alter at any time. New inventions and technologies can emerge and alter Demand and consumer expectations new processes can lower costs and radically alter the market.
Debt tends to be justified on the ability of an investment to offset or carry the debt. Debt used to be restricted to business ventures and governments waging war. However debt is now acquired because delayed gratification is considered a cost i.e. the cost of waiting.^^14^^
Increased consumption increases Demand, which increases employment and wages. However with increased Globalization increased Demand may be countered with outsourcing to low cost suppliers overseas, increased focus on services and a greater reliance on technology and automating processes.
It was assumed that rising house prices would secure the sub-prime mortgages that featured in the S&L debacle and rolled over into the 2008 financial collapse. The Savings and Loans unloaded many of their toxic assets onto banks who then bundled, tranched^^15^^ and resold them to investors the world over. The process of bundling worthless securities with gilt-edged ones and insuring the result allowed worthless collateralized debt obligations (CDO) to be marketed as investor grade certificates. If the mortgage holders had all been able to find jobs and if the housing market had continued its upward trend and if no one had defaulted on their mortgage and if the homes that went into default could have been sold to cover the default and if the insurance that was to cover any potential losses was not dependent on the asset covered for funds then institutional investors the world over might never have realized the extent of the fraud. However, the unemployed mortgage holders did not find jobs and interest rates did rise and the banks started to foreclose on properties that rapidly lost value and as a consequence the assets of the insurer became as worthless as the assets insured. When this happened property being an illiquid asset and prices sticky on the downside the housing market was soon burdened with houses which could not be sold (to cover the default) and whose values no longer covered the outstanding mortgage. What had been a guaranteed win (either the owner would have continued to pay the mortgage or the house would have been sold for more than the debt outstanding) became a nightmare of defaults that led to ever declining prices that made it less and less possible for even solvent borrowers to refinance. Even if the borrower had a reliable source of income and had kept up his or her mortgage payments the mortgage was higher than the value of the property, which made it impossible to refinance any property, on which the mortgage became due.
One mortgage in default is not the same thing as 1000 mortgages in default. One default does not impact the market but when defaults become the norm that dynamic changes dramatically.
When buyers see house prices falling the tendency is to wait for prices to fall even more. This creates a self-reinforcing downward spiral of price drops and people walking away from now worthless property. Delaying the purchase of a home in the expectation that prices will fall makes declining house prices a self-fulfilling prophecy.
This is the other side of a bubble. When people buy on impulse they create bubbles. When the buying stops the bubble bursts. There are no bubbles in the food sector because food on the whole is not an investment it is purchased to eat and even the most serious of gluttons can eat only so much.
There is a link between the unwillingness to delay gratification (preference for a small immediate reward over a larger reward in the future) and other social maladies. Persons who can delay gratification had higher SAT scores, were more likely to plan and were seen as being more competent, mature and more self-assured. Children able to delay gratification were observed to be less impulsive, less aggressive and less prone to hyperactivity. There was also a small correlation between being over-weight and inability to delay gratification. Studies also suggest that self-control can be taught and becomes normalized over time. Which makes one wonder the kind of personality disorders the market encourages by its policies on debt.
Risk can be lessened when costs are divided (pooled) between several investors. Purchasing insurance reduces risk because insurance allows risk to be shared amongst many participants even though the policyholders are strangers and do not trust one another. When the insurance company is part of the risk (as it was in the sub-prime mortgage meltdown) protection evaporates. AIG was selling CDO^^16^^ as investor grade certificates because they were insured. The insurance premiums that covered mortgage defaults were invested in mortgages. The investment in sub-prime mortgages was supposedly protected because of insurance coverage underwritten by investments in the sub-prime housing market. Ultimately the value of housing underwrote the value of the insurance; insurance that was meant to protect investors against declines in the housing market. Just as tranching was supposed to protect against weakness in a single component bundling supposedly spread the risk over many properties. The analysis was flawed because property values are volatile. The property market is by its nature always small and local. It does not matter what happens outside of a specific area. If a few houses come on the market at one time on one street or neighbourhood and remain unsold people stop buying as they wait for prices to fall or fall further.
A business owned by several investors’ shares risk between the partners but partnerships also make it more difficult for decisions to be made in a timely manner – increasing risk.
Insurance policies designed to protect against risk require the payment of premiums. These reduce the policyholder’s cash flow and increase its risks.
97% of all money in Canada is owed to banks. This means interest is paid on 97% of the currency in use. The interest paid on debt reduces disposable income. If total debt is reduced the money supply decreases. The fact that so much money must be paid out to cover the interest on debt increases risks for all of us. The fact that this repaid debt must be re-lent to provide funds to keep the economy going and to provide money to pay the remaining interest creates additional risk. It also produces an economy that is inherently unstable.
Paying down debt removes money from circulation. As the money supply shrinks relative to the available goods and services prices go down (deflate). There is less money in circulation and so money becomes worth more relative to the available goods and services. Deflation is the mirror image of inflation and while it may appear to be a good thing to most people it makes doing business difficult because businesses buy high and sell at a deflated price.
When money is in short supply the price of goods have to go down to attract some of the scarce funds. When there is a surplus of money prices rise.
Inflation encourages people to spend more freely because currency is declining in value relative to goods and services. A person trying to save finds that prices may be increasing faster than his ability to save. It then seems smarter to borrow and buy immediately than waiting and paying cash.
Deflation is a serious problem in a developed economy. Inflation can hurt economic activity but deflation creates worse problems. When supplies are purchased and processed but the goods produced must be sold at a discount bankruptcy is a given. Deflating U.S. house values in 2008 precipitated a worldwide economic collapse. Defaulting on a mortgage is one way to reduce debt and divest ones portfolio of an asset with depreciating values.
When the steel industry collapsed in the Midwest States assets that had fuelled an entire economic sector were rendered worthless. Indeed they became a liability for the communities in which they were located. Deflating steel prices coupled with sticky union wage rates collapsed what had been a billion dollar market.
When the mills in Muskoka exhausted local supplies of timber the immovable assets lost value. The blades were shipped to mills opening in other areas.
Immigration from Briton to the New World collapsed house prices in England for a century.
The sizeable but still climbing debt in Canada keeps the spectre of deflation at bay. But how much debt can the country accumulate even when shared between governments, industry and consumers? How much debt can the world sustain? At what point will defaults become inevitable? At what point will the assets that cover this debt be transferred to creditors? Will nations consist of a few thousand landowners collecting rent from a vast army of tenants? The asset remains but the equity (the value) is transferred from the individual homeowner to a few corporations. Will we see the day when China becomes the head of a new Empire built on the indebtedness of the rest of the world to its inexhaustible army of wage slaves?
Bracebridge’s rebranding efforts to succeed require consumers with disposable income. Without these everything else is moot. Bracebridge could borrow and spend twenty million dollars to promote tourism but a hike in the price of gas could make the effort come to naught – leaving just the debt + interest.
Does it make economic sense to put a Santa on every corner in Bracebridge or spend millions to attract a mega-corporation to Bracebridge? Are we willing to restructure our lives and the town to suit the desires and demands of tens of thousands of tourists who may disappear as quickly as they came? Do we want to change our regulations and tax structure to attract a corporation whose business needs may take precedence over the needs of the town?
