A Worldwide Jeffersonian Moment?

A Worldwide Jeffersonian Moment?

A confrontational spark has already jumped onto our phone screens. Violent clashes have taken place in Chile and in France.

In both countries, the youth and the Gillet Jaunes revolted against the imposition of austerity measures tilted against their interests while the clerisy continue to enjoy the benefits of financial swindling, to put it in Jeffersonian terms.

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From Piketty to Stiglitz, from The Economist to The Atlantic, a consensus seems to exist on identifying inequality as the triggering factor of social discontent and stormy protests movements.

And while there is no doubt that inequality has risen in the last two decades, it does not seem to have pushed its victims into a revolt.

On the contrary, protesters everywhere are middle class citizens who are rather well off and have enjoyed social mobility for at least two generations. Certainly, the world had never experienced a larger period of political stability and economic growth as that which has followed the defeat of Nazism at WWII.

So what is behind these movements?

According to Hernando de Soto, the revolt has been triggered by the emerging middle classes which have a net worth anchored to real capital assets and thus have created wealth by deploying such assets but cannot continue to augment their wellbeing because they lack titles to those assets.

They are what economists define as the informal economy. But in all truth these are the last milers of capitalism, because they provide services that connect consumers with products or services that are essential to create wealth.

In so doing they use capital that while being in their hands does not render itself to financial speculation as they lack the ownership of such capital that comes in the form of land. That land supports home-factories, as many serve as workshops to create the most varied products ranging from custom jewelry to jams and other edible products.

But the land also is used in agriculture and in cattle raising. According to Mr de Soto, who recently lectured the Miami Freedom Forum, the total value of those lands held by “informal” workers is $150 trillion, which is about 5 times the combined GDP of the U.S. and China.

The question then arises: what is preventing 2.3 billion people from getting titles to their assets?

The short answer is rule of law.

The long and inconvenient answer is that it is the clerisy or the cluster of people who benefit from regulations and standardization of every activity that generates wealth and who thrive on financial snowballing.

These people live on what the third president of the U.S., Thomas Jefferson, described as “fictitious capital”, a concept used also by Karl Marx in Das Kapital.

According to Jefferson, fictitious capital is that which is not anchored by rights over assets, equity and liabilities that guarantee loans.

In order for fictitious capital to prosper, you need to create as many institutional monopolies as possible so that links between financial growth and real assets are lost.

Jefferson, thus cautions in his letter to Richard Rush about the detrimental consequences for future wealth creation that fictitious capital can carry. Today the world is drowned in fictitious capital to the advantage of the clerisy and the disadvantage of the informal workers who derive their wellbeing from asset backed economic activities.

And as they continue to grow in number and significance, this segment of the population will question the legitimacy of the clerisy.

A confrontational spark has already jumped onto our phone screens. Violent clashes have taken place in Chile and in France.

In both countries, the youth and the Gillet Jaunes revolted against the imposition of austerity measures tilted against their interests while the clerisy continue to enjoy the benefits of financial swindling, to put it in Jeffersonian terms.

The world already went through a similar confrontation in 1789 when the emerging bourgeoisie decided to bring to a stop the rights and privileges of the nobility. But that was localized in France. It will be very interesting to watch how this confrontation evolves in a larger set and with about half the world population participating in the class substitution exercise.

 

Published by laht.com July 15, 2020

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