CENTER FOR ECONOMIC AND SOCIAL JUSTICE CESJ’s Response To Rodney Shakespeare, Chris Dorf And Alan Avans (Demo)

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CENTER FOR ECONOMIC AND SOCIAL JUSTICE

CESJ’s Response To Rodney Shakespeare, Chris Dorf and Alan Avans

By Norman G. Kurland, J.D. Michael D. Greaney, C.P.A., M.B.A. Dawn K. Brohawn

June 17, 2013

P.O. Box 40711 • Washington, D.C. 20016, U.S.A. • www.cesj.org

INTRODUCTION

PART I

The Basic Principles Underlying CESJ’s Position

A Three Legged Stool: The Kelso-Adler Three Principles of Economic Justice The Four Pillars of an Economically Just Social Order .

The Key to Democratizing Ownership: Beyond “Past Savings” to “Future Savings”

Brief Background on CESJ

Part II

History of the “Debate”

Shakespeare’s Bad Blood with CESJ: A Long, Sad History

How an Honest Disagreement Turns into Shakespearean Slander

Is Rodney Shakespeare a Binary Economist or a Social Creditor?

PART III:

CESJ’S POSITION ON TEN ISSUES RAISED BY RODNEY SHAKESPEARE

Where Lies the Burden of Persuasion?

1. Houses

Producing Wealth vs. Providing “Use Pleasure”

Use vs. Usufruct

Cost v. Cost Recovery

The Homeowners Equity Corporation — A Better Approach to Home Ownership

2. Micro-Credit

3. Small Businesses and Farms

4. Environmental Capital Projects

5. Clean Electricity Generation

6. Students

7. Public Capital Projects

State-Owned Natural Resources

The Bank of North Dakota

Banking Theory

8. and 9. Tax Reform and National Debt Reduction Under Capital Homesteading

10. Addressing Immediate Economic Needs

CESJ’S Responses to Other Issues Raised By Shakespeare

PART IV.

CESJ’S RESPONSE TO ALLEGATIONS RAISED BY THE “CRITICS”

How Dorf’s Straw Man Became Shakespeare’s Hobgoblin

Avans Leaps Into the Fray

A Fruitless Search for the Facts

The “Banning” That Never Was

Shakespeare’s Conditional Expulsion

Adding Old Gas to New Flames

A New, Big Plank of Kelso Policy

An Appeal to Authority

The Melee Continues

Who is “Blakeway”?

Who is John Médaille?

The Great “Expulsion”

A Non-Issue

The Challenge Continues . . .

CESJ’s Alleged Moral Certitude

CESJ’s Alleged Hatred of the State

CESJ’s Alleged Ineffectuality

A Fundamental Disagreement: Expedients Versus Systemic Change

Determining Credentials and Qualifications for CESJ’s Leadership

PART V:

CONCLUSION: “Can’t We All Just Get Along?”

“Loosening up” on Principles

A Challenge to the “Critics” APPENDIX A

CESJ CORE VALUES

APPENDIX B

CESJ CODE OF ETHICS

APPENDIX C

BINARY ECONOMIC MONETARY PRINCIPLES

The Key to Democratizing Ownership: Beyond “Past Savings” to “Future Savings”

The Quantity Theory of Money

Bills, Notes, Money, and Credit

Say’s Law of Markets

The Real Bills Doctrine

Binary Economics and Real Bills

APPENDIX D

SUMMARY OF THE CAPITAL HOMESTEAD ACT

APPENDIX E

ELEMENTS OF 5-YEAR CESJ/CCH STRATEGIC PLAN TO ENACT THE CAPITAL HOMESTEAD ACT

CENTER FOR ECONOMIC AND SOCIAL JUSTICE

CESJ’s Response To Rodney Shakespeare, Chris Dorf and Alan Avans

June 17, 2013

INTRODUCTION

Rodney Shakespeare has thrown down the gauntlet. With a coterie in tow, Mr. Shakespeare has challenged the Center for Economic and Social Justice (CESJ) and three of its leading spokespersons — Dr. Norman Kurland, Mr. Michael Greaney and Ms. Dawn Kurland Brohawn — to a debate. He issued his challenge several times within an initially private discussion thread that began on March 25, 2013. This “discussion” has continued, thanks largely to Mr. Shakespeare’s tireless efforts to keep it alive.

Unfortunately this “debate,” as Mr. Shakespeare has framed it, is not, as it should be, simply on issues, differing principles and points of view, or on the soundness of competing proposals. It has not been, as we would prefer, a forum to debate specific aspects of the economic theory known as “binary economics,” the moral principles of the broader socio-economic paradigm that CESJ calls “the Just Third,” or the practicality of CESJ’s proposed binary economic policy reforms (known as the “Capital Homestead Act”).

Instead, the so-called discussion/debate has provided a convenient platform for namecalling, false charges, and defamation of the reputations of a nearly 30-year-old organization and three members of its Board and volunteer staff, publicly and repeatedly.

As will be detailed later, Mr. Shakespeare has accused us (Norman Kurland, Michael Greaney, and Dawn Brohawn) of rudeness, rigidity, bigotry, insanity, and heartlessly ignoring the plight of students struggling with debt, homeowners losing their homes, or the poor starving in the developing world.

How far we have fallen from Rodney Shakespeare’s good graces!

At one time, Mr. Shakespeare expressed a high opinion of CESJ and its members. On March 19, 1999, he joined CESJ as a “sustaining member.” A few days previously, on March 15, 1999, Mr. Shakespeare had inscribed a copy of his first book The Two-Factor Nation or How to Make the People Rich, which he co-authored with the G. W. Proudfoot in 1997, as follows:

For Norman and Marie Kurland who provide national and international leadership for the cause of economic and social justice.

For Norman and Marie Kurland who provide national and international leadership for the cause of economic and social justice.

In his 2002 book Seven Steps to Justice, co-authored in 2002 with Peter Challen, Rodney Shakespeare warmly acknowledged Dr. Kurland, Mr. Greaney and Ms. Brohawn. He praised CESJ as:

[T]he splendid Center for Economic and Social Justice in Washington, D.C. which, with members in 31 Countries, attracts support from faiths all over the world — Catholics, Muslims, Buddhists, Jews, you name it, they have it. In its continual output of new ideas and proposals, CESJ has put itself at the confluence of progressive thinkers who realize that, since jobs are insecure, often poorly paid, not always available and, in any case, not all people can labour, the way forward for the bulk of the population can only be through capital ownership. The object of that ownership is to ensure a basic income for all and a major Statement of Shared Vision has been drawn up by Norm Kurland and Shann Turnbull (see Appendix B). Readers are invited to visit the CESJ website at www.cesj.org where they will be able to sign the Statement and find a splendid array of information and help. Particular thanks go to Norm Kurland for permission to include The Abraham Society plan in chapter Eight and A New Look at Prices and Money (in Appendix C), as well as to CESJ stalwarts Norman Bailey, Antonio Betancourt (also of The World Institute for Development and Peace), Dawn and Rowland Brohawn, Charles Cargille, Bob Crane (also of the Institute for Islamic Studies, Washington, D.C., the Hon. Walter E. Fauntroy (also of the National Black Leadership Roundtable), Jean Fry, Michael Greaney, Joe Recinos and Virgil Wood.

On August 27, 2002 Shakespeare signed a copy of this book with the following compliment:

To Norm for his admirable leadership of the wide ownership and just society movement.

PART I

THE BASIC PRINCIPLES UNDERLYING CESJ’S POSITION

When engaging in any scholarly debate, we in CESJ always start by defining our terms and presenting the fundamental principles from which our arguments will proceed. (For in-depth definitions of our “Just Third Way” terminology, see the “Just Third Way Glossary” that can be found on the home page of www.cesj.org.) Here are the underlying principles of binary economics underlying our responses that will follow:

A Three Legged Stool: The Kelso-Adler Three Principles of Economic Justice

These principles of Justice are brilliantly articulated in Chapter Five of the 1958 bestselling book The Capitalist Manifesto by Louis O. Kelso and the Aristotelian philosopher Mortimer J. Adler:

Participative Justice:

This is the input principle, how one participates in or contributes to, the economic process. It says that all people have a right to participate in a culture that offers them equality of dignity and opportunity to contribute their labor as well as their capital to the production of marketable goods and services. This requires equal access to whatever means (or “social tools”) society has made available for acquiring property in income-producing capital. As technology displaces or replaces labor, the ownership of capital through interest-free money and capital credit becomes increasingly essential for a person in the modern world to earn a living. Such “social tools” are necessary for all members of a society or institution to become economically independent for their own well-being as well for the good of others.

Distributive Justice:

This is the out-take principle, how one is rewarded for one’s contribution to the economic process. It distributes earnings based on the exchange value of one’s economic contributions. This principle provides all people the right to m receive a proportionate, market determined share of the value of the marketable goods and services they produce with their labor, their productive capital assets, or both.

Under Kelso’s binary theory of economics, every person is entitled to earn both from their human or “labor” contributions and from their capital contributions (non-human things in the form of productive land and humanly-created capital assets) that combine to produce all goods and services sold in the market. Kelso rejected the “Labor Theory of Value,” which ignores the reality of ever-advancing technologies that continue to eliminate many jobs throughout the world. We, however, also agree with the moral principle that a distribution based on one’s needs, rather than on one’s contributions, is a valid principle for charity. Charity, the soul of justice, can be justified as an expedient. However, charity should never be a substitute for economic justice that could reduce the need for charity in the form of almsgiving or income redistributions through the State.

Harmonic Justice:

Kelso and Adler used the term “Limitation” to describe the third leg of the three-legged stool of Economic Justice. CESJ would include the Kelso- Adler concept of “limitation,” but we have substituted the term “Harmonic Justice” to express more fully the positive social justice initiatives that every member of society is responsible for taking to correct defective institutions and systems. “Harmonic Justice” is the feedback principle that, like the symbolic scales of Justice, demands a restoration of balance between “Participative Justice” and “Distributive Justice” when either or both of these essential and interdependent principles of the triad of Economic Justice is being violated within any economic system at any level. Harmonic Justice also places limits on the exercise of rights (especially property) so that other individuals, groups, or the common good as a whole are not harmed by their exercise. Harmonic Justice includes a concept of limitation that discourages personal greed and prevents monopolies. It holds that every person has a personal responsibility to organize with others to correct their enterprises, institutions, laws and other “social tools” at every level of society whenever the principles of “Participative Justice” or “Distributive Justice” are being violated or not operating properly.