Risk is tied up in costs. Bracebridge is put at risk due to the cost of attracting tourist and the collateral costs tourism creates. Liabilities exist as debts we owe others and these create costs. Debts can be monetary or non-monetary obligations owed other agents. Risk always comes down to assets being in danger of being transferred to a creditor. Debt owed creditors represents assets that are transferred to a creditor either as money (lost opportunities) or as seized possessions.
Lending money creates a risk of default. In a loan the borrower gains the assets the loan enables him or her to purchase but the lender may not get the principle or interest back. A borrower realizes the value of a loan when she or he spends the loan into the economy by buying goods and services. Spending money borrowed from a bank creates money. Before the money borrowed is spent the money is a ledger entry in a banks books or digital entry in an account.
Bank debt increases risk because debt increases costs. As more debt is created the more risk is created. This debt threatens the assets of everyone since defaults can trigger an economic collapse and a decline in the value of assets.
(Economic collapse takes money out of the economy so prices decline as a response. Deflating house prices caused a general or worldwide deflation of prices in the 2008 depression. Banks by the 1000s went under and with them went the money they had created which became so much worthless paper or ledger entries.)
A supplier may extend credit to its customers. The buyer can now purchase supplies from the supplier without needing cash or a loan from a bank. Credit given by a supplier impacts the cash flow of buyers less than having to use cash or bank loans – transferring risk from the buyer to the seller who has lost goods and may not get paid.
Businesses may in turn extend credit to their customers for the same reason – to encourage more sales. Sharing risk reduces risk in the network as it reduces costs however extending credit puts greater risk on the supplier, the suppliers risk increases as a buyer may default. The value of the goods given on credit is lost in a default rather than money as in the case of a bank loan.
Businesses that provide credit to their customers increase sales but also increase their exposure to defaults. Third Party lenders such as MasterCard underwrite many privately issued cards.
The bankruptcy of one member in a business-2-business network of buyers and suppliers can have serious repercussions for the rest of the network. Defaults of business customers are a serious problem for small businesses. Small businesses are often deeply embedded in a network of risk in the form of business-financed credit. The failure of one member can create financial problems throughout the network.
When a major business customer defaults it makes it more difficult for its creditors to meet their obligations in a timely manner. A major default can set off a chain reaction of defaults. The Great Depression was not just a collapse of the banking system it was a collapse of the ability of debtors to maintain payments on their debts including the obligations businesses had to other businesses.
Money represents a claim on wealth. Owing or even owning money is inherently risky. The potential for money to be stolen or counterfeited increases the risk of loss. The ability of money to be amassed in unlimited amounts creates another source of risk. People with large amounts of money have large claims on the nation’s resources. This claim can be used to leverage compliance from others. The ability of those who control large fortunes to impact the lives of many others is a risk shared by all of us who use money.
This can be extrapolated to the macro economic level. One nation may have such large claims on the resources of another they may acquire enough influence to alter policies in the debtor nation. The IMF dictates terms to those governments that require its assistance.
Theoretically a billionaire could decide to invest in Gravenhurst in direct competition with what is being done in Bracebridge. If Gravenhurst opened a larger and better equipped Santa’s Village the one in Bracebridge could be forced into bankruptcy and make irrelevant any investing done.
Our costs increase our risks but our risk reflects our uncertainty about the future. We are as uncertain about the future to the degree we distrust others. If we had total trust in others risk would vanish. Our house might still catch fire tomorrow but if we could trust others to provide us with a new home, insurance would no longer be required. Insurance is a way to share risk and ensure that others will pay for a new house if ours burns down when we do not trust the fire retardant properties of our home or the generosity of our neighbours to provide us with a replacement house. If we knew with absolute certainty, no other town would compete against us and that 30% more Torontonians would come to an upscale Santa’s Village, the town could afford to invest heavily in this attraction.
Loans to the Dutch state during the Revolt (1568–1648) against Spain were so secure that interest rates fell even as the amounts borrowed skyrocketed. The Dutch trusted the fund because they trusted everyone else in the fund not to sell their share of the debt and comprise victory. The survival of the state depended on its citizen’s willingness to continue to loan it money.
Banks however automatically mistrust those to whom they lend. This is reflected in the interest they charge. Banks also mistrust governments but the state represents a lower risk because the likelihood of default is small. Loans to the state then are cheaper than loans to private parties. Interest is required because it is never certain that the bank will be repaid and because banks want to make money on their loans. As risk increases the rate of interest rises. This increase in the premium charged for the loan contributes to the possibility of default. When interest rates are high the probability that bankruptcies will cascade through the economy increases at least partially because the rate of interest makes it difficult to repay the debt.
Trust increases with commitment. A Bank prefers a client who has roots in the community because this represents commitment and those who demonstrate commitment are trusted more. People commit to those who they trust and a commitment usually goes both ways. Stable relationships reduce risk. Much of a loan application is a study in how stable the applicant is.
It may serve one partner in a relationship to exploit the other’s trust. A relationship in which trust is lacking weakens the relationship and the commitment that each has to the other. The problem is that the more trust one extends to another person the greater the probability the trust will be betrayed. When people have absolutely no fear of being caught they are likely to do things they would not do had they feared being found out.
People who commit fraud set out to betray the trust of others. They understand what a trustworthy person looks like and so consciously set out to look like someone who can be trusted.
Criminals trust each other because they share a common risk of getting caught and jailed. Mutual assured destruction (MAD) operates to keep criminals honest when they deal with other criminals. However, for this to function as a deterrent risk must be balanced. The judicial system tries to destabilize this shared risk by lowering the consequence of talking and adding to the risk of not incriminating their partners.
Knowing that the first one who confesses reaps the reward of a lighter sentence creates a dilemma for criminals or at least is meant to. To counter the risk of betrayal criminals punish those who break the code of silence harshly. The code of silence is so important to criminals all hardship must be endured before one criminal rats out another. So important is trust to the underworld that the penalty imposed on snitches is often death.
Greed increases the likelihood that people will take risks. It is said that the greater the risk the larger the reward. Greed then encourages people to take risks and the larger the prize the more likely common caution will be thrown to the wind. The readiness of people to suspend disbelief in the expectation of a large payout is exploited by those perpetuating fraud.
A customer patronizes a company only so long as its products price and quality are better than the alternatives. Companies do not trust their customers to keep coming back regardless of what the competition does. This creates the need for constant self-promotion.
Employees are not trusted beyond what is necessary to get the job done. Work is organized to eliminate the need for trust and indeed to protect the company against fraud. Workers are prevented from making themselves so important to the companies operation that the company has no option but to give in to the employee’s demands or to unilaterally trust them. Hierarchies and production lines help remove the need for trust. Hierarchies ensure someone is always watching what an employee does. Production lines ensure every person on the line has an assigned task and that it must be done at a pace to keep the line moving.
Workers who do not trust their employer to provide them with a stable job feel little commitment to the workplace. Employees who have no vested interest in their job try and earn as much money as they are able for doing as little work as they must. Companies focused on profit levels view employees as a cost that must be minimized and customers as marketing categories. Companies careless of their employee’s commitment to the job feel justified in exploiting them for as long as they work at the company.
Risk avoidance requires controlled outcomes. The need or desire to control the future is tied up in our distrust of others. Uncertainty about the future is ultimately a testament to our mistrust of others. When we do not trust other people there is a need to either control them or distance oneself from them. But after one has separated oneself emotionally from others and assumed control over them, the likelihood is they will be exploited, manipulated and victimized.
