Attacks by financiers on Constitution-Proposal / DAVID system ------------------------------------------------------------- Although it seems unlikely that even successful financial attacks on my system will get far, much less come to dominate and destroy society, the issue of financing, lending, renting properly and improperly lie so close together that loopholes are in principle easily cut out. Any ill will and general lack of interest by the public at large to maintain a functioning society does not help. The catastrophic example of Judaism is a frightening example of ineptitude: it is absolutely clear to even the casual observer that such a thing as a prozbul is an attack by criminal elements on the law, however it has been on the Jewish law books for longer then the proper Torah law - that they break down - itself. The heter iska confirms the danger in the same manner. How would an attacker try to do the same with my law model. First let's look into how far the financier will get if he manages to break the non-profit social business credit principle, for fear of otherwise having people lose all confidence. When the financial for profit attacker succeeds in funding businesses in a way the law allows for whatever reason, but most or all other laws and principles in my system remain intact (the conditions of an initial financial attack), the effects will probably be as following: Bad abusive businesses get funded, where workerslaves get exploited. However this does not necessarily immediately engulf all of society, because the non-profit mechanisms are working in the opposite direction. It is the same under primitive capitalist conditions, where at first you can also have honorable financiers. These abusive businesses make the financier richer, able to fund yet more such abusive businesses. However the financier comes up against a second problem which does not exist in any law system today: once the "feeding tube" boss over one of his funded workerslave farms retires, the financier loses control over that company if it is above minor size (10 employees is the default). Suppose the financier is also able to break into the pension of the feeding tube boss. In that case the financier will continue to profit from that company for a certain amount of time. From a legal perspective stopping for profit finance is very difficult because there are two willing partners to the crime, and the victims may never know where their direct boss got its funding from. The situation with company ownership transfer to the employees is the opposite: a good number of people have a strong even vital interest in starting to own the business, and challenge anything and anyone who either tries to prevent that, or who tries to suck parasitic profits out of the company. Even if for profit finance is hard to stop through law because there may not be any complaining victims, this second mechanism is less likely to break down. It is more likely that the financier its operations will be exposed and challenged. Once the company has payed the pension, it is in principle a free company. The only thing it has to worry about is its business competition, which is where the for profit financier can again try to do his damage. When the for profit financier grows richer, he can fund more businesses, and try to destroy businesses that make him no money, such as businesses previously lost through ownership transfer. The financier attacker can fund rival businesses until the employee owned business has been destroyed. This will be less likely to succeed then financing startups, because the attacked company can likewise ask for combative funds from non-profit sources. The attacked company may also launch investigations into why the rival business is able to offer prices 30% below what is normally possible, to discover that the difference is made up by the financier attacker (who hopes to destroy the rival business, and then recuperate the losses through price increases). This may cause the attacked business to launch law suits against potential breaking of the non-profit finance principles, and/or even go as far as demand the law be repaired under that principle (which it clearly should, otherwise the for profit finance attack wouldn't have occurred in the first place). Combative non profit funds may also join in the economic "war," likewise fund competition against the for profit financed companies, or maybe even all the operations linked to this for profit financier. These funds also have a vested interest in destroying the for profit funded companies, especially those that already are exploitive and abusive, because the funds are controlled (in the suggested model) by the would be victims of widespread corporate abuse of people. Suppose the for profit financier(s) are able to break all that down. They continue to fund businesses, make a lot of money. But in order to dominate a whole economy not merely a lot of money in normal terms is needed. What is needed are astronomical sums of money, particularly when the for profit cancer starts to consolidate into fewer and fewer actors. The for profit financier comes up against the problem of ownership maximum. It is impossible to dominate the economy of a country if you are not allowed to own more money then 30 times average, even if you can stretch that to 1000 times average. To cross this hurdle the money would need to be hidden. Suppose all that succeeds. Then the defenses are broken down and the country is going to be overrun by for profit finance cancer, potentially until nothing is left but a simmering stew of corruption and crime. My system would have degenerated into capitalism for lack of maintenance. Not because of natural effects from the system itself, but by