The Four Pillars of an Economically Just Social Order

The following “pillars” are the four foundational policy principles upon which rest the tax, monetary and expanded ownership reforms of the Capital Homestead Act:

• Limiting the economic power of the State to preventing monopolies, protecting property rights of all owners and enforcing contracts, while lifting all legal, tax, monetary and other institutional barriers to universal prosperity, maximum economic choice, meaningful work and full economic empowerment for every citizen.

• Restoring free and open markets within an understandable and fair system of laws (as the most objective and democratic means for determining just prices, just wages and just profits — the residual after all goods or services are sold).

• Restoring traditional rights of private property, especially the historic rights of an owner to control and the full stream of profits from his share of corporate equity and other forms of business organization. (Typically, because dividends are subject to approval by whoever controls the board of directors, shareholders do not receive the full stream of income attributable to their share of ownership, and, when dividends are paid, are subject under today’s laws to double, sometimes triple taxation of corporate profits.)

• Democratiizing capital ownership and profit sharing opportunities, individually or in free association with others, achievable, among other system reforms, through universal access to capital credit repayable with “future savings” (profits) from the future goods and services for which each capital investment is reasonably expected to produce. (Thus, the poor and middle class without past savings would, along with all citizens, gain access to to the “social tool” of capital credit to enable everyone to acquire direct ownership of new growth capital and transfers of existing capital within any free and just economy.)

Having laid out the principles and conceptual framework underlying CESJ’s understanding of binary economics, we shall now take up each of Mr. Shakespeare’s issues.

The Key to Democratizing Ownership: Beyond “Past Savings” to “Future Savings”

One of the fundamental differences between Binary Economics and all other
schools of economics that we are aware of, relates to the underlying assumptions about how to finance growth in the economy — whether by using “past savings” or “future savings.” All of the traditional schools of economics assume that investments in new capital require the use of “past savings” (past accumulations) or the reduction of current consumption. Binary Economics views this baseless yet universally accepted assumption as one of the fundamental reasons for today’s accelerating concentration of wealth and income, and for the huge disconnect in the economy between supply (production) and demand (consumption).

What Kelso and Adler called the “slavery of [past] savings” requires that ownership or control of capital (which Kelso noted is recognized under the law as being the same) be concentrated in the hands of a few. The rationale as Keynes, for example, saw it is that only people whose capital produces far more than they can possibly consume can afford to finance the increasingly expensive capital instruments that are displacing human labor from the productive process.

Within the past savings paradigm, money and credit are presumed to be commodities based on property in the present value of existing marketable goods and services. The only question in the past savings paradigm is whether money controllers in the private sector or the State will control money and credit, and thus control (own) capital. If the former, the arrangement is called “capitalism.” If the latter, the arrangement is called “socialism.”

Thus, the past savings assumption leads inevitably to monopolistic economic power under both capitalism and socialism. There can be no middle ground as demonstrated by the disastrous attempt to maintain the Welfare State that has virtually bankrupted the global economy. Either a private sector elite uses its existing wealth to maintain and extend its power and protect itself from the rapacity of the State, or the public sector elite imposes controls on existing wealth or takes actual title to maintain and extend its power and protect itself from the rapacity of private interests. Observing how businesses finance their growth, and the wealthy acquire more income-producing capital, Kelso built on the work of Dr. Harold G. Moulton in The Formation of Capital (1935). Dr. Moulton, author of a number of books on economics and finance, was a professor at the University of Chicago and president of the Brookings Institution from 1928 to 1952. One of Kelso’s breakthroughs was to realize that classic banking theory embodied in the banking principle — future savings — could be applied to the problem of how workers and others without capital or existing (“past”) savings can finance the acquisition of self-liquidating capital. By turning the contract to purchase new capital into money based on the present value of the future marketable goods and services the new capital is reasonably expected to produce, and replacing the universal demand for collateral with capital credit insurance and reinsurance, it becomes possible for anyone to acquire and possess capital that pays for itself out of future profits.

Brief Background on CESJ

Before addressing the ten issues posed by Rodney Shakespeare, we offer here some background on the Center for Economic and Social Justice (CESJ). This will provide the reader with some context regarding CESJ’s nearly three decades of work teaching and refining aspects of Kelso’s binary economics, the Kelso-Adler principles of economic justice, and policies and applications of Kelsonian monetary and finance at the microand macro-levels of the economy. For a more complete description of CESJ’s work and accomplishments, please refer to “A History of CESJ’s Accomplishments” at www.cesj.org.

The Center for Economic and Social Justice (CESJ) is a non-profit, all-volunteer research and educational organization headquartered in Arlington, Virginia, U.S.A. It was founded in 1984 to study and promote the natural law principles of economic justice developed by lawyer-economist Louis Kelso and the Aristotelian philosopher Mortimer Adler, and the social justice teachings of Pope Pius XI as analyzed and developed by Father William J. Ferree, S.M., Ph.D.

Dr. Norman Kurland, President and co-founder of CESJ, was a close colleague of Louis Kelso’s for over 11 years. Serving as Executive Director of Kelso’s think tank, the Institute for the Study of Economic Systems, Dr. Kurland also worked as Kelso’s Washington Counsel. At that time the New York Times described Dr. Kurland as a “oneman lobbying organization for the Kelso ideas.” Business Week called him “the resident philosopher of the ESOP in Washington.” Dr. Kurland was the chief architect of the political strategy on Capitol Hill that led to the first of over 20 U.S. laws promoting Kelso’s Employee Stock Ownership Plan (ESOP). (His academic background and professional work in addressing poverty and civil rights issues before discovering Kelso’s ideas in 1965, are described at http://www.cesj.org/about/aboutcesj.htm.)

The ESOP, merely the first tool in the Kelsonian expanded ownership toolkit, has transformed over 11 million U.S. workers in over 11,000 companies into worker-owners without requiring a penny of their past savings or wage cuts. Many other countries in all parts of the world, including the United Kingdom, later emulated the legislative models in the U.S. Dr. Kurland and his colleagues were responsible for drafting the first ESOP legislation and the first ESOP model in the developing world.

With other scholars and social activists, Dr. Kurland co-founded the Center for Economic and Social Justice with Fr. William Ferree, Ph.D., S.M. Fr. Ferree was considered to be one of the world’s foremost scholars in the social doctrine of Pius XI, on which he published his doctoral dissertation, The Act of Social Justice.

Fr. Ferree served among other capacities as the Chairman of Dayton University, Rector of the Catholic University of Puerto Rico, and President of Chaminade University in Hawaii. He was considered by another international scholar, Rev. Andrew Morlion (founder of the International University of Social Studies in Rome) to be “America’s greatest social philosopher.” At Fr. Ferree’s funeral in 1985, Rev. Bert Buby eulogized him as the “second founder of the Marianist order.”

Kelso and Adler’s three principles of economic justice provide the moral basis for CESJ’s understanding of binary economics. Pius XI’s social doctrine and Fr. Ferree’s refinements address how, through organized “acts of social justice,” revolutionary social and economic change (as would be engendered under binary economics) can be effected most efficiently, successfully and without violating any person’s basic rights.

Today CESJ calls this new synthesis, “the Just Third Way.” Its moral principles and the systems logic of binary economics are embodied in CESJ’s proposed “Capital Homestead Act,” elements of which are detailed in Capital Homesteading for Every Citizen (2004). Many Kelsonian financing concepts were presented in the official report and orientation book of President Ronald Reagan’s 1986 Task Force on Project Economic Justice, spearheaded by CESJ members in 1985.

These two documents, High Road to Economic Justice and Every Worker an Owner, were presented in 1987 to President Ronald Reagan and Pope John Paul II. While CESJ is an organization with members of many faiths and spiritual beliefs, as well as nonbelievers, it received the personal encouragement of the late Pope John Paul II in its work.

Just prior to the downfall of the Soviet Union, CESJ’s compilation Every Worker an Owner was translated into Polish, with 40,000 copies distributed throughout Polish Solidarity channels. Some of the recommendations of the PEJ Task Force were incorporated into USAID and World Bank economic development policy and served as the basis for a series of seminars at the Vatican during CESJ’s second trip to Rome. These seminars led to the publication by Social Justice Review of CESJ’s book Curing World Poverty: The New Role of Property (1994), which sold more than 4,000 copies.

In order to promote the Capital Homestead Act through political action, Norman Kurland and other CESJ members have launched several initiatives, most notably the founding of the Coalition for Capital Homesteading (www.capitalhomestead.org) in 2009 as a financially independent political advocacy arm of the Just Third Way. While CESJ’s function is primarily educational and research-oriented, the Coalition’s purpose is to organize with different organizations and activists (who might otherwise differ on various issues) to work together for a common objective — enactment of a comprehensive, national program of Capital Homesteading for every citizen.

PART II

HISTORY OF THE “DEBATE”

Shakespeare’s Bad Blood with CESJ: A Long, Sad History

Mr. Shakespeare claims that we refuse to debate him. This is untrue, or atthe very least extremely misleading. No one in CESJ has a problem with debating real issues with Shakespeare or anyone else. What we refuse to do is to get diverted into pointless, interminable arguments over events that never happened, unsubstantiated accusations, rumors, or personal obsessions.

To understand the nature of the current “debate,” we need to understand a little history of Rodney Shakespeare’s relationship with CESJ, and in particular Norman Kurland, Dawn Brohawn and Michael Greaney.

In the Introduction, we pointed out how enthusiastic and positive Rodney Shakespeare was toward CESJ and those he now attacks in his 2002 book Seven Steps to Justice with Peter Challen.

Ms. Brohawn recalls that Shakespeare’s animus towards CESJ and its leadership arose shortly after the publication of his book co-authored with Peter Challen, Seven Steps To Justice, in 2002. In his book, as quoted above, Mr. Shakespeare was highly complimentary of CESJ.

Seven Steps to Justice, in fact, included many of the definitions, writings and proposals developed by CESJ. For example the definitions of “justice”, “social justice”, “economic justice,” “participation,” “distribution,” and “harmony” appearing on pages 21-22, borrow much of the language from CESJ’s writings (see the “Just Third Way Glossary” on www.cesj.org), as well as earlier CESJ writings presenting the foundational concepts of economic and social justice developed by Louis Kelso and Mortimer Adler, and Pope Pius XI and Fr. William Ferree.

