The Wealth of the People: The Wealth of the State

An Inquiry into the Relationship between 
Wealth, Freedom, and Life


By
Fernando Urias

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SMASHWORDS EDITION

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PUBLISHED BY:

Fernando Urias on Smashwords

Copyright © 2012 by Fernando Urias

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Disclaimer

This book is designed to provide information and entertainment. It is published with the understanding that the publisher and author are not engaged in rendering legal, economic, accounting, political, financial, or any other type of professional service. If legal or other expert assistance is required, the services of a competent professional should be sought.
It is not the purpose of this book to reprint all the information that is otherwise available to authors and publishers but instead to complement, amplify, and supplement other texts. You are urged to read all the available material and learn as much as possible about economics and human organizations and tailor the information to your individual needs.
Every effort has been made to make this book as complete and as accurate as possible. However, there may be mistakes, both typographical and in content. Therefore, this text should be used only as a general guide and not as the ultimate source on economic or social organizations. Furthermore, this manual contains information on economics and social sciences that is current only up to the publishing date.
The purpose of this book is to educate and entertain. The author and publisher shall have neither liability nor responsibility to a person or entity with respect to any loss or damage caused, or alleged to have been caused, directly or indirectly, by the information contained in this book. 

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Table of Contents:

Introduction
The Non-Aggression Agreement
The Social Contract
The Rule of the State
The Citizen's Charter
Rule by Written Law
Democracy
No Taxation without Representation
Useful, Supervised, and Limited Government Spending
Separation of Powers
Low Taxation
Low Regulation
Limited Terms in Public Office
Trial by Jury
Common Law
A Constitution
A Bill of Rights
Limited Powers to Make War
Limitation to Enter the Market
A Referendum Process
An Initiative Process
The Mission of the State
Other Functions of the State
The Vision of the State
Final Notes on Book Five

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Introduction
This is the fifth book of the "Wealth of the People" series. The series is an inquiry about the requirements for the production of wealth in a society. The fifth book is about the function that the state performs to support the wealth production process. A state that allows its citizens to produce wealth is a valuable asset to its citizens. This asset can thought as a factor of production that can be called social capital. The assumption that the people will respect life and property is removed in this book and the formation of the state is discussed as a result of demonstrated human behavior. This book assumes that you have read the first four books. If you have not read them, please go to Smashwords.com and read them in order. The complete list of the "Wealth of the People" titles can be found at the end of this book. 

The Non-Aggression Agreement
If you would meet a neighbor in a desert island, you should know that it is better to make and act according to a non-aggression agreement than to fight with each other. You would expect that this agreement would imply the respect for each other's property of because if the property is not respected, a fight could result that would risk your lives. You would want a non-aggression agreement for the following reasons:
First, you would want to keep the fruits of your labor. It would be frustrating and upsetting that the product from your work was taken away by your neighbor. If this would happen, you would want to stop your production activities until you could assure that this would not happen again.
Second, you would want to keep the tools of your wealth production process. To produce in a more efficient way, you would have developed tools to increase your productivity. If the tools were stolen by your neighbor, you would lose your investment, you would drop to a less efficient wealth production process, and you would be reluctant to invest again.
Third, you would want to trade with your neighbor and get the advantages of trade in a market. You would like to enjoy through trade, the efficiencies that would result from your neighbor's investments and at the same time pass to him the efficiencies of your investments.
Fourth, you would like to exchange or copy ideas about the best methods for several wealth production processes. Without the non-aggression agreement, you would have to discover everything on your own and you would not gain the advantage of the transfer of human capital that can occur between two or more people.
If you and your neighbor would share the principle of respect for life and property, you could become wealthy together by working hard, investing in better wealth production processes, trading with each other, and sharing or copying each other's wealth production methods. If you and your neighbor act according to the principle of respecting life and property you would not need an expensive state to protect your life and property. Keeping a non-aggression agreement would be the lowest cost solution for your relationship with your neighbor and it would allow you to work to become wealthy and freer in the fastest way possible. The agreement would be a capital asset that would allow you to work and for this reason, it can be thought as being part of your social capital.

The Non-Aggression Agreement Principle of Wealth Production
If two or more individuals act according to a non-aggression agreement, respecting each other's life and property, they can become wealthy together with their work, investments, trade, and human capital transfer.

The Social Contract
 Social contract was the term used by John Locke to name the contract that a group of people could make to live in peace. The non-aggression agreement would be the start of such contract but to have a contract, the agreement has to be conscious and voluntary. This is hard to do in a large geographical area with the large population that constitutes a city or a nation. The formation of the state has been born many times with this idea but unfortunately, the members of society that end up with the power, find it to their advantage to use the power for their own advantage. Most of states in early history and many today were and are very far from looking like a social contract.
 
