New Time Religion
Two hundred years ago, Revolutionary flags bore a motto whose meaning was disguised by its innocuous words. The message was simple: "An Appeal To Heaven." It meant that when depredations by tyrannical and tax-hungry authorities grew unbearable, citizens had the right to throw off their rulers by any means necessary.
Today, citizens of Hardenburgh, NY, are turning to heaven for relief. More than 270 residents of the Catskill mountain town are now officially recognized as ministers of the Universal Life Church, a California-based body distinguished by its absence of dogma and by what one might euphemistically term an "open door" policy. Result: their land is now exempt from property taxes.
Credit for the wave of religiosity—which has put 70 percent of the town's property out of the hands of the tax collector—belongs to Cardinal George McLain, a plumber by trade. The Cardinal notes with satisfaction that the Hardenburgh group has become "the largest religious community in the world outside the Vatican."
Before becoming a recognized minister, each applicant had to submit proof of association with the Universal Life Church, a listing of his or her congregation, and a directory of church officers. The applications were reviewed by assessor Robert Kerwick, who stood fast in his approval of the requests despite pressure from the state. "The law is quite explicit, and you do not defy the law when you are a local official," he says.
New York State feels less bound by such scruples. Spokesmen for the Board of Equalization and Assessment announced in May that they would review Kerwick's books, and have hinted darkly about legal actions. If a court challenge does come to pass, it may be time for Hardenburgh residents to dissolve their bonds to a state that violates their rights to own property and to worship.
In another encouraging display of New York anti-tax spirit, Representative Jack Kemp (R-NY) has introduced a measure in Congress to overhaul the federal tax system while reducing tax rates. The Republican from Buffalo has cosponsored legislation with Senator James McClure (R-ID) called the Revenue Act of 1977, which would lower individual tax rates by more than a quarter, cut corporate income tax rates, and end double taxation of dividends. The effect of the tax reform, Kemp says, would be to stimulate the private sector so much that overall tax revenues might increase.
Although the measure has virtually no chance of passage, it is forcing Congressmen to line up for or against a permanent tax cut. Incumbents who oppose it may have an interesting time explaining their choice to voters when elections next roll around.
• "Exemption Makes Town Religious Haven," United Press International, May 8, 1977.
• "Kemp & Company," National Review, June 10, 1977, p. 670.
Wildcatters vs. State Mints
As government printing presses drive the economies of the West closer to orgiastic inflation or credit-numbing depression, legal tender laws are coming under attack in surprising places. No less a forum than the editorial page of the Wall Street Journal recently has twice urged a hard look at the laws that give governments a near-monopoly on money and credit.
The first challenge came in the form of a ringing broadside by Friedrich A. Hayek, who shared the Nobel Prize in 1974 for his work in monetary theory. Hayek expressed the view in mid-August that irresponsible monetary authorities have brought the West into an ominous era. Inflation-induced breakdown seems inevitable, he said, unless a "desperate" remedy is applied.
That remedy is to strip governments of their power to outlaw competing currencies. Freed of legal tender laws that force consumers and producers to accept depreciating paper money, banks throughout the world could issue money under the discipline of the market. Private currencies of constant purchasing power, Hayek believes, would overwhelm their weaker competitors, safeguarding individuals from confiscation of assets through inflation.
"We now have no choice but to change our money and currency system, sooner or later," Hayek observed. "I believe we shall yet understand that the one thing the government of a free country must not be allowed to possess exclusively is a printing press for money."
Remarkably, Hayek's proposal received serious treatment in the following week by Lindley H. Clark, Jr., also writing on the editorial page. Clark, an editor of the Wall Street Journal, called the proposal "stimulating," praising Hayek for making "people think about things that they often would prefer not to think about." Worries about an unruly shakedown period and difficulties in fine-tuning the supplies of commodity-backed currencies prevented him from endorsing Hayek's plan, but the attention given by the Journal to free market money marks a major breakthrough for the idea.
