the sovereign individual

The Sovereign Individual – The Greatest Book on our Economic Future

I do not use the term “extraordinary” very often to describe books, but this one qualifies as a TRULY extraordinary book.

It is extraordinary because it was first published in December 1996 and has accurately predicted the following events which have since transpired:

  1. The September 11 2011 attacks by Osama Bin Laden
  2. The decline of the welfare state, which is now transpiring in much of the Western world
  3. The mobility of work and jobs due to the rise of technology

The Sovereign Individual is subtitled How to Survive and Thrive During the Collapse of the Welfare State, by James Dale Davidson and Lord William Rees-Mogg.

Davidson and Lord Rees-Mogg anticipate the collapse of the welfare state and a world where cyberspace frees the elite from the constraints of national boundaries. The welfare state collapses because wealth producers will move their operations elsewhere. We already see this with the outsourcing of both low-skill and high-skill work to the developing world.

The authors look at history, from the age of the hunter/gatherers, to the first city dwellers through the feudal times and the industrial revolution and observe how economic realities shape and reshape the nature of government. Davidson and Rees-Mogg point out that the world changes every five hundred years:

500     B.C.   Greek democracy emerged

     0               Birth of Jesus Christ

500     A.D.   The Dark Ages

1,000 A.D.   The Advent of Feudalism

1500   A.D.   The Renaissance and the Industrial Age

2000  A.D.   The Information Age

The authors contend that the modern welfare state, just over 100 years old is a variation of an old societal relationship – that government treats the most productive members of society as members to be exploited for the benefit of special interest groups.

The Information Age has several aspects that change the nature of the relationship between the Sovereign Individual  (i.e., the creative entrepreneur) and the state:

  • businesses can now be run in cyberspace, and work can be done anywhere in the world. A high salaried Wall Street financial analyst may find his job outsourced to India. Software development may be done in Russia. The concept of a “job for life” will disappear, replaced by contract work.
  • since the Sovereign Individual will not limited to her own country, she may strategically relocate her place of residency to a tax haven to avoid paying high taxes, or keep traveling to avoid being a resident of any country. The Sovereign Individual is no longer confined to any one country and will maximize her own benefit by selecting a state that provides government services for the most attractive price (i.e., taxes)

This is good news for those individuals with initiative and talent. The authors state that:

“Those who can educate themselves will be almost entirely free to invent their own work and realize the full benefits of their own productivity. Genius will be unleashed, freed from both the oppression of government and the drags of racial and ethnic prejudice. In the Information Society, no one who is truly able will be detained by the ill-formed opinions of others.

Politicians will no longer be able to dominate, suppress and regulate the greater part of commerce in this new deal.”

However, governments will be threatened by the departure their most productive people because they pay the highest taxes, which will lead to collapse of the welfare state as we know it. In the United States, the Internal Revenue Service, Central Intelligence Agency and National Security Agency will launch a counterattack against individuals and groups who seek to circumvent taxes. On one side will be cyber currencies and hard encryption, on the other will be increasing harsh penalties to those who resist.

The book includes an action plan. The authors recommend preparing for an exit from high taxing or repressive states, moving businesses offshore and developing cognitive skills that are portable and in demand.

The content of this book was very well researched and presented in a very digestable manner, and the conclusions are controversional. However, this is definitely recommended reading so you can put the changes that are occurring around us into historical context.

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With over 20 years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. in 2007 so that he could dedicate his professional life to help people from all walks of life to deal with their debt.