The Wealth of the People: The Wealth of the State An Inquiry into the Relationship between Wealth, Freedom, and Life By Fernando Urias * * * * * SMASHWORDS EDITION * * * * * PUBLISHED BY: Fernando Urias on Smashwords Copyright © 2012 by Fernando Urias The author acknowledges the trademarked status and trademark owners of various products referenced in this work, which have been used without permission. The publication/use of these trademarks is not authorized, associated with, or sponsored by the trademark owners. Smashwords Edition License Notes Thank you for downloading this free e-book. You are welcome to share it with your friends. This book may be reproduced, copied and distributed for non-commercial purposes, provided that it remains in its complete original form. If you enjoyed this book, please return to smashwords.com to discover other works. Thank you for your support. * * * * * Disclaimer This book is designed to provide information and entertainment. 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Furthermore, this manual contains information on economics and social sciences that is current only up to the publishing date. The purpose of this book is to educate and entertain. The author and publisher shall have neither liability nor responsibility to a person or entity with respect to any loss or damage caused, or alleged to have been caused, directly or indirectly, by the information contained in this book. * * * * * Table of Contents: Introduction The Non-Aggression Agreement The Social Contract The Rule of the State The Citizen's Charter Rule by Written Law Democracy No Taxation without Representation Useful, Supervised, and Limited Government Spending Separation of Powers Low Taxation Low Regulation Limited Terms in Public Office Trial by Jury Common Law A Constitution A Bill of Rights Limited Powers to Make War Limitation to Enter the Market A Referendum Process An Initiative Process The Mission of the State Other Functions of the State The Vision of the State Final Notes on Book Five * * * * * Introduction This is the fifth book of the "Wealth of the People" series. The series is an inquiry about the requirements for the production of wealth in a society. The fifth book is about the function that the state performs to support the wealth production process. A state that allows its citizens to produce wealth is a valuable asset to its citizens. This asset can thought as a factor of production that can be called social capital. The assumption that the people will respect life and property is removed in this book and the formation of the state is discussed as a result of demonstrated human behavior. This book assumes that you have read the first four books. If you have not read them, please go to Smashwords.com and read them in order. The complete list of the "Wealth of the People" titles can be found at the end of this book. The Non-Aggression Agreement If you would meet a neighbor in a desert island, you should know that it is better to make and act according to a non-aggression agreement than to fight with each other. You would expect that this agreement would imply the respect for each other's property of because if the property is not respected, a fight could result that would risk your lives. You would want a non-aggression agreement for the following reasons: First, you would want to keep the fruits of your labor. It would be frustrating and upsetting that the product from your work was taken away by your neighbor. If this would happen, you would want to stop your production activities until you could assure that this would not happen again. Second, you would want to keep the tools of your wealth production process. To produce in a more efficient way, you would have developed tools to increase your productivity. If the tools were stolen by your neighbor, you would lose your investment, you would drop to a less efficient wealth production process, and you would be reluctant to invest again. Third, you would want to trade with your neighbor and get the advantages of trade in a market. You would like to enjoy through trade, the efficiencies that would result from your neighbor's investments and at the same time pass to him the efficiencies of your investments. Fourth, you would like to exchange or copy ideas about the best methods for several wealth production processes. Without the non-aggression agreement, you would have to discover everything on your own and you would not gain the advantage of the transfer of human capital that can occur between two or more people. If you and your neighbor would share the principle of respect for life and property, you could become wealthy together by working hard, investing in better wealth production processes, trading with each other, and sharing or copying each other's wealth production methods. If you and your neighbor act according to the principle of respecting life and property you would not need an expensive state to protect your life and property. Keeping a non-aggression agreement would be the lowest cost solution for your relationship with your neighbor and it would allow you to work to become wealthy and freer in the fastest way possible. The agreement would be a capital asset that would allow you to work and for this reason, it can be thought as being part of your social capital. The Non-Aggression Agreement Principle of Wealth Production If two or more individuals act according to a non-aggression agreement, respecting each other's life and property, they can become wealthy together with their work, investments, trade, and human capital transfer. The Social Contract Social