"No government of the left has done as much for the poor as capitalism has. Even when it comes to the redistribution of income, the left talks the talk but the free market walks the walk. What do the poor most need? They need to stop being poor. And how can that be done, on a mass scale, except by an economy that creates vastly more wealth? Yet the political left has long had a remarkable lack of interest in how wealth is created. As far as they are concerned, wealth exists somehow and the only interesting question is how to redistribute it." ~ Thomas Sowell
Minerva, Chapter 9
'Good evening,' Tara said into the camera and flashed a brilliant smile. She was wearing a conservative suit and her hair was pulled tightly back into a bun. 'On tonight's edition of The Other Hand, we're pleased to have with us Doctor David Mason, distinguished professor of economics at the University of Minerva . Tell us Professor, how is our brave new university doing?'
'Our enrollment is constantly growing,' Mason said, dodging the question. They had only recruited one hundred and thirty students, almost all of whom were the children of parents who had immigrated for ideological reasons. So far the tuition didn't even cover expenses; Mason himself received no salary. But it was all worth it: Here he had a chance to mold an entire generation of radicals.
'Although Professor Mason needs no introduction for our local viewers,' Tara continued, seeing that Mason would not elaborate on the university, 'our foreign listeners might not realize that you are considered a living legend here in Minerva. Professor Mason was in many respects the intellectual architect of the Minervan system, which is basically predicated on Mason's simple yet catchy motto: 'Freedom works.' Now that I have you here, Dr. Mason, I want to know: How do you feel when people refer to you as our George Washington?'
Mason blushed. He derived great amusement from Tara 's phrase 'our George Washington'; this was obviously part of the act, since Tara would never have talked like this in private.
'Inasmuch as I am neither a military leader,' Mason said softly, 'nor have I extracted my salary from my fellow Minervans through the threat of force, I would not consider myself analogous to General Washington. Benjamin Franklin, perhaps.' Mason considered. 'Now your husband, on the other hand, he is a General Washington.'
Tara just smiled. Her producer had discouraged any on-air references to Peter; he said it was unprofessional, but Tara thought the real reason was that half of her viewers were infatuated with her.
'Professor Mason,' Tara said, 'over the past week we've had several guests comment on the cultural and political impact that the little island of Minerva has had. As we approach the fifth anniversary of our founding, what reflections can you make from an economic point of view?'
'I think the most obvious economic aspect of Minerva's brief existence is the return to hard money.' Mason paused to pull out a handful of coins. 'I cannot stress how significant it is that the people of Minerva walk around with actual gold coins in their pockets.
'And notes drawn on Minervan banks,' Mason pulled out a few bills from his wallet and held them up to the camera, 'are increasingly being used in foreign countries plagued by hyperinflation. Rather than holding their assets in the depreciating native currencies, average people, especially in Latin American countries, are exporting their wealth to Minerva. It is particularly common for banks such as Granite Trust to convert the real assets into gold, then keep it on deposit in their vaults. For a small fee, Granite Trust then sends its Latin American customers fully-backed gold certificates, which circulate in their countries as money.'
'One of our guests earlier this week, Robert Renhard, commented on this very phenomenon.' Tara leaned slightly forward. 'He claimed that Granite Trust's tight monetary policies were putting Latin American governments in an impossible situation, as well as stifling economic growth right here in Minerva.'
'Well, no one ever said a journalist could do the job of an economist,' Mason said, referring to Renhard's occupation. 'The fundamental flaw in his analysis is his use of the term 'monetary policies.' This is a political notion, and has nothing to do with the terms of the contracts signed between Granite and its customers. If a Minervan decides not to grow tomatoes in his backyard, this is not a matter of 'farm policy.'
'In any event, his empirical claims are preposterous.' Mason paused to let his accusation sink in. ' Latin America has had financial troubles far longer than a mere five years. And as for the growth of the Minervan economy, why, it has been simply unprecedented. Although I have grave reservations about the construction of such indices, U.S. analysts have estimated that over the last three years'so this doesn't include the starting year when output was practically zero'the island's real gross domestic product has grown at an annual rate of roughly 220 percent.'
'Oh come now, Doctor,' Tara said with amusement. 'That figure doesn't adjust for population, am I right?'
