Tag Archives: History

A Brief History of Tax Havens

                                                                                                       Above: CCP Inc.

For as long as there have been unscrupulous governments levying taxes, there have been savvy people finding ways to avoid paying them. The emergence and continued existence of tax havens in direct defiance of onerous and unjust taxes continues to serve as a catalyst for economic as well as political, social, and ethical reform. It can be said that tax havens and, for that matter, any sort of “enclave of freedom” provide the only true competition to the conventional model of government. Such entities promote human progress and are a source of social innovation.

Ancient World                                                                                                                                                                                                                                               Above: Athenian Acropolis

It is a documented historical fact that the government of Ancient Athens imposed a 2% ad valorem duty tax at the city-state’s principal port. Athens was far from the only ancient polity that engaged in such taxation of trade; other city-states engaged in the practice include Halicarnassus, Cyprarissiae, Delos, Epidaurus, and Troezen. Governments even began experimenting with and implementing protective measures. The princes who ruled over Bosporus even levied a 3 .33% export tariff on all corn produced in the kingdom, unless the produce was destined for Athens, in which case the rate was reduced to 1.66%.                                    Then as now, certain statesmen and people responded to the authoritarian imposition of such measures on them and other average citizens. In Athens’ case, small nearby islands “offshore” from the Peloponnese, became the preferred ports-of-entry for traders, looking to avoid the tax. Over time, even the Athenian bureaucracy responded to the force of market competition. Thucydides writes that in 413 B.C., Athens phased out its 5% import and export duty in tributary ports “because they believed in this way they would increase their revenue.”

Medieval & Modern World                                                                                                                                                                                                                         Above: City of London Corporation            

With the chaos wrought by the fall of the Roman Empire, sanctuary cities, providing individuals as well as organizations, asylum from a variety of different threats fostered a European tradition for increasing trade and political liberalization that would only be realized later. In analyzing the history of the tax havens an interesting trend appears; it seems that medieval and contemporary tax havens have their roots in the English Common Law tradition. Perhaps the star of the modern tax avoidance/protest movement is the 1.2 square miles governed by the City of London Corporation.                                                                                                                                This fascinating organization, shrouded in rite and a wealth of traditions including its Freedom of the City ceremony, traces its legacy of autonomy to its 12th century establishment as a commune and 1191 recognition by Prince John. The city was given special protections including the right to elect its own mayor in the 1215 Magna Carta. The City of London’s history has been joined at the hip with the development of livery companies. Descended from medieval guilds, livery companies today operate as trade associations for a wide variety of professions. Most livery companies carry the title “Worshipful Company of [profession or cause].”                          In addition to providing fodder for conspiracy theorists, the City of London’s 110 livery companies provide a great networking function within their respective professions, champion various philanthropic causes, enforce a professional code in their fields, award professional qualifications, etc. Of course, some of these functions vary according to the livery company, but overall the core functions remain the same. Importantly, the City of London enfranchises the business electorate. How this works, essentially, is that any incorporated or unincorporated business or organization whose premises are located within the city may appoint a number of voters based on the labor force they employ. In addition, the senior members of the liveries, the “liverymen”, sit on a council named the Council Hall, which chooses the Lord Mayor of the City, sheriffs, and other government positions.                                                                                                          As already mentioned, the city plays host to a large number of significant financial institutions including the Bank of England, London Stock Exchange, and Lloyd’s of London as well as offices of over 500 banks. In total, the City of London accounted for 2.4% of U.K GDP in 2009. There are some claims that the City of London effectively operates as a tax haven for foreign multinational companies, shielding businesses under investigation for fraud. Such accusations border on the realm of preposterous. What is clear, though, is that the City’s tradition of secrecy, autonomy, and sanctuary seem to have been picked up by crown dependencies the world over.                                                                                                                                                                                                                                                                                                                   Above: The South Sea Bubble : A Scene In Change Alley 1720