The Consequences of Not Having a Social Contract
What would you to do if your neighbor, instead of working and trading with you, prefers the instant gratification of stealing your property? How could you convince your neighbor that it is more advantageous for both of you to respect each other’s life and property? How could you teach your neighbor that the absence of a non-aggression agreement will result in the loss of the capability to produce at a higher standard of living?
Look at the problem as if you were in the other side. What would you do if your neighbor was wealthy and you were not? Would you respect your neighbor's life and property and work to improve your situation or would you find reasons to justify the taxing or confiscation of your neighbor's property? Would you be willing to work and trade with your neighbor or would you be resentful and harvest the desire to redistribute the existing wealth?
The problem can be posed in a more difficult way when you consider the availability of weapons. Imagine that after a few years of living in the island, you and your neighbor have built some tools and are trading peacefully and one day, walking alone in the beach, you find a wooden chest from a shipwreck. You open the chest and inside you find two muskets, ammunition and powder in good condition. What would you do with this treasure? The muskets can be used as tools of hunting or they can be used as weapons. They would be very valuable for you or your neighbor. Would you keep the muskets to yourself and use them for hunting? Would you use them as weapons to take advantage of your neighbor? Would you sell one to your neighbor and hunt together? Would you be able to sleep at night thinking that your neighbor might want to take them away from you? Would you announce to your neighbor that you no longer have a non-aggression agreement and that whatever you say is the law because you have the muskets? 
What would you do if you were the one without a weapon? Imagine that you had just arrived to the island and you meet Robinson Crusoe. At the time that you meet him, he has been living in the island for several years and he has a shelter, domesticated goats, and plenty of food. He welcomes you, gives you food and shelter and tells you that you have to work for him to pay for the food and shelter. You agree. After a few weeks of this arrangement, in which you are able to start building your own shelter, you realize that he has several muskets, ammunition, and the powder that he recovered from the shipwreck. You offer to buy one but he refuses to sell you one. Would you feel that you are being treated unfairly? Would you think about taking one by force even if it would mean to break your relationship?
The wealth production process advances with investments in physical capital assets that are necessary for the production of wealth. These physical assets and their technology can be used for protection and self-defense. The spear, the bow and arrows, and the muskets are tools of hunting that can also be used for self-defense. Due to many people not understanding the principle of respect of life and property, these physical assets have to be used as weapons to protect the life and property of the people that are working. The person or group of people that has the most powerful weapons can dominate the rest of the people. This happened when there were no metals and bronze was discovered. It happened again when iron was discovered and it proved superior to bronze. It happened again with the discovery of powder, and it is true today with the existence of nuclear weapons.

The Weapon Principle of Wealth Production
The wealth production process requires the protection of the life and property of the people that are working with weapons. This protection is needed because some people have not learned the principle of respect for life and property. The weapons are a factor of production because they are necessary for the wealth production process.

The Rule of the State
The availability of weapons developed with the same technology from the wealth production process is necessary but not sufficient to protect it. Any individual, small group or business enterprise is vulnerable to an attack or extortion from another individual or group of individuals using the same weapons. An individual or small group needs the protection from a large group that will guarantee protection against attack from any other individual or group. This large group historically has been formed by force and can provide protection over a large geographical area. The large group obtains the monopoly in weapons and adopts the responsibility for protection but it also has the power to attack, exploit, and abuse. 
About fifteen thousand years ago, the first agricultural villages were formed. In these villages and later in Sumerian and Egypt, governments were formed that were based on force and weapons. The formation of Egypt seven thousand years ago is an illustration of the growth of the large group. Egypt prospered into one of the first human civilizations because the valley of the Nile was protected by the desert. Nader, becoming the ruler of one of the richest areas, unified Egypt by forming a large group in what would become the Egyptian empire.
From a state of war or lawlessness, the establishment of protection by a large group is an improvement in social capital. The state is a centralized government that maintains a monopoly of the use of force over a defined geographical area or territory. The establishment of a central government, even if autocratic, is an increase in social capital over a state of lawlessness where business cannot be conducted because any person can be a victim of crime.

The State Principle of Wealth Production
A large group of people will dominate a geographical area by force and become the state or government of the area. Individuals, business enterprises, and the market need the protection of this large group to be able to operate the wealth production process.

The Citizen's Charter
A charter is a grant of authority or rights where the granter recognizes the prerogative of the recipient to exercise certain rights specified in the charter but the granter retains superiority. The Magna Carta written in 1215 to recognize the rights of the nobles in England and presented to the King to sign became a Royal Charter. When you are born, you get an implicit citizen's charter that the state grants you with a specific set of rights and obligations. The citizen's charter is not voluntary. It is enforced by the state. It consists of the current level of social capital in your nation. Your citizen charter at the moment of your birth gives you an inheritance of social capital gains that your ancestors have been able to achieve through many generations. You have to live and work meeting the laws and ways of operating of your nation. You can dedicate part of your life to improve your citizen's charter but you cannot refuse it. If you do not act according to the charter, you could end up in prison.
The questions that you have to ask yourself when you come of age are: How fair is the citizen's charter of the nation where I was born? How can I improve myself and my family within the bounds of my citizen's charter? What can I do to improve the citizen's charter in my country? Does my citizen's charter have enough social capital to allow me to be free and wealthy? Who should I vote for in the next election to improve my citizen's charter and increase the social capital of my nation?
The citizen's charter is granted by the group of people that has the power to protect a geographic area, the people that live in it, and their assets. It is very difficult for the people in power to relinquish this power and improve the citizen's charter unilaterally. Most of the improvements of the citizen's charter have come from citizens that in have risked their lives in the effort to seek improvements.
The state has the responsibility to protect the people and their assets but it also has the power to confiscate and abuse. Social capital is increased by limiting the power and attributes of the state through law and democracy. This is a process that has been going on through history very slowly, at a great cost, and at the expense of many lives. After the establishment of a central government that has usually been abusive, people fight for their freedom and their right to be free and produce wealth. The development of the governments of the world across history can be viewed as a gradual improvement of the citizen's charter to convert it into a social contract. There are several agreements, like the non-aggression agreement, that limit the power of the state, define its mission, and convert the citizen's charter into a social contract.

