"Any news on Earth since I've been away, Sprinjj?"
"Yes sir. An intense tax revolt concept with full media backing has entered the consciousness of the American people since May 1978. The trigger was a local tax initiative in California."
"So soon? Well, this is good news! We hadn't expected it before 1980. Do you know that this is a key event, Sprinjj? A turning point of the first significance. It's firm evidence that Earth is going to make it to the next stage. Good for them!"'
America is in controlled revolt. Cued by the media, the people are focusing their rebellion on a single target: taxes. And into this rebellion is going all the frustration of years of living with government that seems more like an uncontrollable cancerous growth than like a public servant.
It is a controlled revolt because the mass media make the mass consciousness. In this case they have struck an unusually powerful response, but they are still responsible for coordinating and amplifying it. And their massive efforts in this direction suggest a policy of backing the tax revolt, of promoting it to the limit.
Who is backing the tax revolt? and why? Where can the tax cutting and reduction in government go with this kind of backing?
A TITANIC STRUGGLE There are two schools of thought regarding the power of the media. One maintains that they reflect what the people want and cater to free choice. The other insists that people are manipulated and indoctrinated by the advertisers and the owners. Both are correct. What the mass media put out must be acceptable to the public and to the major business interests.
The extent to which big business determines acceptable topics for public dissemination has been amply covered in such books as Television in the Corporate Interest by Richard Bunce, The Sponsor by Erik Barnouw, and the landmark study News from Nowhere by Edward Epstein, which deals with news management and selection. Applying this background, we can be reasonably certain that the massive promotion of the tax revolt has the backing of American business.
It didn't start out that way. Business interests initially opposed Proposition 13 as an extreme measure that was expected to fail and discredit the tax-reduction movement. Popular support changed the situation. As it edged up to 30 and 40 percent, the mass media suddenly "discovered" the tax revolt and helped push it over the top.
A related media campaign against government corruption, overregulation, and waste has been going on since Watergate. It is a sign that the cozy alliance for growth between business and government has broken up. While certain kinds of monopolistic regulation have always been appreciated by business, the government has now gone too far. It is getting more and more intimately involved with the conduct of business and is growing uncontrollably. Political methods have not stopped it. The specter of Britain or even Russia looms ahead. Worse, economic collapse due to global energy and credit imbalances could overtake business while it struggles in the bureaucratic web.
The situation calls for extreme measures. Cutting off the government's money supply is one of them. Turning the people against government is another. Both are neatly combined in the tax revolt. Manipulated or not, the people are joining with business against government in a titanic struggle of which we have seen only the opening skirmishes.
There are exciting times ahead. The government can't just be worn down gradually. Its endurance and growth tendency are inherent in every cell. No. The situation must be resolved rapidly if business is to be free to deal with the energy crisis of the '80s. It must be resolved rapidly if the popular momentum is not to be lost. The tax revolt, combined with other strategies in business's arsenal, must knock government right down to a size and structure from which it can never again wield independent power.
The question is, How could this be accomplished?
THE PURSE STRINGS So long as the federal government fails to balance its budget, it forfeits its financial independence and has to go to the bankers for money. To some minds, the enormous national debt and the continuing deficit of over $50 billion even in good years put the government firmly in the hands of its creditors, who have effective financial control if they wish to exercise it.
We can see how this works in other countries that have found themselves in this position as a result of quadrupled oil bills. The International Monetary Fund generally represents the creditors. In the case of Britain in the sterling crisis of June 1976, Her Majesty's Government was running a deficit of 12 billion pounds and applied to the IMF for the maximum possible loan. The negotiations were intense, with the IMF insisting that the deficit be cut by 30 percent as a condition of the loan.
The British screamed bloody murder. Their government is as resistant to budget cuts as ours. They threatened to cut back on NATO. It didn't do any good. They had to take the deal. They made the cuts, vociferously blaming the IMF for their plight.
The Italians were not so accommodating. In Italy—and in Egypt, Peru, and other countries—bankrupt governments have extorted loans as the price of a precarious political stability. There are regular cost-of-living riots whenever the creditors try to tighten up.
Closer to home we have the example of New York City, the very home of the business establishment. The creditors have leaned on the budget, but not hard enough to make the deficits go away. Could they if they tried? Or do they prefer to maintain the subsidy and the financial control that goes with it?
