Monday, 23 May 2011

Starving the Parasitical State

The State as Parasite, a UK centric proposal. by Andy Dwelly is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Note: recent changes in my own circumstances have left me with more time for thinking, and I've also been wondering where the future of Libertarianism now lies with the breakup of the LPUK, after so little progress over the last few years. The problem I've outlined here is an old one, but the solution is one that has only recently become viable as a sort of secondary effect of the internet. This is a draft piece that is mostly addressed to myself – thinking out loud if you will.

The problem.

In the feudal period of Europe, generally judged to lie between the ninth and fifteenth centuries, a villein owed his lord labour to the tune of two or three days a week. Given a six day week, we might judge this as between thirty to fifty percent of his free time was given to his lord. Although the villein did have some rights in return, it was not regarded as a great deal by the serfs, and landlords had a major problem of people fleeing to the towns and cities where they became free men owing labour to none.

In the modern world the landlord has been replaced by the State, which in return for various rights and support takes a significant proportion of the production of the country. In the UK in 2011 this amounts to an estimated 53% of GDP, or to put it another way, the average man is working from January the 1st to 30th May for the State. Other western democracies have similar burdens with Canada showing a tax freedom day of June 5th in 2010 and the US April the 11th.

Apologists for the current situation point out that the State offers much in return for the money it takes. In the UK, education to university is provided, along with a National Health Service, Courts, Police, Army/Navy/Air force, and an seemingly endless array of services and welfare.

The counter argument is that much of this spending is unnecessary, and of the spending that is necessary, much is wasted through incompetence and capture of resources by self interested parties. There is in fact a school of economics that studies this situation, Google for 'Public Choice Theory' for more information.

I am not particularly interested in arguing where the correct level of UK taxation should lie. For my purposes I'm simply going to suggest that the current level is far too high; the consequences on the majority for adults in the UK who are not directly involved in the State are almost uniformly bad. Productive adults are heavily penalized, unproductive adults become captured in a welfare dependency trap - not least by the fact they are given barely enough to live on and certainly have no way of accumulating the resources they need to improve their situation.

Standard solutions.

Having outlined the problem in brief, I would like to equally briefly outline the two standard solutions that many Libertarians trot out. I should add that I find neither idea persuasive. The first solution can be broadly characterized as democratic politics, the second is what we may as well call revolutionary politics.

The democratic political approach suggests that in order to reduce the size and impact of the State, political parties should be formed that have this policy as the main plank to their manifesto. If they can argue that this is the best approach for the country, a majority of voters will elect them and they will then be able to pass the appropriate laws and budgets to reach their goal.

Unfortunately this idea appears to be a complete fantasy. The primary issue is that there are now sections of the UK that have become almost entirely dependent on jobs provided by the State or the welfare alternative. Even the faintest possibility that State spending might be reduced is regarded as something akin to heresy. The recent TUC sponsored 400,000 demonstration against cuts whilst the coalition government was actually increasing State spending is an excellent demonstration of this mindset. No country with a significant proportion of people with this view will elect a Libertarian government.

In addition, the 'first pass the post' election process has locked us into what appears on the face of it to be a two party system. The reality is that there is actually only one party consisting of individuals from a political elite that take on a slightly redder or bluer hue according to personal taste. These people, educated at either Oxford or Cambridge have been taking turns to rule Britain since before the second world war. It has become clear that many of them have grown comfortable with the idea that the productive labour of the country is their personal piggy bank to be used or traded with other countries at will. This situation is mirrored in most if not all of the western democracies.

It is not in the interest of the ruling elite that the size of the State should be reduced since it reduces their power, wealth, and privilege. Only very minor variations of policy make it into either of the two important manifestos (yes – I am ignoring the Liberal Democrats) and anything in an election manifesto deemed inconvenient once a government is in power is simply ignored. For an example of this kind of behaviour one need look no further than the recent history of promises regarding a referendum on the subject of EU membership.

In short, I believe the current political system has a very severe institutional bias against anything that might change the balance of power between the people and the State.