Reducing risk for oneself may seem to require others be exploited or controlled. Criminals reduce risk by exploiting the weakness of others e.g. their fear of death or injury. This gives them some control over the outcome of an engagement but in they end violence against others only increases risk and creates an outcome over which they have little control.
To reduce risk without sharing risk requires risk be transferred onto others by force or subterfuge. Risk can only be reduced overall by sharing or locally by transferring it to those outside of an inner circle.
Hierarchies are a way of cementing trust within a small favoured group then using this as a foundation on which to exert control upon an ever-widening pyramid.
Control creates opposition to ones control and the threat of rebellion necessitates force or deceit be used to prevent those who are being controlled from throwing off the costs of their subservience. What this means is if one sector of society bears an inordinate share of the costs of maintaining order this increases the probability that this sector will actually be the source of disorder. The state needs sufficient resources to ensure this sub sector will not or cannot block the means the state uses to extract wealth. This increases the costs of the State. Of course the higher the costs of control the greater the likelihood that rebellion will occur.
Fraud is a type of control. Criminals (and the state) make the cost of non-compliance appear greater than the cost of agreeing to their demands. Victims of blackmail face a risk in paying the blackmail but the consequences of not paying seems so great that from the victim’s perspective paying the extortion is the cheaper option. Governments are able to rule with virtually no opposition because those governed at least in a democracy see compliance as the choice with the lowest cost.
Voters are constantly reminded of their need and even their obligation to vote because so long as they see voting as a low cost alternative to rebellion the more risky options (such as rebellion) is not likely to be considered.
AIG transferred risk onto others by underwriting the risk with the same assets that were being covered. But those purchasing the investments thought that if they did not get in on the action they were at risk of losing money in the form of a lower realized income. They would have had better returns, as it turned out had they put their money under their mattress.
Money^^17^^ confounds the most fundamental law of nature, that of increasing entropy. The 2nd Law states that energy always tends towards a less organized state and that order always decreases. Money however has been given the magical power to make more of itself. This neat little contravention of the basic fact of the universe, that entropy increases, is encapsulated in the saying that it takes money to make money. However reality gets its revenge because no matter how much money is made unless more goods and services are created the total value or real value of money remains the same.
So, it would seem that bankers and businesses in their wisdom have managed to overcome the laws of nature but of course money as debt creates chaos in the form of debt and inflation as the Supply increases.
Money may appear to disobey the rule of entropy but in accordance to the laws of nature the social costs of money simply transfers costs (entropy) elsewhere. It is the same process that allows life to exist by transferring the cost of its organization onto its food sources.
Money is the perfect tool with which to exploit mankind’s greed because if offers infinite gain at relatively little cost. Spending money if done in the right way can make more money in a never-ending upward spiral of greater wealth. It is the promise of ever-greater freedom.
Money as paper or electronic digits can be printed, stolen or accumulated exponentially without physical limits. But this is not without costs or consequences for money represents value and value is enshrined in our assets. In reality currency is an asset with no value except its ability to be traded for assets with real value.
Exploitation always consists of costs being pushed onto others without a corresponding benefit; exploitation is failing to meet the standards of a rational exchange. Printing money allows the state to acquire wealth surreptitiously from its citizens. Currency is transfers risk as it transfers assets. The possession of money gives the bearer an unchallenged right to claim goods and services up to the value of the money offered. But with money there is always risk of loss.
Rebellion, revolution and social upheaval occur when people realize the costs of not rebelling are greater than the cost of obedience. At some point the victim of blackmail realizes further compliance will not only bankrupt them it will not save them from the truth they fear.
Exploitation is by definition a betrayal of trust and transference of assets. The products of betrayal are economic injustice, inequality and ultimately revolution. Yet, the tendency of man is to exploit every opportunity and ever weakness in others.
Exploitation shifts the fruits of labour to those who did not contribute to its production, so exploitation does not create wealth it is merely redistribution and an unfair one at that.
Exploitation cannot take place if trust does not exist to some degree between the victim and the person who does the exploiting. A ruler may exploit the trust of his subjects and often does. But there is an expectation that a line will not be crossed. Subjects will make excuses for a leader’s actions and accept abuse of what we call human rights if this seems to be the lower risk option and within predictable limits. There is trust in the tyrant to not increase the risk and cost of compliance. Rebellion is often attributed to some act that is said to have been the straw that broke the camels back but rebellion is our reaction to a betrayal of trust.
We see this dynamic play out in war. Armies will endure what in any reasonable persons eyes are intolerable conditions. The risk of rebellion during war is to lose the war. Each soldier must consider the prospect that if he complains or incites rebellion the success of his action may contribute to the victory of the enemy. He trust all his or her countrymen and woman to be working for the same cause, defeat of the enemy.
There are rare instances when the risk associated with losing a war does not increase risk to the degree that continuing the fight does. Refusal to fight has halted conflicts. The armies of Spain refused to fight when their wages were not paid. Sometimes the army ransomed conquered territory back to Holland in order to collect their back pay. One assumes they saw little risk in what they did that is losing the war posed no greater risk than the rewards of winning the war.
The earth is the responsibility of all persons past, present and future. There is no other organism humans can pass the buck to. This is the doctrine of Dominion. We hold final responsibility for what happens to this world. If we act responsibly we act rationally and we create equity. The world increases in value. If we act irresponsibly we destroy more than we create and the value of the planet, decreases. This is not the way to peace.
Muskoka is its equity. Bracebridge is the wealth of everyone who lives, has lived and will live in Muskoka. We can share what we have with all persons and reduce the risk that is the lot of all or concentrate the wealth of Muskoka into the hands of a few persons. Assets tied up or wasted do not count as equity. Gold buried under a thousand feet of rock has no value. A factory and its equipment (its assets) may as well not exist if idle.
We can treat Bracebridge as a resource to be exploited or an asset to be improved. The first course increases risk because it treats reality as an independent entity and allows us to abdicate responsibility for the state of the planet. The second path requires creation of equity. This is not consistent with the former attitude. If we continue to use free market thinking significant change is not likely to happen.
Environmentalism is not strictly, as some suppose, a movement to make nature more important than people. Environmentalism tells us we have responsibilities and there are larger concerns than profitability. Environmentalists see wasted resources as a cost we all pay. Environmentalists are peoples who do not see the benefit of compromising peace to achieve wealth; they do not agree that freedom is synonymous with market share. Environmentalists do not see freedom as being defined by assets possessed but how they are used.
Turning Muskoka into a playground for tourists would reduce the quality of life for most residents even if it did increase the profits of a few businesses. Potentially a large influx of tourists would harm the natural beauty of Muskoka perhaps beyond repair. Many people would get an economic benefit from tourism but a few would benefit more than the rest. In the end those whose assets were tied to the region would find a bill come due that would more than offset any of the early gains. The tourist businesses would die off and some would simply move away and the residents and those in the immediate area would be left with the greater portion of the unpaid costs.
A solution that has no costs is not possible. There are always compromises and trade-offs to any plan of action. There will always be those who do not approve of whatever plan is suggested. However, the residents of Muskoka are the ones who will pay the final costs. These costs could include a decline in tourism and the cost of repairing the damage done to the environment by a failed tourist industry. Muskoka is already burdened by the climbing costs created by the Talisman resort.
Causing damage to the environmental is as unethical as it is economically disadvantageous because the cost of the damage is never shared equally nor fully contained in the price of what is produced otherwise the damage would not exist.