Shakespeare, as he himself acknowledged, showcased in Seven Steps a number of proposals authored by Dr. Kurland, including the for-profit expanded ownership vehicle then called the “Community Investment Corporation” (page 47), and now referred to as the “Citizens Land Bank.” In addition he included Dr. Kurland’s Abraham Federation proposal (pages 89-102) that Shakespeare renamed “the Abraham Society;” the “Shared Vision Statement: Towards a More Free and Just Global Economy” (Appendix C, pages 132-134) launched by CESJ and Australian expanded ownership advocate Shann Turnbull; and Dr. Kurland’s paper published in 2001 by the Journal of Socio Economics, entitled “A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation” (pages 135-166).

Shakespeare’s publicly expressed high regard for Dr. Kurland, Michael Greaney, and Ms. Brohawn, however, was to be short-lived. In a luncheon meeting in Arlington, Virginia, attended by Shakespeare, Ms. Victoria Grof, Dr. Kurland, Ms. Brohawn, and Mr. Greaney, Ms. Brohawn praised the book, but raised some questions about Shakespeare’s reference to State-created “debt-free money” on pages 40, 80 and 129.

Ms. Brohawn pointed out to Shakespeare that Seven Steps proposes as “Step Five”:

 “[D]ebt-free money (State-issued, non-repayable money) should be issued as another individual basic income to the extent necessary to keep a stable level of prices” (p. 129).

This would be, in CESJ’s view, “legal counterfeiting” by the State. Under the scheme Shakespeare proposed, this “non-repayable money” would be issued by the government as “another individual basic income”, presumably to every citizen. This money creation mechanism advocated by Social Creditors and Keynesians for creating artificial and stimulative demand in the economy would not be backed by real assets, the future production of marketable goods and service, or even the government’s promise to back the new money with its future tax collections.

Ms. Brohawn expressed her confusion regarding Shakespeare’s proposal. It seemed to her to resemble Major C. H. Douglas’s “social credit” scheme, more than reflecting Louis Kelso and Patricia Hetter Kelso’s definition of money that was cited in Appendix C of Seven Steps (“A New Look at Prices and Money,” page 135):

Money is not part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers, and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. [Emphasis added.] It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.

She commented to Mr. Shakespeare that, in her understanding of binary economics and in her reading of the Kelsos’ definition, money represents a debt — i.e., one party’s promise (contract) to deliver to another party something of a specific value at a particular time or on demand.

Thus from a Kelsonian perspective, “debt-free money” issued by the State or any entity or person, is an oxymoron. Money is in one sense “debt,” as it represents the promise, obligation or contract by one party (in this case, the State) to deliver to another party something of agreed upon value at an agreed upon time. Under Shakespeare’s concept of “debt-free money” the State would simply pump into the economy something that had no actual value (and did not represent anything of value to be delivered at some point in the future). Or it sounded to Ms. Brohawn like this “debtfree/ value-less” money would be exchanged for another party’s goods and services that did have value. Shakespeare didn’t explain this seeming contradiction at the time.

Ms. Brohawn then raised a question about the book’s call in “Step 2” (page 128) for:

“interest-free loans (i.e. , “State-issued repayable loans created free of charge beyond administrative and other necessary costs) [to] be used, via Community Investment Corporations and the like, for capital investment needed by the public sector thus enabling such investment to be for one half, even one third, of the present cost.”

It was unclear to Ms. Brohawn whether the book was calling for interest free money to go to government for funding public projects (where the government would be the owner of the new capital and infrastructure), or whether such development would be financed through for-profit, expanded ownership vehicles like “Community Investment Corporations” (now called “Citizens Land Banks”) proposed by CESJ. CESJ’s proposal would result in every man, woman and child in the community becoming a direct owner of the land development corporation, having an equal vote and deriving incomes from leasing fees and taxes for the use of land and infrastructure.

As Ms. Brohawn explained to Shakespeare, his language seemed to contradict principles of Kelsonian finance. It also increased the economic power of government, rather than turning non-owning citizens into owners. Shakespeare’s only response was that his book was offering the option of interest-free and debt-free financing for public sector projects going directly to the government, or to for-profit vehicles like “Community Investment Corporations.”

Although, as Ms. Brohawn recalls, the conversation got somewhat heated, everyone left the meeting on amicable terms. It appeared to Ms. Brohawn that Shakespeare was at least considering the concerns that she, Dr. Kurland and Michael Greaney had raised.

Unfortunately, not long after, the issues of “debt-free money issued by the State” and “interest-free money for funding public sector projects,” were raised again in the Kelso Binary Economics Discussion Group online. CESJ’s concerns were again raised, but this time Shakespeare’s responses to Dr. Kurland, Michael Greaney and Ms. Brohawn became more vitriolic and personal. He insisted that nobody at CESJ had read his book, and that CESJ’s objections to government getting interest-free loans to fund public sector projects violated the Islamic prohibition against riba, i.e., loans made at interest.

How an Honest Disagreement Turns into Shakespearean Slander

CESJ’s difference with Shakespeare in our respective interpretations of Islamic teachings on interest and riba, and our opposition to the use of interest-free loans to government to fund its public projects, became the new basis for Shakepeare’s public accusations that CESJ’s leaders, and, in particular, Ms. Brohawn, were anti-Muslim bigots.

This also became the source of his claim that we refuse to debate him, although Rodney Shakespeare stated repeatedly in the forum that he refused to debate with CESJ until we had read his book . . . despite the clear evidence that at least one of us had obviously done so. None of us, however, felt it necessary to put in writing what we felt were inconsistencies with Louis Kelso’s, Robert Ashford’s or CESJ’s understanding of the logic or basic principles of binary economic theory or reforms necessary to implement binary economics.

Shakespeare’s poisonous public accusations continued, with no apology ever offered to Ms. Brohawn and her colleagues. Finally, group moderator Kemp Harshman asked Shakespeare to leave the group until he, Shakespeare, issued a personal apology for behavior that violated the stated rules of the discussion group and simple common decency.

Even though Shakespeare has never resigned or been removed as a member of CESJ, and continues to be listed as a CESJ Counselor, he has to this day never apologized for his baseless and libelous accusations against Dr. Kurland, Michael Greaney and Ms. Brohawn for alleged anti-Islamic slurs and bigotry.

Nor has Shakespeare ever explained how his proposals for “debt free money issued by the State” and “interest-free money to be used for public sector projects” reflect the financing principle of feasibility — and violate the principles of 1) private property, 2) limited economic power of the state, 3) free and open markets for determining just wages, prices and profits, and 4) universal access to direct capital ownership opportunities —that are central to binary economics and its application in the real world.

Why did Shakespeare’s opinion of CESJ shift so dramatically from expressed friendship, to unscholarly vitriol aimed at a group of people who have not changed their commitment to the theory of binary economics and to the principles of justice that offer the moral basis for the Just Third Way? Is it possible that Rodney Shakespeare is outraged that CESJ has found fundamental flaws in his understanding of binary economics, or that we never gave the level of praise to Shakespeare’s other writings that Norman Kurland openly expressed for Binary Economics: The New Paradigm? In his review of the book that Shakespeare co-authored in 1999 with Robert Ashford, Dr. Kurland wrote:

In 1965, when I first heard of the late Louis Kelso’s revolutionary solution to the problem of world poverty, I thought, “Of course! Why didn’t I think of that?”

Upon reading Binary Economics: The New Paradigm by law professor Robert Ashford and the British writer-scholar Rodney Shakespeare, thirty-four years after committing my life to implementing the Kelsonian paradigm, another thought came to me: “Why didn’t I write that?”

If anyone deserves a Nobel Prize for Economics, Ashford and Shakespeare do for their original, scholarly and persuasive case in support of Kelso’s binary theory of economics.

We are now convinced, based on his other writings before and after Shakespeare coauthored Binary Economics with Ashford, that Ashford was the principal author of Binary Economics, with Shakespeare serving mainly as an editor of Ashford’s ideas and marketer of the book to the publisher. The main points CESJ praised in the book were contained in Ashford’s previous scholarly writings. These included his extremely wellwritten article in Curing World Poverty: The New Role of Property, published by Social Justice Review in 1994 in collaboration with CESJ. Michael Greaney and Dawn Brohawn assisted the late Father John H. Miller. C.S.C., S.T.D., then head of the Central Bureau of the Catholic Central Union of America in St. Louis, as editors.

Today we and CESJ have become, according to Rodney Shakespeare, Chris Dorf, and Alan Avans, and with the acquiescence of (well-intentioned) conciliators such as Steve Nieman, “the Exclusive Brethren (EB).” We, the “EB,” stand charged by Shakespeare, et al., with inability to cooperate with others, self-imposed isolation from the rest of the world, and the repeated exclusion and banishment of others from our midst.

Perhaps most ironically (and amusingly), given his former high praise of the organization and individuals he now decries, Rodney Shakespeare has proclaimed that CESJ has little or no understanding of “Binary Economics (BE).”

Given the derogatory nature and, with a few exceptions, lack of substance in the socalled “discussion,” the authors of this paper (Dr. Norman Kurland, Michael Greaney, and Dawn Kurland Brohawn) had previously chosen not to participate in it. We have learned from past exchanges that it is a waste of time attempting to engage in reasoned discourse with a bully, particularly on the Internet. Our first reaction when confronted by such behavior is to ignore it as mean-spirited, small-minded rudeness, and hope that it will run out of steam on its own.

Unfortunately, to date there has been no letting up on the part of Mr. Shakespeare. He, Chris Dorf and Alan Avans have leveled damaging charges against CESJ as an organization and us as individuals. Given the continuous stream of invective, we expect the negative commentary and judgmental statements to continue. Because these scurrilous accusations continue to be published by Shakespeare, et al., to an everwidening audience, we felt compelled to answer those charges, for the public record and for the sake of the truth.

Our task, however, in responding to this particular “challenge” by Mr. Shakespeare has turned out to be rather complicated. Accusations, insults, logical fallacies, contradictions, inconsistencies, unsupported assertions — all this and more was mixed in, making the task of forming adequate responses difficult. Nevertheless, this explains the inordinate amount of time it has taken us to prepare a careful and admittedly lengthy response.

Consequently, rather than merely debate on matters of substance (which we would gladly do), we have been forced first to untangle those legitimate issues that have been raised, from the rat’s nest of false accusations and denigrating labels that distract the observer from the serious points being debated.

Is Rodney Shakespeare a Binary Economist or a Social Creditor?

Let us first say that Mr. Shakespeare has been fully aware for many years of CESJ’s positions on the issues to be discussed here. In fact he incorporated several CESJ pieces in his 2002 book Seven Steps To Justice, co-authored with Rev. Canon Peter Challen. The most significant of CESJ’s contributions to Seven Steps was “Appendix C,” Dr. Norman Kurland’s article “A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation,” first published in the Journal of Socio- Economics (2001).