Rule by Written Law
The first agreement to limit the power of the state is the request from the citizenry that the laws be put in writing. It is one of the rights of the citizens to be ruled by law that is written, understood by everybody, and not subject to the arbitrariness of the people applying the law.
The first codification of the law was done by the Sumerians under Hammurabi around 2000 B.C. This law extensively regulated family life. One of Hammurabi’s greatest achievements was this effort to “make justice appear in the land”. He collected the laws of the various Mesopotamian City-States and created a law code that would cover the whole region. This is called the Hammurabi’s Law Code. The Code consists of 282 sections dealing with most aspects of daily life. This development of written law was a major advance toward justice and order and also a major advance in social capital.
Sometime around 450 B.C., a group of judges posted 12 tablets in Rome's marketplace. This was done because it was demanded by the common people of Rome. The Romans believed that the people should be ruled by law and not by the whim of their rulers. They wanted the laws written for all to see and for all the people to know their rights. This code of law remained in effect for almost 1,000 years.
In A.D. 1215, a group of nobles in England, worried about their feudal rights, met in Rummy Mede in England. They presented to King John the Magna Carta to be signed. The Magna Carta placed clear limits on the royal power. With the Magna Carta, the King was bound by law. The nobles intended the Magna Carta to protect their feudal rights but over time, it guaranteed the rights of all English people.
In A.D. 1799, Napoleon Bonaparte took part in a commission to draw up a uniform code of laws. This code reaffirmed the principle that the same laws should be used to govern all people. This code was applied in France and in lands as far as Quebec and some Latin American countries.
Having written law is a great improvement in social capital. The law is a code of conduct and rights formally recognized by a society and enforced by the state. Law provides social control, order, and justice. Many of the rules required to support the wealth production process need to be written into law. The law is part of the social capital of a nation and its content and practice determines how easy or hard it is to engage in business enterprises that produce wealth.

Democracy
Democracy, the election of representatives for government by a vote of the people, is one of the most effective methods to improve social capital by limiting and defining the power of the state. Democracy was present in the Sumerian City-States and the Egyptian Villages. It might have been present in previous human communities. In the Sumerian City-States, it disappeared quickly when the citizens had to appoint military leaders to defend the city. These leaders found themselves with absolute power. The Sumerian kingships became hereditary and the principle of democracy was not established as a culture.
The first stable democracy was the one created by the Greeks. The Greek City-State was governed by the polis. The polis consisted of a city and the surrounding villages. Citizens took part in government and gathered in the Agora, at the foot of the temple of the local deity, to carry out public affairs. The citizens of a polis could vote, hold public office, own property, and speak for themselves in court. The polis expected the Greek citizens to serve in government and to defend the polis in time of war. The citizens were only a minority of the population of a polis. Those who were foreign born, slaves, those who did not own land and women were excluded from citizenship. Greek communities became later ruled by Kings. By 700 B.C., the Kings had lost power to the land holding aristocrats. By 650 B.C. disputes arose between the aristocrats and the common people. Farmers, merchants and artisans that were excluded from citizenship wanted a voice in the government. To keep their power, the Kings became tyrants. A tyrant is a man that seizes power and rules single-handedly. Greek City-States later became oligarchies, where a few wealthy citizens held the power of the City-State and limited the power of their democracies.
Around 500 B.C. the Roman patricians, wealthy aristocrats that had success in Rome, declared the city a republic. A republic is a community where the people elect their leaders. The patricians established a government based in an executive and a legislative branch. The plebeians, that included rich merchants that voted and paid taxes but could not hold public office, went on strike in 494 B.C. demanding more participation in the government. They got it through the recognition of the publicly elected tribunes. The Roman expansion required military leaders that disputed among themselves and the democracy was over in 45 B.C., when Caesar declared himself dictator for life.
Democracy disappeared all through the middle Ages and did not appear again until England. In 1649, after a long struggle with the English Kings, the English Parliament abolished the office of the monarch and declared England a commonwealth, a state governed by elected representatives.
The American colonies started with democratic governments. Under the far rule of King George, each colony had a Royal Governor appointed by the King but it also had an elected assembly. Voting was restricted to men that owned property, as it was in England but in the colonies it was much easier to acquire land. A much greater percentage of the population, as compared to England, could vote for the government. The assemblies kept the right to approve taxes requested by the governors.
Democracy was spread through Europe during Napoleon’s campaigns. Napoleon helped spread the ideas and reforms of the French Revolution throughout Europe. In the countries that Napoleon conquered, the French established constitutions and enforced the principles of the Napoleonic Code. When Napoleon’s empire collapsed, many European states wanted to keep the changes that were brought in by the French domination, especially the abolition of the absolute monarchies.
Democracy is a way that the public can get their ideas and wishes implemented to improve the citizen's charter. It is a great improvement over a one man rule. Nonetheless, democracy does not guarantee that the citizen's charter will improve. The people of many nations are prone to believe in politicians that offer a free lunch and they vote for expansions of the state not realizing that the cost for the apparently free lunch is their freedom and wealth producing capability.

No Taxation without Representation
 From the formation of the first agricultural villages 15,000 years ago, the first governments found it very hard not to abuse their power to tax and live at the expense of society by imposing excessive taxation that has been many times the cause of revolts.
With the growth of the villages into cities and the cities into nations, the need for defense was in the hands of military rulers that sustained their organizations with taxation. Unfortunately, since their power was unbounded, the power of taxation has been abused many times. For example, Ancient Egypt was home to about 5 million persons. The majority of them belonged to the poor lower class. Many were farmers and for the land that they farmed, they paid rent to the King, usually a large percentage of their crop.
In the manorial system during Feudalism, the wealth of a feudal lord came from the labor of the peasants who lived in and worked the lord’s land. Manors, or states, varied in size. In return for the Lord’s protection, the peasants provided various services to the Lord. Chief among the obligations were to farm the lord’s land and to make various payments of goods. In addition, peasants were obligated to set aside a number of days each year to provide various types of labor, such as road and bridge repair.
The Magna Carta prohibited the King from raising taxes without the consent of the Great Council and in 1625, the Parliament in England forced King Charles to sign the Petition of Rights that forbid the King from raising taxes without the Parliament's consent.
No taxation without representation was one of the tenets for the American Revolution that started in 1775. The King of England imposed taxes on the American colonies that had no representation in the British Parliament.
If the people are going to pay taxes to sustain a state, they have the right to be represented in the decisions regarding the amount of the taxes and their use.

