To:       Honorable President Barack Obama

Sub:     Advice of Most Successful Entrepreneurs for Governance
           
Date:   March 4, 2014

Dear President Obama,

The U.S. has become a nonpareil destination of humanity primarily because its system (rules) of governance is based on the advice of most successful entrepreneurs.   This is why U.S. presidents and Congress have invariably given access to lobbying by successful enterprises.  Your administration has not fallen behind in this efficacious tradition of seeking advice from prominent industrial honchos to shape policy. 

Why does a leading entrepreneur like the ex-Goldman Sachs CEO Hank Paulson–who was cajoled by the U.S. President to head the Treasury and is now a professor at the prestigious Booth School of Business of the eminent University of Chicago –then worry about any risk to the economy due to political leaders heeding to advice on governance posted on internet sites.  He may have echoed the concern of other successful entrepreneurs.  They have not referred to my emails, faxes or postings at pro-prosperity.com.  Pro-prosperity.com has been ostracized by the media embedded with businesses, though I observe and welcome numerous identity-hidden visitors. 

The successful business leaders have a legitimate point about political leaders depending increasingly on apparently non-business sources like Pro-Prosperity.Com.  This site and its author prescribe first-best efficient rules of governance, as an alternative to the current system of governance established through the advice of hitherto successful entrepreneurs.   The established system is antithetic to my first-best system.  Here are remarkable facts that substantiate why the heretofore successful entrepreneurs and their academic mentors may be genuinely worried:

  • The U.S. Congress and President heeded academic research–that did not originate from business enterprises or government regulatory agencies and was not funded by any vested interest– to legislate a really unprecedented rule of governance (FDICIA 1991) by which banks with capital below a minimum threshold are foreclosed.   This foreclosure rule ultimately became a norm of bank governance worldwide.  Stability of the U.S. banking system begot immense economic prosperity with quadrupling of the American economy and stocks.  This vindicated why the U.S. government should have heeded academic research dissociated from business enterprise.

 

  • That the bank holding companies circumvented the bank foreclosure rule through multi-tier leveraging and that academic research dissociated from business was again taken seriously as soon as it was presented to U.S. Congress in March 2003 is obvious by subsequent Federal Reserve testimonies and conference of academic experts on safety and soundness of the U.S. banking system.
  • President Bush cajoled Hank Paulson to relinquish his CEO post in Goldman Sachs to be the Treasury Secretary and asked Ben Bernanke (the only economist who has written a formal doctoral thesis on the Great Depression) to intern at the White House before becoming the Fed Chief to take every step necessary to avert a recurrence of the Great Depression after receiving my January 2005 memo on “Enhancing American Competitiveness” by undoing the Ponzi scheme centered at the Fed.   The first thing Hank Paulson did was to require bank holding companies to have sufficient capital on a consolidated basis, which led to a collapse of the most thinly capitalized BHCs.

 

  • There was an incessant campaign by top industrial honchos and lawmakers to shut down Fannie Mae and Freddie Mac.  But after circulation of my paper entitled “Coalition of Borrowers,” the U.S. government under your leadership has taken a U-turn and the European Union has embraced the U.S. home financing model.

These facts raise serious questions that the U.S. must resolve to remain the nonpareil destination of humanity:

  • Has the U.S. government broken its efficacious tradition of taking the advice of successful entrepreneurs to establish an alternative system of governance?
  • Should the U.S. consider the advice of an Indian villager with apparently no significant business experience anywhere?  
  • Will taking such advice be risky for the U.S. economy?

Such questions have been answered in a recent memo circulated among Indian political leaders and thinkers, excerpted below:

Date:   February 17, 2014

Sub:     Which nation can emerge successfully from the global economic crash?

A system of governance, which debars election of lawmakers having business interests or collecting funds from businesses, is crucial for sustainable business development and employment generation.

Industrialized and emerging economies are now facing unsustainable industrial growth and employment stagnation.  It is due to crony capitalism, which promotes enterprises that benefit a cartel of business leaders and lawmakers by (a) indebting the public exchequer, (b) burdening the public with taxes and inflation in prices, and (c) sacrificing numerous potential enterprises. 

Electoral success of a party now depends on monetary contributions received from established business enterprises.  The principal goal of these businesses is to destroy their competition or to preemptively ‘buy’ fledgling entrepreneurs (by destroying jobs) using new money created by fiat of lawmakers and borrowed through political lordship over banks. 

If lawmakers have business interests or collect money from businesses, the rules they will enact will always privilege certain businesses by penalizing competing enterprises, burdening the public with taxes and inflation and indebting the state exchequer.  In fact, the current system of governance fosters fewer large businesses for politicians to make private deals for mutual advantage.  This system stifles the growth of numerous small enterprises that could create abundant jobs for the unemployed youth. 

