Chapter 4 Model Framework of Economic, Legal and Political Institutions

4.0 Summary and Outline of a Proposed Constitution
4.0.1 Summary
4.0.2 Outline of a proposed constitution and its goals
4.0.3 Human rights and laws
4.1  Utopias Versus Realistic Model Institutions
4.2  Economic Institutions:  Money Supply and Industries
4.3  System of Taxation; Minimum Basic Income; Incentives for and Limitations on Economic Activities
4.4 Social Organization
4.5 Improved Democratic Governance
4.6 Ethics, Psychology and the Legal System; Crime Prevention
4.7 International Organizations


Cultural institutions are not shaped by the character of the people, rather, institutions shape people, their character, and their interactions. We are born into cultures and few individuals are able to actuate changes. The goal of this model is to create institutions that improve human interactions and the quality of life of all people.
Incentive structures are a central problem in most democracies. In the USA, economic incentives encourage unethical behaviors by banks, corporations and governmental institutions; with risk taking in business decisions and political actions, the influential person may win or not win, but losses are passed on to customers, investors, workers and society.
Of particular significance are economic institutions and the study of natural ethics. Ethical principles must be integrated in all institutions and considered in all relevant decisions.
In this model, the economy is decentralized. Economic activities are supported by savings, interest-free loans and grants, issued by local branches of the central or federal bank and by local cooperative banks. Lending activities by banks are very limited. Production facilities are mostly owned by their workers and people directly involved with the products’ design, development and distribution.
Taxation consists primarily of sales and property taxes. Levels of taxation are designed to encourage economic activities that are ecologically sound and improve the quality of life; many products and production processes are discouraged through luxury and dyseconomy taxes (dys- means ‘bad,’ ‘painful’). All citizens receive a basic minimum income, which may be considered a return of sales taxes on basic consumption, and for the very poor, a negative income tax. This income varies according to location and is adjusted to the local economy.
The political system is a highly decentralized multiparty democracy. Governments usually contract with local enterprises to provide the services for which they take responsibility, to build and maintain the infrastructure, etc. Improved principles of voting are applied.
An independent government branch arranges elections and referenda. This agency is responsible for informing the voters on candidates and issues. It also determines basic qualifications for candidates (mainly educational), and who may vote; for instance, in a referendum concerning women’s issues, only women may be allowed to vote.
To halt ingrained unethical traditions and to avoid conflicts of interest, elected and appointed officials must not be citizens of the area they govern or of neighboring areas, they must come from distant places and/or cultures; as an alternative, important positions may be shared by a local politician and a person recruited from a distant area.
Human rights, important issues of international or global concern and ethical decision-making are taught at all levels and implemented wherever possible. Self-monitoring and peer supervision are broadly instituted. International cooperation is a high priority.
There are no courts that determine guilt and punish. Negative consequences of unethical and dangerous behaviors, such as fines, are to spoil rewards of the behaviors. Conflicts between individuals and conflicts between or within institutions are referred to public mediation and arbitration services. Persons who are dangerous for any reason are considered emotionally disturbed; they are generally treated as persons with a mental (psychiatric) disorder. Treatment of emotionally disturbed persons is comprehensive and includes different levels of services within the community or treatment in residential settings, short-term, long-term, or indefinite. While ending patterns of violence and protecting possible victims is a primary goal, perpetrators must be treated in a humane way.
Economic changes may appear most difficult. However, with a political will, disincentives to speculative investments, which threaten the whole world economic system, are possible. To summarize relevant steps: Separating conventional banking from speculation and investments in the ‘shadow banking system,’ and forbidding banks’ investing in complex ‘financial instruments’ such as derivatives and hedge funds, ‘synthetic portfolios,’ etc. All sales of stock, bonds and other securities and real estate should be taxed, slowing down transactions, encouraging long-term planning, and giving governments added income. Newly issued money should be directly moved into circulation rather than into bank reserves; conventional bank functions are maintained with people depositing savings and borrowing mainly to buy homes, enterprises mostly investing own profits and borrowing some from banks to expand and for research and development. Additional funding of enterprises may consist in bonds and stock that are only sold to people directly involved with the design, production and distribution of its products. Individuals and enterprises should own enough money to operate without significant loans from private investors and financial institutions.
A shift in thinking is needed: Owning capital, such as real estate or a business, gives people the freedom to work independently, doing management work, realizing one’s skills as farmer or in a business, etc, and it is valuable for added retirement income when later selling one’s assets. It is ethically wrong to expect that just owning properly should bring profits. Owners’ demand of rents above what is needed to maintain the property and pay taxes led to the incredible accumulation of wealth in very few families. Profits do not lead to progress, people with a drive to make improvements do. Managers and specialists do not deserve hugely higher salaries than unskilled workers who do needed work that nobody else wants to do. For the success of surgeries, cleaning personnel, infection control nurse and surgeon are similarly important. Financial “services” are not helping the economy by optimally allocating material resources; they sift profits off other people’s work. CEOs may have talents but in few civilizations are they paid incomes hundreds of times higher than salaries of average workers, as is common in the USA.
Progress is not guided by profits: ideas of visionary leaders and scientific-technological work do. Most scientists, engineers and inventors are paid employees who will not own and profit from the patents gained in their work. Investors hardly understand whether the money they lend will be well used but with very high profits from some investments, they can risk losing much money in other endeavors. Leaders in the field, many of whom work in universities, and peers who work in leading enterprises would be much more qualified to allocate money for research and the development of new technologies.
Profits distort directions of developments. What is simply good is usually seen with suspicion and may not attract investors. What is enticing and addicting is much more likely to bring high profits than what improves people’s quality of life.
Proposed changes in legal systems are less radical than they may seem. A move towards mediation, only minor punishments and a main focus on rehabilitation, rather than punishments, is taking place in many civilizations. Peace, not punishments or ‘justice,’ was the main goal in settling conflicts in ancestral gathering-hunting civilizations. Punishments that are much more severe than the crime, such as stoning people for premarital sex or hanging a thief, have been futile attempts to make people complacent and were embedded in religions; “an eye for an eye” was actually a move towards less cruel punishments and Christian ethics does not condone any punishment.

continuation at 4.0.2, 4.0.2

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