Useful, Supervised, and Limited Government Spending
Taxes shift the use of the resources from the people that earned them in the wealth production process to the use of the government. It is of great impact to society what the government does with these resources. Government spending can range from useful physical capital projects, such as roads and bridges to wasteful and lavish spending of government officials.
Taxation is mandatory by the state but it is to be used for the proper maintenance of the government. The state will try to grow as much as possible and the people need to limit government spending and supervise the spending to make sure that it is used in the proper activities. The state budget and expenditures should be available for the people to review.
Early Egyptian civilizations spent a great deal of the taxes collected in irrigation systems that created a surplus of food. Around 2050 B.C. the Kings in Egypt supported irrigation projects that added thousands of acres to the land already under cultivation.
The taxes are well used when they are spent to run a government that increases and protects everybody’s freedom and prosperity. The misuse of funds by the government is when the government officials abuse their power to use the resources at their disposal to be wasted in luxurious consumption, war, or corruption. The nation suffers because hard earned money that could have gone to investments goes to government consumption. The resources are dissipated instead of going to physical capital investments, public or private, and the nation does not advance in its wealth producing capabilities. 
The government does not have the market competition of cost and profit governing the right or wrong of its spending. The citizens of a nation need to have a way to control government spending to make sure it is used for purposes that benefit society and supervise that the government services are acceptable.
Through democracy, the people need to be able to limit and supervise government spending and debt. A government can get heavily into debt if it does not have limitations to spending and debt imposed by the people.

Separation of Powers
In 594 B.C. Solon in Greece set up two legislative houses where the Aristocrats belonged to the Council of 400 and landowning commoners made up the Assembly. The Council drafted measures that went to the Assembly for approval. Any citizen could belong to the Assembly, in which they were considered equal before the law and guaranteed freedom of speech.
In 1066, William the Conqueror took over England. He set up a Great Council of royal officials, bishops, and nobles to advise him. This would be the base for a legislative chamber that would later become representative of the people. During Henry III, a new social class, the middle class, emerged. Its income came from business and trade, not from the land. Recognizing their increasing power, Henry III added them to the Great Council. The name of the Great Council was later changed to Parliament. By 1400, Parliament had divided into two chambers. Nobles and clergy met as the House of Lords while Knights and Bourgeoisie met as the House of Commons. In 1642, Parliament sent to King Charles “Nineteen Propositions” that made Parliament the supreme power in England. King Charles refused the propositions and the English War resulted from these differences. The war would conclude 4 years later in 1646, where the Parliament gained complete control of the English government.
The American Constitution followed the idea that the central political authority was to be divided among the executive, the legislative and the judicial branches of the government. It also established a republic with an elected head of stated, a federal system with power divided between a central government and regional governments.
By observing the English system, Montesquieu admired and wrote about the separation of power that was occurring in England and contributed to the establishment of this separation of powers in France and the rest of the world.

Low Taxation
Fleeing the oppression of their government, a group of Englishmen settled in North America in 1776. They worked the land and formed markets with a minimum of government taxation. They were not encumbered by a heavy government that required heavy maintenance with oppressive taxes. In the thirteen colonies that they founded, they formed city governments that were democratic and representative although they did not have women's vote and they permitted the slavery of the black people. The representative governments of the thirteen colonies kept taxes low bringing unprecedented growth in their economies. The colonies also benefited from the industrial revolution that would increase productivity dramatically. The rapid growth of wealth that occurred in North America was due to low taxes, a fast increase of physical capital, and an unprecedented high percentage of the people engaged in useful work. This was an environment of high social capital given by low taxation, low government spending, and low regulation.
High taxes have been the cause of many civil wars. Governments will try to tax as much as they can. The high taxation that the state imposes on its citizens drains resources that could be used for the wealth production process. The people need a way to limit the taxes that the government will impose. Historically this has been done through representation in a lower house in congress.
High taxes transfer the lowest need of the taxed people, which is their investments, to government spending. Some of the government spending will be spent in physical capital projects such as highways and dams, but most of it will go to consumption of the government employees for services rendered.
 High taxation is one the greatest impediments to the growth of a nation. A high taxation correlates to a high percentage of people that are not working in the wealth production process. High taxation means that a high amount of the resources are not going to wealth production process and its investments. The expense of the government has to be watched over and maintained at the lowest level possible.
Wealthier nations will have a higher percentage of its people engaged in productive enterprise instead of living out of the budget of the government. Whether the government is a monarchy, a fascist dictatorship, a communist dictatorship, a populist dictatorship, a republic or a democracy, excessive taxes placed on the people are the greatest violation of property rights and the greatest impediment to the growth of the wealth production capability of the nation and should be, for this reason, controlled by the people.

Low Regulation
In order to tax and to justify its existence, a government will try to regulate as much as possible. Regulation can come together with taxation because regulation can be an excuse to impose taxes. Regulation can also come without taxation as a way to justify the jobs of the state. Some regulation is needed for the life in society but many regulations can hinder the wealth production process.

Limited Terms in Public Office 
A democracy requires frequent elections so that the ruling people do not consolidate their power and deny the right of the people to change the leadership. This has also been the cause of rebellion. The Mexican revolution in 1910 started under the banner of "Effective Vote, No Reelection" after President Porfirio Diaz retained the presidency for thirty years.

Trial by Jury
The Athenian government included a jury system to decide court cases. Juries consisted from 201 to 1,001 members, with a majority vote needed to reach a verdict. 
The jury system was not perfected until England established it with the Magna Carta in 1215. In the trial by Jury, a group of peers decides on the fate of a given case, giving the power of decision to the people of the jury and taking it away from the judge designated by the state. The jury is bound by the laws of the state and the job of the judge is to preside over the process to make sure that the law is followed but the decision of the case belongs to the jury. The process is very effective to eliminate the corruption to which a judge is subject from either side of a case when he alone has to make the decision. The corruption of a jury is much more difficult to accomplish. 
The trial by jury represents a wider separation of the judicial power from the executive power than the Roman Justinian or Napoleonic method of a judge that can be influenced by the executive branch of the state.