contract was the term used by John Locke to name the contract that a group of people could make to live in peace. The non-aggression agreement would be the start of such contract but to have a contract, the agreement has to be conscious and voluntary. This is hard to do in a large geographical area with the large population that constitutes a city or a nation. The formation of the state has been born many times with this idea but unfortunately, the members of society that end up with the power, find it to their advantage to use the power for their own advantage. Most of states in early history and many today were and are very far from looking like a social contract. The Consequences of Not Having a Social Contract What would you to do if your neighbor, instead of working and trading with you, prefers the instant gratification of stealing your property? How could you convince your neighbor that it is more advantageous for both of you to respect each other’s life and property? How could you teach your neighbor that the absence of a non-aggression agreement will result in the loss of the capability to produce at a higher standard of living? Look at the problem as if you were in the other side. What would you do if your neighbor was wealthy and you were not? Would you respect your neighbor's life and property and work to improve your situation or would you find reasons to justify the taxing or confiscation of your neighbor's property? Would you be willing to work and trade with your neighbor or would you be resentful and harvest the desire to redistribute the existing wealth? The problem can be posed in a more difficult way when you consider the availability of weapons. Imagine that after a few years of living in the island, you and your neighbor have built some tools and are trading peacefully and one day, walking alone in the beach, you find a wooden chest from a shipwreck. You open the chest and inside you find two muskets, ammunition and powder in good condition. What would you do with this treasure? The muskets can be used as tools of hunting or they can be used as weapons. They would be very valuable for you or your neighbor. Would you keep the muskets to yourself and use them for hunting? Would you use them as weapons to take advantage of your neighbor? Would you sell one to your neighbor and hunt together? Would you be able to sleep at night thinking that your neighbor might want to take them away from you? Would you announce to your neighbor that you no longer have a non-aggression agreement and that whatever you say is the law because you have the muskets? What would you do if you were the one without a weapon? Imagine that you had just arrived to the island and you meet Robinson Crusoe. At the time that you meet him, he has been living in the island for several years and he has a shelter, domesticated goats, and plenty of food. He welcomes you, gives you food and shelter and tells you that you have to work for him to pay for the food and shelter. You agree. After a few weeks of this arrangement, in which you are able to start building your own shelter, you realize that he has several muskets, ammunition, and the powder that he recovered from the shipwreck. You offer to buy one but he refuses to sell you one. Would you feel that you are being treated unfairly? Would you think about taking one by force even if it would mean to break your relationship? The wealth production process advances with investments in physical capital assets that are necessary for the production of wealth. These physical assets and their technology can be used for protection and self-defense. The spear, the bow and arrows, and the muskets are tools of hunting that can also be used for self-defense. Due to many people not understanding the principle of respect of life and property, these physical assets have to be used as weapons to protect the life and property of the people that are working. The person or group of people that has the most powerful weapons can dominate the rest of the people. This happened when there were no metals and bronze was discovered. It happened again when iron was discovered and it proved superior to bronze. It happened again with the discovery of powder, and it is true today with the existence of nuclear weapons. The Weapon Principle of Wealth Production The wealth production process requires the protection of the life and property of the people that are working with weapons. This protection is needed because some people have not learned the principle of respect for life and property. The weapons are a factor of production because they are necessary for the wealth production process. The Rule of the State The availability of weapons developed with the same technology from the wealth production process is necessary but not sufficient to protect it. Any individual, small group or business enterprise is vulnerable to an attack or extortion from another individual or group of individuals using the same weapons. An individual or small group needs the protection from a large group that will guarantee protection against attack from any other individual or group. This large group historically has been formed by force and can provide protection over a large geographical area. The large group obtains the monopoly in weapons and adopts the responsibility for protection but it also has the power to attack, exploit, and abuse. About fifteen thousand years ago, the first agricultural villages were formed. In these villages and later in Sumerian and Egypt, governments were formed that were based on force and weapons. The formation of Egypt seven thousand