Founded in 1711, the South Sea company was a joint-stock company created as a way to consolidate and ultimately reduce the British government’s debt. Basically, the company’s business model was to attract investors who would pay off a government IOU in exchange for exclusive trading rights in the South Seas. The venture rested on the speculation that new markets for British goods would emerge in Latin America, opening up new silver and gold markets to the company and its private, British investors. Faster than you can say “Ponzi Scheme”, people were flocking to the South Seas Company, astronomically overvaluing the price of the stocks. The pioneering spirit embedded in the business plan of the company became a sensation. Soon, schemes promising to invest in everything from “floating mansions” to “sunlight reclamation from plants” sprouted up across Great Britain.                                                  When the leaders of the South Sea Company finally realized that the company’s stocks were vastly overpriced relative to the company’s actual earnings and value, they sold their own shares in the business. When news broke out of their sales, a mad frenzy of investors selling off their shares in the company ensued. The market would’ve completely crashed had it not been for the banking prowess of the British Empire.                                                                                                 Perhaps the most enduring legacy of the South Sea Bubble was not the lesson in investing (Can you spell, Bernie Madoff?) but the Bubble Act of 1720 which effectively forbade the formation of all join-stock companies not approved by the royal charter. Throughout the British Empire, new rules and restrictive regulations relating to business incorporation were enacted. Until the law’s repeal in 1835, rates of incorporation were considerably lower throughout British domains than they had been previously. In the late 19th century, the cash-strapped states of New Jersey and Delaware began reforming these laws and began attracting out-of-state businessmen, seeking to incorporate in these “havens”, in droves.

                                                                                           Above: Egyptian Delta Land & Investment Co.

The 1929 British court case Egyptian Delta Land and Investment Co. Ltd. vs. Todd  was a landmark development in the creation of modern-day tax havens. The dispute arose over the issue of taxation as related to a corporation’s location(s). The Egyptian Delta Land and Investment Company though legally incorporated in London, was headquartered in Cairo and operated in Egypt. Essentially, the court ruled that the company was exempted from paying British taxes because it did not operate in the UK. This case set the precedent for offshore business incorporation and the nervous governments that try to counteract it. Years later, various British and former British holdings exploited and tweaked this ruling in their own laws including the Bermuda, The Bahamas, and Cayman Islands. Bermuda, in particular, would prove to be an early pioneer of the modern tax-haven.

                          Above: Conyers Dill & Pearman

Bermuda traces its history as an offshore destination to, you guessed it, a bunch of lawyers, specifically, the law firm Conyers Dill & Pearman. In 1935, firm’s founder Reginald Conyers drafted Bermuda’s first  “exempt company” legislation, birthing what some consider the first modern tax shelter. The law’s language specifically addressed “exempt companies,” laying the foundations of the modern-day offshore business craze. Today, the firm works in various offshore financial centers such as the British Virgin Is., Cayman Is., and Mauritius.                                  Around the same time in Switzerland, the Federal Act on Banks and Savings Banks was enacted (1934), offered banks strong protections of privacy. Article 47 of the document (known colloquially as the Swiss Banking Act of 1934), enshrines the concept of absolute professional secrecy. In other words, any inquiry into any account held in Swiss banks is considered a criminal offense. The law restricted access to information about private holdings in Swiss banks to any government, including the Swiss. Exemptions can be made in the case of Swiss judge’s subpoena, or investigation of terrorist-related funds. In addition to the national legislation, the laws of numerous Swiss cantons were written to extend various business and financial protections to individuals and organizations.                                                                                                    Following on the heels of the First World War, Lichtenstein passed the Lichtenstein Persons and Companies Act in 1926. The law, along with subsequent laws in 1928, relaxed and streamlined Lichtenstein’s incorporation rules; made Lichtenstein the only continental European country to have a codified Trust Law; and extended privacy protections to foreign holdings in the country. The law also introduced a vast repertoire of incorporation types to the Lichtensteiner legal system. As a result, the mostly poor and agrarian economy that had been ruined by the First World War was transformed almost overnight into a modern economy, focused on financial services. The growth was precipitated by the vast influx of domiciliary and holding companies in the 20’s and 30’s. The 1926 law, combined with Lichtenstein’s maximum business tax rate of 20% and open border agreement with Switzerland, have made Lichtenstein an attractive and wealthy offshore center.                                                                                                        Following the 1950’s, the 20th century saw a huge proliferation in the number of tax havens worldwide including every type of municipality from Pacific island nations, to the Irish Financial Services Centre in the heart of Dublin, Ireland. In recent years, the OECD (Organization for Economic Co-operation & Development) which is anchored by representatives from high-tax developed nations, has been aggressive in their attacks on tax havens and offshore financial centers. Recently, the Swiss signed an OECD treaty ensuring the exchange of tax information in certain instances. This comes off the heels of prior Austrian and Luxembourgish concessions.

