Extropia

I explained here why socialism is an unavoidable consequence of democracy. My point is that egalitarianism is inherent to democracies and manifests like an entropic force, flattening wealth distribution across society (bringing it to maximum entropy). Since entropic forces cannot be opposed inside isolated systems, I conclude that socialism cannot be countered from within a democracy.

Consequently, an enduring capitalist society:

  1. Must be founded outside the jurisdiction of established democracies.
  2. Must be based on principles that are non-threatening to laissez-faire capitalism over the long term (that don’t have inherent entropic forces working against it).

Location

Since reforming a democracy from within is not possible, and overthrowing a country by force is not feasible, the only remaining option is colonization. The only places left to colonize today are the high seas and the outer space. Ocean colonization is presumably more accessible, so seasteading is the way to go. Additionally, modular seasteads allow a flexible topography, an advantage which will also prove relevant.

Principles of Governance

Egalitarianism is the direct result of the democratic decision making process. On one hand, on a personal level, individual self-interest makes people favor decisions that provide them with something for nothing. On the other hand, state governance is a zero-sum game on a global level, because the only way for the state to provide something to someone is to take it from somebody else. Entropy, in the form of socialist wealth redistribution, is the natural way in which democratic decision-making mechanisms reconcile this tension in an optimal manner. Therefore, to naturally prevent entropy, the decision-making mechanisms must be praxeologically adverse to wealth redistribution.

Background

Capitalist societies flourished in the 19th century in young republics or constitutional monarchies, with incipient democratic influences. They were built on the ruins of past autocratic regimes such as empires, kingdoms, principalities, theocracies, etc. that were prevalent up to the late 18th century. These regimes were based on social stratifications in which upper classes had political power and privileges, while lower classes supported the state through taxes and other obligations.

The late 18th and 19th century transformations were first and foremost about ensuring fair representation in the governance of the state and revoking the caste privileges that noble classes had over regular citizens. However, not everyone was a citizen by default. In the late 18th century for instance, very few people were citizens. Being a citizen provided certain rights in exchange of specific obligations. Citizens basically had the obligation provide the revenue to support the state. In return, they had the right to be partners in the governance of the state. For instance, the very title of The Declaration of the Rights of Man and of the Citizen issued during the 1789 French revolution implies this separation through the clear distinction between the rights of “men” and the rights of “citizen”, in other words between civil rights and political rights.

The key in the liberal movements of the late 18th and 19th centuries that overthrew the autocratic regimes in power was the correlation between taxation and representation. Incidentally, “No taxation without representation” was a motto for the American Revolution. Liberal reforms ensured that, for a time in history, the people who had political power were more or less the same people who paid the taxes. Most voting systems in the 19th century were censitary, meaning voting rights were restricted based on the voters’ contributions in taxes.

Wherever property taxes were levied, most countries limited the right to vote to landowners. Britain, for instance, had various property qualifications for electors throughout the entire Victorian era. In the United States, states collected poll taxes on voters and property taxes on land and commercial buildings. Consequently, voting rights were in accordance with these fiscal policies. In The Critical Period of American History 1783-1789, author John Fiske writes:

In New Hampshire, Pennsylvania, Delaware, and South Carolina, all resident freemen who paid taxes could vote. In North Carolina all such persons could vote for members of the lower house, but in order to vote for senators a freehold of fifty acres was required. In Virginia none could vote save those who possessed such a freehold of fifty acres. To vote for governor or for senators in New York, one must possess a freehold of $250, clear of mortgage, and to vote for assemblymen one must either have a freehold of $50, or pay a yearly rent of $10. The pettiness of these sums was in keeping with the time when two daily coaches sufficed for the traffic between our two greatest commercial cities. In Rhode Island an unincumbered freehold worth $134 was required; but in Rhode Island and Pennsylvania the eldest sons of qualified freemen could vote without payment of taxes. In all the other states the possession of a small amount of property, either real or personal, varying from $33 to $200, was the necessary qualification for voting.

Another example is the Prussian three-class-franchise system, introduced after the 1848 revolutions, which segregated the electorate in three classes based on the amounts paid in taxes. Proportional to their contributions, votes from people paying high taxes weighted substantially more than votes from people paying low taxes.

However, this state of affairs was unstable. In time, voting discriminations were gradually removed and universal suffrage became the norm. Although liberal societies started out with low entropies, democratic decision making mechanisms slowly increased political entropy to the point where the correlation between taxation and representation was reversed again. The only difference lies in the proportion. Instead of having a small privileged class and a large supporting lower class, we have a small productive class supporting generous entitlements for everyone. Distributing from many to few obviously yields more than distributing from few to many, so today’s idlers are poorer than their counterparts of old, but the principles are the same. It turns out that representation without taxation is just as bad as taxation without representation.

Decision Making

Correlating taxation and representation means every voter has a number of votes proportional to the taxes paid. Electors paying more have more votes, electors paying less have fewer votes. Not paying any taxes disqualifies one as an elector. Modern technology finally allows perfect implementation for such a system. Exemplifying voting systems are currently used, for instance, by online brokers. On corporate action events, each shareholder, whether he owns 1 share or 100.000 shares, can cast his votes electronically, proportional to his participation.

