Page 9


Economic Immunization By Bernard Rapoport The obvious. In numbers as well as in influence, bureaucracy is increasing in geometrical proportions and this bureaucratic spirit seems to be \(in the same attitude relative to his access to those who are in control of our society. It leaves many of us with the view that it is easier to contain corruption than power. Two of man’s most glorious discoveries in my view are democracy and capitalism. My concern is whether we can continue to enjoy either of them. Concomitant with the bureaucratic picture and equally debilitating is an increase in the concentration of economic and political power. Fewer and fewer companies dominate the economic scene and in a political sense federal control is totally overshadowing state and local government. Multinational corporations have their tentacles in every part of the world. We always are puzzled over which came first, the chicken or the egg. In our world the beginning is with economic power. As it becomes increasingly concentrated, less and less opportunity is afforded as to the possibilities for an individual to have a realistic opportunity to go into business for him or herselfin effect, a denial of the opportunity that capitalism is supposed to represent. The work ethic is an integral part of the justification for democracy and capitalism not only here in America but in Western Europe as well. Unemployment is a condition that we are beginning to accept as normal. We can’t quite decide whether 6 percent, 8 percent or 4 percent is acceptable. Perhaps the answer will be supplied by a bureaucracy established to make this determination. As we proceed along the lines of increasing monopoly and monopsony, as a society we become less sensitized not only to the economic cost of unemployment but to the great social cost which goes along with A society that provides realistic tu nity is one wl -tii.:41 has a constant strEarn of capital formation. It not only reinfem -3,’, the commitri, ,:nt to capitalism, but sinci: newer businesses are more labor intensive, it provides a more realistic answer to avoiding unemployment. When we consider the effects of monopoly and ilonopsony I submit that they thwart the opportuniy for capital formation because the sums required in monopoly enterprise are so vast that we get to the point where we seem to be today, to wit, there is just not sufficient means with which to provide capital requirements. The truth is if we had an infinitely larger number of businesses in America, the requisites for capital formation for such businesses would not be nearly as severe as what we are experiencing in our country today. We are reluctant to admit that man’s nature is aggressive. It doesn’t have to be, perhaps, but as Dennis Gabor said: “I believe in the perfectibility of man, because this is the only working hypothesis for any decent and responsible person. But I know of the almost infinite corruptibility of man. History is mostly a sad tale, full of nauseating examples.” Since this is the record, it would appear that the only meaningful alternative is real competition. The thwarting of the trend toward monopoly is best achieved by creating those laws which will prevent its occurrence. The proper approach to eliminating monopolies is through the taxing deviceyes, a tax on bigness. For example, if the company did $100-200 million a year in business there would be a 1 percent tax on gross sales; $200-300 million, the tax would be 2 percent; $300-400 million, 3 percent; $400-500 million, 4 percent; $500-600 million, 5 percent; and so on. In other words, if one bought a car from General Motors, the tax might be $10,000 or $12,000 and a similar car from American Motors would have a tax of $30 or $40. I know there will be tumultuous shouting against this kind of proposal, such as “Do you want to stop progress?” “How will we compete with other nations?” “What will we do about the foreign multinationals that operate in our country?” These are serious questions. I submit that an even more serious one is what do we mean when we talk about preserving the “American way of life”? Everyone is in favor of that, and yet it almost defies definition. What we perceive it to be is a country that affords great opportunity in a climate of freedom. Promoting this requires, it seems to me, the kind of tax that I have just outlined. I do not favor limits on growth except at that point where it threatens our precious democracy and economic freedom. I suspect ‘too that we have been brainwashed to the point where we have more confidence in machines than we do in people, that we relate efficiency to what is bigger and accept this as an incontrovertible fact. I suspect this is just another one of those myths that can be exploded with proper investigation. The concept that I have advocated above is what I call economic immunization. We understand immunizing our population against disease. We need to extend this thinking to our economic system as well. Personally, I feel that President Carter’s approach toward the capital gains tax may be right in terms of shortterm gains. I do not believe that there should be special treatment for income gained from the sale of stocks in the short term. Gains from such transactions should be fully taxed because such “deals” make no meaningful contribution to the national interest. We should enact those tax credit laws which do change behavior to the national interest. For that reason, an entrepreneur who wants to start a business and holds the stock for ten years or longer has made a contribution to the national interest and a 25 percent tax rate for him or her would be in order. Anyone who has experienced the trials and tribulations, and especially the risk, attendant to initiating a new enterprise can fully understand this point. A proper use of the tax credit has been suggested by Jerry Brady of Senator Kennedy’s staff. This was to give a credit of $300 or $400 to each American family to put in storm windows. Now again, here a tax credit could change behavior to the national interest. Not only would it result in lots of new jobs, but would lessen our energy needs. The shortness of space allocated for this essay is such that I will not address myself to such problems as regulation and consumer protection laws, except to say as regards the former I would think that most boards relating to economic control should have three business representatives, three labor representatives, and four public representatives. On the Consumer Protection Act, I favor enactment for the reason that a confident public will buy more and such an agency would contribute to the public’s confidence. In conclusion, I think categorical cliches sound good even when they are on opposites, such as “small is beautiful” or contrarywise, “freedom without restraint.” Neither one can be accepted as the final answer. I believe economic immunization, that is, building into our economic system those inhibitors that will prevent those happenings to our society that inure to its detriment, is one approach that needs to be considered seriously by the administration and our Congress. The ideas expressed here are for one intentto stimulate intelligent dialogue that will promote democracy and capitalism. American Income Life Insurance Company Bernard Rapoport, Chairman of the Board P.O. Box 208, Waco, Texas 76703 AUGUST 11, 1978