Looking Forward                                                                                                                                                                                                                                   Above: The Seasteading Institute

While there are many aspects of tax havens and their development that I have left out of this article (perhaps it will be fodder for a future post), I think the most interesting is the prospect offered by seasteading. Essentially, seasteading is a movement by a small but dedicated group of libertarians and anarchists committed to offering citizens of the world alternatives to traditional government. Essentially, a seastead is a site located in international waters, beyond the EEZ of existing land-based nations, on which people can dwell. The seasteads can be joined to one another and disconnected as needed. The concept is that people will form voluntary associations rather than have a governmental entity imposed upon them. The belief is that by subjecting social governance to the same competitive forces that power the market, human creativity will be unhindered, unleashing the beneficial powers of technology and social innovation.                                                                                                                                                               Currently, The Seasteading Institute is directing its recruiting efforts towards fulfilling what it calls The Eight Great Moral Imperatives: “Cure the Sick”, “Enrich the Poor”, “Feed the Hungry”, “Clean the Atmosphere”, “Live in Balance with Nature”, “The Velella Mariculture Research Project”, “Power the World”, and “Stop Fighting”. The group hopes to achieve all this by engaging the ingenuity of its supporters and the freedom offered by the absence of government to achieve technological breakthroughs that will better humankind. Does this sound like a crazy, utopian pipe dream? Maybe, but it sure is a noble pursuit.

In closing, I’ll leave you with the following thought. In order to create a more just and prosperous future and ensure the continuing of human flourishing, we as the human race must move towards a model of social organization that subjects these institutions to the forces of competition and creative destruction led by the choices of individual actors.

 

New Deal or Raw Deal?

                                                                                                       Franklin Roosevelt’s New Deal is, perhaps, the greatest single dupe ever foisted on the American people. According to the revisionist narrative, the era represented a vindication of the progressive messianic complex. If modern revisionists are to be believed, the New Deal rescued an America reeling from an economic disaster caused by a clueless and non-interventionist government and fundamentally re-structured the American economy all while achieving fundamental and long-lasting reforms in social welfare and justice that have benefited ensuing generations of Americans. As you might have guessed from reading this blog, I don’t subscribe to a revisionist line of thinking.                                                                                                                          In my view, the New Deal represents a unilateral roll-out of the progressive agenda on the American people and the hijacking of the Democratic Party as a means of implementing this agenda. Not only did the federal government undergo a massive expansion in size and scope but it was achieved through egregious transgression of the constitutional process. If anything is to be learned from this chapter in American history it is, in the words of Benjamin Franklin:

“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

One of the earlier attacks on the personal freedoms of American citizens came in 1933 with FDR’s Executive Order 6102. The directive, made the hoarding of monetary gold by any person or organization criminal. The order required all in possession of gold to return said gold to Federal Reserve Bank in exchange for a set amount of paper currency per ounce. Not only did this law set a dangerous precedent that normalizes and encourages economic collectivization by the federal government but it was done in the name of economic necessity. Proponents argued that in order for the Federal Reserve needed to increase its gold reserves in order to maintain the reserve ratios it had set for itself. Following the order American citizens were subjected to federal raids and seizures of gold exceeding the allowable limit. Not only were American individuals and businesses deprived of their property but foreign companies too. It wasn’t until 1974, nearly 41 years later, that the private ownership and trade of gold was once again fully legalized.

