An objective observer of today’s divisive politics in the Western world would note that Progressivism on the left and social conservatism on the right are ‘failing to launch’ with the center of the electorate that decides elections and sustains viable political movements. Why? Both violate our two core natural rights: exercise of free choice in all aspects of life and ownership of our labor free of 3rd party taking. Naturally, they’re each doomed to fail. Daniel Henninger’s WSJ Op-Ed: Why The Left Can’t Govern explains the problem on the left. On the right, Mitt Romney was the most qualified executive to ever run for office and the economy was in the worst shape since the late 1970s. ObamaCare was a government run train wreck in the making. Romney still lost because he and the RNC wanted in short to deport illegal, yet productive workers; create a national marriage amendment; and overturn Roe v. Wade (even though Romney had opposite positions within the last 10 years before running for President twice-another problem). The GOP gifts 35% (and growing) of the vote to the Democrats even before the primary season starts and there is nothing much different with the 2014 national GOP position.
So what’s the fix? Our elected leaders simply need to apply a winning evolutionary strategy called ‘win-stay, lose-shift’ when they develop public policy. This strategy is simple: you expand policies that work and change policies that don’t work until the greatest number of stakeholder groups realize the greatest benefit. In doing so, you create what’s called in the science world an ‘evolutionary stable strategy’ that permanently beats competing strategies such as Progressivism or pure free market capitalism. Of course, I submit that an Ownership Society is that socio-economic ESS, next mutation of capitalism, and logical complement to representative democracy as an established political ESS. More below.
First, today’s backdrop. American society, and our politics as a result, is increasingly polarized as measured by all-time time highs in stock market value, GDP/capita, federal taxes paid/GDP, and federal taxes paid by the rich/total taxes. On the other hand, national debt/capita and dependence on government programs are all time highs, and inflation-adjusted median household income is close to flat since 1980. Two earlier OS posts frame this divide: 1. OS Post: Bill Gross on Income Equality; 2. OS Post: 2014 State of Our Government Dependence. The government-led economic remedy since the New Deal in the 1930s is expanding Progressivism and inflationary New Keynesism monetary policy. This one-two punch has actually increased income inequality by applying regressive income taxes on one generation of lower-middle income workers to pay current government bills including Social Security, Medicare, and Medicaid programs for retiring beneficiaries. Further, a high octane free market capitalist system fueled since 2008 with $3.8 trillion of fresh cash from the US Mint money tree has inflated all assets to near all-time highs. Consequently, asset owners have become richer while lower and middle income workers who are paying Social Security/Medicare taxes have nothing left to save and invest after higher bills for housing, food, utilities, and clothing.
‘Win-stay, lose shift’ history: Dating back to 1993, evolutionary dynamics mathematicians have simulated various human behavior in response to changing environmental conditions and other persons’ behavior using computer models. The modeling has proved that the ‘win-stay, lose-shift’ strategy is a superior strategy above all competing strategies like Prisonner’s Dilemma defector (take what you can and run), tit for tat, and generous tit for tat. Harvard Dr. Martin Nowak’s 1993 research provided a mathematical explanation for the winning strategy compared to others. This axiom is the foundation of our genetic natural selection process. Our genes, and any life form, will compete to win as a default behavior. Darwinian survival of the fittest explains the winning performance of a capitalist system to generate greatest taxable wealth for owners as well as the relative political success of Progressivism to try to remedy the natural inequities with collectivist entitlement programs. The good news is we have a proven evolutionary solution:
Dr. Nowak’s evolutionary dynamics team at Harvard’s Program for Evolutionary Dynamics has developed 5 Rules of Cooperation in which people will cooperate out of enlightened self-interest perhaps with different expected outcomes.
- Kin selection: people will take care of their closest blood relatives. This was the only accepted rule of cooperation in the evolutionary science world until Nowak and others’ modeling work in the 1990s.
- Direct reciprocity: I scratch your back, you scratch my back. Modeling now proves the Golden Rule.
- Indirect reciprocity: Cooperate with others in a community where reputational value is important and may effect future relationships.
- Spatial selection: Cooperate with people in closest physical proximity. Example is shared property interests in a company or community.
- Group selection: Members of several smaller interconnected groups will cooperate more than members of a few larger groups.