Common Law
The court system developed under Henry II, King of England, around 1136 A.D., established a common law system throughout the English kingdom. In each community, judges began to meet with a grand jury. A system of trial by jury was developed to establish the guilt or the innocence of the accused. The common law and trial by jury system of legal justice, evolved in England and it was quite different than the Roman Justinian or Napoleonic Code. The power to decide was passed to the people with the invention of the common law system. The combination of common law with a jury system was not the prevailing law of the European continent. The common law system is strongly based on the law of precedent. It is relevant to any case what has been decided by other judges or juries throughout the land. This system transfers a great amount of power from the government to the juries across the land. This system puts the writing of the law in the hands of the people in a way that the most democratic legislature cannot accomplish.
 A good system of common law includes a self-escalation and a self-correction process by which a jury or judge that judges incorrectly, will be measured by judges and juries of a higher level in an appeal process that will review the decisions and make amends if necessary. In doing so, both the original case and the appeals become the law of the land as they go through a discussion and decision process of what is just and what is not just. This is a superior system of resolution that very few nations enjoy today. Although peers are not experts in the law, they know what they want for the accused and for themselves. On the other hand, as much as a judge wants to be lawful and impartial to the case, he is a single person pressured to be swayed one way or another, usually with corruption.

A Constitution
The way the government is going to operate is written in a constitution. The people define the function and the limits of the government in a constitution.
The definitions of the systems of government came by force before democracy and the writing of constitutions came with the desire to have written law. The constitution defines how the government is going to be structured, how is it going to be run, how are laws to be defined, who is going to make sure that the laws are complied with, and at the same time, limit the powers of the government and define the rights of the people.
The restoration of Charles II as King of England gave England a constitutional monarchy. This was a monarchy where the power of the King was limited by a constitution. England’s Constitution was formed by putting together several documents that were the law of the land that included the Magna Carta and the Petition of Rights.
The founders of the United States of America understood the need to limit the power of the government. They wrote a constitution that balanced the powers of the government among three branches: the executive, the legislative, and the judicial branches. It also established a republic with an elected head of stated, a federal system with power divided between a central government and regional governments. A Bill of Rights was added later to protect personal liberties, such as the freedom of religion, freedom of speech, and the right to trial.

A Bill of Rights
The recognition of individual rights such as the right to live and the right for free expression need to be written in the constitution. These rights are considered natural rights that although they have to be established democratically, they are understood to be natural rights that not even a democracy can violate.
By 507 B.C., the constitution of Athens stated that all free men were citizens regardless of what class they belonged to. In 594 B.C. Solon freed debtors from slavery and extended citizenship to artisans and merchants who were not born Athenians.
The Petition of Rights signed in 1625 by King Charles of England included the right not to be imprisoned without just cause. Troops were forbidden from being housed in private homes without the consent of the owner and the King could not call martial law unless the country was at war. In 1689, the British Parliament wrote the Bill of Rights. The King could not raise taxes or maintain an army without the consent of the Parliament. The King could not suspend laws. It guaranteed the right to a trial by jury. It outlawed cruel and unusual punishment and it limited the bail that could be required to stay out of prison. Later, in exchange for a change in the Exclusion Bill, the Whigs accepted the bill of Habeas Corpus. A person would not be held in prison by the King or anyone else without just cause or without a trial.
The American Constitution initially did not include a bill of rights. They were added later as amendments. They include the rights of freedom of expression, the right to bear arms, not having to house soldiers, freedom from unreasonable search, due process of law, speedy trial, trial by jury, no unreasonable punishment, the right for rights not specified, the right to vote for the President, freedom from slavery, equality under the law, other voting rights not specified, the right to transport and possess alcoholic beverages, and the right for women to vote.

Limited Powers to Make War
Around 2050 B.C., a new dynasty reunited Egypt and moved the capital to Thebes. The Theban Kings seized new territory, adding fortresses along the Nile to capture Nebia (Sudan) and Syria. Given the origin of government to be the rule of force, the history of mankind has many instances of governments using the nation resources for aggressive war activities.
This happened in Egypt in the time when the Pharaoh invaded Syria, with the conquests of Alexander the Great, in the expansion of the Roman Empire, with Napoleon campaigns, with Germany in two World Wars, and in many other wars. The power of national defense is to be used for defense for the people and their markets. The resources of the state for national defense are to be used to protect the social, physical, and human capital of the nation and never for attack or conquest.
A war of conquest is not justifiable for the same principle that you should not attack your neighbor. As much as there might be reasons such as economic gain or religion, a war of attack is a violation of the basic principle of respecting your neighbor. A war of attack and conquest is a waste of lives and money because the people conquered will fight hard for their freedom.
One of the justifications for a war in the past was to extract tribute. This tribute might pay for the expense of the conquering nation but it will stifle the wealth production capability of the conquered nation. The conquered nation will have to support two governments, the local government and the tribute of the conquering nation. This high burden makes a war of independence an economic necessity.
The power of a nation to attack other nations needs to be limited by the people but without taking away the power of the executive to make quick and right decisions for national defense.
An argument can be made that a conquering nation would bring the imposition of a new and hopefully better way of operating the government. For example, the Roman Empire, wherever it conquered, would impose Roman law, which in most cases, was superior to the law of the conquered land. The same effect occurred with Napoleon and his attempt to implement the Napoleonic code in the countries that he conquered during his European campaigns. This progress of humanity is an advance but it gets stained with the blood of all the people that die in the process that raises the question whether it was worthwhile.