allowing criminals to break the law and expand their operations. When that starts to happen, especially armed with proper economic understanding, there should be many people who understand the problem and what to do about it. There is (ideally) a majority of people who suffer economic exploitation, with an interest to close the gaps in the dike and get the economy in order. The late stage in the rotting process of capitalism is also the most hopeful, because finally the many people who where strictly focussed on themselves at all times because they had it so good financially, start to notice the wide spread suffering, and start to get hit by it, hurting them where it hurts them most: self interest, greed, perceived status from owning money. -*- Attacks to look out for... It is instructive to look into the heter iska attack on Torah law first, to understand how laws get broken into successfully. The heter iska (literally "proper investment") acknowledges that a jew is not allowed to lend to a brother on interest, and that the jew must lend readily. The Torah explicitly forbids making loans on interest, for all intends an purposes it says: "you are forbidden to ask interest on a loan." The heter iska pretends that its mechanism is different. First it claims that a loan has the familiar structure of giving someone money and getting it back plus increase, it then claims this is forbidden, which it is. You see there that the heter iska attempts to validate the Torah law. This may put the attacked society at ease: "no, it is not a direct attack." You may want to look out for such sugary talk in the future. The heter iska is a specific ritual to lend money: the financier puts up XX money, the to be invested in business puts up XX money, they put these sums together XXXX. They then claim they make a mutual investment to this fund. The financier is the one who is not going to work with the money, the to be invested in boss is going to work with the money. In many cases that will mean buying cheap labor and exploit them, which is exactly the problem. The financier gets a little money when the deal is made, as if this is pay for work. You can see here how pay for work and who gets money is being mangled up in weird ways. Whenever you see rituals like that proposed again, be on the lookout for an attack on the law because it is trying to throw sand in your eyes. Why does the to be invested in working boss have to put up the same amount of money, only to give it to himself later, which means nothing ? To confuse you, to confuse the law. Why does the working-boss get a little money in return for making the deal while nothing has yet happened ? To confuse you, to confuse the law. Note how the little money at the beginning of the deal for the working-boss is allowed to be "marginal," for instance the value of a single biscuit, or one cent on a vast sum. Then the heter iska presents a form to be filled in, with two witnesses present. Why the theatrical show ? First of all its reason is (probably) to have witnesses that can testify that the ritual for heter iska was followed, rather then a simpler form of giving someone money on interest. Secondly the theatrical show is to give the impression no crime is taking place. Thirdly it might be used to divide the blame for lending on interest between 4 people instead of just 2, reducing the chances of it being challenged. Spreading the guilt to more people, guilty people are less likely to challenge their own guilt. Whenever you see over the top rituals again, this may be part of an attack on the law right under the nose of the public. What does a "magician" do when he does his tricks: he clicks with his hand up high on the right to distract the public from his left hand. It is a distraction. The focus of the whole affair is on doing the ritual, the fact that the Torah law is broken escapes the attention (more). The last part of the heter iska is what it is all about: the profits made from the investment are split equally between financier and working boss. But here again they haven't forgotten to seed your eyes with sand because if the whole lending on interest affair turns out to be magnificently profitable, then the more then expected profit stays in the hands of the working boss, and not the financier. Otherwise it would be rather obvious that this is merely lending on interest. Or is there something more devious at work as well, something more cunning ? Imagine a sum producing an astronomical profit. If the working boss is to hand half of it to the parasitic financier, the working boss would be saddened by that. The working boss might challenge the whole heter iska system, expose that it is merely lending on interest. The working boss might also try to claim that it was a proper Torah loan, not on any interest at all. In that case the profits would all be for the working boss, the financier would have a problem. This reduction of investment profit is not good for the financier, but it protects the heter iska system itself from pressure from the working boss who scores much more profits. The heter iska is a marvelous piece of devious legal engineering. Criminal brilliance. Against this kind of brilliance we are up against, in maintaining our non-profit finance system, and a happy, prosperous society. -*- Using the heter iska as a guide, I've imagined the following attack within my model: my model allows the lending of goods in exchange for profit. For example a bike lending business. It can be a useful trade: maintain a stock of bikes, lend them to people who got to a beautiful natural area by train or other. The bikes must be maintained, competition is possible keeping prices fair, a service being provided. To keep such businesses legal the following law does not prohibit lending of useful objects such as bikes: _8.2.a-12 No Speculation No person is allowed to make a living income entering a risk-taking state by lending or otherwise investing not directly physically useful instruments of economic value - such as money - in businesses. All income in one month above a certain limit made from such not itself as an activity productive speculation is to be surrendered to the Government immediately. The limit is .