Below is a solutions list based on ‘win-stay, lose-shift’ strategy that supports exercise of free choice and greater ownership in our labor. The proposals do represent an ‘intervention in the free market system’ to ensure public policy like the tax code best serves these two natural rights essential for sustainable prosperity and social harmony.
- Education. Charter, parochial, and private schools work! Smaller class sizes are proven better learning environments. We need to end education discrimination of the public school monopoly. Look at NYC’s Success Academy Charter results. We need to support school choice with means-tested vouchers, liberate hiring/firing to school administrators by eliminating tenure as an employment guarantee, encourage educated workers to enter the teaching profession with tax incentives, and reward high performing schools and teachers with supplementary bonus compensation from new public-private education trusts that private industry can fund. See OS: Education Solution.
- Wealth creation through asset ownership: Individual stock ownership in liquid public equities generates 7-9% long-term compound capital appreciation above any other asset class. Long-term asset ownership especially of homes and financial assets (stocks or bonds) works! We need all Americans to have a minimum investment account on Team USA, Inc. so they enjoy these proven benefits and become financially independent in retirement. OS Post: Minimum Investment Accounts.The relative community success of Silicon Valley, Seattle, Austin, Minneapolis, Boston, Silicon Alley-NY, Nashville, and Dallas is the presence of successful companies started and sustained with substantial employee stock ownership. To note, the S&P 500 has generated a 8.98% total return (including dividend reinvestment) or 6.77% adjusted for annual inflation rate since 1871. You’ve seen this slide before. We need to eliminate capital gains tax on stock sales to employee stock ownership programs or any 20% US employee owned company (excluding founders, officers & directors); permit tax-deductible ESOP interest and principal deduction; tax credits for ESOP interest if taxable income growth covers the tax credit cost; treat all stock options as qualifying options; offer $3-4/hour of tax credits for performance-based employer contributions to minimum wage employees’ 401(k) accounts; and allow workers under 55 to direct their Social Security taxes into personally-owned, government administered retirement accounts. $10k invested/year compounding at 5.3% real return for 30 years generates the results below. That’s independence.
- Health care: Consumer choice, transparency of price and quality, accountability for consumption and lifestyle decisions, competition across state lines, and private management of public programs all work! We need to repeal ObamaCare and liberalize a currently protected industry with archaic trade barriers to competition. Medicare and Medicaid should be 100% privately managed in a manner that guarantees annual cost savings to current public programs, comparable benefits, and same choice of physician. Medicare HMOs already manage 30% of Medicare and 100% of Part D prescription benefit. They should manage 100% and guarantee annual savings. Medicaid is already almost 80% managed by private HMOs under strict performance requirements. Let’s get to 100%. OS Health Care Proposed Solution.
- Retirement: Social Security taxation is a highly regressive tax that gives today’s workers no hope for secure retirement simply based on today’s math of an aging population. The benefit cuts and/or tax increases are unrealistic if we wait to reform. Workers under 55 should be able to direct 100% of their Social Security taxes into a personally owned and directed retirement account that can be administered by the government. Assets remain with the individual’s descendants at death. OS Retirement Proposed Solution
- Immigration: We have over 7 million productive, yet undeclared workers in the US paying sales taxes, Social Security and Medicare taxes if working under false Social Security numbers, and property taxes through rental or owned property. They are performing jobs many Americans would not take. They need to have a ‘Dream Card’ 3-5 year path to citizenship. OS Immigration Proposed Solution
- Rejuvenation & Relationships. Everyone needs to have the right to their personal property, a second chance at the American Dream if they have fallen on hard times, and the legal rights of a same-sex civil union. Freedom of choice and association our key natural rights.OS Rejuvenation & Relationship Solution. Look at the fantastic work that Twin Cities RISE is doing to rehabilitate former welfare recipients. Twin Cities RISE vocational training success story. Look at the great work Purpose Built Communities is doing to rehabilitate run-down communities and give families a second chance. Purpose Built Communities case study.
In summary, our elected leaders need to take highly successful private sector working models, incentives, programs, etc. and scale them at a national level. ‘Win – stay/expand, lose – shift/adapt’ is an evolutionary axiom. Our leaders just need to embrace the strategy to craft policy that rewards cooperation among stakeholders in a natural way. We voters need to hold them accountable when given the chance.
Note: Seminal evolutionary science books, The Selfish Gene by Richard Dawkins and Supercooperators by Dr. Nowak will give you a readable deep-dive on the evolution of cooperation.