The case of the federal government is much more urgent and serious and complicated. The OPEC creditors demonstrated last winter that they have ample financial leverage to control US monetary policy. The government can no longer print its way out of debt without destroying the dollar. Now we are waiting for the other shoe to drop: creditor control of fiscal policy. How long before major creditors exact budgetary control as the price of continued deficit financing?
The larger the deficit, the more leverage there will be for instituting specific reforms—devolution of functions to the states, market-type competition, deregulation, and so on. For any given deficit, however, government spending will fall only as fast as taxes are cut. Hence the importance of the tax revolt.
Not that the government would hold still for all this. We would expect it to withhold services strategically and to mobilize its vast army of dependents to resist the cuts.
Not very smart. That escalates the conflict and gives the balance of power to the people, who can play business and government off against each other. Business would have to neutralize the cuts by taking up public welfare and winning dependents from the government camp. Thus is born the concept of cost-effective, nongovernmental public welfare.
Ultimately, this government reaction is self-defeating, since withholding services adds strength to the tax revolt. With the appearance of alternatives, the only hope for survival of a given bureau or agency is to compete—assuming it has the flexibility and survival instinct to learn how.
PROMOTING SELF-SUFFICIENCY In some cases the alternatives will be invisible and virtually costless. The large dependent group known as the unemployed, for instance, can be reduced along with working hours and the minimum wage. Farming out work, employment in the home with the help of improved communications technology, and self employment would all extend employment opportunities to those who are presently clients of the state, with the bonus of making taxes harder to collect. Spreading work over more people would also reduce the average tax rate.
With the exception of the minimum wage, which will be a knock-down, drag-out political battle, all of these areas are controlled directly by business or can be influenced through the media. Watch for the selling of leisure rather than the high-income lifestyle.
What of the more difficult case—the unemployable? No individual business will want to take them on. How can rehabilitation, training, and support be subsidized if not through a government program such as CETA?
To the business and banking consortium that is financing the government deficit, each dependent removed from the welfare rolls is worth something in hastening the government's demise and returning funds to the private sector. The political and economic benefits can be translated into a sizable sum available to pull somebody out of the dependency trap. How would it be channeled?
On a payment-for-results basis. There is an attractive opportunity here for independent, competitive businesses to invest in training and rehabilitation programs, being reimbursed on the basis of subsequent reductions in their clients' demands on public services. Unlike the existing government agencies, which thrive on the perpetuation of their clients' dependence, these businesses would be competing to discover the most efficient and effective ways to promote self sufficiency.
There are additional measures business can take to reduce dependency and the need for such agencies. It can do a great deal through the media, marketing efficient low-income lifestyles and providing education for self-sufficiency. This meshes well with the campaign to substitute leisure for consumption and is a dramatic reversal of television's role. It also fits in with business's conservationist stance, which has been evident since 1973 and is likely to continue through the energy crisis of the '80s.
Of course the lower level of business, the most highly competitive sector, shows no signs of letting up with its "buy, buy, buy!" messages, but the dramatic increase of 30 percent in TV advertising rates in the fall of 1977 marked the entry of the big boys on the scene, with their unfamiliar messages of conservation and support for the free-enterprise system. What they are doing is buying the medium, so essential to their promoting the new orthodoxy and selling the changes to the people. This is good news for television—both for the producers, who stand to make a lot more money, and for the viewers, who will find that the new, anti-commercial, educational slant saves them money and is more pleasant to watch.
New technology—economical, self-sufficient, decentralized—will come out of the closet to which it was consigned during the era of waste and growth and will further help to reduce the cost of living and extend the options for the dependent classes, and for everybody else.
These are unfamiliar and novel economic concepts that stand orthodox beliefs on their head. What it adds up to is a survival plan for business with interesting fallout and opportunities for the rest of us. The tax revolt is a key event in this plan, and it is already under way. In order to keep it going, government dependency has to be reduced, and business can take a variety of measures to achieve this. The available evidence at this early stage suggests that business interests are indeed implementing some of them. And if they are serious about survival, they will have evaluated all of these ideas and many more besides.
BUSINESS SURVIVAL Is the business community together enough to look after its interests in this way?
There is no shortage of opportunities. The international oil companies have had State Department blessing to get together on oil pricing strategy since 1971. The international banks tie all business interests together in guiding money flows and investment decisions for the future. Top bankers and financial officials from all over the world are continually meeting to pull the world economy together. We have seen how the IMF is already using discretionary funds to control national governments. Other business "unions" such as Business Roundtable and trade associations exist in abundance. Organizations such as the Advertising Council coordinate business interests in the media. Consulting firms and research institutions assemble a consensus of the best thinking on business policy. Even government, or that part of it that has traditionally existed to serve business, coordinates and facilitates policies for the benefit of business as a whole. Add to this the possibilities of private meetings worldwide and the spur of imminent economic disaster. It all adds up to an integrated operation. If business did not have strategic capability, it would hardly have made it this far through the unstable '70s.
