The Communist Manifesto: The Revolution Will Be Centralised – Part One

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An individual’s pursuit of knowledge is only as strong as their ability to remain objective. For many months I have reasoned that the political system to which we are currently bound runs through a false paradigm of left vs right. As citizens slug it out over whose ideology is superior, globalist institutions like the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) operate from a level that possesses no allegiance to any political persuasion.

For globalists, ideology is a vehicle through which they impose centralised means of control. History offers up many instances of how an ideology of the time eventually lead to the growth of centralisation. The creation of The League of Nations after the First World War, and the United Nations after World War Two, is one example.

On an economic level, the Federal Reserve in the US was created just seven months before the start of World War One. The BIS originated in 1930, whereas after the Second World War both the IMF and the World Bank came into existence.

Out of conflict comes consolidation.

To understand more about how ideology creates the conditions for centralising power, I recently read for the first time The Communist Manifesto. There are many third party interpretations of the document – along with academic analysis and reader’s guides – but the only objective way of learning about and researching communism, or any other political initiative for that matter, is to go straight to the source.

In the midst of studying the manifesto, I began collating information on the history of central banking and the introduction of differing forms of taxation in both America and the United Kingdom. This is relevant because when the manifesto was first published in 1846, the US was in the middle of a period where there was no formal central bank in existence. Between 1837 and 1862, US banks issued their own notes as currency.

The first central bank in the US – the United States of North America National Bank – was chartered in 1782, but was downgraded from a national to a private commercial bank after the US colonies battle for independence from the British Crown. This led to the creation of the First Bank of the United States, chartered in 1791. When the charter came up for renewal in 1811, it was voted down in the Senate.

A year later, the War of 1812 began between America and the UK.

The next attempt at a central bank came in 1816 with the Second Bank of the United States. The bank was under a twenty year charter until 1836, and after coming up for renewal President Jackson declared that the government would cease using the bank and subsequently pay off all remaining debt. A result of this was the Panic of 1837, where bankers in England contracted trade with the US, as well as removed capital and tightened credit.

Nine years later came publication of The Communist Manifesto, which included ten planks detailing certain conditions that, according to it’s authors Karl Marx and Friedrich Engels, “in most advanced countries” wouldbe pretty generally applicable.” On the economic side these included,

1. A heavy progressive or graduated income tax.
2. Abolition of all rights of inheritance.
3. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

Before we look to examine the content of the manifesto, let’s see what materialised in both the US and the UK following its publication.

In 1861, the American Civil War began. As a direct result, Congress imposed the country’s first ever personal income tax. This attempt at taxing income was later rescinded in 1872. A common theme running throughout the history of economics is the imposition of taxes as a cover to pay for war.

1862 saw Congress pass the Legal Tender Act which made national currency notes legal tender. What this did was permit the issuance of money to finance the civil war without raising taxes beyond their current level. The national currency notes were known as Greenbacks. Crucially, this paper money was accepted in lieu of gold and silver. For the first time, paper currency was backed solely by treasury securities. The act initially allowed for $150 million in national notes to be created, before being upgraded to $450 million in 1863.

Another critical part of The Legal Tender Act was how national currency began to eradicate notes in circulation from multiple independent banks around the country. Banks that were designated to issue national currency were backed by the US treasury.

From here, the act progressed to the formation of the National Banking Act in 1863. Under the act, banks were chartered by the government and it allowed for the direct creation of national banks. It marked the first time since 1816 that an attempt was made to establish a central bank in the US. Most importantly, it served as the precursor to the creation of the Federal Reserve in 1913.

To ensure the success of the act, the goal was to create a single national currency whose money was backed only by the US treasury and was printed by the government itself. The method chosen to accomplish this was to tax notes issued by state and local banks, which effectively forced non-federal currency out of circulation. The plan worked.

The National Banking Act was then updated in 1864, which established the Office of the Comptroller of the Currency. This office was granted the responsibility of chartering and supervising all national banks. What it also did was take banking out of the hands of state government. The previous method before this was for charters to be granted by individual state legislatures. The updated act converted more than 1,500 state banks into national banks.

The foundations had now been firmly laid for the creation of the Federal Reserve Act 49 years later.

1913 was a pivotal year in the history of Western economics. To begin with, The Revenue Act was introduced in the US, with income tax enacted from October across the entire country. In the UK, the Provisional Collection of Taxes Act 1913 granted the government permission to carry on collecting income tax for up to four months following the expiry of the measure, until the Finance Bill becomes law. Interestingly, this is still the set up now in the UK. Income tax remains a temporary tax which expires on April 5th of each year, and has to be subsequently renewed as a provision in the annual Finance Bill.

Then, on December 23rd 1913, the Federal Reserve Act was signed into law. It remains to this day the central bank of America and the most influential central bank of any nation in the world.

Next for the US, in 1916, was the introduction of the Federal and State Estate Tax. This tax still exists today and taxes estates worth in excess of $5 million at 40%.