Mr. Shakespeare had also received copies of CESJ’s 1994 book, Curing World Poverty: The New Role of Property, and most importantly, CESJ’s 2004 book detailing our binary economic reforms, Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security. While we = have on several occasions carefully critiqued from a Just Third Way strategic framework specific aspects of Seven Steps to Justice, we have never received from Mr. Shakespeare a critique of any point made in either of our books, most importantly, Capital Homesteading for Every Citizen.

In the prior “discussion” and numerous online exchanges of the Kelso Binary Economics discussion group (hosted by Kent State University), we have presented our Capital Homesteading solutions to the economic problems that Mr. Shakespeare has raised. For the benefit of those who have not seen CESJ’s past responses to Rodney Shakespeare, we will offer below some brief responses, reflecting our “Just Third Way” perspective and in terms of Capital Homesteading policy reforms.

For more detailed explanations of CESJ’s basic understanding of Louis Kelso’s theory of binary economics than was presented in the Introduction to this paper, we invite the reader to visit www.cesj.org, where they can download free many materials, including the book Capital Homesteading for Every Citizen and Louis Kelso and Mortimer Adler’s seminal books, The Capitalist Manifesto and The New Capitalists. We have also included as appendices to this paper a number of brief pieces to illuminate some of our statements here.

For those who agree with or cannot offer flaws in our positions on binary economic theory or the Just Third Way paradigm, Shakespeare’s arguments and proposals appear to have shifted closer to Major Douglas’s “Social Credit” and away from Kelso’s binary economics or the “pure credit” ideas of Harold Moulton in his 1935 book, The Formation of Capital. That being the case, it might be more accurate for Shakespeare to begin calling himself a “Professor of Social Credit” rather than a “Professor of Binary Economics.”

For example, in Binary Economics: The New Paradigm, which Shakespeare coauthored with Professor Robert A. Ashford (footnote 143 on page 229), their book states:

“The binary democratizing of credit has nothing to do with the theories and proposals of Major C.H. Douglas and the Social Credit Movement which fail to link production and consumption by way of private property rights on market principles. Thus, when addressing the credit needs of people without capital, to avoid confusion with the analysis of Major Douglas (which they reject), the Kelsos do not use the term ‘social credit’ but ‘commercially insured capital credit’.”

We can further see where Shakespeare’s adoption of Social Credit policy diverges from Binary Economics. Louis Kelso and Patricia Hetter in their book, Two Factor Theory: The Economics of Reality (page 190, footnote 27a), agree with some of Major Douglas’ premises, but clearly reject his solutions:

Social Credit is an example of the ease with which even one with an engineering background can reach erroneous conclusions by reasoning in monetary rather than real terms. Starting on the firm premises that labor or employment is a means, not an end; that our inability to eliminate poverty is due to institutional rather than physical causes; that the ideal goal is maximum production and minimum toil; that manufacturers and famers are eager to expand production, and that the bloating of wages and salaries with welfare defeats the cause of general affluence by inflating prices, Maj. C.H. Douglas concluded that the whole problem of the purchasing power gap could be eliminated by the central government’s printing money (“tickets” to consumption) and distributing it … as a “national dividend”…. Having been misled into believing that the problem of inadequate purchasing power could be eliminated by means of a superficial monetary device, Major Douglas then was compelled, in the interest of logical consistency, to attack the most fundamental concepts of economic justice and economic motivation. He stoutly asserted that as the non-human factor took over more and more of the productive burden, there need be norelation in the economy between outtake and input; that in a sound monetary system, money is not (imagine!) a measure of value but a mere information system for signaling the need for more or less production; that the legitimacy of the means by which he acquires his purchasing power is of no concern to the consumer; and that wealth produced by capital belongs not to the owners of the nonhuman factor, but to the society as a whole precisely what the Marxists have always maintained.

As we point out in our above questioning of Shakespeare’s understanding of money, particularly from the standpoint of binary economics (see also Appendix C of this paper, “Binary Economic Monetary Principles”), Shakespeare now promotes something akin to the Social Credit ideas of Major Douglas. Unlike the principles and applications of binary economics, Douglas’s ideas have not been officially implemented in any country.

Douglas, like Shakespeare, proposed that money should be created out of thin air as a non-repayable debt by the State to close the purchasing power gap in a monopoly capitalist world. To anyone who understands the “Quantity Theory of Money” as seen in the application of Say’s Law of Markets called the “Real Bills Doctrine,” what Douglas advocated and Shakespeare promotes amounts to “legal counterfeiting.” That is, more units of money created for consumption without asset backing chase the same amount of marketable goods and services actually produced.

A similar situation allowed someone like Adolph Hitler to be elected in 1933 with the support of major German industrialists who feared the anti property and anti-market policies of German Socialists and Communists. Hitler came into power promising prosperity and an economic order that would overcome widespread fears of a return to the social disorder caused by hyperinflation in Germany triggered by the costs of reparations following World War I. (From an official rate of exchange of 4.2 Reichmarks to the U.S. Dollar in 1914, the German printing presses produced so many Reichmarks that the official exchange rate by 1924 skyrocketed to 4.2 trillion Reichmarks to the U.S. Dollar, with the black market rate a multiple of that.) Hitler’s concepts of top-down order and leadership came close to conquering the world in World War II and triggered the genocidal programs against Jews and others he blamed for the breakdown of a global civilization led by “the Master Race.”

The Douglas-Shakespeare brand of legal counterfeiting (where government adds to the total money supply to spread artificial consumption power among the population in excess of total revenues from the production of marketable goods and services) could open the door to the level of politically inspired run-away inflation rates experienced by the German people.

Thus, by advocating the creation of new money to expend on anything that is not directly self-financing in this fashion, Rodney Shakespeare undermines and even negates a fundamental principle of binary economics. He also displays a questionable commitment to the key to the growth of capital ownership: the concept of “future savings” for the financing of newly formed or transfers of existing capital assets. True binary economists focus on interest-free credit financing for enabling for those without past accumulations or collateral to acquire clearly productive assets, i.e., capital that pays for itself out of future profits earned from the marketable goods and services that such capital produces. Shakepeare’s advocacy of non-payable debt (which is really charity or welfare in disguise) is totally inconsistent with binary economic theory.

Given his reliance on State financing and ownership of infrastructure, the advocacy of empowering the government to print up non-repayable money (“debt-free money”) to spend into the economy for housing, student loans, green development, etc., we are faced with the unavoidable conclusion that Rodney Shakespeare is not the Kelsonian binary economist he touts himself to be.

CESJ accepts binary monetary theory as described on pages 5n, 24n, 214, and 284 of Binary Economics: The New Paradigm (1999), which was co-authored by Professor Robert H. A. Ashford and Rodney Shakespeare. Amazingly, Mr. Shakespeare fails to grasp how his notions of interest-free financing for State ownership of infrastructure and similar capital projects violate the essential principles of binary economics (including the “binary property right” and “binary growth”). An economist is supposed to understand “money.” On this count alone Shakespeare does not appear to meet the qualifications of that profession. Consequently we now believe that Dr. Ashford was in fact the main author of this important textbook on binary economics and the scholar who developed these terms from Louis Kelso’s original theory.

PART III:

CESJ’S POSITION ON TEN ISSUES

RAISED BY RODNEY SHAKESPEARE

Where Lies the Burden of Persuasion?

As a matter of form, and based on Mr. Shakespeare’s previous enthusiastic praise for the quality of CESJ’s work, CESJ believes that the burden of proof in a debate on binary economics and CESJ’s proposals, rests with Shakespeare. In challenging CESJ’s understanding of binary economic theory and our comprehensive Capital Homesteading reforms, Mr. Shakespeare has the obligation to do more than make unsupported assertions. He should specify, according to his understanding of binary economics, the flaws in CESJ’s articles and books and in the reforms contained in our proposed Capital Homestead Act. We are and will remain open to such a critique of our statements and writings.

It is not our responsibility, however, to advocate for or explain positions contrary to our understanding, and what we believe to be Louis Kelso’s and Robert Ashford’s understanding, of the logic of binary economics. We should not have to make Mr. Shakespeare’s arguments for him.

Frankly, there are many people like Rodney Shakespeare and other critics who have not bothered to read with any reasonable degree of care Kelso’s early works or CESJ’s writings. They come to a discussion with closed minds, and never seriously attempt to understand the revolutionary concepts underlying the Just Third Way and binary economics as a new paradigm.

We are not interested in wasting time disproving ideas from other paradigms that have guided economic policies of the past and have proven themselves inadequate or even harmful. We are, however, prepared to defend the ideas we believe are true and will solve problems not solvable under traditional approaches to peace, prosperity and freedom for all.

So, with advance apologies to the reader, we were faced with more than simply clarifying CESJ’s position on legitimate issues raised by its critics. We are also forced to spend precious time and space providing an historical context and facts behind this socalled “debate” in order to refute their ad hominem assertions.

Over the course of the online “discussion” on the Kelso Binary Economics
Discussion Group at Kent State University that opened the door to his strategy to marginalize CESJ’s accomplishments (as covered in Part II, CESJ’s Responses to Allegations Raised by “Critics”), Rodney Shakespeare raised ten issues for which he has demanded from us a statement of CESJ’s position:

1. Housing
2. Micro-credit 

3. Small Businesses and Farms
4. Environmental Capital Projects
5. Clean Electricity Generation
6. Students
7. Public Capital Projects
8. Paying off the National Debt
9. Flat Rate of Tax
10. Immediate Economic Needs

1. HOUSES

“houses , state and private (a continuous supply of warmth, shelter, cooking facilities,
bath for 100 years…. – only lunatics think a house is a consumer item)”

Shakespeare states, “only lunatics think a house is a consumer item.” He bases this on Chapter 10 of Democracy and Economic Power, “The RECOP,” in which Louis and Patricia Kelso reversed Louis Kelso’s 30-year public position before this 1986 book was published. Kelso’s previous position was that one’s home is not a capital asset because outside earnings were needed to buy that home. In Democracy and Economic Power they began advocating the use of interest-free money to enable people to purchase homes. (pp. 99-103.) In Note 1 on page 103, the Kelsos admitted that, “In past writings and lectures, although with misgivings, we have abided by federal and state tax law interpretations that classify personal residences as consumer goods rather than capital goods.”