The alternative standard proposal is that of revolution. The idea here is that a small group of people will violently overthrow the current system, seize the levers of power and essentially fire the majority of politicians and civil servants. The word 'fire' here is a euphemism, 'set on fire' is probably more a more accurate description of what some commentators have in mind, and fantasies regarding lampposts and piano wire have figured largely in much recent Libertarian writing.

Now as it happens, the western democracies have faced, and faced down, a series of violent terrorist threats in the last several decades. In the UK, there was the IRA and in the US, some home grown stuff as well as Al-Qaeda. There have been a series of less successful but equally brutal movements in other parts of Europe, including Baader-Meinhof in Germany, ETA in Spain and the N17 group in Greece. You may have noticed that despite these several attempts to violently overthrow the State, the various states remain resolutely un-overthrown. It can be argued that in Europe,the last even partly successful revolution ended with the partition of Ireland in 1921, ninety years ago. It's never happened in North America.

There are various reasons for this including the fact that the police and military responses to terrorism are both well financed and largely effective, but there is also the fundamental fact that revolutionary and terrorist groups that attack the innocent are easily portrayed as villains - because they are. Under the circumstances it's hard for a terrorist movement to gain any popular support.

There is another point to be wary of here which is to ask what the consequences would be of a successful Libertarian revolution under current circumstances. Imagine a world where in the space of weeks, all welfare and a considerable proportion of government services was removed from an unprepared population.

The result would inevitably be widespread chaos and death. There are areas

of this country where far more than half the adult population either work or depend on the State for their livelihood. They've been given no reason to imagine the future will be much different from the past, and certainly most of them lack the inner resources, attitudes, and education to cope in any way apart from desperation. The rioting would exceed anything seen during the frequent

protests in London and would certainly outclass anything recently seen in Greece. Keep in mind that parts of Greece are currently almost out of control and they are only contemplating cuts of around 10% in social spending.

In short, a democratic solution is unlikely and a revolutionary solution is untenable.

What to do.

The proper solution must have several characteristics. First of all, we should dismiss the notion of completely eradicating the State as an entity. This is not feasible and in any case it's not particularly desirable. There in fact many things that are sensibly provided by collective effort - albeit rather less than most of us imagine. Let us therefore set a goal of reducing the governments take to (for example) 20% of GDP. That's not a number picked out of thin air, there are a few examples of working counties where this is about the amount taken. Hong Kong is one such.

We also want the solution to be applicable over a relatively short period of time, but not so quickly as to put our population in danger from some kind of social breakdown. In effect we are all travelling along in a bus that's going far too fast down a hill. If the brakes are simply slammed on, the bus will simply leave the road with unpredictable consequences. However, we do have to slow down before we reach the T junction at the bottom of the hill. My view of timescales is that a proper solution should take no less than ten years, but ten to thirty years for the full impact would be perfectly acceptable.

Another characteristic is that a solution must be applicable by an ordinary individual without putting that individual too much harms way. Thus refusing to pay existing tax, which will inevitably lead to fines and other punishment is not going to work. I watch various flavours of Freemen on the Land with considerable interest, but the big battalions are all on the other side.

This constraint also suggests that attending protests and rallies should be also avoided. Recent examples of police behaviour suggest that public protests can lead to far more trouble than an individual protester can handle. They are also totally ineffective. Anyone believing that a protest will change anything might wish to contemplate the impact of the march against the Iraq war that took place in London in February 2003.

The reason that this characteristic is important, is that if we are going to make a significant difference to our situation, we are going to have to do it as part of a mass movement. It can't be a mass movement if it is too difficult, risky, or scary, for the masses.

The 'parasite state' is a phrase that's frequently used by Libertarians. Recently it was used again by Duncan Carswell, an MP with possible Libertarian leanings. He said:

"The modern British state has many of the characteristics of a parasite; it grows and feeds off each of us. Far from nurturing, it infantilises us and stifles society.
Ever more tax is collected from us to pay for the livelihoods of remote officials whose sole purpose is to tell us how to live our lives. Tax is not simply too high, but at times seems designed to punish those who try to do the right thing.