years ago is an illustration of the growth of the large group. Egypt prospered into one of the first human civilizations because the valley of the Nile was protected by the desert. Nader, becoming the ruler of one of the richest areas, unified Egypt by forming a large group in what would become the Egyptian empire. From a state of war or lawlessness, the establishment of protection by a large group is an improvement in social capital. The state is a centralized government that maintains a monopoly of the use of force over a defined geographical area or territory. The establishment of a central government, even if autocratic, is an increase in social capital over a state of lawlessness where business cannot be conducted because any person can be a victim of crime. The State Principle of Wealth Production A large group of people will dominate a geographical area by force and become the state or government of the area. Individuals, business enterprises, and the market need the protection of this large group to be able to operate the wealth production process. The Citizen's Charter A charter is a grant of authority or rights where the granter recognizes the prerogative of the recipient to exercise certain rights specified in the charter but the granter retains superiority. The Magna Carta written in 1215 to recognize the rights of the nobles in England and presented to the King to sign became a Royal Charter. When you are born, you get an implicit citizen's charter that the state grants you with a specific set of rights and obligations. The citizen's charter is not voluntary. It is enforced by the state. It consists of the current level of social capital in your nation. Your citizen charter at the moment of your birth gives you an inheritance of social capital gains that your ancestors have been able to achieve through many generations. You have to live and work meeting the laws and ways of operating of your nation. You can dedicate part of your life to improve your citizen's charter but you cannot refuse it. If you do not act according to the charter, you could end up in prison. The questions that you have to ask yourself when you come of age are: How fair is the citizen's charter of the nation where I was born? How can I improve myself and my family within the bounds of my citizen's charter? What can I do to improve the citizen's charter in my country? Does my citizen's charter have enough social capital to allow me to be free and wealthy? Who should I vote for in the next election to improve my citizen's charter and increase the social capital of my nation? The citizen's charter is granted by the group of people that has the power to protect a geographic area, the people that live in it, and their assets. It is very difficult for the people in power to relinquish this power and improve the citizen's charter unilaterally. Most of the improvements of the citizen's charter have come from citizens that in have risked their lives in the effort to seek improvements. The state has the responsibility to protect the people and their assets but it also has the power to confiscate and abuse. Social capital is increased by limiting the power and attributes of the state through law and democracy. This is a process that has been going on through history very slowly, at a great cost, and at the expense of many lives. After the establishment of a central government that has usually been abusive, people fight for their freedom and their right to be free and produce wealth. The development of the governments of the world across history can be viewed as a gradual improvement of the citizen's charter to convert it into a social contract. There are several agreements, like the non-aggression agreement, that limit the power of the state, define its mission, and convert the citizen's charter into a social contract. Rule by Written Law The first agreement to limit the power of the state is the request from the citizenry that the laws be put in writing. It is one of the rights of the citizens to be ruled by law that is written, understood by everybody, and not subject to the arbitrariness of the people applying the law. The first codification of the law was done by the Sumerians under Hammurabi around 2000 B.C. This law extensively regulated family life. One of Hammurabi’s greatest achievements was this effort to “make justice appear in the land”. He collected the laws of the various Mesopotamian City-States and created a law code that would cover the whole region. This is called the Hammurabi’s Law Code. The Code consists of 282 sections dealing with most aspects of daily life. This development of written law was a major advance toward justice and order and also a major advance in social capital. Sometime around 450 B.C., a group of judges posted 12 tablets in Rome's marketplace. This was done because it was demanded by the common people of Rome. The Romans believed that the people should be ruled by law and not by the whim of their rulers. They wanted the laws written for all to see and for all the people to know their rights. This code of law remained in effect for almost 1,000 years. In A.D. 1215, a group of nobles in England, worried about their feudal rights, met in Rummy Mede in England. They presented to King John the Magna Carta to be signed. The Magna Carta placed clear limits on the royal power. With the Magna Carta, the King was bound by law. The nobles intended the Magna Carta to protect their feudal rights but over time, it guaranteed the rights of all English people. In A.D. 1799, Napoleon Bonaparte took part in a commission to draw up a uniform code