Increasing tourism is good up to a point but at the point when the resources of Muskoka are harmed to benefit some at the expense of the rest of us increasing tourism turns into increased liabilities.
We all live on the world we are all dependent upon its resources and each other. We who live in Muskoka are dependent on what we have in Muskoka. We cannot afford to exploit or allow the region to be exploited for short-term gain. In the end we need to create a sustainable community – not just because we have a duty to others to preserve the world’s resources but also because reducing the amount of stress to Muskoka’s ecology makes Muskoka a more sustainable and even a more marketable region. But is restraint on how much we stress the environment compatible with the market’s need to create jobs?
There are those who would argue environmental concerns disrupt the proper workings of the market. Environmental concerns distort market mechanisms goes one argument because these usually require government funding. However, it is not easy to turn a desire for clean air into a product marketed by private enterprise for profit. The same complaints levelled at the environmental movement might also be applied to worker safety. Safety concerns also increase costs for businesses and government promotion of safer work practices distort market mechanisms.
Even if the demand for better food, cleaner air and unpolluted water is not reflected in the willingness of the consumer to pay more for healthy products from environmentally conscious businesses may be due to the same reason why most consumers do not prefer high end homes and luxury cars and locally produced artisans goods … they simply cannot afford them.
Capitalists see environmentalists as being on the left. They argue environmentalism increases market costs. Markets favour the lower cost option where quality is comparable. But is a cheaper car that was made without concern for the impact the process had on the environment really the best buy when compared to a car of similar quality with a higher price tag and minimal environmental impact?
If we are economic animals concerned only with the best value from a personal perspective then the destruction of the environment becomes a non-issue. If we are looking for the best value from a more rational perspective then paying more for a product that saves the environment makes more sense than the alternative.
Free market ideology tells us we ought not pay more than the lowest price the market provides. Environmentalists appear to be following a different drummer, a different set of protocols.
But is the environmental movement capable of overthrowing market ideology. The short answer is no! Most people will not sacrifice personal ends for the collective good. Environmentalism asks business and society to pay more for the good of society and future generations. The mechanisms of the market generate the lowest possible cost for the individual. The market dumps a lot of social costs onto society and future generations in the form of environmental harm but can the market be corrected by government interference? Government is another social cost so ultimately going green not only interferes with the markets ability to lower costs it does so by creating additional social costs in the form of bureaucratic intervention.
Environmentalists ultimately want legislation to make sure any profits made reflect the real costs of the product. The price of a commodity ought to reflect real costs. The market requires businesses to compete on the Global level whilst legislation impacts primarily the national arena. Businesses fear concerns for the environment will increase their local costs and make them less globally competitive. Environmentalism is part of the discussion we have had about how to protect local businesses from the pressures of a global market. The free market allows only one option, Nations and local communities must de-regulate so local businesses can compete on the global level or be rendered uncompetitive. Legislation that interferes with the ability of markets to grind processes down to the most profitable level will be met with bankruptcy for those sectors made less competitive.
Businesses do not succeed simply by lowering prices they win by increasing profit margins within a given price spread.
As Riane Eisler says in her article, Beyond Capitalism And Socialism: “It (liberalism) can best be understood as a means of maintaining top-down control. Although neoliberal rhetoric is about freedom, what this really means is freedom for those in control to do what they wish, free from government regulation. Neoliberal policies were designed to reconsolidate wealth and power in the hands of those on top, and its mantra of ‘trickle down economics” conditioned people to accept the “traditional” order under which those on the bottom have to content themselves with the crumbs dropping from their masters’ opulent tables.” ^^18^^
Democracy is historically presented as the political rights of the people being wrested from the tyranny of the Divine Right of Kings. The doctrine of Divine Rights was an improvement over the time when rulers thought they were gods. At least kings even those appointed by God could be dethroned when they no longer represented what the people thought God wanted.
Democracy is defined as the rule of the people and this has been equated with having the popular vote but true Democracy is more closely aligned to what is known as Grassroots or Direct Democracy. What most people think is Democracy is the right of voters to appoint a group of men and woman to be the national (or regional) lawmakers. In Canada we call it Representative Democracy because those who are voted in represent the people. However the power of Democracy is not in the people’s power to change government it is the people’s right and power to ensure government works within the rule of law. Kings were not reticent about writing laws so long as no one expected them to work within their proclamations when it no longer suited them to do so.
Governments in democracies are not rulers in the sense that kings are rulers; it is not the government that has the power it is the laws they pass and to which they are as subject to as any other citizen or organization is. Democracy is about the rule of law more than it is about the rule of the people.
The power to make laws however is meaningless unless there is the means to enforce them. Nothing is so disheartening to people or corrosive of the rule of law, than laws that can be broken with impunity. The first task of a lawmaker is not to write or conceive of a law but devise the means of its enforcement.
The task of law making and law enforcement necessitates governments have the right and power to finance these activities which means governments must have the right and power to tax wealth away from its citizens in amounts they believe necessary to do what they are mandated to do. Enforcing the law also requires governments allocate revenues in a way that reflects the community’s best interest. This power to redistribute wealth through taxation and social services helps to maintain stability in the face of an economic system that produces wide disparities in wealth. But governments are always limited in how much wealth they can legally and morally and practically extract even when this is done with the best of intentions. No matter how high the ideals that underwrite the tax there is always a sense that taxation is akin to thievery. One wit observed that the State imprisons thieves because it will not tolerate competition. Representative government, while preferred to autocracy, still leaves many feeling they are not so much represented as abandoned.
The right to vote supposedly gives power to the electorate but the numbers voting dilute individual influence. Once elected the power tends to shift to those who were elected. The cost of getting elected however puts real power into the hands of those who have or can pay to run for office, one cannot vote in someone who cannot afford to run a campaign. Someone may wish to run for office on a platform of aggressive taxation but they are unlikely to be backed for office. Indeed the presence of someone running on a high tax platform in a political race is likely to result in larger than usual contributions being made to opposition candidates.
Politicians need wealthy benefactors if they wish to run for office but this leaves them beholden to their biggest contributors, especially if they intend to run for office in the future. Ensuring ones platform whether stated or implicit reflects the principles of the candidates major benefactors help ensure future support will be forthcoming.
If the political process can be usurped by the most wealthy then there is a risk that too much wealth in too few hands will translate into governments who will be more willing to take wealth from less wealthy sectors than from the more prosperous. Governments dependent upon donations by wealthy persons to run a campaign may assume the form of an oligarch. Politicians dependent on rich benefactors to contest an election may gradually cease to design platforms that reflect the will of the people.
Exploitation of populations by their government has destroyed whole civilizations. Indeed State mandated exploitation (Socialism) is usually the reason why empires fall. If Rome had not exploited its citizens to benefit its ruling class it would not have fallen to the barbarian. But then again it would not have been Rome because the base of an empire is always exploitation. Empire is always built on or paid for by Socialism because Empires are a form or result of Globalism and this necessitates costs be paid for by a subject people.
But exploitation carries with it the seeds of its destruction in that if fresh new fields of exploitation are not discovered sufficient to offset the cost of exploitation the Empire becomes too great an expense for the people to sustain.
Exploitation exists when one’s labour benefits others without a corresponding benefit to oneself. If an exchange is not rational that is if the exchange does not fit the criteria or profile of a rational exchange it contains an element of exploitation. A slave is exploited insofar as his owner consumes the slave’s labour. Rome was built on the success of its Legions. But this wealth accrued to fewer and fewer elites while the masses were left landless and penniless to become wards of the state. California seems to be adopting this same profile.