     The economic freedoms of private businesses and citizens were further infringed with the passage of the Agricultural Adjustment Act (1938) and the decision in Wickard v. Filburn (1942). The Agricultural Adjustment Act granted the Agricultural Adjustment Agency the power to regulate the private production of wheat, cotton, corn, hogs, rice, tobacco, and milk. In future amendments to the law, the list was expanded to include rye, flax, barley, grain, sorghum, cattle, peanuts, sugarbeets, sugarcane, and potatoes. The federal government chose to regulate these specific products because they were deemed to be in overproduction. According to the New Deal proponents, regulation (i.e “destruction”) of crop surpluses grown privately was essential for a full and complete economic recovery.                                                                             The controversy surrounding this legislation finally came to a head in the 1942 supreme court case, Wickard v. Filburn. The defendant, Roscoe Filburn, was an Ohio wheat farmer who grew wheat in excess of the limits set forth by the government. The excess wheat was grown purely for subsistence, that is, personal consumption not for sale. In court, Filburn argued that the Agricultural Adjustment Act didn’t apply to his surplus of wheat because it didn’t fall under the domain of commerce which the federal government was given the power to regulate under the Interstate Commerce Clause of the U.S Constitution. Against previous rulings by lower courts, the Supreme Court ruled that the surplus did fall under the category of “commerce” because growing wheat for personal use affected the amount of wheat that would be bought for chicken feed! This ridiculous ruling not only defies basic economic sense (the price of chicken will be higher if Filburn has to buy other people’s wheat) but set a dangerous precedent for the interpretation of the Commerce Clause (Art. 1, Sect. 8, Clause 3) in future supreme court cases.

                                                             The failed Judicial Procedures Reform Bill of 1937 was another constitutional near-disaster. Had the bill passed, the office of the president would have expanded its powers on Caesarean proportions. Had it passed, the bill would have allowed the president to appoint a new supreme court justice whenever a sitting justice reached the age of seventy. The legislation allowed for up to 6 justices sitting on the same court to be appointed in this manner. The impetus behind this conspiracy, which was so see-through that it became known as the “court-packing scheme,” was Roosevelt’s desire to create a court that favored his legislation. Publicly, this motivation was presented as a measure to ensure that no one party ever controlled too many branches of the federal government, never mind the will of the people.                                                                                 With the creation of highly-publicized social assistance programs the New Deal heralded a new era of dependency on government. The New Deal certainly laid the foundations for an American welfare state whose complete construction is being debated to this day. The creation of Social Security in 1935 saddled generations of American taxpayers with deficits and anxiety over the impending insolvency of this huge social “safety net.”                                                                    In 1935, under the Social Security Act, the Aid to Families with Dependent Children (AFDC) was  established. The program was a precursor to the modern-day Temporary Assistance for Needy Families (TANF) better known as welfare. The AFDC was and, in some circles, is considered radical for its direct financial support of single, unemployed, and unwed mothers. Research conducted in previous decades, most notably the Moynihan Report, found that programs such as the AFDC encouraged out-of-wedlock births and the general disintegration of the working-class family unit.  It wasn’t until 1996 that the AFDC was reformed with the passage of the Personal Responsibility and Work Opportunity Reconciliation Act.

                                                     The National Housing Acts of 1934 and 1937 laid the foundations for the large-scale construction of public housing projects and redlining practices that promoted inner city decay and racial segregation that dominated the middle part of the 20th century. To be fair, the legislation did create the Federal Savings and Loan Insurance Corporation, which insured deposits in savings and loan institutions until it was consolidated with the FDIC in 1989. However, the creation of the United States Housing Authority ushered in a new era of large-scale public housing projects that concentrated and magnified the miseries of the urban poor. To build these housing projects, neighborhoods were razed, stripping residents and businessmen of their land ownership in the process.                                                                                    The Federal Housing Administration only magnified these problems with their racist redlining and blacklisting tactics whereby neighborhoods were evaluated for the relative “stability” of lending to and insuring residents, often based on a locale’s racial demographics. As a result, banks and insurance companies refused to do business in certain neighborhoods, stifling many of the otherwise upwardly-bound poor.                                                                                                          There are too many pieces of the New Deal to examine fully and satisfactorily in one post. One thing is clear; the New Deal has left our nation with a legacy that we are still grappling with and will continue to grapple with for some time.