Savers, taxed once on their income, must pay tax on their prudence. Older folk,forced to pay for their long term care, find virtue penalised and a lifetime’s thrift ignored. And after all that income tax, national insurance, road tax, VAT, license fee, petrol tax, what’s left over? For many families, little more than pocket money."

Parasites are of course the subject of considerable study in the world of biology, and one interesting insight is that trying to avoid the effects of parasites is one of the drivers of evolution. There is some evidence that the invention of sex (as opposed to single celled reproduction) was one of the more successful strategies, so we have that much to be grateful to parasites for.

The point is of course, that species have changed when attempting to deal with parasites. Rather than the random questing of evolution, we can apply a little intelligence to the problem.

Consider the standard definition of a free market exchange. Here we have a producer of goods. I've made it boxes as they are easy to draw. On the left the producer of boxes has brought some boxes to market. On the right there's someone who wants some boxes for some reason. The consumer of boxes offers money. If the box meets the consumers expectation for quality, workmanship etc. and the price offered meets the producers demand then an exchange is made and the consumer happily departs with some boxes while the producer now has some cash.
A similar situation holds when we consider employment.

On the left we have an employee who works for an employer (here he is, handing over some boxes he's made),

and on the right an employer who is prepared to pay wages. If the quality of work is good enough for the employer and the employee thinks that the wages are high enough then an exchange is made and both depart happily.

It's not very difficult to see that both diagrams are the same, and that in fact at some fundamental level both activities are the same. Of course this is to ignore the various regulations that control both markets and employment.

We might talk about various kinds trading standards, the impact of minimum wages and so on. For the moment we will ignore all of this. What we will do is take a look at the impact of the State.

In both set ups there is now a third party involved. As the money moves from the consumer and the employer to the producer and the labourer, some of the cash is diverted away to the State - the third guy with the crown.

There's no particular difficulty in seeing how this works. In the market case the tax is exerted via VAT now at 20%, and by a myriad of additional costs laid on the producer. Duty on fuel on taking goods to market, hidden taxes on insurance and energy, business rates, corporation tax, and so on. Such costs are usually passed on to the consumer because that's where the money is coming from. Hence, if the producer suffers a hidden tax such as a tax on energy, it is the consumer who ultimately pays.

In the case of employment the tax is applied largely in the form of income tax and national insurance.

There is in fact another tax that's been cunningly concealed in the diagram above. The guy with the crown not only takes currency from workers and businesses. He also creates the cash in the form of notes and instruments, and he controls the amount that is in circulation. He can increase the circulation by making more notes, and decrease circulation by removing notes as they flow around.

Decreasing the amount of money in the system hardly ever happens, and in fact it suits the guy with the crown to actually increase the amounts available because he's quietly been borrowing additional cash, promising to give it back with interest from the amounts he'll be able to sequester from us in the future.

Those debts are now large enough to have become slightly inconvenient. By introducing more notes, we start to see inflation. The crown's debts are reduced because the value of the notes the State is paying back the debt with, is reduced. This may be one of the motivations behind 'quantitative easing'. The money of course is merely numbers in a computer, but the impact of inflation is very real, reducing the value of any cash held by people both in person and in a savings accounts. Effectively inflation is a tax on anyone who uses the inflating currency in transactions. Inflation in the UK is running at around 4.5% at the moment using the CPI measure. The slightly more broad RPI measure is running at around 5.2%

At one point in the '70s inflation was running at more than 20% so it's down considerably from that point. It is however currently at a rate that makes life increasingly difficult for anyone who is basing their lifestyle on money transactions, and that's most of us.

The parasite attacks through taxes and inflation. So the obvious question is, 'what intelligent change can we make to our lives to minimise the impact of the parasite ?'

Looking at the diagrams again, it should be clear that the impact is all on the money side of the exchange. It should therefore be equally clear that by minimising the money side we minimise the ability of the parasite to drain off the fruits of our labour. We can, in effect – starve the parasite.

What does this mean in practice ? First of all, I'm not proposing that Libertarians should all stop working, I'm also not going to suggest that we should stop engaging in the free market. What I am suggesting that we should start taking steps towards minimising our money based interactions.

