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June 15, 2012

There once was a country that viewed itself as a fair and just society. They even called themselves the “Fair and Just Society.” Like most societies they could be divided into three groups of people. One-third of the people had the least amount of the income and wealth of that society, let us say only about 20% of the income and wealth. The second or middle one-third had about what would be the average of that societies wealth and income distributed among them, say 30%. The last group, the wealthiest one-third, had about 50% of the wealth and income of that society.

Let us also assume that at some point the members of the Fair and Just Society agreed among themselves that there are certain things that they all need and should be paid for collectively, like, for example, the common defense, roads, education of the Fair and Just Society’s children and so on. And let us further assume that the members of this Fair and Just Society agreed that these collective expenses should be paid for by each section of society according to their means. The lowest one-third agrees to pay 20%, the middle 30% and the top one-third 50% because they all agreed that would be fair and just.

Now let us assume that all things have worked out reasonably well for our Fair and Just Society and that even the poorest one-third had enough to eat, clothe and shelter themselves and everyone was pretty happy. Then one day, for whatever reason, good cost control, a sudden jump in productivity, the discovery of oil or gold or whatever, the Fair and Just Society finds that they have collected more funds than are needed for their common expenditures (Defense, education, etc.) and decide to ask the people what they should do with it.

Upon hearing this everyone was happy, no one more so than the upper third and their agent who was sent to speak to the representatives of the Fair and Just Society. He told them that because his employers were the upper third in income and wealth they knew more about money than anyone else and that it was very complicated and because of that he recommended that the money be returned to the people in the form of tax relief because than each individual will be able to choose what it wished to spend it on and so they will each benefit individually and the economy would benefit in general by this infusion of money.

Some of the representatives upon hearing this could not fully comprehend why giving to each person to spend as he wishes was better than all the people deciding together on spending it on something that would benefit them all the most. After all they argued, the money still gets back into circulation and the Fair and Just Society gains an asset owned by all the people. And some even thought at least some of it should be held for a “rainy day,” when it might be needed. But most of the other representatives agreed that giving the money back to the individuals seemed reasonable and fair. So they asked the representative of the upper third how he suggested that it be done.

“Well,” he says, “I was hoping that you would ask that. Over lunch I prepared this chart.” And he whips out a chart. “What this chart shows” he says, “is that you should give all this money to the upper third because, not only do they know more about money than anyone else, they, having so much of it after all, but also since they do not have to spend in on necessities like food and stuff they will have this excess cash that they will invest in new factories and the like, you know, to make shoes and canned soup.” “And” he continued “they can even take some of that money and, oh say, pay for research or start-ups and increase productivity and things like that.”

When the agent of the upper third finished speaking, the representatives of the Good and Just Society all looked at one another for a moment then broke out laughing. “You cannot be serious,” the chairman said, “no one in their right mind could possibly be so stupid as to believe what you just said. Nevertheless, as a fair and just society we do think that it is fair and just to return it equally to all in accordance with their contributions to the common good, a 10% reduction to the bottom third on their 20% contribution, a 10% reduction to the middle third on their 30% contribution and a 10% reduction to the upper third based upon their contribution.” And with that they all got up and left, still chortling and shaking their heads.

Now because this is a parable, we will assume that in fact an across the board 10% reduction in taxes is fair and just.

Of course we all know that for many reasons an across the board reduction in taxes was not fair and just at all. For example, the lowest one-third would most likely spend it on consumable necessities like food, clothing and shelter since their 10% would not be that much money. Or, as was overheard the agent of the upper one-third telling some of the representatives of the Good and Just Society outside the hearing room. “They will probably just spend it on dope and booze and taking a few days off work.”

The upper one-third on the other hand probably would also spend some of it on dope and booze, but they would still have a lot of money left over. So they will call in their advisors and direct them to take this excess cash and use it to make more. After the advisors leave, the upper third would probably take a puff of their joints, a sip of their Mai Tais and brood about the workers in their factories that did not show up for work that day. Eventually they decide that they would have their secretaries draft letters to the Representatives of the Fair and Just Society complaining about the morals of the lower one-third and a lot of the middle one-third and that in the future any tax cuts should all come to them. That done, they will leave on vacation, using some of the money they received from the Fair and Just Society, because they believed they earned it.

The representatives of the upper third on the other hand seeing all this money becoming available then meet to plan how they will turn this cash into more cash for the upper third and along the way turn themselves into members of the upper one-third.

