There is a natural flow to the mechanisms of a market. To observe needs being met or morphed and prices finding their natural place is rather like watching Nature at work, it has a beautiful simplicity and yet to try and conceive consciously of organizing all the actions and reactions boggles the mind. Marketplaces have existed for a very long time, they spring up on their own and have followed an innate logic in their mechanisms, irrespective of the culture or the lands they are in. All this must be respected when we consider purposeful intervention in the workings of markets and trade.
To the ancient workings of the marketplace we have, in the last century or so, added two new components: industrialization and capital markets. Both of these additions have had greatly stimulating impact on the vivacity and reach of human enterprise and without them, as just one vivid example, average life expectancy across the globe would probably still be in the mid-40s. Undoubtedly the development of capitalist enterprises in the last few centuries has had an overall beneficial impact on the lives of many.
Now we have reached a time when we must balance the value of capital, industry and markets with the value of humanity and the environment. We must do this without devaluing or disrespecting either side of the equation — it’s not hard to do, it’s just that we don’t have much experience doing it.
The key is to evaluate where we can practically intervene, without upsetting the natural flow and mechanisms. The most obvious area is that many markets are operating with inputs and resources that are incompletely costed and because of that, while the markets themselves are operating appropriately, the efficient allocation of resources is not happening. This cost accounting problem stems mostly from the differentiated timescales at which the true costs become evident and the resulting problems are specially compounded when the costs that are realized at a later time are fundamentally un-retrievable.
It is important to understand how markets operate before we consider intervening in them. At the core of any market, its spirit if you will, are the needs that it seeks to fill. In seeking to fill those needs, there are two primary forces at work which the market balances: ideas about how those needs can be filled and the efficiency with which those ideas can be delivered. The market then assesses the risks and safety of the choices available and selects one to fill the need. Where there are multiple choices, it is a competitive market and where there is only one, it is a monopoly.
Markets are focused on transactions and the efficient exchange of the particular goods and services at hand, they do not and cannot accommodate the needs of remote and indirect participants in the transaction. To burden markets with the long-term needs of the elderly, for instance, can only be a clumsy effort, at best, and will distort the market’s natural mechanism. Markets can be properly loaded with direct but distant costs, for instance carbon and waste taxes.
We need markets to do what they do well and we need to encourage and cherish the natural enterprising spirit of all people. This means unburdening markets from responsibility for societies’ infrastructure and freeing people to pursue their natural entrepreneurship – see Micro Economics.
We must also recognize that it is the natural conclusion of enterprising spirit to operate a monopoly. This is the natural outcome of an ambition that aims to achieve the greatest returns and profits with the highest levels of efficiency possible, which effectively means without competition. Ironically this same logic reached its ultimate conclusion in the central command economies of the communist era. Innovation is the tonic that cures monopolies and so we must protect the right to innovate and guard against artificial creation of barriers to entry in all markets — see Copyright & Trademark below.
The move away from the gold standard and the development of the modern banking system has undoubtedly unleashed massive latent potential in societies everywhere to grow and develop much faster than they could have before, by leveraging trust to create wealth. However we must recognize that the benefits of this system are only available when all parties trust each other and the mechanisms that make up the system. For this reason it is essential that capital markets are properly and thoroughly regulated with a view to maintaining a common trust in their operation.
It is unavoidably the case that when capital markets lose the trust of their participants, it is the people, in the form of government and taxes, that must be relied upon to salvage the system. It is this “lender of last resort” benefit that is essential to the operation of capital markets and the “bankers”, who own this benefit, have the right to regulate those who use the benefit. Those bankers are the people who provide the taxes, that allow the government to provide the trust, that underpins the system.
Much is made of trade policy in a political system that does not offer social security and is dominated by large, capital intensive enterprises. However, once political power is devolved down closer to the people and the communities they live in, then the significance and relevance of any higher authority establishing a “trade policy” is greatly diminished. Additionally, if a society takes on responsibility for the care of its people’s basic needs, that naturally throws up criteria for making decisions about trade policy which address many of the concerns expressed in a society that does not assume that responsibility.
Once a system of multilayer democracy, variable law and BASE have been established, then the resulting structure of use taxes will effectively define the trading policies of communities, regions and states. BASE removes the need to establish any minimum wage and absolves the commercial marketplace of any responsibility for funding the social fabric of our societies. Finally, the common sense understanding of all layers within the structure, of what their strategic resources are, will provide a natural protection against exploitation.
Copyright, Patents & Trademark
There is undoubtedly value in both copyright protection and trademark recognition to reward innovation and protect quality.
Unfortunately copyright protection is implemented in a cumbersome fashion that is too often used to inhibit market entry and is therefore a barrier to progress. LIFE proposes a new international copyright system that preserves rewards for innovation without stunting the right to progress. Under the LIFE copyright system, copyrights will be recognized by establishing both uniqueness and first use, at which point a patent is issued.
The difference comes in how a patent operates. In the LIFE copyright system the patent confers on any user of that patent the responsibility to pay a reasonable royalty to the patent holder for any use, without an obligation to first seek permission. Failure to pay the royalty at time of use will cause the user to be subject to a penalty royalty rate of double the reasonable rate. The established principle would be that the patent or copyright represents 100% of the value, or profit, of the product in question unless the user is able to establish that they have added value, outside of the patent, to the product — this would effectively restrict the blatant copying of patent product, such as pirated software, while allowing the use of a patent as part of a larger product and assessing its value in proportion.
The abuse of trademarks confers no benefits on society and should not be tolerated.