Direct Participation vs. Representation

Although electronic voting facilitates direct participation, it does not exclude representation. Some electors may choose to delegate career politicians to represent their interests if they are so inclined. In keeping with the brokerage example, this would be similar to brokers who are in charge of managed accounts and who make investment decisions on behalf of their customers. Of course, the voter must be able to revoke this arrangement at any time, for instance, by resetting his e-voting passcode or some equivalent mechanism. This way, an irresponsible delegate may instantly lose his voters’ support, and consequently his power. Also, when a more qualified political figure appears, a voter can change his representative any time. There is no need for regular elections.

Flexibility

Obviously, an electronic voting system is the only one flexible enough to handle such correlations between taxation and representation and to track variations in individual voting rights in real time. But there are other advantages too.

An electronic voting system ensures high availability, allowing direct participation and maximizing pluralism in any legislative or executive matter. Such matters can cover issues like: enacting a constitution, amending the constitution, electing a president, firing the president, delegating a specific mandate to a government, transferring responsibilities between institutions, replacing the chief of police, cutting the defense budget, joining an international organization, etc.

Any issue can be opened to public debate and, if deemed important enough, proposed for ratification. One way to implement this would be to have an open platform where anyone can submit proposals for voting. Whatever is proposed during one month can be ratified throughout the next. Issues submitted during a calendar month would be opened for voting during the next calendar month. Once a majority of votes is expressed in favor, the proposal is ratified.

Direct participation makes the legislative and executive systems extremely agile and responsive. Acting upon priorities is immediate. The community can react quickly to opportunities, adapt to changes in real time and revert bad decisions. Public employees and institutions, in particular, are permanently under the voters’ direct control and, consequently, instantly accountable for their actions. This prevents them from becoming entrenched and parasitic in the state apparatus.

Tacit Disapproval

To ensure only relevant regulations and measures are enacted, tacit approval must be replaced with tacit disapproval. There are no negative votes. By default, not casting one’s votes automatically means voting against. This way, no one can game the voting system by overloading it with trivial content that is going to pass unnoticed on the account that electors can’t be bothered to explicitly reject it. If an issue is not stringent enough to capture the electors’ or their representatives’ attention, then it is not important enough to be ratified. This ensures full involvement and responsibility on behalf of the electorate for any enacted measure.

Tacit disapproval is bound to produce legislation that is clear, simple, relevant and minimalistic.

Taxation

Regarding taxation, the aim is to have a fiscal system that is simple and robust, and that interferes as little as possible with personal liberties. Property taxes, where owners pay an amount proportional to the footprint they occupy are ideal for this purpose.

First of all, property taxes are easiest to implement. One only needs a cadastre. Since a seastead is likely to be built with standardized modules, it would be just a matter of counting the number of modules one owns. If you own (and pay taxes) for one module, you have one vote. If you own two, you have two votes, etc. Literally, whoever owns the place pays the bills.

In comparison, income and profit taxes require strict control over businesses and population, enforcing measures such as bookkeeping regulations and supervision over financial transactions. This stifles economic development and complicates fiscal administration with sophisticated internal revenue services responsible for monitoring and controlling all economic activity.

Correlating fiscal policies with property ownership also has advantages in establishing sound priorities, since real estate owners have high stakes in seastead maintenance, infrastructure, law enforcement and defence:

  • Property owners benefit directly from the expensive maintenance and infrastructure investments, which keep their property afloat and endowed with utilities.
  • Crime rates have a major influence on real estate value. An electorate of property owners is going to be firm on violent crimes, while tolerant and unlikely to waste resources on victimless crimes.
  • In case of external conflict, property owners are the ones with the most to lose since they can’t just flee and take their property with them. Defence is going to be at the top of their priority list.

Placing property owners at the core of the fiscal and political system ensures sound long term policies. It involves those who have the highest stakes and long term commitment to the republic. This also gives direct access to state governance to businesses or other organizations and institutions, since they can also own property.

Political power is given by one’s relevance in endorsing the state, as citizenship used to be in the past.

Money

The state does not control the money supply. It is not necessary for the state to issue a specific currency (although it might be practical at some point). Private transactions can be conducted in any currency the parties agree on. For the purpose of levying taxes, collecting fines and charging licenses on the use of natural resources (radio spectrum, fishing, etc.) the state can accept any standardized currency. For instance, the state can opt for precious metals and accept gold bullion bars and popular bullion coins like the South African Kugerrand, American Golden Eagle, Canadian Maple Leaf etc.

Various public expenses are settled with currencies both parties agree upon on a case by case basis, just like any private transaction. In time, some currencies will probably become prevalent in the economy, but the state must never enforce a legal tender, allowing instead the currencies to compete. The state only imposes the medium of exchange when cashing its own payments (taxes, fines, licenses) and negotiates it when spending (with public employees, contractors, suppliers etc.). It has no authority to regulate the medium of exchange on someone else’s behalf.

Conclusion

The main challenge in defining a social contract is to establish what is the proper balance between the citizens’ duties and privileges. In any political order, there is an inherent tension where everyone tries to usurp more rights and be exempted from as many duties as possible. This tension combines with the principles of governance to shape the way in which society develops. In a democracy, as explained here, this development materializes into socialist wealth redistribution.

To create decision making mechanisms that are praxeologically adverse to wealth redistribution, a constant balance must be kept between one’s contribution to society and his influence over the governance of the state. When your political influence and, therefore, your ability to direct public expenses in your favor is limited by the extent of your prior contributions, the two cancel each other out. Because the state itself consumes money during any redistribution process, you can directly take back only a fraction of what you give beforehand. Therefore, you will be interested to contribute as little as possible and to keep the state minimalistic, instead of constantly looking for ways to maximize your public allowances and benefits at the expense of other taxpayers.

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