of laws. This code reaffirmed the principle that the same laws should be used to govern all people. This code was applied in France and in lands as far as Quebec and some Latin American countries. Having written law is a great improvement in social capital. The law is a code of conduct and rights formally recognized by a society and enforced by the state. Law provides social control, order, and justice. Many of the rules required to support the wealth production process need to be written into law. The law is part of the social capital of a nation and its content and practice determines how easy or hard it is to engage in business enterprises that produce wealth. Democracy Democracy, the election of representatives for government by a vote of the people, is one of the most effective methods to improve social capital by limiting and defining the power of the state. Democracy was present in the Sumerian City-States and [...]... with the wealth production process and its markets This is a vision of a state that maximizes the wealth, freedom, and life of its citizens The Wealth Permitted by the State The learning process of a society to organize itself for the production of wealth ends in the definition of its state The execution of its state represents the level of social capital of the nation The rules and behavior of the state. .. enterprises These two factors determine the wealth of the nation but they rest on the level of social capital that the nation's state enforces The Freedom Permitted by the State Tools increase the freedom of the people Trade increases the freedom of the people A state that protects the life and property of its people, the wealth production process, and the markets, increases the freedom of its people The state. .. advantage of many other persons The State Mission Principle of Wealth Production The mission of the state is to protect the life and property of the people, including their wealth production processes and its market The state is the keeper of the citizen's charter and responsible to lead its transformation into social contract Other Functions of the State Once the state is present, there are other functions... and wealth of the people They are also the people that oversee everybody to make wealth in honest ways The Vision of the Soldier When the state becomes a protector of the life, freedom, and wealth of the people, the soldier has a very dignified mission The mission of the soldier becomes to protect the country from foreign threats to save the lives and livelihood of the people of the nation The State. .. group of peers decides on the fate of a given case, giving the power of decision to the people of the jury and taking it away from the judge designated by the state The jury is bound by the laws of the state and the job of the judge is to preside over the process to make sure that the law is followed but the decision of the case belongs to the jury The process is very effective to eliminate the corruption... services at the cost of high taxes that hinder the investment and growth of the nation The government official becomes the care taker and liberator instead of being the oppressor seeking to get advantage from his position The Vision of the Law Enforcement Officer When the state advances to the role of a keeper of the wealth production process, the law enforcement officer becomes the protector of the life... an agent to facilitate the conditions where its citizens can increase their wealth with their work and their investments The Vision of the Government Official Through the process of development of social capital, the government official becomes a person to lead the increase of the possibilities for the wealth of the people by protecting the wealth production process instead of promising a government... state holds the definition of the freedom of the people in a literal sense The state can limit the activities of its people Just as important but less obvious the state determines the freedom of the people by limiting the wealth producing capabilities of its citizens A state that does not allow its citizens do be wealthy is holding the freedom that these people would have if they were wealthy The Life... produce wealth for its customers, its owners, and its employees The Wealth of the State The fifth book discusses what happens when the assumption that everybody is going to behave correctly is removed The book explores the historical formation of the state and the implications for the production of wealth The level at which the state supports and protects the wealth production process is the level of social... Permitted by the State The state has the mission to protect the life of its citizens The state has to make decisions of life and death such as in the case of war It has to be sensitive when activities for self-defense results in the loss of life war for some of its citizens It should not be engaged in wars of conquest that certainly will mean the loss of citizen's lives The state is the servant of the people, . Initiative Process The Mission of the State Other Functions of the State The Vision of the State Final Notes on Book Five * * * * * Introduction This is the fifth book of the " ;Wealth of the People". decision to the people of the jury and taking it away from the judge designated by the state. The jury is bound by the laws of the state and the job of the judge is to preside over the process. and the Petition of Rights. The founders of the United States of America understood the need to limit the power of the government. They wrote a constitution that balanced the powers of the government