Does this mean that we shall be poor ? The answer to this is a definitive 'No', and furthermore I'm not going to wiggle off the hook by redefining the word 'poor' to mean 'no actual goods, but great in spirit' or any similar religious cant. I actually mean it is possible to not have much money and still not be poor.

To see how this is possible, consider the situation of a man who has been conventionally wealthy in the past but has spend most of that wealth on durable goods. A home held outright, a high quality car with low fuel consumption that tends not to break down. Perhaps the kind of furniture you can leave as an heirloom to your children. There are however, no savings as such.

Let us also suppose that his current income is actually now just a few thousand pounds a year. Enough to meet his food and council tax, and any trivial entertainment he might require. For any common sense definition, would we regard this individual as poor ? I don't think so. In fact, the government definition of poverty is so badly formulated that he might be able to claim all sorts of benefits even though he effectively leads the life of a tremendously wealthy man.

Could he be taxed ? Obviously he has to pay council tax although in fact he might be able to avoid this on the basis of his low actual income. He'd pay tax on fuel and the hidden taxes in his energy bills. Because his income is low he will pay little or no taxes of any other kind.

Does he suffer from inflation ? Although he's on a relatively fixed income, and the cost of food is increasing, the majority of his assets are unchanged. The house remains a pleasant place to live. His car continues to take him out on trips when he wants to go. His enormous leather sofa, remains unchanged and I suspect it will be in much the same shape in a hundred years time.

It's interesting to note that the nominal value of his assets has changed over the years. The value of the house went up – then down. The car steadily depreciates although one day it may well start to increase again as a 'classic' model. The sofa is currently worth less than when he bought it. For all practical purposes however, none of this matters.

What I've described here is a very special case although I am aware of one person in exactly this situation. But the real point is that the reason for his immunity from the parasite is not because he is a special case but because he does not do a lot of money transactions. How can this be applied to the average individual to minimize their vulnerability ?

...and here my own personal experiment starts. My daily expenses can be divided up into housing, energy, transport, food, beer/wine, entertainment/news. At the moment there is nothing to be done about housing and energy with moving seriously into 'back to the land' territory.

Transport can probably be largely taken out of the exchange cycle (I can't avoid annual road tax) since there are a number of 2nd hand diesel engine cars available out there and in the UK we are allowed to make around 2500Lt per annum of biodiesel for our own use without tax. I suspect the motivation here is partly as a sop to the green end of the political elite, and partly as it doesn't make economic sense to try and collect tiny amounts of tax from thousands of individuals. A level of judicious telecommuting will also help. One day a week reduces the transport bill by 15%

There are various ways you can make your own biodiesel but the process involves heat and inflammable chemicals – not a great combination in my opinion. Oddly enough though, Rudolf Diesel originally designed his engine to work with vegetable oil and a number of modern diesel engined cars can be converted to run on vegetable oil directly. Currently the cash and carry price of such oil is £1 per litre as opposed to £1.46 per litre at the pump. It's also possible to collect used oil from various fast food places although that is becoming harder as the value of used oil is realized.

Given that my primary motivation is to starve the parasite, and noting that there is no tax on vegetable oil (it's a food), it still serves my purpose, even at a 46% discount.

Next up is actual food. I've spent an adult lifetime avoiding gardening, largely based on the grim childhood experiences of labouring on my father's patch. Gardening, it appeared to me, consists of large amounts of drudgery where ground is dug over, planted, weeded, pests dealt with, more digging, weeding etc. etc. At the end of this you get potatoes that are no better than Tescos' potatoes.

With traditional methods, this is largely still true. However, recent advances in horticulture suggest that a considerable proportion – possibly all - of a family's daily requirements can be met on a quarter acre of urban land, that is, about the size of an average back garden. Surprisingly, this can now be done without the relentless effort this used to require. It would seem that a family of four can be fed all the vegetables they can eat with just a few hours gentle and rather pleasant labour a week, nine months a year.

