Communism for Conservatives

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Three of the ten planks of the Communist Manifesto (1848) are still universally accepted.

2. A heavy progressive or graduated income tax.

5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

10. Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial production, etc.

The ten planks were supposed to be the means of ushering in the classless society of Communism. The next sentence after plank #10 revealed the utopianism of Marxism.
When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power will lose its political character.

Classes did not go away in the Communist paradises. There were the haves and the have-nots. The basis of access into the minority class of the haves was through membership in the Communist Party.

The state never went away. It got stronger and more demanding. It became more pervasive.

Today, the Communist paradises are gone, except for Cuba and North Korea. They have all officially abandoned Communism as an ideology. Yet they all maintain their commitment to the three planks. Why? Because these three planks constitute the Promised Land of the entire world. There is no nation in which these three planks are not operative, at least on paper.

There is no nation that funds itself exclusively by some version of a flat tax: the same tax rate for all taxpayers. Every nation has a graduated income tax. Some are more graduated (“progressive”) than others. The Scandinavian nations are at the high end. The United States is at the low end. But the top rates are all at least 40%. This, by the way, is twice the rate of the 20% flat tax that the Pharaoh imposed on Egypt (Genesis 47:24). Egypt, let us not forget, was the archetype of tyranny for the Israelites. God told them that 10% is tyrannical (I Sam. 8:14, 17). To get back to Israel’s tyranny, tax rates would have to be cut by at least 75%. But Americans think of themselves as living in the land of the free.

Central banks are all officially state banks. There may be some degree of private ownership, but officially the final jurisdiction is in the hands of the national governments. This may be a contrived illusion for the sake of the voters, but these institutions do derive their power from special legislation from the national governments, or, in the case of the European Central Bank, the European Union. No central bank can survive apart from a grant of monopoly privilege by the supreme civil government.

Tax-funded educational systems are universal. The vast majority of all students are taught in these schools. In most European nations, attendance is compulsory. Only in the last 25 years have home schooling families in the United States gained a semblance of liberty from the local school boards. Some states remain tyrannical. The Home School Legal Defense Association still has lots of families to defend.

So, in these three areas of life, the vast majority of those voters who think of themselves as conservatives still cling to the tenets of Communism. They think nothing of this. They are 30% down the path to Communism, and they don’t know it, or just don’t care.

The ex-Communist paradises are 30% Communist and have no intention of becoming less Communist.

So, Marx and Engels got 30% of their program accepted by the bourgeoisie world.

Then there was this plank:
3. Abolition of all rights of inheritance.

Because of a peculiarity of the tax code, the inheritance tax has been suspended in the United States for 2010. But next year, the old system returns: up to 55%. So, to impose taxes on the rich, the voters have adopted another of the planks, at least in principle.

So, where are we today? Maybe at 32% of the Communist program. Let’s round it up to one-third. That’s close enough for government work.

ONE-THIRD COMMUNIST

How is it that virtually the whole world has adopted one-third of a program that was so revolutionary in early 1848 that Marx and Engels did not put their names on the original German edition of their famous manifesto? One word: power.

People want to get other people to think the way they do. They want them to do what they instruct them to do. The love of power is universal.

The voters think they can control what is taught in the public schools. Voters think that the textbooks will reflect their values. They think that the teachers will be recruited from their group. They will hold the hammer.

They also think, “Those lower sorts will not pay for their children’s educations. Their children have a right to become more like us. This means that they should stop being like their parents. The schools will force those parents to comply.”

It’s all about “those sorts of people.” It’s also about “our sort of people.” C. S. Lewis put these words into the mouth of a ruthless character in his 1945 novel, That Hideous Strength.
“Man has got to take charge of Man. That means, remember, that some men have got to take charge of all the rest — which is another reason for cashing in on it as soon as one can. You and I want to be the people who do the taking charge, not the ones taken charge of. Quite.”

A decade before Marx and Engels penned their anonymous little book, the Commonwealth of Massachusetts had begun its experiment in tax-funded compulsory education. It abolished tax funding of Congregational churches in 1832. Before the decade was over, it had begun financing a new priesthood. No one saw the irony of this at the time. Few have seen it since then.

Opposition to this or that aspect of the public schools is a waste of time. The reforms come and go, but the system remains intact.

By 1900, the system was universal in the United States. It had spread to much of the West. After World War I, it was universal in the West.

The same was true of the graduated income tax. It was passed in England in 1911. It was said to have passed — technically, it didn’t — in the United States in 1913. In that year, the Federal Reserve Act was signed into law in late December. The Federal Reserve System went into operation in 1914.

The ruling class saw that Marx was correct on these three points. The very rich used tax-exempt foundations to escape the inheritance tax. They did this in advance of the inheritance tax. Rockefeller and Carnegie set up foundations before 1913. They set aside their fortunes to achieve goals they chose. Anyway, they thought they did.