Limitation to Enter the Market
The function of the state is to protect the market, not to be a part of it. The government should not enter business for the same reason that a baker should not make shoes. It is not the reason for its existence.
 It is a great temptation for the people in power to confiscate or participate in wealth producing enterprises but this will invariably kill the industry. The market function rests in business enterprises selling a product for a profit percentage over its cost. This profit is limited by free competition. The government cannot be part of the competition because it will have the resources from taxes and can subsidize any product beating any legitimate businesses.
Another common occurrence in history is the tendency of the state to give economic favors, usually to preferred groups that in some way or another pay back the government officials that facilitate the favor. These economic favors could be in the form of monopoly privileges, expensive contracts, subsidies, and outright bribes. These are all market interferences for the benefit of selected businesses enterprises at the expense of the people.

A Referendum Process
An advanced state would have a referendum process by which a significant number of citizens can request that any law be submitted to a popular vote. One of the most advanced referendum processes is the one in Switzerland. Swiss voters can demand a binding referendum at federal, cantonal and municipal level. It is not the government's choice whether or when a referendum is held. It is a legal procedure regulated by the Swiss constitution. Any federal law, certain other federal resolutions, international treaties that are ongoing in nature, or any change to Swiss law may be subject to a referendum of 50,000 people. An obligatory referendum is required on any amendments to the constitution. The possibility of referendums forces the Parliament to search for a compromise between the major interest groups. In many cases, the mere threat of a referendum is enough to make the Swiss Parliament adjust a law. The federal rule and referendums have been used in Switzerland since 1848.

An Initiative Process
An advanced state would have a process by which a significant number of citizens can initiate a law that would be submitted to a popular vote. An initiative is a process to submit the petition to the government to put the law to a popular vote. The right to an initiative has been in the Swiss Federal Constitution since 1891. The law binds the government to submit to a vote any proposed constitutional amendment supported by 100,000 signatures within 18 months. A citizen-proposed change to the constitution in Switzerland at the national level needs to achieve both a majority of the national popular vote and a majority of the canton-wide vote in more than half of the cantons to pass. The vast majority of national initiatives introduced since 1891, when the system started, have failed to receive voter support but this is probably because the Parliament often elaborates a counter-proposal leading to a multiple-choice referendum. Very few such initiatives pass the vote, but more often, the parliamentary counter proposal is approved.

The Mission of the State
The mission of the state is to protect the life and property of its citizens. This includes the protection of the wealth production process and its markets. To fulfill this mission, the state has the power of the large group and the monopoly of weapons. The temptation to use this power for personal gain by the people in power is too great and makes it imperative that the role of the state be well defined, minimized, and performed by people that are elected considering their capacity and will to serve with honesty.
The state is established by force and it is by the effort and blood of the people that it gets transformed into an institution that protects the life and property of its citizens. The state should lead the improvement of the citizen's charter to convert it into a social contract as it would be written by the people.
The state taxes the wealth production process by force but in exchange it has to provide the structure in which the people, the business enterprises, and the market can operate and prosper. The level to which the government provides this structure is the level of social capital of the nation.

The Protection of Life from a Foreign Invasion
The first objective of the state is to protect the life of its citizens from attack from a foreign power. This is done with a system of national defense. The wealth production process and its markets cannot work when a foreign nation takes over. The first states were military organizations that were needed to protect the City-States, its boundaries, and its trade routes.
The state, through a combination of weapons, the participation of its citizens, and the knowledge of the principles of its neighbors, has to ensure that it has the ability to discourage or repel any foreign power from invading. This can be done in several ways, some small countries like Switzerland and Finland, train all its citizens as soldiers, other like Japan rely on international agreements, others know that their neighbors intentions do not include the desire or resources to conquer. The largest nations always have to rely on their own power of self-defense.
It does not help to build up a great community with great social and physical capital if another nation attacks and decides what is going to be done. A nation that wants to preserve the wealth production capability of its citizens needs to have, as a necessary expense, the national defense sufficient to defend against an outside invasion. A small nation that wants to protect itself needs to train all its citizens as soldiers in order to show a large nation that a overtaking of the nation would be extremely expensive.

The Protection of Life within the Nation
The protection of life within the nation is done through the establishment of criminal law and a judicial system. With Hammurabi’s Code, crimes against people or property became the concern of the whole community. This was a major advance in social capital. An unpunished crime against people or property, be done by a burglar or a government became a concern of the whole community. Every person attempting to the life of another person should be put in jail. The government has to provide the last resolution through the judicial system ideally using the jury system and common law to specify what happens to any citizen that violates the law. The state has to enforce the decision of the judicial system.

Prison Rehabilitation
The first necessity of the people and the state with a person that violates the respect for life is to put him away to protect the life of the rest of the citizens. The consideration for punishment should be secondary because the first consideration should result in long prison terms. The range of a sentence should probably consider the time that the person will take to learn the fault and convince a panel that the learning is complete and the person will not commit the fault again. The consideration for deterrence is probably also low since most criminals do not keep up with the news and the law. A jury should be able to look at all the facts of the case and decide a length for a prison sentence that would be long enough for the person to reflect on his fault and be freed without being a threat to any other citizen.
The idea is to educate the person in living with the citizen's charter and this education might require confinement. The best education is to operate worth the same rules as the outside bit under confinement so a good rehabilitation program would where the confined people are able to work and make income with the print wall s and at the same time be forced to be educated to fill the gaps that might have caused the violation.