'That's true,' Mason conceded, 'but the population is increasing in the countries that currently use GDP as an indicator of economic health; I was merely being consistent. But you're right: Since the population in Minerva has been roughly doubling every year, the per capita figure would be about half what I said. Still, unprecedented.'
'But there are those,' Tara said, pointing her finger for emphasis, 'who say that this rate of growth is unsustainable. The initial population of 5,000 or so plant workers, has grown to a projected 50,000 by year's end. What do you say to someone who thinks, frankly, that we're going to run out of standing room? Where will we put our waste products, Professor Mason?'
Tara held up her hands in helplessness. 'Just dump them in the ocean?'
'Ms. McClare,' Mason said after a moment's thought, 'if we extrapolate from current trends, we can conclude with a high degree of probability that I will remain seated here and eventually crap in my pants.'
Tara said nothing, but Mason waited for any viewers who might be laughing.
'But we know that in reality this won't happen, because surely I will take steps to avoid this outcome, once it becomes an actual threat rather than a hypothetical one.' Mason paused. 'The same is true for society at large, which is, after all, composed of individuals. When the need arises, someone in Minerva will take care of it. As our current dumps become full, or if the price of land renders their operation unprofitable before then, entrepreneurs will devise new ways to collect and remove refuse. Perhaps they'll intensify recycling efforts, perhaps they'll ship it to foreign dumps, perhaps they'll put it on large barges and burn them at sea.'
'I'm sure the other members of this planet will be thrilled with that,' Tara said and smirked. 'But isn't the broader issue, Professor Mason, whether the economic growth can be maintained? Isn't this euphoria an illusion? Apartment sky-rises are going up, huge financial buildings are underway . . . . Won't we run out of jobs?'
'Ms. McClare, you really ought to take my class sometime,' Mason said. 'A moment ago you were horrified that we would run out of standing room. Now, in the same breath you complain that businesses are erecting tall buildings to house our immigrants in the most space-effective way possible.
'We are on a small island, yes,' Mason continued. 'Its area is only slightly more than ten square miles. But even so, our population could grow to 600,000 and we would still have a lower density than the city of Macau , in Portugal .
'Can we use these people? Yes!' Mason smiled. 'Human beings, with their wonderful brains, are the most important resource a city needs. You wouldn't be worried if we imported 10,000 supercomputers, would you? Then it shouldn't worry you when thousands of people from all over the globe leave everything behind and move here to start a new life. A life of freedom.
'Ms. McClare, we already have a booming trade in fishing and tourism. But it takes young boys to work the fisheries and empty lobster traps, and it takes young women to staff our hotels and smile at the drunken tourists. I look around me, and everyday I see hundreds of eager young boys and girls arriving on our docks, hungry for work. This is a great thing.'
'I'd like to go back to something you mentioned a moment ago,' Tara said. 'You said that our immigrants are coming here for a 'life of freedom.' But what do you say to those who claim that Minervans enjoy no political liberty at all, since we have no legislature or elected representatives? Aren't we really just the subjects of Eugene Callahan, president of the Minerva Corporation?'
Mason paused. This was a tricky point; Tara was no slouch. In fact this very issue had been the cause of a major intellectual rift between Mason and most of his old colleagues.
'What you have said is, I believe, a grossly misleading characterization.' Mason paused again. 'There is a certain sense in which, under international law, the shareholders of Minerva could be construed as the legitimate government of the island and its inhabitants. However, in truth they have no special prerogatives in our society, except that which is due to extraordinary wealth. But any actions, at least domestically, they take must conform to our independent legal codes.'
'Perhaps you could elaborate for the benefit of our foreign viewers?' Tara asked.
'Certainly. It is true, when the island was initially settled, all incomers signed an agreement with the Minerva Corporation, which stipulated a standard legal code'based largely on English common law, but I won't get into that here.' Mason paused. 'Now, the special feature of the Minervan code, is that it functions merely as a default. That is, any two parties can opt out of its provisions, and create their own mutually binding legal obligations, so long as they specify this beforehand, contractually.