THE BUREAUCRATS INHERIT

A strange thing happened on both sides of the Iron Curtain. The bureaucrats began to take over the pools of wealth and power. In the United States, beginning in the 1880s, Civil Service reform began being extended. The Republicans feared the threat of a clean sweep politically, now that the Democrats were beginning to have a shot at local political offices. So, they pushed for the creation of tenured jobs that would be available only to people who passed exams. This immunized them from changes in politics.

In every Western nation, this system spread. Bureaucrats thwarted democracy. That was why the systems were set up: to guarantee that “our sort of people” maintained control over the implementation of rules. They write the rules. In the United States, “The Federal Register” publishes 77,000 pages of fine print rules every year. It adds up!

This has led to a new system of law: administrative law. Civil servants in the executive decide what rulers will implement which laws. They decide the rules of the game. They write the rules to serve the desires of the bureaucrats.

So, Marx turned out to be closer to the truth than his critics. Politics has faded in influence. Politics is like the surface of an ocean. From time to time, there are great storms and great waves. Ships go down. But beneath the waves are growing numbers of sharks, gliding silently far below the turmoil on the surface. They consume anything they can. Marx thought the proletariat would win. Instead, the bourgeoisie did — on a scale that seems irreversible.

Men of similar outlook run the large foundations, the universities, the K—12 schools, thousands of Federal agencies, and the fading mainstream media. Only one thing can remove them from power: budget cuts. This is the lesson of the past century. No reform sticks that is not in the interest of senior bureaucrats. No funds are cut, so no reform changes anything significant.

When a bureaucracy fails spectacularly and in full public view, the political appointee who officially runs it is replaced. Then the agency asks Congress for more money, so that a similar mistake does not take place. Congress forks over the money.

FEMA is still operating. Brownie is long gone. Such is the iron law of bureaucracy.

The bureaucrats need only two things to persevere: (1) guaranteed income; (2) a stream of replacements educated by bureaucrats. In short, they need only planks 5 and 10 of the Communist Manifesto.

RUML’S 1945 SPEECH

Beardsley Ruml in 1945 was the Chairman of the Federal Reserve Bank of New York. He was also the head of Macy’s Department store. In 1942, he had pushed the creation of the Federal withholding tax. That quadrupled tax revenues in one year.

He had gotten his start at the Laura Spelman Rockefeller Memorial Fund.

He had a Ph.D. in psychology.

In 1945, he gave a speech to the American Bar Association. It was on taxation. It remains the most important speech on the nature of modern taxation ever delivered in the United States. Here are excerpts. I strongly recommend that you read them. They will clear up a lot of loose ends.
A government which depends on loans and on the refunding of its loans to get the money it requires for its operations is necessarily dependent on the sources from which the money can be obtained. In the past, if a government persisted in borrowing heavily to cover its expenditures, interest rates would get higher and higher, and greater and greater inducements would have to be offered by the government to the lenders. These governments finally found that the only way they could maintain both their sovereign independence and their solvency was to tax heavily enough to meet a substantial part of their financial needs, and to be prepared — if placed under undue pressure — to tax to meet them all.

The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government. Two changes of the greatest consequence have occurred in the last twenty-five years which have substantially altered the position of the national state with respect to the financing of its current requirements.

The first of these changes is the gaining of vast new experience in the management of central banks.

The second change is the elimination, for domestic purposes, of the convertibility of the currency into gold.

He laid it out as well as anyone ever has. The function of the central bank is to make sure that the government is not dependent on buyers of its debt. This has been the rationale of central banking ever since the Bank of England was created in 1694.

Of course, its real purpose is to keep the largest banks solvent. But he was talking about the official explanation.

Roosevelt’s abolition of the gold standard in 1933 was the key. Had Ruml looked forward to August 15, 1971, when Nixon ended the last trace of the international gold exchange standard by closing our gold window, he would have understood its implications: eliminating the final restraint on the independence of the Federal government from outside control.

He went on.
Federal taxes can be made to serve four principal purposes of a social and economic character. These purposes are:

1. As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;

2. To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes;

3. To express public policy in subsidizing or in penalizing various industries and economic groups;

4. To isolate and assess directly the costs of certain national benefits, such as highways and social security.

This is a good summary of politics and taxes today, just as it was in 1945.

Taxes are about funding the debt, distributing wealth, subsidizing and penalizing groups or industries, and funding popular programs.

This Rockefeller agent, capitalist, and supreme central banker told the lawyers how the modern welfare-warfare state had implemented one-third of the Communist Manifesto.

The system runs on central banking, progressive taxation, control over education, and the abolition of the gold coin standard. Ruml covered three of the four. But he was speaking to lawyers. They are part of the education hierarchy.

CONCLUSION

When the Tea Party breaks publicly with points 2, 5, and 10 of the Communist Manifesto, I will be impressed. Until then, I remain an amused bystander.

I have seen conservative political movements come and go: the Goldwater movement, the Reagan revolution, the Contract With America. None of them has publicly repudiated planks 2, 5, and 10.

The Tea Party seems ready to repudiate #5. That’s a move in the right direction. It has caught my attention.

When a conservative movement is 20% Communist, it has a way to go.

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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