Crony capitalism stifles free enterprise and ingenuity.  It is inefficient.  It is the root cause of historical revolution by unemployed youth and downfall of empires.  Crony capitalism flourishes as lawmakers are not debarred from having business interests or collecting funds from businesses.  

Only a new system-that debars election of lawmakers with business interests and prevents elected lawmakers from collecting funds from businesses-can exploit the unlimited entrepreneurship for employment regeneration and economic resurge of a nation. 

The new system of governance must basically mandate public funding of elections of lawmakers without links to businesses.  The established political parties and business/academic interest groups cannot, however, easily disband their current leadership to establish such a system needed for emergence of the economy from the rut. 

  • Principle of Separation between lawmakers and businesses

 

What sort of business experience do I have to aver that the alternative first-best efficient system of governance, which debars lawmakers from having business interest, will really succeed? Large business conglomerates will pooh-pooh my entrepreneurial experience.  Even a good friend of mine once taunted me about practical credibility of my advice on an alternative system of governance. 

After rumination over self-criticism and friendly admonitions, it dawned on me last year that the principle of separation really underlies the immense success of the riskiest and most wealth creating global business enterprise that I have been running peerlessly since 1989: 

  • The product of my enterprise is new knowledge on a system of governance for wealth creation and preservation of the society that props me.  The value of this enterprise is the new wealth created and preserved as a result of new knowledge.
  • My competitors are all immensely qualified and experienced scholars with doctorate degrees from top universities and nonpareil academic laurels. 
  • The business of producing any new knowledge is the riskiest of all ventures because competitors will have to vet if the produced knowledge is really new. 
  • The competitors have produced the existing knowledge and/or guided by such knowledge.  They have educated the humanity with the existing knowledge at established academic institutions.
  • One crucial piece of existing knowledge that has guided most, if not all, humans (e.g., lawmakers, business entrepreneurs, researchers, educationists and others who produce and serve) is that they maximize their own economic net-worth (wealth) while making decisions for themselves and for others (to the extent they are involved).  This existing knowledge (known as utility theory of Ken Arrow) has won Nobel Memorial Prize in economics.
  • The now-failed established system of money and finance has been founded on existing knowledge that choices are made to maximize economic net-worth.  This system has been theoretically proved and empirically validated as unstable, inefficient and fundamentally and constitutionally unfair.  
  • A famous professor of economics and finance, for whom I had deep respect, conceded during a seminar in response to my observation that his economic model would work only if the public were stupid.  When I presented my new knowledge which did not presume the public to be stupid, he was not pleased. 
  • The elite academy comprising my competitors furiously influenced publishers and journals under its control to not publish my new knowledge to stifle my career and hobble my economic survival. 
  • My rivals ultimately failed to suppress the new knowledge discovered in my research because they presumed falsely that I was, like them, guided by their principle (knowledge) of maximization of economic net-worth and that I would eventually surrender when their ‘sanctions’ hurt and perished me penuriously and ignominiously. 
  • My rivals have warned me and other scholars to not pursue for any new knowledge that adversely hurts their self-interests in the established laws on wealth creation and preservation. 
  • My rivals failed to see that some individual may value discovery of truths (new knowledge) more than his economic net-worth for betterment/survival of society that supports him. 

 

My business of producing and propagating new knowledge about wealth creation and preservation has thus become peerless and nonpareil. This is undoubtedly the riskiest business in terms of raising one’s economic net-worth.  As the owner of such business, however, I rationally view the total net-worth of society that props me as the market value of my risky business.  This market value is higher than that of any other business enterprise.  My personal share of economic net-worth of this enterprise is meaningless because it has no relevance to me after my death.  But the total wealth created and preserved by the new knowledge produced by my enterprise remains eternal.

The riskiest business of creating new knowledge on the system (rules) of governance for wealth creation and preservation has succeeded immensely because I have inherently followed the principle of separation between designing laws and my business interest.  My pursuits for creation of new knowledge on an alternative system of governance were never dictated by enhancement of my personal economic net-worth or even publicity.  I had to struggle, however, for my economic independence in order to produce and propagate new knowledge.  My competitors (existing experts and apparently successful entrepreneurs) failed because of the intimate link (conflicts of interest) between the knowledge they professed and their personal business/professional interests. 

With best regards,
SankarshanAcharya     
Founder, Citizens for Development and Pro-Prosperity.Com


http://pro-prosperity.com/Research/First-best%20Management%20Academy.pdf

http://pro-prosperity.com/Research/Bank-foreclosure-rule-paper-Acharya-Dreyfus-Journal-of-Finance-1989.pdf

http://pro-prosperity.com/Global%20Economy%20Chatterbox/Warning-USCongress-In-2003-On-Home-Mortgage-Debacle.html

http://pro-prosperity.com/USPresident013105.html

http://pro-prosperity.com/Research/Coalition%20of%20Borrowers.pdf

http://pro-prosperity.com/Research/Constitutional-Monetary-Finance-System.pdf