• "Toward Free Market Money," Wall Street Journal, August 19, 1977, p. 12.
• "Speaking of Business," Wall Street Journal, August 23, 1977, p. 14.
Toll Mounts for Minimum Wage
The Presidential jaw must have fallen agape when August's unemployment figures appeared. Despite Jimmy Carter's promises to reduce joblessness, unemployment had jumped to 7.1 percent, up .2 from the previous month. Carter immediately summoned his chief economic advisor, Charles L. Schultze, and his Labor Secretary, F. Ray Marshall, for an explanation.
Whether the two paid notice to the minimum wage is an open question. But had they been reading current popular and academic journals, the officials could not have escaped compelling indictments of the minimum wage law. In Time, Harvard sociologist David Riesman stated that the law resulted from "an alliance of the better situated labor unions with the liberals against the deprived and the elderly, whom people would otherwise employ for household or for city work that now doesn't get done." Stanford professor Thomas Sowell, a black economist with strong free-enterprise leanings, added: "Talk about people being unemployable is just so much rubbish. Everybody is unemployable at one wage rate, and everybody is employable at another."
The 14.5 percent August rate in minority joblessness—almost a full percentage point above the July rate—lent immediate weight to the professors' assertions. Even more convincing arguments appeared in the Harvard Review of Economics & Statistics. An article written by a Federal Reserve Bank economist, James F. Ragan, explored the impact of minimum wage rate increases over the past eleven years. His conclusion: they have raised the unemployment rate of teenagers by about four percent.
The chairman of the Federal Reserve Board, Arthur F. Burns, took a similar message to Congress in August. As Congress deliberated on the merits of increasing the minimum wage, Burns pointed out the worsening of unemployment that has accompanied previous boosts. His arguments seemed to carry little weight, despite fears that the current stall in the economy foreshadows another recession. If Congress increases the minimum wage level as expected, President Carter will probably sign—and hold more hurried consultations in the future when unemployment statistics appear.
• "The Underclass," Time Magazine, August 29, 1977, p. 21.
• "A Higher Minimum Wage Hurts Teenagers," Business Week, August 22, 1977, p. 14.
Phasing Out Freebies?
Two small, but encouraging, steps to recognize the importance of the "user pays" principle have occurred in recent months. The first will let taxpayers in Southern California partly off the hook for the cost of pollution controls, while the second may lead to changes in the funding system for the nation's highways.
With property taxpayers on the brink of revolt in Los Angeles and neighboring counties, the South Coast Air Quality Management District has roughly halved the amount it will exact from the public in taxes. Beginning next spring, it will instead levy fees directly upon the companies whose manufacturing processes discharge noxious chemicals.
What makes the approach promising—although not perfect from a libertarian standpoint—is its recognition that polluters should be penalized according to the amount of pollutants they emit. Putting a price tag on pollutants will encourage industries to make more economically efficient decisions regarding in-house controls, rather than having to suffer the caprice of local regulation-happy bureaucrats.
Politicians in the area have been quick to detect the potential appeal of the approach, despite opposition from major utilities such as Southern California Edison. "This program will shift the burden of responsibility to those who are responsible for causing the pollution and away from the property taxpayers," observes Los Angeles County Supervisor Ed Edelman.
Ordinary citizens are not likely to be pleased by the findings of an Urban Institute team, which surveyed the costs of the federal highway program over the past 20 years. Examining the expenses incurred by different categories of users, the study group found that the average car driver has been giving a subsidy to truckers and to rural motorists, by paying a disproportionate share of gasoline taxes.
Researchers for the Institute found that urban drivers contributed 20 percent more to the upkeep of the highway system than they occasioned in expenses. Rural drivers, on the other hand, met only about half of their costs. And truckers shared almost none of the $260 billion in fixed costs of highway construction and maintenance with drivers of small and medium sized vehicles. Their share of the total was just $26.7 billion, barely covering the special design features and wear-and-tear their trucks caused. In short, comparatively speaking, truckers have enjoyed a virtually free ride.