Bread is another interesting one. Traditionally making our own bread takes several hours of elapsed time while dough is kneaded, rises, punched down, rises again, formed into loaves and baked. This is certainly possible for home based individuals but simply not practical for most of us. Once again the reality of the situation has changed and it is now possible to create a perfectly adequate loaf of bread with around 1 minute's effort and around 20 minutes elapsed time. I've been doing this regularly for about 6 months. I suppose at a pinch you could also use a bread machine, but I've personally found that the product is not that good and there is a truly gruesome amount of washing up that needs to be done afterwards.

Jams, pickles, sauerkrauts, yoghurts and so on are all simple country crafts.

As a devout non-vegetarian, meat is high on my list of desirable foods and I admit that as someone who lives in a rural district, I have a definite advantage over those who live in the city. I therefore propose to find out how chickens and ducks work. I note that many medieval households had fishponds that provided for the table. I've rejected aquaponics as a way forward because it looks extremely energy intensive to me – but a simple fishpond appears feasible in my case. We also have a large rabbit warren locally and I'd like some payback for the cabbages they've taken from me.

As it happens, I've probably covered rather more than two thirds of the meat bill right there. If shopping for meat is reduced to purchasing an occasional joint of lamb and some mince, I shall not be unhappy. On the other hand, I will not be doing anything about dairy and coffee. A pet cow or goat is too much at this stage and even if coffee could be grown here in the UK, it would have to be properly processed afterwards.

In the past three years the duty on beer has quietly gone up by about 47% and there have been smaller but equally unpleasant increases in duty on wine and spirits. I note in passing that we can easily make our own beer direct from grain, passable wine from kits, and even grow perfectly good tobacco as far north as Scotland. Homebrewed beer typically costs about 30p per pint in ingredients and energy. This compares well to the £1.50 to buy a similar bottle in a supermarket, or £3.00 for the same pint in a pub. A considerable amount of the difference accrues to the government. A typical brew day can produce enough beer to last me the best part of a couple of months. It's also rather fun.

Finally we move onto entertainment and news. I'm unlikely to be able to convince my family to give up the TV but virtually all other wants are met for free via the internet. Our internet connection costs £20.00 a month but it's a good one. Money well spent.

As for the rest of it, clothes, shoes, school trips and so on. They will simply be handled as before. The whole experiment will not be taken to extremes, it starts to become a useful tool against the parasite when others do the same as me for similar reasons, rather than me cutting out all personal tax paying activities.

To sum up, I've decided to voluntarily reduce my money based economic activity and as a consequence the amount of tax the State is legally able to extract from me has dropped, and will drop considerably more over the next few years. I've belatedly reached the conclusion that planting a carrot is one of the most subversive things a citizen can do. Has this made me poorer ? Not in any practical sense that I have been able to detect so far, although I am spending rather more time with my family and the food quality has greatly improved.

I'm rather hoping that at some point over the next few years some alarmed State apparatchik will have the stupidity to ask me 'what if everyone did this ?'. What indeed ? Refusal to engage economically can hardly be made illegal without arresting large parts of the North of England. It's possible that new taxes might be invented to try and extract value from those following this path, but they are going to have to be collected in cabbage stalks and eggs. Good luck paying ministerial wages with that.

This approach does free up quite a lot of my time and one of the things I will be doing is writing on the practical aspects of this approach. The diesel, the food, the beer, and so on. But you know what – I will not be charging for any of it, apart from anything else I don't want to bump up my cash income. If you want to show your appreciation you can send me a gift. There's going to be a lot of gifting in the future.

While I was researching this essay I discovered that doing this sort of thing is called 'Going Galt' after the protagonist of Ayn Rand's novel, Atlas Shrugged. Galt – an industrialist, goes on strike along with a lot of other industrialists and America crumbles. I think the phrase is a bit of a misnomer since it suggests you have to have achieved huge personal success in order to make any withdrawal of this nature meaningful. In fact, what I've started to do, and will continue to do, is an approach open to anyone, and I hope to encourage many others to follow the path I've tentatively started to tread.

Andy Dwelly

West Sussex 2011

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