Assuming that business is serious about surviving, we can expect it to get fully behind dependency reduction. It is easy to fan the flames of tax revolt; the dependency reduction that has to go along with it is the difficult task. And the hardest part is getting it started. Progress will be very slow at first, and the economic and political stress very high, as the new ideas and techniques gradually gain a foothold in our socioeconomic structure.
As these techniques begin to take effect, however, a momentum will develop. Less dependency means liberated lives. Less government means less regulation, more economic and personal freedom. Less taxes means more money to spend and to invest in the future. New technology and lower living costs will ease the burden of staying alive. All these changes arriving together will tend to produce an explosive release of human energy, a boom in prosperity and new business opportunities, a sense of release from the chains that were keeping us from the future.
Once we find that reducing government works, we will continue the process with enthusiasm. But there is one more major obstacle to be dealt with.
POLITICAL CURRENCY One of the factors entering into the tax revolt is the sense of popular power, the power of the individual to say no and see the system respond. As the tax revolt continues, business and government will be competing for voter support, and popular political power will emerge as a determining factor in this revolution. It can be applied for or against business, but that is not the problem. The problem arises if it is applied through the medium of government. Then it's back to square one, with the government extorting taxes to protect the people from business, a process that is well established today in the areas of environmental protection, consumer safety, and so on—serving no one else as much as government itself.
It is necessary to replace this process with direct negotiations. Just as business can negotiate with unions over wages and working conditions, it can negotiate with consumer and environmental groups over their interests, short-circuiting the governmental process.
Unlike unions, these interest groups would not have a monopoly. And their bargaining power would be in the form of political currency.
Politicians know all about political currency. They buy and sell and trade on it and make sure that the public never get their hands on it. It starts off as votes, purchased efficiently through the electoral establishment, and is parlayed into the wealth of Washington (see "The Wealth of Washington," Harper's, June 1978) and lucrative interventions in the business and financial spheres. The public interest groups that went to Washington in the past 10 years had political currency, derived from their voting membership, to sell. But they fell among thieves. Government took it and turned it into great new agencies, bureaus, and office buildings.
If public interest groups can go directly to business, they can get a better deal. And business can provide an incentive for them to come in the form of financing—something that has been their perennial weakness. The free rider problem is solved if membership is costless. Membership would increase. A sudden expansion of public interest groups and removal of voting power from the disposal of government would result from this simple innovation.
A radical idea? No. Its progenitor already exists. It is called a class action suit. The courts, inefficient as they are, still do a better job of resolving disputes between business and the public than does the legislative-executive monster, and the principle of reimbursement of the costs of the exercise has been established.
This idea can take many forms. Besides the two just mentioned—public interest "unions" and class actions—we might find business courting the electorate by responding to popular grievances before the government can exploit them. Arbitration agencies may arise to mediate disputes and bypass the judicial branch of government. Free markets in political currency could arise, cutting out the machinations in Washington. Computers and telecommunications could decentralize the political process and make a form of continuous direct democracy possible. Voter needs and attitudes, properly collected, interpreted, and marketed, could be translated into appropriate public and individual benefits without empowering a government monopoly along the way.
The possibilities are vast. The only government monopoly that emerges intact from this process is that which maintains the constitutional and legal framework. This is the source of the people's voting power and political currency, and they would do well to preserve it.
All these weapons against government—the tax revolt, control of the media, financial control, reduction of dependency by various means, and, finally, nongovernmental politics—form an impressive array. If they are all applied at once, government growth can be reversed, its dominance broken.
After that, the momentum of success can lead to the fulfilling of libertarian goals and, incidentally, those of many other humanist, progressive, liberal, left-wing, and right-wing groups. It's an all-win solution—all, that is, except those who derive their happiness from wielding State power.
From this perspective we can recognize the tax revolt as the start of something big, the start of a whole new era. A high-technology, self-governing society would represent a new phase in the evolution of mankind. In California, 1978, we took the first step in this transformation. Can we go the rest of the way?
Mr. Brownlee is a systems engineer and economist from Ireland who has worked for several major corporations on electric transit projects. He is now doing private research on the economic-political dynamics of the future.