This raises some questions with respect to Shakespeare’s claim that anyone who refuses to accept this is a lunatic. Were the Kelsos, prior to the writing of Democracy and Economic Power lunatics, feigning lunacy to get along, or merely humoring the hundreds of millions, possibly billions of lunatics who accept the classification of a house used as a primary dwelling as a consumer item? At what point did they see the light? Did they truly see the light and come to sanity by going counter to what they themselves referred to as “conventional wisdom,” or were they feigning sanity as Shakespeare defines it? How did they explain their change of heart/mind?

In their 1967 book, Two-Factor Theory: The Economics of Reality1, Louis Kelso and Patricia Kelso stated:

Consumer goods purchased on credit increase neither the buyer’s income nor his productive power; on the contrary, interest costs … decrease the effective purchasing power of his income to buy useful goods and services. Consumer goods are thus inherently non-financeable. They do not pay their costs of acquisition. They do not produce wealth or income after they have been acquired. (Page 61)

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1 Published by Alfred A. Knoft, Inc. New York and Random House, Inc., New York, 1967

On page 120 (Ibid.), Kelso and Hetter further state that as one of their thirteen “guiding considerations” for a national legislation to universalize citizen access to capital ownership:

(3) The credit system of the economy should be used primarily to finance new capital formation and the building of new viable capital estates. Only secondarily should it be used to finance consumer goods. Its objective should be to raise productive power so that consumption can be financed as fully as possible out of current earnings rather than out of borrowings. Of course expensive consumer items such as houses and perhaps automobiles may continue to require consumer finance, but, with rising incomes and diminishing prices, it should be easy drastically to shorten credit terms in order to minimize loss of purchasing power through interest.

On page 191, footnote 34 of Two-Factor Theory, Kelso and Hetter state clearly:

It should be obvious that consumer credit widens rather than narrows the purchasing power gap. On conventional twenty-five year installment purchase of a residence, the purchaser pays for more than two houses in order to buy one. And a personal residence is not an income-producing asset. [Emphasis added].

In a total reversal of the position in Kelso’s two books co-authored with the philosopher Mortimer Adler (1958 and 1961 respectively), in Two-Factor Theory coauthored with Patricia Hetter in 1967, and the continuing position of binary economist Professor Robert Ashford, the Kelsos attempted in 1986 to explain their rejection of the “conventional wisdom” that houses (family residences) are consumer goods:

[O]ur acquiescence in the conventional wisdom of course proved wrong. Obviously, family residences are capital goods whose marketable wealth is consumed exclusively by the owners. In a democratized market economy, where a residence would be treated as a capital asset for initial purchase financing, for depreciation, and for all other purposes, and personal income equal to the amount used to purchase it would be free from income taxation, as it is in ESOP financing, a personal residence would pay for itself with dazzling swiftness. (Democracy and Economic Power, page 103, footnote 1)

We are unconvinced by the Kelsos’ reasoning here. We agree with their original premise that a capital asset is one that pays for itself with the future stream of income it produces. The Kelsos even contradict themselves earlier in Democracy and Economic Power (page 39):

It is the capital instruments themselves that, once acquired, will earn the costs of their own formation or purchase.

On page 99 of Democracy and Economic Power, the Kelsos again contradict their
earlier position as well as Professor Robert Ashford’s continuing position (which we
share):

The most important form of productive capital most consumers traditionally acquire, or seek to acquire, is a home. A residence is a capital structure — a “dwelling machine,” to use Le Corbusier’s phrase. It produces marketable wealth. If the consumer did not own it, he would have to rent its equivalent at a rental value determined by market forces. Moreover, a well-built house, distinguished by high-quality materials, craftsmanship, architecture, and style, can produce wealth (living space and use pleasure), not just during the lifetime of one consumer, but for generations.

There, clearly stated, is the Kelsos’ answer. “Living space and use pleasure” are the marketable goods and services — wealth — presumably produced by a house as a capital good.

Producing Wealth vs. Providing “Use Pleasure” 

While this is the answer the Kelsos gave, we do not agree with it. Most obviously, of course, a house does not produce living space. A house is living space. Nothing is selfgenerated or created. A house-as-house does not produce a house-as-living-space. It is a house-as-living-space. This part of the Kelsos’ argument is a tautology.

Classifying “use pleasure” as wealth — a consumption item — is a bit more difficult to understand. Most people take “use” and “consumption” as synonyms, at least in this context. Consuming — using — a good or service can give us pleasure. We may even consume that particular good or service in order to experience the pleasure it gives us.

The problem is that pleasure is not itself a marketable good or service, that is, a consumption item. It can be (and, in a non-ascetic environment, often is) why we consume that item, but it is not itself the item. I cannot sell or convey to you by gift the pleasure I feel. You might take pleasure in the fact that I am feeling pleasure, but that is your pleasure, not mine.

Dwelling in a house can give pleasure. A house is not itself pleasure. Pleasure is the result of using something. It is not itself the thing. This part of the Kelsos’ argument confuses cause and effect.

The claim that with interest-free loans “a personal residence would pay for itself with dazzling swiftness” is simply baffling. Even granting for the sake of the argument what we do not for one moment concede in fact, that a house produces wealth in the form of “living space” and “use pleasure,” there is no income generation in a personal residence from either the living space or the pleasure the owner takes in its use. You cannot go to the mortgage lender and tell him or her that he or she can accept your use, or pleasure in that use in settlement of the debt. Anyone attempting to do so would, in the words of (Rodney) Shakespeare, be regarded as a “lunatic.”

In any event, the Kelsos themselves undermined their own argument when they correctly observed that a capital good “will earn the costs of [its] own formation or purchase.” They then contradicted this statement by claiming that when a house is considered a capital good, “personal income equal to the amount used to purchase [the house] would be free from income taxation,” thereby allowing the homeowner to recover the cost “as it is in ESOP financing.”

That is an egregiously misleading statement. “Cost” and “cost recovery” are two different things — as different as the sources of the income used to meet the cost of capital goods versus the cost of consumer goods. A capital good produces marketable goods and services which, when sold, meet the cost of forming that same capital. This cost is recovered — not met — through depreciation, tax credits, subsidies, and so on.

In contrast, a consumer good does not produce a marketable good or service. It is the good or service. Recovering the cost of a consumer good, even if it is done “with dazzling speed,” in no way meets the cost — satisfies the debt — incurred by acquiring the good in the first place. The money to satisfy the debt must come from some other source.

Thus, because a house used as a primary residence does not in and by itself generate the income to pay for itself, a home is, therefore, not a capital asset. Moreover, with today’s still high rates of official unemployment, underemployment, and millions more who have left the labor force, any single family who purchases a home on credit is exposed to a high risk of default before repaying the lender.

 The Homeowners Equity Corporation — A Better Approach to Home Ownership

Interestingly, CESJ has developed a proposal that would turn a personal dwelling into a capital good for which Kelsonian “pure credit” financing would be appropriate. The “Homeowners Equity Corporation” (HEC) was developed as a new “social tool” to be owned and controlled by occupants of homes with “toxic mortgages” to address the home mortgage crisis. The crisis was brought about in part when lenders and mortgage speculators, encouraged by the Federal Government and the Federal Reserve, provided low-cost credit backed by subsidized home mortgage insurance to risky borrowers to 
purchase their homes, instead of confining such home loans to the pool of existing savings of the private sector.

HEC’s would need the same tax treatment provided for democratized worker ownership through leveraged Employee Stock Ownership Plans. Competing HECs throughout the country should also have access from local banks to interest-free but asset-backed capital credit available for the purchase at current market-determined prices of large numbers of existing homes with mortgages subject to foreclosure. Asset-backed loans to HECs for new mortgages to purchase foreclosed residences would be monetized interest-free at the discount windows of each of the 12 regional Federal Reserve Banks under section 13 of the Federal Reserve Act.

HECs could also be formed to finance hundreds of thousands of new personal
dwellings each year, but not in the way Shakespeare demands. Instead of having individual families purchasing their dwelling directly, HECs would spread the risk of default among many renters as family incomes of direct home buyers continue to become increasingly vulnerable as technology displaces many forms of work. Through professionally managed HECs, many home occupants would have the option of renting their houses from a HEC through lower cost and less risky group borrowings in which the renters shared governance rights as HEC shareholders.

A rent sufficient to pay for the shares over a period of years and meet administrative and maintenance costs would be calculated. Shares in the HEC equal to the fair market value of whatever equity the home occupant previously invested or had remaining from the original borrowing prior to the HEC’s new mortgage would be placed in the renter’s tax-sheltered HEC share account. As with leveraged ESOPs, shares equal in value to the HEC’s new mortgage would be placed in the renter’s HEC escrow and allocated to the renter’s share account as the HEC’s new mortgage’s borrowing costs are repaid out of the future rents paid by the occupant.

This would spread the risk that a single owner has in loss of future income to meet hyper-inflated mortgage charges, thus avoiding the major problem that led to the 2007 credit crisis from “toxic” home loans.

A number of variations are possible with the HEC. For example, someone who
exchanges HEC shares for title could enter into a maintenance contract, relieving the homeowner of tedious maintenance tasks. The HEC could maintain a vacation resort with other HECs, or even be partners in a number of them throughout the world. HEC shareholders would get favorable rates, but the resorts would be open to all — and the profits would be paid to HEC shareholders or applied to the accelerated purchase of HEC shares.

A tenant could make a zero down payment, or 100%. Private charity or government vouchers could be provided for people with inadequate incomes. “ESOP financing” by the HEC would in effect allow a tenant to acquire beneficial ownership of his or her primary residence through direct ownership of shares (along with other tenant shareholders in the HEC) with “interest-free” money. Ownership risk would be spread out among many shareholders, offsetting or ameliorating the effect of a decline in the value of a single house. And so on. 

Changing dwellings would be much easier, and much more pleasant. (Military
families would benefit greatly from this, as would retirees.) A tenant in temporary financial difficulties could negotiate for reduced payments covering only current administrative costs and maintenance, with a temporary moratorium on principal payments. At worst, cashing in a portion of HEC shares to go back into escrow would be far more advantageous and certainly less risky than a single individual’s home equity loan or a reverse mortgage.

And so on. The bottom line is that it is completely unnecessary to deviate from the common sense principle that all capital assets should be capable of paying for themselves with their own earnings. By making it possible for tenants to own the company that owns the house, a HEC turns a personal residence into a capital asset for the HEC, while the use is rented to a tenant who just happens to be a shareholder of the HEC that owns the house. A tenant would not be released from the obligation to make rent payments simply because he or she is a HEC shareholder.