To keep what we earn is fair but it is difficult to apply this doctrine to the free market because the market fails to account for hidden costs. The market is inherently exploitative and does not keep track of hidden costs nor accurately assign costs. The market promotes freedom not truth. Ownership is simply a legal fiction perpetuated by the State. Kings used to bestow estates on their favourites and as quickly seize them if they fell out of favour.
Governments allow exploitation but try to reduce the worst effects to maintain peace. Government sees a need for hierarchies in power and wealth to maintain order. However, it is the steeply built pyramid that destabilizes society. Wealth when concentrated can exploit investment opportunities and power needs to be concentrated at the centre so order can be maintained but when taken too far leads to revolution.
When power was focused on the person of the king investments focused on providing for his personal and State needs. Armouries were created and shipbuilding promoted by kings seeking to retain and expand their power but little capital went into developing consumer products and markets. State power was reduced as private wealth increased. The State over time discovered it could extract more wealth from a prosperous and industrialized citizenry than it could from an agrarian one. This meant it had to defray some level of exaction as it waited for private capital to accumulate.
Modern democratic ideals require the State correct if not prevent social injustices otherwise public outrage will result in losses at future elections but at what point does the process become self-defeating? Taxation is inherently exploitative. But it is difficult to determine in the over-all impact is good or bad so while we look with disfavour on taxation the public accepts the burden. The problem for the State is to decide at what point not dealing with a social issue is wrong and at what point will increasing taxes to deal with a social issue lead to defeat at the polls.
The dynamics of tax collection and pressures regarding social issues puts the focus of the State primarily on the middle class.
Despite the tenor of Adam Smith’s statement given below the reality is that the greatest pool of accessible wealth is in the middle class not the upper echelons and the greatest potential disruption of the state likewise comes from the middle class not the unpropertied poor.
“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.”^^19^^
This position is oddly reminiscent of the Communist doctrine of: ‘From each according to ability to each according to need.’
Requiring those with greater wealth to give more proportionately than those less successful suggests that most people believe those who have great wealth do not totally deserve it and that the State is justified in removing a greater proportion of it to help the less fortunate and society generally.
If the State takes wealth unequally from the rich it suggests to some that the very wealthy do not deserve their fortune and that some of it exists as an unpaid debt the State has a right to seize on behalf of those to whom it is owed, the less fortunate citizens of the state.
In conjunction with the Right to extract wealth from citizens for the good of the nation private property must also be protected from unlawful seizure. The tyranny of the majority is as unjust as the tyranny of the few and must be equally prevented.
Society has divided into two camps, the Right promotes Socialism of the rich the Left support Socialism of the poor, the former dispute the right of governments to use tax money for social objectives. Negative Rights support the rights of private property and see no special rights adhering to persons who have no property. But even the most pro-business government will find it necessary from time to time to increase the tax burden on the rich to quell a potential uprising from the base. The State no matter what its responsibilities or level of power cannot reject all social responsibility without risk of a mass uprising. However, even China was forced to open the doors of market freedom to prevent economic stagnation. This is the quandary of the Right/Left debate. Life being what it is if the basic needs of life are not met and even exceeded society will not function well enough to survive no matter what the size of army it can field. It is thus necessary for the State to address the basic necessities of survival even at the cost of its ideals not simply attempt to squash every demand for reform.
Tyranny no matter how absolute cannot survive on the basis of power alone. The State cannot use its power to benefit no other sector but itself nor unilaterally promote the needs of business. A stable society requires cooperation and consideration for others. The State needs the cooperation of cleaners, delivery persons, garbage men and store clerks and all the other elements that make up society. Armed might can defeat uprisings but it cannot defeat apathy and apathy can bring a government down as effectively as violent opposition.
If people cannot or will not work the nation collapses.
A nations stability and economic strength depends on the level of participation. The failure of Medieval Economics was its shallowness; dependent as it was on luxury items even the army was made up of a few expensively equipped knights and a mass of poorly equipped peasantry.
But economic engagement tends to necessitate economic equality. The more everyone works and buys the more complex and stable the economy but the free market, capitalism and competition do not lend themselves to equality of outcome. Capitalism may dislike state regulations but remain dependent on State authority to maintain the markets existence.
But what is the purpose of government and who defines it? In most States one Party will tend to favour business and another labour; one will push an agenda based on the basics needs of society and another an aggressive pro-business agenda. Yet in a democracy no party regardless of its stated allegiances or supporters can afford neither to disregard certain sectors nor focus exclusively on the interests of it’s members.
At the same time, every activity and program the State implements benefits one part of society more than others. Building roads favour those who have need to transport themselves and goods more than those who travel less. The provision of schools benefits those with children at the expense of those without. Some governments dedicate large amounts to health care though there are constituents who spend large sums ensuring they will not need these facilities. There appears to be some correlation between a person’s lack of personal or corporate responsibility and their need and use of government programs. To put it another way those who show the least responsibility for their own health and welfare are the ones who benefit the most from State spending. So then the argument comes up as to what kind of citizen is the State promoting?
Adam Smith argued that slavery ended because slavery was inefficient and benefited a few persons but at a substantial premium for the many. Of course ending slavery created substantial expenses for those who had invested in the trade. Slave owners were not specifically against manumission but were against the financial impact that manumission represented arguing the State ought to compensate them for what they believed was a loss of property. Those who rejected the idea considered the viewpoint of slave owners as repugnant arguing that to give slave owner’s compensation was tantamount to treating the ending of slavery as a transfer or seizure of assets rather than the State righting an injustice. Abolitionists argued slavery should not be seen as anything but a crime against humanity and ending it a non-negotiable necessity for all governments. Humans are not assets nor ought they to be capital in a business.
Paying compensation to slave owners would have meant that freed slaves would be paying for their freedom through tax revenues. However human freedom is a Right and not something to be purchased. Freedom in a free society is not a commodity to be bought and sold.
It might be noted here that the free market did not make freedom a marketable commodity as slaves rarely had the means to purchase freedom. Freedom was not (in market terminology) in high Demand. States allowed those with the capital to enslave persons and to sell them to the highest bidder. By the workings of the market there was a high Demand for slaves. Slavery existed as a phenomenon of the Right because there was no market impediment to slavery and a lot of pressure to maintain it just as there is a lot of market pressure behind the drug and human trafficking businesses.
The State penalizes employers for allowing workers to be injured on the job. The expectation of security from personal injury is a reasonable expectation and has been made a Right in most countries. This helps ensure injured workers will continue to receive wages and not become a burden to the taxpayer should the company not have ensured the worker will not get injured on the job. The surcharges make it more economically to provide light duty to the injured employee than transferring the cost of his or her care onto the taxpayer.
If employers were not charged for allowing workers to be injured the taxpayer would be required to subsidize employers that wilfully allowed their employees to be injured. Most governments ensure their citizens have a Right to personal security even in a private enterprise if only because to believe otherwise would create a back-lash from the electorate.
Employers who say these measures reduce profits may feel they are being unfairly treated but no State can afford to unilaterally defend private enterprise without qualification. Protecting the Rights of Private Property Owners is important but no State will persist that does not consider the welfare of the worker. Those who promote the business perspective argue that an employee need not accept a job if the conditions do not seem to offer what the employee considers minimal safety standards but the company operates under licence from the State and enjoys the benefits secured by the General Tax Revenues so those who contribute to the general welfare have a Right to impose certain basic conditions on all those who partake of these provisions and this includes work places. Businesses exist by the grace of the State and this fact alone gives the State a Right to impose certain conditions of the workplace one might say it obligates the State to represent the interest of all stakeholders in the nation when it regulates business activity.
