WS>>The White Economy

carl william spitzer iv cwsiv_2nd at JUNO.COM
Tue Nov 18 18:15:41 MST 2003

          by Linda Johnston, MD, DHt

          "We call it the White Economy," said Big Al. If you are
     not familiar with him, Big Al is the hardy, football-player-
     sized,  working-class, Yorkshire character in Alan  Plater's
     1984  comedy/mystery,  The Beiderbecke Affair.  I  like  the
     phrase "White Economy" so much I wish I had coined it, but I
     didn't. Let's give credit where credit is due and shake Alan
     Plater's  hand  and  do our best to bring  it  into  general
     circulation.  After all, its about time to give a  less  pe-
     jorative name to private initiative, entrepreneurial  energy
     and a pure market economy than Black Market.

           Big  Al has such an eminently sensible,  down-to-earth
     view  on life that you wish he lived next door to  you,  was
     your  uncle  or at the very least was  running  the  Federal
     Reserve  or the IMF. He was made redundant (laid  off)  from
     what we can only suppose was one of those heavy labor  manu-
     facturing or building jobs that had been the backbone of the
     industrial  north of England for decades. Although he  looks
     the part of a construction worker or steel mill operator, he
     doesn't  talk the part. We don't hear anything about  unions
     or  unemployment  benefits or capitalistic  pigs  or  greedy
     owners in their poncey suits. Big Al is one of a dying breed
     of men who take care of themselves.

           Not content to sit around and lick his wounds or blame
     others,  resourceful Big Al starts his own business, a  pri-
     vate, door-to-door catalog sales organization made up of the
     good  deals  that individual people get  through  their  own
     friends and coworkers, a sort of eBay without the  Internet.
     He  stores the goods in the basement of his  parish  church.
     Big  Al can sell his goods for less because he  has  minimal
     overhead,  pays  no  sales (VAT) taxes,  no  payroll  taxes,
     unemployment  insurance taxes, has no licenses,  permits  or
     other  scraps of useless paper that the government  requires
     before someone can use his own energy, ideas and  initiative
     to  run a business hence the White Economy. "It  was  those
     same people in Whitehall that made me redundant. The  system
     told  me  I was of no further value to society. This  is  me
     saying bullocks."

           Big  Al created a market that is doing exactly what  a
     market should do: bring goods that people want to buy to the
     people  who want to buy them.  What makes it a White Economy
     is  that it is not doing what a market should not be  doing:
     being involved in social engineering, reforming human  char-
     acter,  funding  idle bureaucrats, supporting  other's  good
     causes,  providing welfare for people who don't  work,  pro-
     tecting  favored  industries,  giving  benefits  to  certain
     groups,  enforcing quotas, employing inefficient workers  or
     any  of the other duties that have been piled on the  wagons
     which bring goods to market for sale.

           Economics  101 tells us about the irrefutable  Law  of
     Demand. It is quite simple really: the more something costs,
     the  less we buy of it. When the real price of something  is
     drowned  under the added costs of government and its  plans,
     we  buy  less. Government spokesmen assure as  that  we  are
     getting a lot for our money essential services like police,
     firemen,  schools and things like that. They  don't  mention
     the hundreds of thousands of other useless, frivolous expen-
     ditures,  the waste, fraud, patronage and vote  buying  that
     goes  on with the largess that is extracted from people  who
     buy  and  sell  things by people who have  not  earned  that

           A  great  deal of harm is done to the economy  by  the
     government actions which increase the price of a good  with-
     out  increasing its value. Oscar Wilde said it  almost  cor-
     rectly when he quipped, "Americans know the price of  every-
     thing  and  the value of nothing." It would have  been  com-
     pletely  correct if he had attributed this particular  igno-
     rance to bureaucrats instead.

           Economists measure the harm done to markets by compar-
     ing  the  decreased  amount of goods sold as  the  price  is
     raised  through  the visible and invisible taxes  and  other
     government costs, to the amount that sells at the "real" un-
     governmentized  price. As bad as that is, there is more  bad
     news.  The  government doesn't even get all the  benefit  it
     extracts from the market. This loss of market activity costs
     more,  often  much  more, than the gain of  benefit  to  the
     government. This difference is called, appropriately enough,
     Deadweight  Loss. A market contaminated by government  costs
     is  the real "Black Market" because so much of  its  profits
     disappear down a big government deadweight black hole.