[5%, one twentieth].. of average monthly income. There is a possible loophole here: - A would-be financier meets a would-be working boss. - The financier asks the working-boss what he/she needs for business. - The would-be financier buys these materials/real-estate, or alternatively says to the would-be working boss to buy them for him. - The financier then comes to own personally a significant amount of the goods/real-estate of the business. - The financier then hires these goods/real-estate to the would-be boss. That would produce the feared problem that businesses that are most profitable for a dictator-boss get much more funding. These kind of businesses will abuse the workers worst. The would-be boss is nowhere without the financier, it is the financier that makes the morally bad would-be boss powerful by electing that boss to work with those goods/real-estate. This works like a hidden for profit finance mechanism, or maybe not so hidden but rather in plain sight, like the heter iska. Breaking the principles of the system in plain sight. The above suggested method might even be technically legal in my Constitution, whereas the heter iska is clearly illegal under Torah law. Even if the above mechanism is technically legal under my Constitution, it still goes against the principle of for profit finance. However if you look at the above law: the real-estate/goods are directly useful utensils, or could easily be made out to be such. The profit of the company disappears partially toward the financier, causing the financier to have an interest in lowest worker incomes / conditions. There is a law that says anyone can only have 4 businesses. The for profit financier might say that he has a large "lending real-estate/goods to businesses" business, it is all just one business. A way to close down this loophole for profit driven business finance can be to define this type of business, and set a low maximum on the amount of wealth it is allowed to own: _8.2.a-10 Company Capital Limit The Two Third majority of Government establishes a maximum amount of wealth, expressed as a multiple of the average wealth times the number of employees in the company, above which no company is allowed to own. Value is based on realistic production cost for goods, the fair price rather then the actual price - ignored is unusual or speculative value in the actual markets significantly above total production costs, such as may result from works of art. Company can own ..[5]. times average wealth per full time employee. _8.2.a-10.1 Company Capital Limit, other The Two Third majority of Government can define sectors of the economy that work with their unique maximum on maximum Company ownership, different from the default maximum set in Article 8.2.a-10, Company Capital Limit. This can mean my Constitution needs another law to prevent above mentioned loophole. It may be useful to keep an eye on the problem one way or the other, because for-profit finance is hard to police for lack of direct victims. But maybe there is hope, even under my unexpanded Constitution. A single person financier can control astronomical amounts of wealth. Financier businesses tend to have fewer employees then productive companies would have for the same amount of capital they work with. The one person company typically does not have much capital. To be a single person financier means under standard rules you can already not own more then 5 times average wealth for your business. Maybe that is just enough for a number of small businesses, to lend them their work places and utensils. If the Government sets the size of the capital of "businesses that lend other businesses their utensils/real-estate" to 0 such businesses would effectively be outlawed. Because of economic land distribution it is fortunately reasonably unlikely that businesses will have no way to access relatively cheap or completely free work space locations. That would reduce the demand for lend-hardware-to-businesses. At the same time: there can be completely valid and economically great markets where businesses lend other businesses all sorts of things, from saws to tables and maybe even workplaces. These markets already exist. At the same time it can be a vehicle for disguising for profit business finance. Because the proper markets and bad for profit financier are so close together, it is somewhat hard to make good laws for it. Maybe another law can help close this gap better: - A business that permanently uses essential parts of its business, will become the owner of those parts if an amount of money has been payed in their rent equal to 120% of the fair value of said parts. Contracts after that moment are to have a fair price for maintenance services only. Replacement of rented objects does not void the previously payed money. Contracts must not be made with a view to cut them short just before transfer of ownership becomes legal obligation, but contracts must imply the transfer of ownership will occur. That will typically exclude most normal rental businesses. A business which expects to use something for as long as buying would be cheaper then renting, would typically buy rather then rent. Hence it is unlikely much of a significant market is collapsed because of this law. Another closely cut matter: the difference between buying something on a loan, and hiring something with a view to become owner after its value has been payed, and hiring something without ever becoming owner. Do the lending limits (for instance that non-collateralized parts of the loans collapse every 7th year the loan was running) law hold for the second form, should the law enforce them on the third form anyway ? One difference is probably that hiring occurs between the costumer and the productive business maintaining the objects, while a "loan" is taking out an amount of capital from a specialized lending business (bank). But if a bank becomes owner of a property it could start renting it to a house rent company, who rents it further to costumers. Conclusion: vigilance is needed when it comes to the finance sector(s), more laws may be needed to crush for profit finance. On the other hand: a society that engages pro-actively and strongly in the practices of non-profit finance will push to the smallest of margins the for profit finance attackers. Another more abstract law: - Passive economic rent is outlawed, the income from business practices must have a reasonably fair relation to the work going into it. Under that law you might be able to prosecute passive ownership relations- ships that are effectively parasitic. These ownership relationships would tend to catch for profit financiers, since they whole goal in life is to be parasitic: to gain money without doing a comparable amount of work for it. Another law: - When a business is going to be transferred to the employees, any parts of the business that where previously rented from another business fall in the hands of the employees for nothing, if the fair value had already been payed in rent or as part of other service contracts. That law makes the ownership transfer more painful for such for profit finance attackers. Another law: - The height of the pension to be gained out of future profits from a company for the previous owner is related to the amount actually worked in that company. Reduces danger that external non-working owners run off with the pension that is meant for the retiring working entrepreneur. Another law: - When a business starts up it must show where its capital is coming from if it wants to be registered as a properly incorporated business. In a country maintaining a list of all companies (such as Holland), a company that wants to be on the list must reveal capital sources. This can then be investigated, insight can be manufactured about where capital in practice comes from to see if a for profit finance problem is developing. Alternatively this could be made mandatory. -*- Personal remarks: law _8.2.a-12 No Speculation was one of the most difficult laws to formulate when I wrote it, if not the most difficult. Perhaps it needs several more additions along the lines suggested. I am not too worried about the potential loopholes because of all the barriers and alternative system. It seems a bit weird that an entire economy first running properly could then end up dominated by businesses renting out real-estate and utensils to other businesses. But in theory it seems it could happen. Once the problem covers a larger percentage of society, say 25%, it starts to feed itself more power, using its power to benefit companies under its control and crush others, buy politicians, judges and police, curb laws etc etc. The problem should be crushed decively when it is still small, say between 5% to 10% at most (or less). Putting more defensive laws in the Constitution could be an excellent idea to crush these problems before the enemy has even thought of them. -*- _8.2.a-12 No Speculation No person is allowed to make a living income entering a risk-taking state by lending or otherwise investing not directly physically useful instruments of economic value - such as money - in businesses. All income in one month above a certain limit made from such not itself as an activity productive speculation is to be surrendered to the Government immediately. The limit is .[5%, one twentieth].. of average monthly income. _8.2.a-12.1 No speculation, no for profit rent finance A business that uses valuable goods and/or buildings, will become the owner of those parts if an amount of money has been payed in their rent equal to 120% of the fair value. Replacement of rented objects does not void the previously payed money. Contracts must not be made with a view to cut them short just before transfer of ownership becomes legal obligation, but contracts must imply the transfer of ownership will occur. _8.2.a-12.2 No speculation, no parasitism Passive economic rent is outlawed, the income from business practices must have a reasonably fair relation to the work going into it. _8.2.a-12.3 No speculation, no screw the employees rental tricks When a business is going to be transferred to the employees, any parts of the business that where previously rented from another business fall in the hands of the employees for nothing, if the fair value had already been payed in rent or as part of other service contracts not covering cost and reasonable profit (20% maximum) of rendered services. _8.2.a-12.4 No speculation, no reward for parasite boss The height of the pension to be gained out of future profits from a company for the previous owner is related to the amount actually worked in that company. Passive external owners have no right to be compensated out of the company its assets or future profits when the employees gain control. _8.2.a-12.5 No speculation, declare capital source When a business starts up it must show where its capital is coming from if it wants to be registered on a Government maintained list of businesses known to the Government to exist properly.