The same concept could be applied to other consumer durables, such as automobiles and even bicycles, and, in fact, has been in some places. The need is not so critical as it is with housing, however, and it can be left to private initiative. The concept cannot be applied to education (below), because you cannot rent an education, but (at least in theory) it could be applied to anything that can be rented.

2. MICRO-CREDIT

micro credit (e.g., small piece of land for chicken coop, or tricycle-taxi. And will cesj please explain why it has over 5,000 signatures from micro credit recipients on its Statement of Vision yet cesj refuses to support interest-free loans for micro-credit?)

Frankly, we are not sure what Shakespeare is talking about here. The Capital Homestead proposal in no way discriminates between the use of “pure credit” (“interest-free loans”) for small or large enterprises. The only criteria are that the borrower be “creditworthy” and that the loan be for a capital project that is financially feasible. Capital credit insurance and reinsurance as well as joint purchasers and renters of many consumer durables in HECs, condominiums and cooperatives enhances creditworthiness. “Financial feasibility” means that an asset will generate its own cash repayment within a reasonable period of time.

In that sense, CESJ fully supports the use of pure credit for small, financially feasible capital projects. In our writings we have repeatedly stated that the mere size of a project is completely irrelevant, small or large. The aggregation of capital or the size of the enterprise should be optimal, not big or small simply because “big is bodacious” or “small is beautiful.” The size of the enterprise should be what the free market determines is optimal for that enterprise, without the artificial constraints imposed by ideologies, government subsidies, or taxes that treat small or large enterprises differently.

If CESJ has not “supported” micro-credit and other “politically correct” programs to the degree Shakespeare demands, it is primarily because CESJ’s main focus happens to be elsewhere. CESJ works for the systemic changes needed to make it possible for 
ordinary people to use pure credit to acquire and possess private property in income-producing capital, whether that capital be “big,” “small,” or “micro.”

CESJ has no problem with, nor does it refuse to support shifting micro-credit capital lending from its current past savings based, charity-funded system, to a pure credit, interest-free system. If the desire is to help as many people as possible out of poverty in the shortest period of time, however, a much larger scale effort is required.

Dr. Kurland, in a discussion with Dr. Muhammad Yunus of the Grameen Bank,
agreed that micro-credit is a good means to help poor people become economically self-sufficient, but posed to Dr. Yunus the concept of macro-credit for addressing poverty on a national or global scale.2 Dr. Kurland explained that as technology advances and global competition demands large aggregates of capital, technological expertise and advanced marketing and distribution systems, the best that can be achieved with micro-credit is to bring people out of dire poverty. This will not, however, remove the systemic causes that keep them poor. Dr. Yunus responded positively to the proposed Just Third Way reforms in global macro-credit policies.

More than subsistence lending for micro-capital projects is needed to help the poor. Only supply-side pure credit lending on the “macro” scale will bring them out of poverty entirely. System-wide access to adequate and large-scale capital credit in companies capable of competing in the global marketplace will empower people to own the technology that is displacing their labor. Lack of capital ownership prevents the poor from becoming productive on an adequate scale, and at the same time generate the mass purchasing power essential to maintain any economy.
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2 See “The Binary Economics of Louis Kelso: A Democratic Private Property System for Growth and Justice” by Robert H.A. Ashford on pages 99-322 in Curing World Poverty: The New Role of Property. St. Louis, Social Justice Review, 1994, John H. Miller, C.S.C., S.T.D., ed., This book, prepared in collaboration with CESJ, also included “Uprooting World Poverty: A Job for Business” by Louis O. Kelso and Patricia Hetter Kelso

3. SMALL BUSINESSES AND FARMS

The insinuation that CESJ is somehow opposed to making pure credit financing
available to small businesses and farms, is yet another straw man Shakespeare has set up.

Again, the Capital Homestead proposal would apply to all, repeat, all financially
feasible capital projects, regardless of their size. Feasibility, that is, the projected capacity of a capital growth project to pay for itself out of its own future earnings, is the key to using pure credit (the key mechanism of binary finance), not the objective or subjective size of the project.

Regarding interest-free asset-backed productive credit for farmers, as a point of
history, in 1979 Dr. Kurland worked with the leaders of the American Agriculture
Movement (AAM) representing small farmers from around the U.S. who drove 450
tractors to Washington to protest the policies of the Carter Administration that were
bringing about the demise of family farms in America.3 After totally disrupting traffic
throughout the city, the tractors were parked on the mall facing the U.S. Capitol building. The police barricaded the tractors by surrounding them with city buses. In exchange for an agreement by the farmers to take their tractors home, then-Mayor Marion Barry ordered the police to remove the barricade and allow the farmers to have history’s first public protest against Federal Reserve policies, with a peaceful Tractorcade surrounding the Fed building with 450 tractors. This enabled AAM leaders, accompanied by Dr. Kurland, to meet with Fed officials calling for the Fed to create money to enable local banks to refinance agricultural loans at 3% (the rates at that time were at double digits). This was essentially the same concept of interest-free asset-backed credit called for in CESJ’s Capital Homesteading proposals, where the rate charged would cover administration and service charges, as well as risk premiums based on the riskiness of a particular loan.

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3 “The Farmers in the Fed,” Washington Post, March 2, 1979, p.D1.

4. ENVIRONMENTAL CAPITAL PROJECTS

environmental capital projects (Will cesj explain why a mangrove-crested sea barrage should attract interest-bearing and not interest-free loan money?)

Shakespeare asks, “Will cesj explain why a mangrove-crested sea barrage should attract interest-bearing and not interest-free loan money?”

No reason in the world . . .as long as the mangrove-crested sea barrage is owned directly by the citizens through a for-profit Citizens Land Bank, “CLB” (also called a “Community Land Cooperative, “CLC”), and not the State. As such, all land and natural resources now owned by the State could be transferred free to a for-profit planning and development enterprise. Lifetime shares would be owned equally by all citizens for land acquisition and infrastructural improvements, such as highways, bridges, power transmission, mass transportation and environmental projects.

Improvements and purchases of privately owned lands required by a CLB can and should be financed with interest-free money. Borrowing costs for development, land purchases and maintenance would be covered by user charges and tax revenues. Profits would be shared equally among all citizens. CESJ has never opposed environmental capital projects for expanding the economic power of all citizens, as an alternative to State or collective ownership.

5. CLEAN ELECTRICITY GENERATION

clean electricity generation (Does cesj know that the desire to use interest-bearing, rather than interest-free, money stops the UK from generating cleanly 10 percent of its electricity supply from just one project?

Shakespeare asks, “Does cesj know that the desire to use interest-bearing, rather than interest-free, money stops the UK from generating cleanly 10 percent of its electricity supply from just one project?”

Assuming Shakespeare’s figures are accurate, we agree that this is indeed a pity — only, why stop at 10 percent? Why not go for 100 percent?

Shakespeare seems completely oblivious to the fact that in East St. Louis, Illinois, CESJ worked with the late State Representative Wyvetter Younge on a project intended to supply clean “premium” power for ten municipalities in Illinois and for export to St. Louis, Missouri. It combined a waste-to-energy combination of advanced steam 
reforming, fuel cell and solar technologies that would pay for itself in 5 years. The project was designed to be financed with pure credit (“interest-free”) financing from the St. Louis Federal Reserve, and would be owned through lifetime shares in a Citizens Land Cooperative (CLC). A bill drafted by CESJ to authorize the CLC passed the Illinois House of Representative by a vote of 114-0. (More information on this project can be found on CESJ’S website in “CESJ’s Accomplishments.”

Due to various factors, the project never came to fruition. These factors included the death of its influential leader Representative Younge before the Illinois Senate passed the enabling legislation. (See “7. Public Capital Projects”) Nevertheless, for Shakespeare to insinuate that CESJ is somehow ignoring or is not sensitive to the desperate need to develop clean and sustainable sources of energy is simply untrue.

6. STUDENTS

“[S]tudents are the second factor in the creation of wealth. The failure to recognise interest-free loans for students makes cesj a laughing stock.”

Aside from the fact that Louis Kelso never referred to students as “the second factor in the creation of wealth,” unless you’re a student athlete who is (illegally) paid to attend a university, going to school is an expense, not an “investment.”

We need to emphasize that financing education within a world in which the money system and economy is restructured according to the logic of binary economics and Capital Homesteading reforms, is fundamentally different from financing education in today’s unjust system of monopoly capitalism or socialism.

Even raising the question, one must question Shakespeare’s understanding of and commitment to binary economics. He presents himself to the world as a “Professor of Binary Economics.” We know of no writer or serious student of binary economics, however, including Louis and Patricia Kelso and Robert Ashford, who would agree with Shakespeare’s assertion that interest-free money and credit should be created by the monetary system to provide for the otherwise worthy education and consumption needs of students.

Further, none of these binary economists agrees with Shakespeare’s characterization of certain forms of credit as “non-repayable money.” As Shakespeare asserted in an email to Chris Dorf on June 2, 2013 in response to an article on money and credit Dorf had sent him, “It is not clear to me that the Public Banking people understand the difference between repayable and non-repayable money, nor the uses to which government-created money should be put.”

The concept of “non-repayable money” does not appear in binary economics, money being defined as “anything that can be accepted in settlement of a debt,” nor is money creation (as opposed to currency regulation) a proper function of government, as can be seen throughout the writings of Harold Moulton, on whose monetary theory Kelso built.4

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4 See especially Moulton’s The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943.

The focus of binary economics is on increasing the productiveness of the non-human factors of production. In this way students and all members of society – including educators and school administrators — can become owners of machines and other nonhuman inputs to the productive processes of society. This will enable students and the rest of society to earn capital incomes to supplement their incomes from other sources. Direct personal ownership of productive capital would help pay for the consumption needs of all members of society . . . from the bottom-up. Shakespeare reverses the emphasis of binary economics by misusing interest-free credit for consumption rather than liberating non-owning people through capital ownership from their continued dependency on their employer, the government and the power elite who now control money and credit.

Education is a marketable good or service, a consumption item that students purchase. Consuming an education does not directly produce marketable services and direct incomes, except for educators and other supplying educational goods and services. Education is an expense for students, however profitable it may (or may not) be for teachers and administrators. Going to school costs money, it does not generate a profit; getting an education is not financially feasible capital by any stretch of the imagination.

The last few years have revealed as an outrageous lie the “conventional wisdom” that getting an education is an “investment.” Young people have been told that if they get a “good education,” they are virtually guaranteed a “good job.” What passes for “education” these days has become “job training for jobs that won’t be there,” as students discover upon entering today’s workforce.