Neocolonial Organizations Introduction

 Above: Map of European Neocolonial Organizations

While the glory days of Europe’s great colonial empires is long past, the influence of post-colonial unions or associations of former colonies remains a significant yet under-appreciated. While given relatively little attention, these organizations form significant trade networks, philanthropic channels, language blocs, and zones of cultural diffusion. First of all, here is an as-of-yet incomplete map of these organizations. Not show here is the Dutch Language Union, whose sole purpose and mission is preservation of the Dutch language.

Commonwealth of Nations                                                                                           

The Commonwealth of Nations, an association of Great Britain’s former colonies created in 1931, is comprised of 53 member countries spanning 6 different continents and Oceania that account for roughly 1/3 of the world’s population, 1/5 of its trade, and 1/4 of its land area. Status as a member of the Commonwealth is not simply an honorific title; member countries interact through the various commonwealth organizations such as the Association of Commonwealth Universities (ACU), Commonwealth Association of Architects (CAA), Commonwealth Business Council (CBC), and Commonwealth Medical Trust (Commat). The organizational structure resembles that of the U.N, minus the security council. There is no formal trading bloc formed by the Commonwealth, but research suggests that trade between commonwealth countries is significantly greater than that between a commonwealth and a non-commonwealth neighbor. The Commonwealth has promoted a number of now-ubiquitous traditions across its member states: the Queen of England is the official head of state for most Commonwealth members; the multi-sport Commonwealth Games are held every four years; and every 2nd Monday of March Commonwealth Day officially commemorates the organization.

Community of Portuguese Language Countries   

The Community of Portuguese Language Countries (CPLC), founded in 1996,  consists of 9 full members, 2 associate observer states, and a plethora of interested nations. The CPLC nations cover roughly 4.15 million sq mi and are home to upwards of 240 million people. The core branches of the CPLC are the The Conference of Heads of State and Government, The Council of Ministers, The Standing Committee for Consultation, and The Executive Secretariat. The primary aims of the CPLC are mostly diplomatic, linguistic, and research-oriented. Other organizations include the Association for Portuguese Language Universities, Community of Portuguese Language Medicine, and The Union of Portuguese Language Lawyers.

The International Organization of the Francophonie                          

The Francophonie, founded in 1970, is currently composed of 57 member states with various membership statuses. The Francophonie represents roughly 890 million people, 19% of world trade, and 11 million sq mi on 5 continents and Oceania. The Francophonie relies on five core agencies to carry out its operations. These agencies include Association of Francophone Universities (AUF), TV5Monde, Senghor University of Alexandria, and International Association of French-Speaking Mayors. The Francophonie has been behind numerous conflict resolutions, economic development campaigns, philanthropic pursuits, and cultural preservation projects.

Commonwealth of Independent States    

The Commonwealth of Independent States (CIS) is a union of 11 former Soviet Republics, including 9 full member states and 2 participant states. The CIS is primarily focused on promoting free trade and political stability in the region. As of late, there have been serious efforts to promote the standardization of the Russian language among member states. The organization also developed and implemented a regional free trade agreement, CISFTA, forming a new trading block and common market. Additionally, the organization is responsible for the development of a NATO-like treaty among member states, CSTO. Both CISFTA and CSTO face tenuous futures. Like the other neocolonial organizations discussed earlier, the CIS is heavily involved in election monitoring in member countries.

I have not gone into specific instances of these organizations at work, but I promise to do so in a future post. Membership in one of these organizations does not necessarily preclude a nation from joining other neocolonial, supranational organizations. Again, I will go into specific case studies at a later date. This post is meant to lay the groundwork for future discussion of this topic.