They reasoned that after all that money spent on dope and booze there would not be enough cash left among the lower two-thirds for the upper third to invest their money to acquire it from the lower two-thirds. Nevertheless, there would be some and so they decide to increase their marketing budgets to persuade the lower two-thirds to spend whatever money they have left on products produced in the factories owned by the upper third. But still the upper third had a lot of money left over from the gift the Fair and Just Society had given them.

“Let’s use that money to buy the assets of the lower two-thirds,” suggests one.

“But the lower third has no assets,” complains another.

“Yes, they do,” states another. “We can buy their future and their freedom. We can give them some of our money to buy more dope and booze and tell them that they can pay us back from their future wages with a sizable profit to the upper third of course, and substantial commissions for us. And then we will tell them that since we have given them so much money and we know all about economic things, we being so rich and so smart, they can trust us to keep them in dope and booze forever. And in return they will agree to vote in the elections for the representatives to the Fair and Just Society as we the agents of the upper third tell them to.”

“As for the middle one-third,” he continued. “Many of them have worked hard and amassed some assets like their houses and their small business, so we will point out to them that because of all their hard work and our knowledge of finance, their assets have appreciated and they would be wasting that value unless they put it to work. Then we will loan them some money in return for the owning their assets if they do not pay us back.”

And they all agreed that was a good plan and they put it into practice.

Now it came to pass that this worked so wonderfully well for a while that the lower two-thirds, although actually poorer, appeared to be living so much better than they had been. As a result, they thought the agents of the upper one-third were much smarter than they were. And also, so much money was flowing into the hands of the agents that they soon began to replace some of the upper one-third.

Then one day there was, of course, not enough things for the upper third to buy because almost all the assets had been purchased and almost all of the futures mortgaged and on top of it they had even more money now with nothing to do. So the agents of the upper third went to the members of the upper third and showed them how instead of making things or buying more assets they could simply gamble all this money on the economy because everything was so good and the agents were so smart things would keep getting better and better and except for a few corrections now and again they would make even more money.

Then a funny thing happened, soon there were fewer members of the upper third who actually made things, they had been replaced by the agents who really did not make anything at all.

Then of course there was what is known as a “correction,” the lower two-thirds had mortgaged all their futures and no longer had the money to buy things. So as the factories closed down the lower two-thirds began to lose their jobs and their homes and businesses.

Some of these people turned to the Representatives of the Fair and Just Society and asked them to do something about it. Unfortunately for the lower two-thirds, the Representatives of the Fair and Just Society had by now all been replaced by the employees of the upper one-third. Nevertheless they agreed to look into their concerns.

“No problem,” they said, “we can make everything better by cutting those things we have been paying for up until now and lowering taxes on the upper one-third so they can invest even more. We can pay for whatever essential community services are left (like protecting the assets of the upper one third) by borrowing from the upper one-third and it all will work out just like it was described in that chart.”

Now we all know that that’s what really happened, but since this is a parable we will assume that everyone actually did believe that the distribution of the money was fair and just and that no one could have possibly foreseen what actually did happen.

So, the representatives of the Fair and Just Society a few months or so after making the fair and just present to the people were surprised to find, that while the income and wealth of the upper one-third grew exponentially, the lower two-thirds barely held their own and their debts to the upper third increased even more rapidly than the upper third’s income.

This being a Fair and Just Society and their representatives, not yet being replaced by the employees of the upper third, understood what that meant for the future of the Fair and Just Society. So, they convened a meeting and called in the upper third and their agents and told them, “We all made a mistake and in order to avoid an economic catastrophe and to preserve the Fair and Just Society, you are all just going to have to give all the money back.”

OK, I will admit maybe that this a fantasy and not a parable. But still…


1. No society, if it hopes to survive, can surrender to an individual, institution or groups of individuals or institutions unbridled and uncontrolled dominance over its economic and political well-being, no matter how apparently beneficial it appears at the time.
2. We are better off as a society to agree to what we want our society look like and act to make it so than to just hope for the best or trust to our individual efforts alone.
3. A fair and just society never ever follows the advice of those with the most to gain financially.
4. A fair and just society resists giving collective funds or advantage to those with the resources to compete for them on their own.
5. There is no magic wand, invisible hand, or strong and brilliant leader that can save us from our folly. If we believe that, then Pogo was right when he said so long ago, “We have met the enemy and he is us.“


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