           For  example,  a dollar collected  by  the  government
     could  cost the market $1.30 in lost transactions.  That  30
     cents is the extra cost for the dollar, except we get  noth-
     ing for it. You might as well go down to City Hall and  give
     them $1.30 and take only a dollar in change, before you give
     them that dollar in taxes. When we add up all the deadweight
     losses  from  all the taxes, fees, licenses and  other  non-
     productive  costs,  it is no wonder that the  market  crawls
     instead of sprints. Have you ever tried running to the  goal
     line  with  a  60-pound pack of bricks on your  back  and  a
     concrete  ball chained to your ankle? You think not? If  you
     own  a business, work in a business or buy from a  business,
     you are doing the equivalent every day.

           Big  Al formed his own White Economy in 1984.  Do  you
     remember how things were 19 years ago in that George  Orwell
     year?  That was the time when personal computers were  rare,
     the Internet was barely a gleam in its founders' eyes and we
     all  wish we had been buying Microsoft and Intel stock.  How
     prescient Big Al was with his small enterprise flying  under
     the government tax radar screen. From that humble beginning,
     we  now  have our own enormous,  supercharged,  turbo  White
     Economy. All of this market activity has such a  significant
     economic impact precisely because it can operate as a  White
     Economy.  No more do sellers and buyers, not wishing to  pay
     such exorbitant costs added to goods for the  non-productive
     activities of non-producing people, have to know that secret
     friend of a friend of a friend or sneak behind warehouses in
     the  dead of night to buy tax-free cigarettes or watches  or
     cameras  or shoes or any other goods. Each of us can  simply
     log  on  to any one of millions of web sites  and  buy  just
     about anything we want, mostly tax free, and from  business-
     es,  many  of which are license free and  located  in  areas
     where the other involuntarily added costs are minimal.

           Bureaucrats,  long accustomed to the easy pickings  of
     the captive audience of businesses, are squealing. Maybe  it
     is their turn to know what it feels like to be made  redund-
     ant. "Tax the Internet" is their clarion call and the  topic
     of  many meetings in every jurisdiction across the  country,
     and  even the world. They just haven't found a way to do  it
     yet, but I suspect in their heart of hearts they are  begin-
     ning  to realize what the rest of us have known for  a  long
     time now; the White Economy is here to stay and won't be  as
     easy to plunder as market activity has been before.

           I recall a story told by Joseph Ricketts, the  founder
     of  Ameritrade, the innovative company  that  revolutionized
     on-line stock trading. It was not long after its arrival  on
     the scene that its phenomenal success and prosperity came to
     the  attention of Mr. Rickett's state's legislators.  I  can
     just imagine them pouring over the company's prospectus with
     visions  of  sugarplums dancing in their heads. A  bill  was
     introduced  proposing  some type of new business  tax  that,
     although it did not mention Ameritrade by name, was aimed at
     them specifically. Joseph reminds me a lot of Big Al and did
     what he probably would have done. He picked up the phone and
     called  his state senator, casual-like, for a chat. He  men-
     tioned  that being an on-line company, he could pick up  and
     move  his  entire operation to another state for  much  less
     than the proposed tax would cost him each year, and he would
     not  hesitate to do it. The bill suddenly disappeared.  This
     is  only  one small aspect of the White Economy's  power  to
     resist attempts at plunder.

           Big  Al had read an article in a  financial  newspaper
     that warned (in typical Chicken Little fashion) that "all of
     this sort of thing was undermining the Whitehall economy and
     could  bring  the  whole of  civilization  toppling  to  its
     knees."  Big Al's reply was not so prescient, "I  don't  see
     that, personally. It is not going to happen just because  me
     and  Little  Norm are selling hedge cutters." Yet,  that  is
     exactly what it is doing to the "Whitehall civilization"!

           There  are  many wonderful scenes in  The  Beiderbecke
     Affair about free enterprise, privacy, government  interven-
     tion,  personal  initiative, crooked  police,  city  counsel
     members on the take and other surprisingly timely issues  of
     freedom.  If you haven't joined the White  Economy  already,
     buying  this  film through an Internet  company  that  sells
     video  products would be the most tantalizingly  appropriate
     way to join in.

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