Trends in American Family Life

As we all know, the U.S is a land subject to great, sweeping sea changes. The nature and composition of the families of its citizens is no exception. There are a number of trends, in terms of both perception and actuality, that are transforming our idea of the American family. It is important to understand these trends as it directly relates to our demographic and cultural future.

Households and Marriage

The U.S Census Bureau defines a “household” as consisting of all the people who live in a unit of housing. A “family” is defined as a householder and one or more other people living in the household related to the householder by birth, marriage, or adoption. A “non-family household” can consist of a householder living alone or with non-relatives. Individuals living with roommates or in college dormitories , for example, are counted under this banner.

                                                                            U.S Households

2010 2000 1990 1980 1970 1960 1950 1940
Avg. Size1 2.58 2.59 2.63 2.76 3.14 3.33 3.37 3.67
Avg. Family Size1 3.14 3.17 3.17 3.29 3.58 3.67 3.54 3.76
Total 100.00% 100.00% 100% 100% 100% 100% 100% 100%
% Family2 66.40% 68.10% 70.20% 73.70% 80.30% 85.10% 89.40% 90.00%
%Husband-Wife 48.40% 51.70% 55.10% 60.20% 69.40% 74.80% 78.10% 76.00%
%one householder 18.10% 16.40% 15.00% 13.10% 10.90% 10.30% 11.30% 14.10%
%Non-Family2 33.60% 31.90% 29.20% 26.30% 19.70% 14.90% 10.60% 9.90%

In the above data, gleaned from U.S Census reports, a few trends jump out: the decreasing proportion of family households, the shrinking size of families, and the decline of husband-wife households as a proportion of all households. As a nation, we have been trending toward smaller families and smaller households. We have also been moving away from the “nuclear family”, a household headed by a married wife and husband. Additionally, a greater portion of us are living in non-family living arrangements. In short, the focus of American domestic life is shifting away from the family and towards a more single lifestyle.                                                             Following the Supreme Court ruling on Loving v. Virginia (1967), marriage between two spouses of different racial backgrounds became fully legal in all fifty states. Interracial marriage provides for an interesting deluge of statistics that require further conversation. For our purposes, however, we will mention the overall rise in interracial marriage as it pertains to the larger trends in American marital life.

                                                          Interracial and Interethnic Marriage 

2010 2000 1990 1980
Same Race Couple 91.60% 93.20% 95.50% 96.80%
Mixed Race Couple 8.40% 6.80% 4.50% 3.20%
Sources
1http://www.census.gov/population/socdemo/race/interractab1.txt
2http://www.census.gov/population/socdemo/ms-la/tabms-3.txt

 

                                                                 New Marriages

2010 1980
Same Race Couple 84.90% 93.30%
Mixed Race Couple 15.10% 6.70%

Children                                                                                                                                                                No one is more subject to the changes in the fabric of American family life as children. The most marked changes have occurred in the living situations of U.S. children. The coming commentary on the data presented in this blog post will focus largely on the state of American children.

                                                            U.S. Children Living Arrangements 

2010 2000 1990 1980 1970 1960
% single-parent 30.20% 26.70% 24.70% 19.70% 11.90% 9.10%
%two-parent 65.70% 68.10% 72.50% 76.60% 85.00% 87.70%
Sources
1http://www.census.gov/population/socdemo/ms-la/tabch-1.txt
2https://www.census.gov/population/www/socdemo/hh-fam/cps2010.html

    Please note that until recently, the census did not distinguish between unmarried, cohabiting parent households and households lead by married parents. The number of children living in cohabiting, unmarried parent households while not negligible, is still minuscule and, as such, does not change the percentage of children living in two-parent households greatly.                          The tale of the breaking up of the American family is one marked by dismissals of the truth, misguided policy interventions, and marginalization. To understand the situation, one must go back to March 1965 when Assistant Secretary of Labor Daniel Patrick Moynihan released his now infamous Moynihan Report. The report, officially titled “The Negro Family: The Case for National Action” was controversial because in the opening, Moynihan had the following to say:

The United States is approaching a new crisis in race relations. In the decade that began with the school desegregation decision of the Supreme Court, and ended with the passage of the Civil Rights Act of 1964, the demand of Negro Americans for full recognition of their civil rights was finally met. The effort, no matter how savage and brutal, of some State and local governments to thwart the exercise of those rights is doomed. The nation will not put up with it — least of all the Negroes. The present moment will pass. In the meantime, a new period is beginning. In this new period the expectations of the Negro Americans will go beyond civil rights. Being Americans, they will now expect that in the near future equal opportunities for them as a group will produce roughly equal results, as compared with other groups. This is not going to happen. Nor will it happen for generations to come unless a new and special effort is made.                                                                                                        

    What Moynihan was alluding to and what he later expounded on in his report, was the impending dissolution of black families.  Moynihan correctly predicted the epidemic of black single motherhood, juvenile delinquency, and the dissolution of the black family unit. Ironically, as black-Americans (I hate using that term) underwent the process of integration into American society they experienced the disintegration of their family life.                                                                 The Moynihan Report was groundbreaking because it was the first true recognition of the phenomenon of the “emasculation of the Western male”, stated more precisely “the marginalization of the Western male.” Moynihan asserted that one of the main causes for the coming explosion of illegitimacy, divorce, and dysfunctional families was the exclusion of the urban black male from his traditional role as the provider for the family. Unlike his counterparts in rural settings, the urban black man faces a stiff labor market and is, thus, more prone to be unemployed. This leads to a “changing of the guard” in which a case worker, normally a woman, intervenes and deals with the wife of the unemployed house, cutting the man out of the picture. As Moynihan states, the role of the husband is reduced to that of errand boy to and from the relief office.                                                                                                                                                             The term “Moynihan’s Scissors” is given to the rates of black male unemployment and black welfare enrollment which began to diverge starting in 1962. Moynihan also noted that due to obscenely high rates of under- and unemployment for black men more black women had to be wage-earners, further undermining the man’s role as the provider of the household. To further compound the problem, the remaining stable, middle-class black families dwelt largely in the same Northern slums and ghettos in which the breakdown was occurring due to redlining and housing segregation. This put middle -class black youth from stable homes at greater risk of contracting the same social ills as their less fortunate neighbors.                                                             Particularly relevant to contemporary discussions about race and gender is Moynihan’s finding that the disparity in educational attainment between black males and females was greater than the disparity between white males and females. Both black and white males lagged behind females in terms of educational attainment and grade-level completion, but black males lagged even further behind black females than did white males to white females. The relative lack of education among black males weakened their job prospects and created, for many, a complex of inadequacy and insecurity around the comparatively better educated female counterparts. Taken altogether, the low levels of education among black men only hurt their standing as the provider for the family. Essentially, Moynihan claimed that matriarchy would kill the black family.                                                                                                                                 As it turned out, Moynihan’s conclusions proved to be right. In fact, he predicted not only the rise in illegitimacy in black families but also for the population as a whole. As with a number of other trends in American life, black families proved to be a bellwether for the nation as a whole. Indeed, when Moynihan warned of the coming breakdown of the black family, 25% of black children lived in homes not headed by a married couple. Today, 30% of ALL children in the U.S do not live with both of their parents and an even greater number do not live with married parents. Today, 66% of black children live in single-parent households and an even greater portion don’t live with married parents.                                                                                                         Moynihan was also proven to accurately predict the consequences of the breakdown of the family. The years following his report witnessed a huge crime surge, a rapid uptick in drug abuse, and an institutionalization of urban poverty, especially among blacks. Also of note was the ensuing achievement gap in educational achievement(test scores) between blacks and whites which ceased to narrow sometime in the mid-1970s. Over time, such trends have extended to the broader society and even today threaten the security, stability, and well-being of American children from all classes, creeds, and backgrounds.