'What happened over the course of a few years'okay, I'll finish up,' Mason said, acknowledging Tara's raised eyebrow, ''is that more and more people, whether moving into an apartment complex, or signing a work contract with an independent business, would agree to resolve any legal disputes through binding arbitration. In other words, rather than entrusting the outcome of any future lawsuits to the judge provided by the Minerva Corporation, any individuals can agree beforehand on a third party arbitrator, known for his fairness in past rulings. I would estimate that over ninety percent of legal disputes are settled through independent arbitration, and not under the 'jurisdiction' of Minerva (and the only reason it's that low is that almost ten percent of legal disputes involve the Corporation itself). So in that sense, no, we are not at all subject to Mr. Callahan's whims. If employees of the Corporation did anything outside their acknowledged property claims on the island, everyone would instantly recognize it as theft. People would stop immigrating, and foreign capital would stop flowing into our banks. Eugene Callahan may be ruthless, but he's not stupid; he will not kill the goose as it lays golden eggs.'
'A serendipitous metaphor,' Tara said, chewing on a pencil, 'for it leads to our last issue'we're just about out of time. What is your take on the situation brewing on the Lotosian mainland?'
'Yes, a most unfortunate development.' Mason shook his head. Lugar's coup was now two months old; it seemed he would remain in power indefinitely. 'General Lugar is a military dictator. He is in charge only because he has convinced his competitors that he will kill them if they challenge his rule. He is predictably blaming the hardships caused by their terrible war on his predecessor's sale of the island. I fully expect he will launch an invasion within two years. He will claim to be liberating enslaved Lotosians, but in truth his goal will be the vaults of Granite Trust.'
'And this doesn't worry you?' Tara put the pencil down. 'Should we all take our money out of Granite?'
'Come now Ms. McClare,' Mason said and grunted. 'If it ever came down to that, I assure you, the shareholders of Granite would have moved the gold abroad. Believe it or not, they are more concerned about the fate of their gold than you are.'
'You said 'if it ever came down to that,'' Tara repeated. 'Does this mean you think Lugar will decide not to invade? Perhaps due to international pressure?'
'No, Ms. McClare, that's not what I think at all. What I think,' Mason said, 'is that Lugar will assemble a ragtag group of tired, hungry conscripts, will hand them some obsolete weapons, and will ship them over here to be slaughtered.'
Tara 's eyebrows shot up. This response surprised even her.
'By the time the invasion actually gets underway,' Mason continued, 'we will easily outnumber whatever army Lugar sends. (Incidentally, this is why I'm so pleased with our rapid immigration.) And with the prospect of war looming over their heads, the Minervan population will heavily arm themselves.'
'But won't there be terrible bloodshed?' Tara said in horror. 'Are you saying our children might have to fight and die?'
'Ms. McClare,' Mason said with resignation. 'Do you fret at night, worrying that 'we' might forget to produce enough electricity for the island? Do you call up the grocery store to remind them to buy milk for their customers?' Mason folded his hands in his lap. 'If something needs to be done, someone will figure out a way to do it and turn a profit.'
'So what are you saying? We all have to hire bodyguards? Or mercenaries?'
'Of course not,' Mason answered, then added, 'but you can if you want. However, in this specific instance, the free market has provided a far more elegant solution.'
'Briefly Professor,' Tara said, looking at the clock.
'Well, as you no doubt are well aware,' Mason said, referring to Tara 's portfolio, 'the price of land on the island has exploded. However, foreign investors and potential immigrants are still hesitant to commit to Minerva, because of the Lotosian situation. But when the world sees how Minerva handles itself during an invasion, capital and workers will simply swarm here.'
'And?' Tara asked, not seeing the relevance.
'What that means is that owners of real estate will reap a huge profit from a successful war. So what Steven Peckard'a brilliant financier from Wall Street'did was the following: He bought thousands of call options on prime Minervan real estate. Basically, he's currently buying the right to buy a certain piece of land at ten times its current price, five years from now.'
The point was important yet subtle; Mason knew most of the viewers would not really understand options. He had to spell out the implications of Peckard's ingenious scheme.
'So now we have a situation in which a businessman stands to make billions in American dollars if he can take steps to push up the price of real estate at least a few points higher than the strike price printed on the options.
'Now I don't know much about military affairs,' Mason admitted. 'And it's possible that Peckard himself doesn't either. But you know what? I bet he finds out very quickly. You'd be surprised how far a few billion dollars can really go.'