The Protection of Property
The protection of life brings the protection of property as an extension of the protection of life. A person defending his property would put his life in danger.
The protection of property is a requirement for the wealth production process to work. It means that a person that works will keep most of the results of their work. It also means that there are rights of property over the tools that make the wealth production more efficient. Without the protection of property, individuals, and business enterprises are not able to invest and the wealth production process would operate with a low level of physical capital resulting in a low income for its citizens.
The protection of property implies the protection of the markets. Without a market where the people can trade, there is no place to pass the benefits of the investments in the wealth production processes that all the people would be making through the business enterprises.
The protection of property is a requirement for the state to allow their citizens to become wealthy. The protection of property is an essential component of the social capital that a nation needs to have for the wealth production process to exist.
Any person or business enterprise that causes damage to any other person should be asked to pay for the damage. The emphasis of the property law should be to pay by working in the market instead of going to jail. Jail should the final outcome if the person does not comply. The interest of the people should be to have retribution for the damage more than punishment. The idea is to protect the wealth production process and educate all the people to abide to the citizen’s charter.
A state with high taxes is a violator of the principle of protecting the property of its citizens. A state that is too expensive and spends the collected money in consumption is taking resources from investment not allowing the nation to increase it income.
Individuals and business enterprises agree on many things but sometimes there are disagreements. These disagreements can be arranged for arbitrage by private business enterprises but the state has to provide the last and binding resolution. It falls to the government to establish the system that specifies contract law, makes the last decision, and enforces it.
The state is responsible to define legally the rights and obligations of the stock company or corporation. The origin of the corporation goes back to the 1600’s in Netherlands, when people that wanted to invest in exploration of the earth raised money by combining their resources into what was called “joint-stock” companies. These companies were legally defined as being owned by the owners of the stock but were limited in their responsibility, in case of a loss, only to the money invested. This method of financing is very effective to form large business enterprises.

An Independent Electoral System
The government has to fund and protect an electoral system for the fair carrying of the elections. This includes the registration and protection of the political parties, defining the voting age, protecting the right of all people to vote, the process of election, the registration of the citizens, and the fair counting of the votes. The establishment of democracy requires that there be an agency independent from the government that oversees that the voting is fair.

The Coordination of Common Projects
The state is also responsible to coordinate and fund common projects that are needed by the people, such as irrigation projects and road construction that are very difficult to do in another way. The impact on the economy is very positive because business becomes easier due to the improvements. The investments of physical capital that are necessary, such as roads, most of the time have to be made by the government, sometimes with the use of Eminent Domain, in which the property rights of a few persons has to be considered for just compensation when yielding the property for advantage of many other persons.

The State Mission Principle of Wealth Production
The mission of the state is to protect the life and property of the people, including their wealth production processes and its market. The state is the keeper of the citizen's charter and responsible to lead its transformation into social contract.

Other Functions of the State
Once the state is present, there are other functions that government performs. These functions can be legitimate if the people approve them democratically but the people have to be careful because the state will try to expand as much as possible and will try to convince the people that this is the best way to go about it. Some of these functions might be indeed done better by the state but some others are more effectively performed by business enterprises through the market or by a combination of the state rules and business enterprises. It is up to the people through a democratic process to decide what functions are to be delegated to the state.

The Money Supply
It seems that no state has been able to stay away from taking over their money supply. The Roman state took over the money supply and managed to debase the currency and cause inflation even when the value of the coins was based on the metal they contained. The cause of inflation and most financial crises is the mismanagement of the money supply and the banking system by the state. Inflation and mismanagement of the money supply are as damaging to the wealth production process as high taxes.
Banking started with government officials overseeing farm surpluses and giving receipts for the commodities in storage. It was easier to trade with the receipts without having to transport the commodities. All this receipts had a one hundred percent backing of the products that were stored or the reputation of the warehouse manager and banker would be at stake. The receipts that became more useful for commercial transactions would be the ones backed by gold and silver. For the purposes of trade, the receipts were complemented with coins were stamped on both faces and sometimes on the edges to guarantee the quantity and the quality of the metal they contained. This was and would be a system of money backed by one hundred percent reserves. It would be interesting to think how much better this system would work instead of the state controlled fractional reserve systems that most nations have.
To maintain the value of money and keep a state from using the supply of money to finance budget deficits causing inflation and financial rollercoaster, the management of the supply needs to have laws that make them as independent as possible and protect them from abuses by the state.

The Stable Money Value Principle of Wealth Creation
 The wealth production process and its investments require a money supply that will have stable and predictable value.

State Education
The people and the state have an interest that everybody has an amount of human capital sufficient to be properly integrated into society and understand the laws of the land. This could be a requirement by law to have the education and the education to be supplied privately but it has been more effective for the state to enforce and supply the education. Nobody should be left with such a low level of human capital that the person might not be able to get employment and increase the chances that he will become a criminal. The minimal education is an investment in human capital that the people and the state might deem to be mandatory. The investment in human capital would include the ability to read and write basics of arithmetic, and general knowledge. There is also the need to educate thee people in the content of the citizen's charter although usually the states educates on the preservation of the state’s power instead of teaching about the improvement of the citizen’s charter. Another requirement of basic education that is almost absent is the way the wealth production process operates.
The people and the state might decide to invest in higher education but the cost and the effort required by the students make it prohibitive to make it mandatory for all the people.

Safety Nets
The people might decide that they want to help those less fortunate through the state. The help is good for the people involved but it is a shift of resources from investment to consumption.
If the government spending goes to do payments for the less fortunate in society and the taxes come from the rich, the shift will be from investment to consumption. If the taxes come from the middle class, then the shift might be from consumption of products of the middle class to consumption of products consumed by the poor.
Safety nets can be placed by the state on food, shelter, and health insurance.

The Limited Government Principle of Wealth Production
The state is very necessary for the proper operation of the wealth production process. Its function is maximized when the state is limited only to its mission and it is run with only the resources necessary without waste.

The Vision of the State
The origin of the state was by force but the historical necessity of the state is to become an institution representative of the people that will improve the citizen’s charter to be as close as possible to a social contract. The mission of the state is to protect the life and property of its citizens but in doing so, a vision emerges where the state, with its composition of social capital, becomes the main factor that determines if a nation and its citizens can be wealthy. The social capital that is reflected in the enforcement of the citizen’s charter determines the percentage of people working in productive work and the amount of physical capital that they use in their work. The protection of property becomes a requirement for a nation’s wealth and freedom. This suggests a vision of an advanced state that goes beyond protecting life and property but sees itself as an agent to facilitate the conditions where its citizens can increase their wealth with their work and their investments.