Fiddling with interest rates on student loans is the equivalent of rearranging deck chairs on the Titanic. If the price of higher education and the resulting debt burden were not so great in the first place, there would be no problem with interest rates on them.

The easy availability of loans for students is itself a major part of the problem. Pumping money into education by providing financing to the “consumer” — the student — has increased the cost of education dramatically.

Assuming that a “good education” automatically means a “good job” creates a vicious circle. As a result, the cost of education has been spiraling out of control. Ironically, the myth that a “good education” will result in a = “good job” has meant that the cost of education increases even faster during an economic downturn when demand increases, and even more money is made available, driving up the cost even more.

This could not possibly happen if being a student or getting an education were a genuine investment. The cost of forming capital is irrelevant as long as the capital generates sufficient income to cover its own cost and provide an adequate return to the owner.

The obvious conclusion is that because getting an education does not, in and of itself, generate wealth, it is therefore not a capital good by any standard. The use of pure credit to finance an education is therefore directly contrary to the most fundamental principles of binary economics.

This does not mean that CESJ is indifferent to the problem. If, as moral authorities through the ages have agreed, paying for someone’s education is a virtuous act, then private individuals or foundations can make interest-free loans, or even non-repayable grants to students — as long as these are financed out of existing accumulations of savings. Most people agree that a well-educated citizenry is a benefit, albeit indirect, to the State. Given that, interest-free loans or non-repayable grants financed by a tax levy, can also be justified, but not money creation.

Dr. Kurland’s first job as an attorney after studying law and economics at the University of Chicago was with the Department of Health, Education, and Welfare. He was given the task of building the case to support President Kennedy’s denial of taxpayer dollars to parochial schools.

As a good advocate should, the first thing Dr. Kurland did was to study the opposition’s case so that he could refute it intelligently. After examining the arguments in, e.g., The Catholic Lawyer, Dr. Kurland decided that the other side was right and he was wrong. He reversed his original position and became a champion of education vouchers at all levels of education.

With full implementation of the proposed Capital Homestead Act, government vouchers could address Shakespeare’s demands but be gradually phased out. Under Capital Homesteading, the private sector would become more productive. This economic growth would be financed through interest-free credit used to purchase new, directly owned capital. Rising dividend incomes would enable students to pay for their own education. It would also provide supplementary capital incomes to substitute for the inflationary costs of salaries and benefits of teachers and school administrators at all levels of education under today’s pre-Kelsonian economic system. That’s why we try to concentrate our time and attention to advancing support for passage of the Capital Homestead Act, rather than expedients required under the current system.

7. PUBLIC CAPITAL PROJECTS

public capital projects (water, sewage, roads. Alas, cesj thinks that water and sewage provision are consumer items….)

By “Public Capital Projects,” Shakespeare means “water, sewage, roads.” The term also refers to bridges, street lighting, and so on. He then adds, “Alas, cesj thinks that water and sewage provision are consumer items….”

We assume that by “water and sewage provision” [emphasis added] Shakespeare means the infrastructure by means of which water is supplied, sewage removed, and so on, not the water or sewage itself. Although, noting the facility that some have shown in word-games, we hesitate to use the word “consume” with respect to sewage, it is the water and the sewage that are the consumption goods or services, not the infrastructure that supplies water and disposes of sewage.

In any event, “CESJ thinks” no such thing as “water and sewage provision are consumer items.” We are fully aware that infrastructure is, in every sense of the word, “capital.” We have never denied this.

What we object to, and what has been made clear to Shakespeare and others a number of times, is government ownership of anything that can be owned — and directly owned — by actual flesh-and-blood citizens, not through the State or by the collective on behalf of “the people.” If the State obtains interest-free money to construct infrastructure, the State, not the citizens, will own and control that infrastructure. The debt will presumably be retired by taxing the citizens — who will still not own it, even though they are ultimately paying for it.

If, however, as CESJ proposes, the citizens form a for-profit “Citizens Land Bank” (CLB), as was proposed in in the 1990s for East St. Louis, Illinois (as earlier discussed under “5. Clean Energy Generation”) and is currently being discussed with activists in Cleveland, Ohio, the CLB can take title to all land and infrastructure currently owned by government. Each citizen and permanent resident could receive a single lifetime nontransferable, no-cost, fully participating and voting share, to be surrendered without compensation at death or permanent relocation.

The CLB would lease land to private developers or producers, and pass the profits on as dividends to the citizens. By this means citizens, rather than government, would participate directly as capital owners and planners in local development.

The CLB would obtain interest-free loans from local commercial banks. The loans would be used to purchase privately owned land for large-scale planning and community development and for infrastructure projects. The commercial banks would in turn rediscount the interest-free loans at the central bank.

User fees would be charged to cover the tax-deductible cost of construction and maintenance. Any excess would be distributed to the citizens in the form of dividends. Dividends would be tax-deductible to the CLB, but treated as ordinary income when distributed to the recipient.

In this way the community could be provided with infrastructure at the highest quality and lowest possible cost, and the citizens could receive income from economic development. This would be done without the State being the owner.

State-Owned Natural Resources

We note with great interest that Shakespeare, who presents himself as a professor of binary economics, declares he has daily television or radio interviews and has recorded his own program. Per the results of an internet search, many, if not all these interviews, and possibly the program, appear to be on PressTV, the Iranian State-owned network.

Shakespeare, however, does not seem to be taking full advantage of this unique opportunity. Instead of focusing on the faults of other people, groups, and countries (enemies of the religious dictators now controlling Iran, like the United States and Israel), Shakespeare could be advocating direct citizen ownership of State-owned assets, especially Iranian oil, through a CLB, just as CESJ has advocated for Iraq. This would be fully consistent with the principles of binary economics, as well as be attractive to his sponsor, which presumably is established to benefit the people of Iran.

The Bank of North Dakota

We note in passing that Shakespeare has, on a number of occasions, claimed that the Bank of North Dakota makes interest-free loans to the state for public sector-owned infrastructure. This is untrue. Michael Greaney personally made contact with a bank official and was assured that the Bank of North Dakota does not, and has not in its entirehistory, ever accepted a state-emitted bill of credit or created interest-free money for state-owned infrastructure or for any other public sector purpose whatsoever.

This would, in point of fact, be unconstitutional under Article I, Section 10 of the United States Constitution. This states, in relevant part, that “no State shall . . . emit bills of credit.” We verified the bank official’s statement by reviewing the bank’s abbreviated financial statements, which were at that time available on-line.

The Bank of North Dakota is a state-owned institution that was established as a commercial bank of issue primarily to finance qualified private sector agricultural, commercial and industrial capital projects intended to benefit the citizens of North Dakota. Individuals or businesses from outside the state can apply for financing if they can demonstrate that the project is intended primarily to benefit the citizens of North Dakota. The bank does not, repeat, does not finance state-owned infrastructure, or any other public sector projects by accepting state-issued bills of credit.

Banking Theory

Shakespeare’s understanding of banking does not appear to be consistent with the theory of commercial or central banking in general, or of binary banking theory in particular. Shakespeare’s confusion may be the result of misunderstanding the dual character of virtually all commercial banking today, which combines aspects of both deposit and issue banking.

Confusing issue banking and deposit banking has contributed to, or in some cases been the cause of, every financial panic since the Mississippi Bubble of the early 18th century. It was the primary cause of the Panic of 1825, generally considered to be the start of the modern “business cycle.”

Specifically, speculation in government securities triggered the Panic of 1825. The new republics of Central and South America issued the securities to meet State expenditures and back their currencies once they were no longer backed up by the faith and credit of the Spanish government. Interestingly, one of these, “the Republic of Poyais,” did not even exist!5

The “business cycle” (which binary economics would eliminate) is caused by an imbalance between supply and demand. This, in turn, is caused by over- or under-issue of bills of credit, that is, money creation by governments for public sector spending or “appropriations.” Government money creation fuels speculation in secondary or outstanding private sector securities, as well as direct speculation in the government securities.

In its dual character (which it shares with virtually every other commercial bank in the world), the Bank of North Dakota does, in fact, make pure credit loans (issue promissory notes) based on future savings, but only to finance private sector development. This is “issue banking.” Its other banking services, such as student loans, state treasury services, and banking services, are based on past savings. “Banking services” include clearinghouse operations and a limited offering of retail banking services to depositors. This is “deposit banking.”

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5 David Sinclair, The Land that Never Was: Sir Gregor MacGregor and the Most Audacious Fraud in History. Cambridge, UK: Da Capo Press, 2003.

To explain, a bank of deposit is defined as a financial institution that takes deposits and makes loans. A bank of deposit’s capitalization and deposits, less any reserve requirement, limit the amount of loans it can make. A bank of deposit cannot create money. It can only accept already-existing money. The most common types of banks of deposit are credit unions, savings and loans, and investment banks.

A bank of issue is defined as a financial institution that takes deposits, makes loans, and issues promissory notes, typically for investment in private sector capital assets. A bank of issue can, of course, also operate as a bank of deposit and make loans out of its capitalization and deposits. The principal business of a bank of issue, however, is to accept private sector bills of exchange (not government bills of credit), purchasing the bills of exchange by issuing promissory notes. The most common types of banks of issue are commercial and mercantile banks, and central banks.

“A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation” was published in The Journal of Socio Economics.6 After requesting and receiving permission from Dr. Kurland, Shakespeare included his “Prices and Money” article in his book, Seven Steps to Justice. Judging from his subsequent comments on creating interest-free money, however, Shakespeare does not appear to have understood the logic of the paper.

(See Appendix, Binary Monetary Theory, for more detailed explanations on the nature and creation of money.)

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6 Norman G. Kurland, “A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation,” The Journal of Socio-Economics, 30: 495-515.

8. AND 9. TAX REFORM AND NATIONAL DEBT REDUCTION UNDER CAPITAL HOMESTEADING

We can address the eighth and ninth of Shakespeare’s points, CESJ’s tax proposal and national debt reduction, very briefly. We advocate under the proposed Capital Homestead Act a single rate of personal income tax, set at a level to balance the budget and eventually eliminate the national debt. The single rate would be levied on all income from whatever source derived, above generous income exceptions for the poor and middle-income citizens. There would be no differentiation between labor and capital incomes, or incomes from charity, gifts, welfare or gambling. All other taxes would be abolished, including sales and property taxes.