In some ways, the Urban Institute study was unsatisfactory: it made no attempt to calculate the costs of noise, congestion, pollution, and displacement of homes for highways. Yet pointing out the recipients of massive, hidden subsidies may speed the day when voters insist on an end to such privileges—thereby removing powerful special interest obstacles to privatizing roads.
• "Smog Board Moves to Make the Polluters Pay," Los Angeles Times, May 28, 1977, p. 1.
• "Paying Fair Share for Roads," Search, Urban Institute, June, 1977, p. 7.
Basket Cases Reborn
Contrary to popular belief, not all Third World countries are run by maddened left- or right-wing dictators. More than a passing understanding of economics and civil liberties is being demonstrated by a few Third World nations. Some of their leaders seem to have studied free market economics more carefully than many American politicians, if recent events are any guide.
Sri Lanka, formerly known as Ceylon, has begun a sensible attempt to attract business. Junius R. Jaywardene, the newly elected prime minister, has announced plans to set up a 200-square-mile zone for free trade. Jaywardene has little opposition to the plan, because his United National party controls 137 of the 168 seats in parliament.
The planned zone is "to be a solution to our economic problems," says Jaywardene, who is known in Sri Lanka as "the high priest of capitalism." Those problems include a high unemployment rate and low foreign exchange reserve. Investors will no doubt welcome the absence of duties and taxes within the free trade zone, as they do in similar zones recently established in Korea and Taiwan. The success of these areas in stimulating the economy of the host countries may herald an Indo-Asiatic renaissance of free trade.
In the African nation of Gambia, similarly enlightened thinking has begun to take hold. A nation of 500,000 people, Gambia has no army, and exports nothing but peanuts. Yet its currency—the dalasis—is stronger than the pound sterling to which it is pegged. In its 12 years of independence, the Gambian government has lasted 11 years and six months longer than the British predicted when they pulled out in 1965. Common sense, thrift, and ingenuity account for much of the nation's success. The government operates on a comparatively small budget of $20 million. Officials live modestly and expensive projects are undertaken with reluctance. While other African nations compete to see who can buy planes and start a national airline first, Gambian Airways owns no planes, but has become the most profitable airline in Africa by acting as a booking agent for other carriers. In contrast, Air Zaire frequently ignores scheduled stops, and Air Burundi loses $24,000 a week running its bi-weekly international flights to Nairobi.
In turbulent Southern Africa, Swaziland is offering a permissive climate for business and pleasure alike. Bounded on the south by South Africa, and on the north by Marxist Mozambique, Swaziland is making a name for itself as "the Switzerland of Africa" because of its refusal to imitate its neighbors' statist habits. The Connecticut-sized country retains neutral and stable relations with both the South African government and the Organization of African Unity.
Over the past ten years Swaziland's economy has grown at a six percent annual rate, one of the highest in Africa. Its foreign currency reserves are estimated at $80 million, and the country has a positive balance of trade. Because Swaziland belongs to the Common Customs Union, investors can do duty-free business with neighboring countries such as South Africa. As Henry Nathan, managing director of the National Industrial Development Corp. explains it, "That's a market of 27 million people, and companies locating here can avoid the political stigma of investing in South Africa, but still have access to the market." These factors, combined with social legislation that permits interracial sexual relations, soft core pornography, and gambling, have produced a benign atmosphere for entrepreneurs.
Despite the strides made by some Third World governments, others remain grossly mismanaged. Idi Amin of Uganda is not the only head of state with a taste for a ludicrous and barbaric style of rule.
Jean-Bedel Bokassa, self-proclaimed president for life of the Central African Republic, has recently surpassed himself by naming himself an emperor, and the republic as his empire. On December 4, 1977 Bokassa and the favorite of his nine wives will be crowned at the Bokassa Sports palace. For those who may wish to attend, the sports palace is located on Bokassa Avenue next door to Bokassa University near the Bokassa statue, in the capital city of Bangui, probably soon to be renamed Bokassa.