If the private property owner can expect his rights as an owner of private property to be protected why should employees not expect their life and limbs to be safeguarded? It is not reasonable to expect employees to be versed in the maintenance and operational standards of all the machines and equipment he or she may come in contact with as an employee especially when the employer is the keeper of this knowledge.
Why ought a business to expect all the benefits the State can provide but expect their employees to not expect a similar degree of protection because they stepped over an invisible line created by the State called a property line?
The nation and its government existed before a company was formed and registered. Indeed the land originally belonged to the State that at some point sold it to a private citizen with the proviso it would be used within certain parameters defined by building codes, zoning regulations and other enactments. The state of freedom that would justify the existence of a free market has never existed and never will exist because property rights are always and always will be a legally defined and limited condition. Ownership (a necessary precondition to have a free market) is not only a legal fiction it is a figment of the Capitalists imagination.
Without the State businesses could not exist. The business exists because the nation and the State exist. The business owner then ought to be cognizant of the expectations that come with operating a business within the jurisdiction of the State and accept that the rights of the many must come before those of the individual. The State does not exist for the individual or his or her property. The individual and his or her property exist for the good of the collective. The property owner and all citizens have to subject themselves to the authority and rules imposed by the State for the Common Good. Giving special consideration to the owners of private enterprise is not reasonable or possible from a political perspective when or if those rights cause the good of all to decline. The rights of one ought not to serve as a cost borne by the rest.
Governments protect employers from labour using the force of numbers to impose their will on their employer and the workplace. Workers are not allowed to forcibly possess their places of employment nor evict or replace their employer. Mass action that overwhelms the freedom and rights of others is not allowed. Neither the power of ownership nor the power of numbers or the power of position must take precedence over the need to have a peaceful society directed towards the betterment and welfare of all. This is what is known as the rule of law. We have freedom but it is a freedom governed by rules of conduct enshrined in the enactments of legislative assemblies. In 1641 a letter was sent to the king complaining about ‘endeavours to subvert the fundamental laws of England’.
May 3, 1641 We the knights, citizens and burgesses of the Commons House in Parliament, finding to the grief of our hearts that the designs of the Priests and Jesuits, and ether adherents to the ‘See of Rome, have of late been more boldly and frequently put in practice than formerly, to the undermining danger of the true reformed Protestant religion in His Majesty’s dominions established; and finding also that there hath been, and having just cause to suspect there still are, even during the sittings in Parliament, endeavours to subvert the fundamental laws of England and Ireland, and to introduce the exercise of an arbitrary and tyrannical government by most pernicious and wicked counsels, practices, plots and conspiracies; and that the long intermission and unhappier breach of Parliaments hath occasioned many illegal taxations, whereby the subjects have been prosecuted and grieved; …^^20^^
But government is a rather blunt instrument for the delicate task of remodelling society – it has enough trouble adjudicating between differing interests. Governments tend to be pragmatic not idealistic. Laws proscribe rather than prescribe; prevent rather than encourage or propose. They direct us in how to live and create boundaries over which we ought not to step but do not actively promote a particular way of life except in the negative. Laws do not tell us how we ought to live if we wish to live the good life but rather how not to live if we do not wish to be harmed. Laws are better at saying how not to live if one does not wish to run afoul of the law than how to live to be all that we ought to be.
The cost and difficulty of correcting every case of exploitation or injustice makes it economically impossible for governments to effect social change on the micro level even if the State could decide what an ideal society looked like. Indeed because an obsessive concern for justice can impose unsustainable costs onto society the State has to make a concerted effort to restrain over-zealous bureaucrats. If the police, for example, attempted to eliminate crime the State would be an over-taxed oppressive police state. The attempt to enforce justice creates an oppressive injustice. In short justice as an end in itself creates even worse injustice.
This is an issue governments have never solved. There is an irreconcilable tension between freedom and order. A State that attempts to tell citizens what to strive for is a Fascist State whether done for the good of Right or Left. Freedom requires order but order demands the State limit the amount of freedom its citizens have. The State may wish to liberalize the operations of government (shift Right) but in doing so it must voluntarily limit the control it exercises over the activities of its citizens. The State may have or could obtain the power to impose order but in the interests of freedom (and the costs of Absolutism) governments limit the exercise of power.
Liberalization when applied to government (a Leftist paradigm) implies its policies are being shifted to the right.
But as levels of control are lowered increased freedom is misused this lowers the level of freedom that was enjoyed and requires the State to up its monitoring and enforcement activities. The World Wide Web is a case in point, what started out, as a free domain became a place of intrigue, corruption and fraud, necessitating a deeper penetration of law enforcement much to the chagrin of those who lauded it as the new Wild West. Perhaps they forgot why the original Wild West had to be tamed.
Freedom requires trust and trust requires responsibility. Giving a person their freedom means that they can use their freedom to betray you. Responsibility is a form of internal control that supplements and may even supplant external controls.
When we do not trust anyone we refuse to grant freedom to them and so prevent the possibility of our trust being exploited but the failure to trust eliminates the possibility of a truly human relationship. Without self-control order cannot be maintained and freedom cannot be enjoyed. No system or State can function if no one trusts anyone else. A responsible society requires self-control be exercised by the citizenry. The State cannot control the people unless they impose some degree of order on themselves. A well-functioning State requires a citizenry that works together from a moral sense of right and wrong.
All relationships are based on trust. The people must trust their government and the government must to some degree trust the people and the people must trust one another.
Communities are based on trust. The fact that we live in community and the nation and indeed the world exposes us to a certain level of risk. To function within a collective requires we exhibit trustworthiness and extend trust to others. Trust requires we be predictable and present an ordered appearance to others. However this predictability and openness creates risk we will be harmed
The first and second world wars were created by agreements meant to prevent war. Britain and France gave guarantees of support that were not hedged; neither could extricate themselves from an unforeseen event, the assassination of Archduke Franz Ferdinand of Austria. Open-ended trust led to millions of injuries and death.
The Rights of private property owners restrict the power of the State but still wars happen. Usually the demands of war justify the abridgement of many of the rights enjoyed during peacetime. In an effort to control invasive species (a type of war) the government has given itself the right to cut down all infected trees and those within a specified distance from it. This policy rescinds private property rights so far as woodlands are concerned but is justified and tolerated so as to protect our forests (win the war against the invasive species). In the context of the juxtaposition of freedom and control, freedom was misused to allow invasive species to infect our elm trees and so greater control had to be implemented in the form of imposing a policy of tree cutting on private owners.
Rationing consumer goods in wartime does not just prevent consumers from buying too many consumer goods it prevents companies from using private resources to produce goods not required for the war effort.
The State is often seen as a service or a service provider. Yet, is the State a service we want? Does it even provide service we want and if so do we really want the government to be the way these services are provided? Do we need the services of the State? Can we opt out of their service plan? If war is a service the State provides is this service demanded as people Demand conventional products and services? If war is not a product or service in the normal sense of the term how and why does war happen; what are the means of its production?
No one admits to wanting war least of all those who must fight it, yet war is almost a constant of human history. If the free market cannot prevent war nor is specifically the avenue through which war enters history how effective is the technology of the market in providing what is wanted and by extension, how capable is it in not producing things not wanted?