In 1918, US income tax was increased to finance World War One.

1930 saw the creation of the Bank for International Settlements (known today as the ‘central bank for central banks‘), whilst in the same year ten million people became liable for income tax in the UK.

Two years later and during the Great Depression, the top marginal tax rate in the US reached over 60%.

In 1933 Congress passed House Joint Resolution 192, which began the process of withdrawing the Gold Standard in the US. President Roosevelt signed the resolution, and the treasury could now begin offering the public new government securities. Except these securities did not include what had been the traditional “payable in gold” clause.

The same year also saw the introduction of The Banking Act of 1933, which further centralised the US economic system. It’s two key requirements were for a federal system of bank deposit insurance, and the increased regulation or prohibition of the combination of commercial and investment banking. The act was updated in 1935. One of it’s leading champions,  Marriner Stoddard Eccles, who was governor of the Federal Reserve board at the time, said the new legislation must include provisions for “controlling speculation” and “promoting the stability of employment and business”. Eccles put forward these suggestions:

  1. Create a central committee of board members and bank governors to control open market operations
  2. Place the board in control of paper specification
  3. Ease controls on real estate lending

President Roosevelt dutifully signed the updated act into law.

The US Social Security Act of 1935 was then implemented, an act that laid the foundations for the modern welfare state in America.

More significant changes to the structure of world finance came as a result of World War Two. In 1944, the World Bank was created, and is today part of the United Nations network. In the same year the UK’s current PAYE system was introduced as a consequence of the treasury needing to collect more taxes due to the war. UK income tax rates also increased to pay for the aftermath of the Second World War, and is today the primary source of public funding.

1945 saw the founding of the International Monetary Fund. The IMF began life with 29 member states but has since ballooned in stature, incorporating every major economy in the world.

In the UK, 1973 marked the introduction of the VAT tax. This came as a direct result of the UK joining the European Economic Community on 1st January 1973. Purchase Tax, which originated in 1940, was replaced by Value Added Tax (VAT) in at a rate of 10%. Today, that rate is 20%.

A further key event came in 1971, when President Nixon temporarily suspended the international convertibility of the US Dollar. This measure became permanent, however, and in 1976 the US government removed all references to gold from its statutes.

From this moment on, the entire world monetary system was made purely of fiat currency, with central banks free to create an unlimited supply of money no longer backed by the commodity of gold. This is known today as Fractional Reserve Banking. Wikipedia describe it as so:

Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank

Fractional Reserve Banking is a dual system. First you have “Central Bank Money”, which is money created by a central bank. The bank can choose whatever it likes as its form of money, be it banknotes, coins, electronic money, commodity certificates or precious metals. Electronic is the primary tool of usage, especially since the 2008 financial collapse.

The second part of this system is “Commercial Bank Money”, which is simply another term for credit/debt.

According to Wikipedia,

When a deposit of central bank money is made at a commercial bank, the central bank money is removed from circulation and added to the commercial banks’ reserves (it is no longer counted as part of M1 money supply). Simultaneously, an equal amount of new commercial bank money is created in the form of bank deposits.

M1 money supply is essentially the amount of notes and coins in circulation.

Under Fractional Reserve Banking, debt is included as an asset, despite the fact that all debt is created out of nothing by central banks – at no cost to them – and has no tangible worth beyond the paper it is printed on. Central banks thus have carte blanche to create new money and are supported in this venture by the State. They are then given license to loan this money out to governments and individuals whilst charging them a rate of interest on it.

Aside from central banking, other notable changes to the UK tax system included the introduction of Inheritance Tax in 1986. This was followed in 1993 by Council Tax, which originated out of the Local Government Finance Act 1992. Council Tax replaced the Community Charge, otherwise known as the Poll Tax.

Now would be a good time to remind ourselves of the main economic planks to The Communist Manifesto that I mentioned earlier.

1. A heavy progressive or graduated income tax.
2. Abolition of all rights of inheritance.
3. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

We can say with confidence that these three demands have, to a degree, been met throughout the Western world, in particular those of income tax and centralising the banking industry. History proves this to be the case. Arguably the most successful pillar of the manifesto has been the rise of central banking.

In saying that, it would be factually incorrect to suggest that the birth of central banks came about after the manifesto’s publication. The first central bank originated in 1668 – the Swedish Riksbank – and predates the manifesto by 180 years. Britain followed Sweden’s path in 1694 when the Bank of England was chartered.

Today, The Bank for International Settlements has 60 central banks – including every major economy – under its control, whereas the IMF has 189 countries under its jurisdiction. 180 countries also comprise the World Bank.

Only eight countries in the world today do not have a central bank. They are Andorra, Monaco, Nauru, Kiribati, Tuvalu, Palau, Marshall Islands and the Federated States of Micronesia.

In part two of this article, I will begin looking at some of the content leading up to The Communist Manifesto, and map out the role of the bourgeoisie class as a motivation for its publication.

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