Francisco Ngeuma, president for life of Equatorial Guinea, might have taken lessons from Hitler. As president Ngeuma has tried to settle old tribal scores between his tribe, the Fang, and wealthier, better educated Bubis. In the nine years since independence an estimated 50,000 people have been killed or disappeared, and another 100,000—one quarter of the population—have escaped. Emergency powers taken by Ngeuma have enabled him to ban fishing from boats to prevent more escapes; require all unemployed persons over the age of 15 to work in the cocoa plantations or phosphate mines, as a method of preventing vandalism; and cancel passports (and thus the nationality) of all Equatorial Guineans abroad. Ngeuma has gone so far as to celebrate the "National Miracle" (his naming himself president for life) by ordering his praises included in the Catholic Mass. One can only wonder where those Masses were held, since Ngeuma previously confiscated all of the churches for storage of coffee and cocoa.—Naomi Geschwind
• "Sri Lanka Victor Set to Tackle Economy," Los Angeles Times, July 23, 1977, p. 1.
• "Gambia Survives by Its Wits and Lives Within Its Means," Los Angeles Times, July 18, 1977, p. 1.
• "Africa Airlines—Flights into Fancy," Los Angeles Times, July 2, 1977, p. 1.
• "Thriving Swaziland Does Tightrope Act As Industry Cheers," Wall Street Journal, June 2, 1977, p. 1.
• "Bokassa: Emperor With Everything but Respect," Los Angeles Times, June 14, 1977, p. 1.
• "Equatorial Guinea Today Like a Chamber of Horrors," Los Angeles Times, June 11, 1977, p. 1.
Sitting Bull's Revenge
Back in America, our own Third Worlders have been scoring a victory or two on tribal reservations. A Congressional commission has recommended that Indian tribes be given functional sovereignty over their land, possibly opening the way for a host of tax-free commercial enterprises to flourish in the United States.
Life on Indian reservations, now led in frequent squalor under the eye of the Bureau of Indian Affairs, could change markedly if the recommendations of the commission are approved. The study group, composed of five Indians and six Congressmen, concludes: "The federal policy must accept the position that the supervisory authority it asserts must be limited and flexible."
Blasting the Bureau of Indian Affairs for a "notable absence of managerial and organizational capacity," and implicitly criticizing the existing local and state government control over Indian education, the report issued by the commission urges that tribes be given all the powers of local governments. These include the power to adjudicate civil and criminal matters and set groundrules for the local economy.
Should the reservations receive semi-autonomous status, they could become highly attractive for investments. All Indian reservations are exempt from federal taxes, and many are exempt from state levies as well. If tribal authorities chose to impose little or no taxation at the local level, the result could be tax-free havens for commercial enterprise. An inkling of the potentially enormous consequences of such tax-free zones can be found in the state of Washington. In the middle of downtown Tacoma, on a piece of property belonging to the Puyallup reservation, is a store that sells tobacco to all customers—without the prevailing state tax of about 20 percent. Officials say that sales of tobacco by the tax-free Indian shop, and others like it, cost the state $12 million in revenues a year.
Although tobacco sales are under legal challenge by the state, adoption of the proposals of the Congressional commission could help assure new freedoms for descendants of the original Americans, at a time when descendants of the colonizers are losing theirs.
• "Report to Congress Backs Sovereignty of Indian Tribes," Los Angeles Times, May 15, 1977, p. 1.
• "Courts Will Provide Peace Pipe in Battle Over Indian Cigarets," Wall Street Journal, May 24, 1977, p. 1.
Zoning rejected. In Benton County, Iowa, voters were given a chance to decide whether or not a county zoning ordinance would be adopted. After extensive public discussion, the results of the vote were 2137 against and only 789 for the measure—a 73 percent rejection rate. No wonder few referendums on zoning are held! (Source: Private Property - Free Enterprise, Ogle County Taxpayers Association, Jan. 1977.)
This article originally appeared in print under the headline "Trends".