There is nothing in the mechanisms of the market that specifically creates the conditions for war yet war happens. There is nothing the market can seem to do to prevent war yet the mechanisms of the market seem easily adaptable to war. Those states with free markets seem easily modified to the needs of war.
The State has the power to prevent war yet it is this power to prevent war that enables it to marshal the nations resources for war. Neither the Left or Right has addressed this problem. The greater the power to allocate resources to war prevention the more power the State has to invest resources into the preparedness and prosecution of war. The administrative processes used to prevent war are the same administrative procedures that make war possible. Governments and international organizations claim national governments and inter-government agencies need freedom of action to prevent war but this administrative power seems to give a few individuals the power to enmesh nations in conflicts that might otherwise have been avoided. Even the United Nations that august body created to preserve world peace is preoccupied with the waging of various conflicts. The Security Council is made up of the most armed and powerful nations in the world yet they are overwhelmed by the peacekeeping duties they assigned themselves.
War is not the only problem governments and the business establishment has. Poverty, debt, unemployment and pollution all persist despite a multitude of social programs operated by uncountable numbers of institutions and billions of dollars funding. If the administrative apparatus of governments are not able to eliminate social costs up to and including war we ought to wonder why.
The State even with the most efficient of bureaucracies cannot ensure everyone does the right thing. Even to try and create this degree of order would require an oppressive bureaucracy – something the Right is constitutionally opposed to as the champions of freedom. Yet, freedom as an end has justified Socialism and even Communism and Fascism political movements often associated with the left but originating sometimes in the Right. The War on Drugs has seen policies implemented that in other contexts would be thought fascist.
The siren call of freedom has justified the State exercise extreme control over those elements perceived to be at odds with the States conception of freedom. The worst excesses seem done for the highest of ends. Fascism is a prime example of the quandary we all face: how do the people hold governments accountable for costs the State creates yet give it the power to prevent elements in society from upsetting domestic tranquility? The same power that enabled the Nazi State to protect its Aryan citizens was the same power that enabled it to enslave them to the Nazi vision of Aryanism.
Autocracy by its nature cannot do what is right. Autocracy may justify itself but only to itself. Making choices for others creates costs for others and it is never cheaper to have someone else make ones economic choices than it is to make those choices oneself. Autocrats are a burden to the degree they are Autocrats because when one is required to obey decisions made by others costs are created. This is a dilemma governments cannot face; they are burdened by a quandary of their own making. The ideology of government contains an inconsistency that cannot be resolved. Freedom can only be had at the cost of control and the greater the level of control and the more it is centralized the higher the costs to freedom. The freedom governments grant to their citizens easily transforms into a fascism in which governments assume control for the peoples own good.
Freedom is an ideology that justifies fascism when freedom is made an desirable end. Fascist governments are justified by the fact that the Right has no way of adjudicating disputes and enforce order than by veering to the Left placing more power in the hands of a central government. No two people can agree on how to allocate a common fund or what course of action to take without mediation and mediation without authority to enforce a ruling is not likely to be successful.
Freedom cannot be rescinded nor control implemented without costs being encountered. States that attempt to impose a single view of the moral good on its citizen’s will encounter resistance. The State cannot choose for its citizens without producing resistance or immoral laxity and mindless conformity; that is control results in anger or apathy.
These comments apply also to business administration. Issues that pertain to governments apply equally to business. Ownership of a business does not give the owner sufficient resources to rule as an autocrat. The State always retains some measure of control over all property. The State does not unilaterally give anyone the right to use assets without conditions being attached. Forests cannot be burned down nor are external or structural changes allowed to a dwelling without proper authorization. Even burning garbage or having a cookout is banned when the risk of causing forest fires (or annoying neighbours) is high.
Owners of capital say restrictions on the use of capital are unjustified. Business owners are defenders of freedom when it pertains to their self-interests. According to the ideology of the free market unfettered use produces the most efficient disposition of assets. Unfettered use means one gets to do what one wants without interference from others however it does not take a lot of thinking to see that usage of property is never in a vacuum but of necessity various uses must always conflict and some uses prevent others. Allowing unfettered use requires faith in the rationality if not prescience of private property owners and no one, governments included believe allowing people to act as they thought best would create the best possible world. In practice eliminating all oversight over the disposition of capital is as impractical as allowing people to drive their car as they see fit. Even speed limits have proved to be a two-edged sword. There is a wide range in the road conditions drivers face as well as a wide range of driving abilities between people. 80 kilometres on a dry road is a far different thing from driving at the same speed on a snow-encrusted road especially when the driver is inexperienced. If no one advocates the unfettered use of automobiles why does it make sense to these same people to allow unrestricted use of other forms of property?
Not many think the ownership of land or other property comes with unlimited authority. The ownership or possession of capital especially land is seen as a sacred trust by many people. Natives say they see ownership this way though they articulate it in a way unintelligible to many Westerners. Christians and many environmentalists also see ownership as a responsibility that requires we use our resources wisely according to a minimum level of efficiency always with an eye to conservation.
The Right to Private Property is for those brought up in Western culture as inalienable as the Right to life yet in practice it is a Right hemmed in by many restrictions.
Bracebridge was built on the wealth its lakes and waterfalls and natural beauty provide. The people that had authority over this wealth did not create these resources they simply privatized them with the blessings and help of government. What gives the State the right to determine who owns what? What is the State? Is it the best means to allocate assets?
Henry Bird built a woollen mill (1872) for private gain on what was and inherently is a natural asset. This was his personal interpretation of freedom as provided by the free market. He hired workers, built a home and generated tax revenues that helped build the town. He was also instrumental in making the area a popular sheep-raising district making Muskoka Lamb a popular item in restaurants and hotels.
A natural asset was exploited on the basis of a 99-year lease to help build up a private fortune as well as the social capital of Bracebridge. The experiences of Bird was an example of capitalism in action. The mill is gone (1953) but some of the buildings remain and the town he helped build still exists as does the waterpower that served as the source of this capital. Did the Falls really belong to Henry Bird via the power of the State; did the power of the water and the wealth inherent in the land truly become the exclusive property of Bird because the government said they did? Henry Bird was not specifically trying to create a town but it benefited him to do that which ultimately brought people to the area. Did he give back more than he got? Was the freedom he enjoyed justified by the results?
No one argues investments do not product social benefits but they do preclude other choices being made. Perhaps more importantly if the free market is about freedom what right has a government to assign control of a natural resource to Bird and other private individuals in the name of the free market? Is there any greater restriction on freedom than giving an important resource to be controlled by a single individual for his or her own benefit?
When Bird saw North Falls he saw it as a resource that could be commercialized for personal gain. He did not see his ownership as an infringement on the rights of others. Bird could have viewed the falls as a common resource owned as much by those in the future as himself and done things differently but even had he thought this he did not have the administrative acumen to turn the idea into a viable business. The advantage capitalism has is that it simplifies the administrative problem of freedom. A person pays money for what he or she wants and takes possession of it and then within certain parameters can do as she or he sees fit.
An interesting fact is that during the depression the mills closed, workers were given work, digging sewers for the town, work was paid for in vouchers.