The Vision of the Government Official
Through the process of development of social capital, the government official becomes a person to lead the increase of the possibilities for the wealth of the people by protecting the wealth production process instead of promising a government to give away services at the cost of high taxes that hinder the investment and growth of the nation. The government official becomes the care taker and liberator instead of being the oppressor seeking to get advantage from his position.

The Vision of the Law Enforcement Officer
When the state advances to the role of a keeper of the wealth production process, the law enforcement officer becomes the protector of the life freedom, and wealth of the people. They are also the people that oversee everybody to make wealth in honest ways.

The Vision of the Soldier
When the state becomes a protector of the life, freedom, and wealth of the people, the soldier has a very dignified mission. The mission of the soldier becomes to protect the country from foreign threats to save the lives and livelihood of the people of the nation.

The State Vision Principle of Wealth Production
An advanced state is the one that is representative of the people and understands its mission to protect the life and property of its citizens but it also understands that in doing this right and with only the resources needed, it is the main factor that determines the possibilities of increasing the wealth of its citizens by ruling with the minimum cost and the least interference with the wealth production process and its markets. This is a vision of a state that maximizes the wealth, freedom, and life of its citizens.

The Wealth Permitted by the State
The learning process of a society to organize itself for the production of wealth ends in the definition of its state. The execution of its state represents the level of social capital of the nation. The rules and behavior of the state determine how much physical capital is invested and how many people are working in productive business enterprises. These two factors determine the wealth of the nation but they rest on the level of social capital that the nation's state enforces.

The Freedom Permitted by the State
Tools increase the freedom of the people. Trade increases the freedom of the people. A state that protects the life and property of its people, the wealth production process, and the markets, increases the freedom of its people. The state holds the definition of the freedom of the people in a literal sense. The state can limit the activities of its people. Just as important but less obvious the state determines the freedom of the people by limiting the wealth producing capabilities of its citizens. A state that does not allow its citizens do be wealthy is holding the freedom that these people would have if they were wealthy.

The Life Permitted by the State
The state has the mission to protect the life of its citizens. The state has to make decisions of life and death such as in the case of war. It has to be sensitive when activities for self-defense results in the loss of life war for some of its citizens. It should not be engaged in wars of conquest that certainly will mean the loss of citizen's lives. The state is the servant of the people, it exists for the life, freedom, and wealth of the people and the sacrifices of citizen’s lives for the state are not justifiable. The sacrifice of a soldier in battle or a law enforcement officer in the line of duty is a sacrifice for the lives of their families and other citizens, not the state.

End of Book Five

Final Notes on Book Five

Dear Reader,

If you have any comments, suggestions, or corrections regarding this book, please send me an email to uriasf@aol.com and I will review them before the next edition.
If you have read this book, liked what you have read, and would like to contribute to this author, please go to Smashwords.com the web site where you got this book and purchase a copy of the book titled "The Automatic Time Management System" by the same author. The author will get a high percentage of your contribution according to Smashwords policies and you will get a time management book that will help you improve your business life as well as your personal life. 
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Fernando Urias

The “Wealth of the People” Book Series
The task of explaining the causes of the wealth of the people in a society is a complex subject for a single e-book. To facilitate the explanation and the delivery of the material, one e-book will be published in each set of topics.
 
The following are the titles of the book series:

Your Wealth
The first book looks at the time savings and the wealth gained by a single person increasing his physical and human capital in an isolated island.

The Wealth of Your Neighbor
The second book is about the agreements that two people have to make to be in a path to increase their respective wealth. These agreements become their social capital.

The Wealth of the Market
The third book explains the opportunities offered by a free market to produce wealth for the people that participate in it. This book explains the wealth gain that results from a market that brings the competitive advantage of every individual to work for each other.

The Wealth of the Business Enterprise
The fourth book explains the function of the business enterprise to produce wealth for its customers, its owners, and its employees.

The Wealth of the State
The fifth book discusses what happens when the assumption that everybody is going to behave correctly is removed. The book explores the historical formation of the state and the implications for the production of wealth. The level at which the state supports and protects the wealth production process is the level of social capital of the nation.

The Wealth of Social Capital
The sixth book is the core of the series. Social capital is defined as the ability of a society to learn and agree on the rules that are necessary for the production of wealth. This is the key for the wealth of the people in society. This is the ingredient that is a prerequisite for the buildup of physical capital with its corresponding human capital that determines if a nation can be wealthy.

The Wealth of Physical Capital
The seventh book is about the wealth of the physical capital that humanity has today. It should make you grateful that you live in this age and not five hundred or five thousand years ago.

The Wealth of Human Capital
The eighth book is about the wealth of the human capital that humanity has today. A great deal of the human capital is taken for granted and a great deal is wasted so it will be good to review the major advances of human capital.

The Wealth of a Nation
The ninth book takes us to a title similar to Adam Smith's Wealth of Nations. A nation is an entity that comprises a geographical area with a legal setting. It is governed by a state that is the keeper of the citizen’s charter. The state maintains the rules of a nation’s operations and in this way determines the capital structure of the nation and its citizens. This is a key factor that results in wealth, freedom, and life for its citizens.

The Wealth of the Planet Earth
The tenth book is about our planet. It introduces the concept of Natural Capital. What we think as natural resources is actually the capitalization of life, organic, and inorganic matter that has been happening for millions of years. Unfortunately, many of the actions that we do in the pursuit of wealth production reduce the planet’s natural capital. If the planet was treated as a capital asset, it would be maintained correctly and it would not be consumed risking a drop of the whole world to lower income levels.

The Wealth of the Human Spirit
The eleventh book will be an inquiry about what these economic principles might mean for the spiritual world.

End of the Series