Free market protocols work well in conjunction with the avarice advocated by capitalism because satisfying ones own desires is simple and a clear expression of what freedom means to Capitalists. Capitalism could not be simpler. All one has to do is to do to enjoy freedom is look out for number one. Knowing what ones estate is worth and seeking to increase its value gives capitalists a quantifiable measure of freedom.^^21^^
This extends into the realm of health. Selling cigarettes create great fortunes. Even the diseases associated with smoking contribute wealth to the economy, or so the market tells us.
“These measures of economic health actually place activities that harm life (like selling cigarettes) and the profits derived from those activities (like medical and funeral costs that result from smoking-related illness and deaths) on the plus side. Yet they give absolutely no value to the life-sustaining activities of both the household economy and the natural economy. So an old stand of trees is included in GNP only when it is cut down – whereas the fact that we need trees to breathe is ignored.”^^22^^
The article goes on to say that caregivers are considered non-existent by the free market though they may be working from dawn to dusk caring for their families.
Had Henry Bird by law or principle been required to administrate the falls in a way that reflected the Rights of all persons alive and to be born he probably would have been less willing to risk his own wealth. The Right argues that if the Left objects to people using what they own for their own ends the Left also ought to understand no one will invest their wealth to benefit others. Resources would be consumed not invested. Bird invested his private capital because High Falls was a resource that could be harnessed and make him a wealthy man. In his view if it was wrong to use a natural resource for private gain it was equally wrong for the Left to expect him to use private resources for the public good. What trickled down from his personal estate to form the foundation of Bracebridge was not important to him and incidental to his activities – except insofar as the town’s growth created a larger Demand for the products of his Mill.
Necessity they say is the mother of invention but freedom to use what one has for ones own benefit is the mother of investments if one accepts the Rights view of the world. Only by being free to use his capital for his own ends would Bird invest it and possibly benefit the community.
The availability of free waterpower reduced the financial risks of starting a Mill for Henry Bird and for others who came to Bracebridge. Possibly Bird would not have invested his capital here had not the falls provided a resource that could be cheaply exploited. Exploiting a natural resource is dependent upon perspective. Had Bird needed twice the capital he may have gone elsewhere or into another line of business.
Knowing the amount of capital he had and the risk he was taking allowed Bird to determine the potential for failure. The town might have set itself up as a commercial enterprise or corporation and officially took ownership of all the natural resources within its boarders. It could have charged Bird for his use of the falls. This might have changed the direction Bird took and the outcome of the venture. It might also have changed the character of the town.
It was in those days difficult to acquire sufficient capital for major projects. If Bird funded the building out of his personal wealth it might be argued that the risk and the profits were his own. Money was often hard to come by in early Canada.
By 1872 Canada had a functioning monetary system. The Provincial Notes Act had become law in 1866 (the same year during which the Free Grants and Homesteading Act opened up land in Muskoka). The Bank of Montreal was established in 1817 and other banks soon followed creating what became the Canadian system of branch banking. However, even with the opening up of national banks money was, in those days as it continues to be, difficult to come by. In the early days of banking shortages of currency were due to the centrality species had in administrating the liquidity of the system.
If Bird had required financial backing he would have had to compete with other entrepreneurs who were also seeking financing and possibly for more promising ventures. Because the U.S. and England competed for the gold, which backed our money supply, it was difficult for an entrepreneur in the smaller and riskier climate of Canada to obtain a loan. (There were generally more promising alternatives). When money is backed by gold reserves a business idea competes directly with all other business ideas through the medium of gold and its international price. If foreign interests are willing to pay more for gold than Canadian buyers then gold flows out of the country. With less gold to back the Canadian dollar fewer loans can be made because there is less money in the country. To increase the amount of money available for loans higher interest rates have to be charged, this should encourage gold to flow back into the country and make more money available for loans. The only problem was that these loans had to attract higher interest rates and the small Canadian economy could not match the economies of scale and the technological advances that made its main competitors such economic powerhouses. Thus it was very difficult to attract gold because it was difficult to find investments that would justify the interest rates required to bring gold into the economy.
The Gold Standard favoured the rich nations and severely penalized smaller economies that presented higher risks such as Canada. In turn it also penalized the small, under-capitalized ventures of the small entrepreneur relative to the well-connected firms of the very rich.
Canada has never looked as inviting to investors as the far larger economies of England and the United States of only because these countries were home to those who had the most funds to risk. Bracebridge being a very minor community set among similarly small villages would have had (as it continues to have) a hard time attracting sizable investments. With the formation of a Central Bank and the rejection of the Gold Standard Canada assumed control of its own destiny (to some degree) no longer relying on the judgement of American and British gold speculators as to its economic worthiness. However, literally and figuratively, Bracebridge was not out of the woods just yet.
The development of a Canadian Central Bank and a national currency may have eliminated somewhat the international competition for money but it hardly changed the influence speculators had over Muskoka’s economy. Muskoka still had to compete for investment dollars against the rest of Canada and insofar as macroeconomic policy allows, the rest of the world. Money is after all a scarce commodity.
Money is scarce due to the fact that if money is not kept in short supply it will no longer serve as an asset. Unless currency has value based on is portability, convertibility and scarcity no one wants it, not to say that practical necessity and legal obligations would not force businesses to use it over the short term but a currency that is provided to everyone who wants it in the amounts wanted is a currency no one wants. Money is valuable because it is in short supply. Free market currencies give people access to goods and services but only when it is kept scarce enough to give it an exchange value. Even within their monetary systems the tension between freedom and control haunts the Left and Right and befuddles both their ideologies.
Money according to the Right is a service provided by banks for a fee. It used to be a service provided by governments at the cost of what governments purchased with the new bills. The State spent money into the economy but did not earn it in the way the rest of society earns money. It was a form of taxation but a form of taxation that was not readily visible. What the Right learned from this early experiment was that the power that allowed the State to print money was the same power that enabled them to do this in an uncontrolled way. Thus Rights created the idea of a Central Bank that earned money by using money as an asset. It was an early attempt to transport the ideas associated with the Tragedy of the Commons to the monetary system.
If banks have the power and freedom to create chequing accounts it is an asset that can lose value. If banks lend money in an irresponsible way their accounts would lose value. Banks of necessity must keep money scarce or it would lose commercial value and they would not be able to charge people for the use of their accounting system. People rent an account from the banks because bank accounts are the least expensive form of money the economy has.
Banks rent money out though it is more correct to say they have created an asset (bank accounts), which serves as the basis of an accounting service that they provide for a fee. Banks provide an accounting service. It does not benefit banks to make the service too easily available because that would depress the value of the service and their profits. Governments on the other hand benefit from printing and spending money because this bypasses the process of levying and collecting taxes. However this is such an easy way to generate revenues that governments tend to abuse the power. As was mentioned the more money that exists the less valuable it is. This over printing of money creates hyperinflation. Inflation is when the asset currency loses value.
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Moral human beings are confronted by a dilemma deep and ancient created by two paths, each way is based on one of two competing theories of rights; the dilemma is fundamental to the way business and government is run, the two paths create two forms of ownership distinct and irreconcilable the two paths impact morality and rationality and the nature of right and wrong, the division creates conflict and pits human rights against property rights, forms social costs and prevents economic rational exchanges from taking place, the division limits our right and ability to say no to costs we did not create and defines the nature of power as the ability to impose costs onto society and future generations; debt, unemployment, poverty and pollution are social costs that create risk and produce waste; to eliminate the division and social costs of this split requires a Reformation similar to that which divided Protestantism from Catholicism in 1517 and for much the same reason – to build a more ethical community.