As we propose, in addition to a lifetime tax deferral on income used to make debt service payments on assets in a Capital Homestead Account (a tax-sheltered asset accumulations that we are currently estimating for Americans at $1 million), non-dependents would have an annual income exemption we estimate at $30,000, while dependents would have an estimated annual income exemption of $20,000. A “typical” family of four would pay no income taxes until aggregate income reached $100,000. The effective tax rate for individuals would thereby be moderately progressive. Anyone whose income fell below the exemption would be provided with government vouchers for necessary goods and services if private charity proved insufficient.

To encourage full payout of dividends, even where the full payout provision is not mandatory (i.e., not attached to Capital Homestead shares), dividends would be tax-deductible at the corporate level, while treated as ordinary income at the personal level. Further encouragement to finance growth by issuing new shares instead of retaining earnings would, if necessary, be given by raising the corporate tax rate to higher levels than at present.

10. ADDRESSING IMMEDIATE ECONOMIC NEEDS

As we have stated previously, Capital Homesteading addresses how we grow the future economy and enable every man, woman and child to own enough new productive capital to become economically self-sufficient. Until that point, we would deal with basic economic needs through the use of vouchers that would be funded with tax dollars or charity.

In addition, tax reform under the Capital Homestead Act — calling for a single rate of tax on all forms of income above a generous exemption level, elimination of the payroll tax on both employers and employees, and a $30,000 income exemption per adult and $20,000 exemption per dependent — would leave more money in the pockets of individuals and families, helping them cover the costs of education, medical insurance, etc.

CESJ’S Responses to Other Issues Raised By Shakespeare

“[C]esj’s strategy is wrong, its psychology is wrong and its policy is wrong.

i) The strategy is wrong because it relies on successful contact with, say, one person in high position who could, in theory, then fully implement the policy. But even Senator Russell Long could not do that.

ii) The psychology is wrong because it is negative and, in particular, Exclusive. Cesj eschews contact with other people and groups. Expelling Chris is about as spiteful and stupid a thing as could be done.

iii) The policy is wrong because there is no major cesj policy which, within a reasonable time, could ever hope to address the disastrous American economic (and social) situation and the USA is rushing into fascism — just think of those 1.6 billion dum-dum bullets!

To take but one aspect of the eight uses of the interest-free money supply, the only thing which could conceivably, and immediately, save the USA from fascism is a huge programme of public capital projects (cf. the 1930s) plus the other six/seven possible uses.”

We will respond first to Shakespeare’s closing assertion that “the only thing which could conceivably, and immediately, save the USA from fascism is a huge programme of public capital projects (cf. the 1930s)….” We presume this is a reference to President Franklin Roosevelt’s Keynesian “New Deal,” a term deliberately chosen to call to mind former President Theodore Roosevelt’s materially different “Square Deal.”

Contrary to popular mythology, an examination of historical data shows that the New Deal did not create millions of sustainable jobs and bring the United States out of the Great Depression of the 1930s, as Shakespeare hints. Rather, it was the U.S. producing and providing the U.K. and other allies with critically needed war material during World War II, and, ultimately, American blood on the battlefields of Europe, Africa, and Asia, that ended the Great Depression. It was increased private sector production for war, and a guaranteed customer with purchasing power (the U.S. government), which spurred dramatic rates of growth, virtually full employment, and higher living standards.

According to Christopher J. Tassava, posting on the website of the Economic History Association,7 and writing on “The American Economy During World War II”: “Between 1929 and 1939, the American unemployment rate averaged 13.3 percent (calculated from ‘Corrected BLS’ figures in Darby, 1976, 8).” Tassava later notes in the same article that “In 1944, unemployment dipped to 1.2 percent of the civilian labor force, a record low in American economic history and as near to ‘full employment’ as is likely possible (Samuelson).”8

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7 http://eh.net/encyclopedia/article/tassava.WWII, accessed May 2, 2013.

8 Ibid.

We will now deal one-by-one with the errors and faulty assumptions in Mr. Shakespeare’s assessments of CESJ and its “strategy,” “psychology,” and “policy”:

i) The strategy is wrong because it relies on successful contact with, say, one person in high position who could, in theory, then fully implement the policy. But even Senator Russell Long could not do that.

As described as far back as 1972, when Norman Kurland’s article “How to Win A Revolution … and Enjoy It” was first published (and subsequently updated), CESJ has been following a multi-prong strategy of communications and system change, of which gaining the support of a “prime mover” (mass communicator and change agent) is but one “prong.” The other prongs include “education,” “the mobilization of people power,” and “creation of working models.” As our article “Dinner at the Madison”9 describes the history behind the enactment of the first of twenty ESOP laws, which happened largely with the backing of a powerful champion, Senator Russell B. Long, there was a long process over a number of years. It took many political contacts through various networks, and extensive door-opening to many potential champions, to achieve those intermediate victories. Senator Long was a champion of employee stock ownership; however, he was not prepared to move beyond that to broad-based citizen ownership.

While getting the ESOP into law was only a first step to Kelso’s larger vision, it has led to more than 11 million workers in the U.S. alone becoming worker-owners without using their own savings. It has received support all the way up to the level of the White House, particularly by President Ronald Reagan, whose Task Force on Project Economic Justice was the first to recommend expanded ownership policies in foreign economic policy. CESJ continues to work with other organizations and individuals around the world to communicate our message and plan to global leaders; expand our educational capacity (via an online Justice University); build people power (via the Coalition for Capital Homesteading); and develop expanded ownership models (e.g., our project in Cleveland to introduce model Justice-Based Management ESOPs, a Citizens Land Bank and the Homeowners Equity Corporation, aimed at gaining access to the discount window of the regional Federal Reserve).

For an outline of the key elements of CESJ’s strategic plan for enactment of the Capital Homestead Act, see Appendix E of this paper.

ii) The psychology is wrong because it is negative and, in particular, Exclusive. Cesj eschews contact with other people and groups. Expelling Chris is about as spiteful and stupid a thing as could be done.

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9 “Dinner at the Madison,” by Norman G. Kurland, published in Owners at Work by the Ohio Employee Ownership Center, Winter 1997/1998.

First, as CESJ’s Core Values and Code of Ethics (Appendices A and B) state, membership in CESJ is open to all people who share our values and will work together toward our Just Third Way vision. Over our nearly 30 years, we have had members and associates from about 40 countries. As Mr. Shakespeare himself noted in his book, Seven Steps to Justice, we are truly interfaith and have members who are atheists and agnostics. We also collaborate with many people and organizations around the U.S. and the world who are not formally connected with CESJ, and may hold some significantly different views on various issues. Regarding Chris Dorf’s alleged expulsion by “CESJ” from the Kelso Binary Economics discussion group, Part II of this paper will show that this was a wholly fabricated accusation, which started from an unfounded assumption on Mr. Dorf’s part.

iii) The policy is wrong because there is no major cesj policy which, within a reasonable time, could ever hope to address the disastrous American economic (and social) situation and the USA is rushing into fascism — just think of those 1.6 billion dum-dum bullets!

We believe that once adopted, the Capital Homestead Act will start to have a positive impact on growth and widespread purchasing power almost immediately, as more businesses take advantage of this new source of capital investment and begin hiring more people, and more citizens start to receive dividend incomes in addition to wages. The tax reforms would also leave more money in the hands of citizens to cover their basic living expenses, and the inheritance policy would encourage the wealthy to spread out their estates to family members, workers, and others. These measures and others under the CHA would reduce the need for redistributive welfare measures, which would also reduce federal and state budgets, and therefore the rising government debt. By exporting the Capital Homestead Act to other countries, we can offer an economic strategy for peace with prosperity and justice, reducing tensions around the world as well as the need for the present level of military expenditures. For more discussion on these proposed reforms, see Appendix D, “Summary of the Capital Homestead Act.”

PART IV.

CESJ’S RESPONSE TO ALLEGATIONS RAISED BY THE “CRITICS”

It bears noting that CESJ’s critics in this “debate” — Rodney Shakespeare, Chris Dorf and Alan Avans — have never challenged CESJ’s “Just Third Way” principles, definitions or systems logic, which underpin CESJ’s understanding of Binary Economics.

The Just Third Way paradigm — which we continue to refine — has emerged from our intensive study and synthesis of “post-scarcity” thinkers including Louis Kelso, Mortimer Adler, Pius XI, Fr. William Ferree, Buckminster Fuller (for his physical design science breakthroughs), and Martin Luther King, Jr. (for his philosophy and practice of nonviolent social action). It also springs from our core team’s professional experience (including in the drafting and enactment of expanded ownership legislation and policy at the state, national and global levels), of which Dr. Kurland’s has spanned nearly 50 years.

More important to CESJ than their opinion of us as individuals, the critics have never told us specifically what they find wrong in CESJ’s Capital Homesteading proposals. (For an overview of these proposals, see Appendix D: “Summary of the Capital Homestead Act”.)

Addressing many of the issues raised by Rodney Shakespeare, our comprehensive legislative package of basic economic reforms, known as the “Capital Homestead Act,” presents new tax, monetary and credit, inheritance, and private property policies designed to universalize and maximize access to direct capital ownership for every person.

The aim of the Just Third Way is to empower each person to participate fully in the social order and have equal opportunity to pursue their fullest human potential. The aim of binary economics is to empower economically every citizen, making the State (government) dependent economically on the people, rather than making the people economically dependent on the State.

The Capital Homestead proposal has been around for decades, albeit under different names. It is essentially based, with some refinements, on specific national structural reforms to the monetary, financial, tax, and inheritance laws that in 1964 Louis Kelso called “The Second Income Plan. Each of the critics here is aware, to one degree or another, of this proposal.

Yet rather than debating the specifics, or clarifying the commonalities and differences in our respective approaches to social change, CESJ’s critics have focused their considerable negative energies on creating “straw men.” Under the guise of “debate” and “important discussion,” they have alleged misdeeds, antisocial personalities, and even outright insanity of the individuals (“CESJ’s leadership”) with whom they disagree. To somehow bolster their position, several of the critics, who are not members of CESJ, have even called for the resignation of CESJ’s leadership — i.e., the people they are supposedly “debating.”

How Dorf’s Straw Man Became Shakespeare’s Hobgoblin

The following retraces the email exchanges that opened up the series of defamatory and damaging statements aimed at CESJ, Dr. Kurland, Michael Greaney and Dawn Brohawn by the three “critics.”

On March 25, 2013, Mr. Chris Dorf, an occasional participant in the online Kelso Binary Economics Discussion Group (hosted by Kent State University in Ohio), broadcast to the group a complaint against Dr. Norman G. Kurland, president of CESJ:

CESJ,

I have talked to a friend about CESJ’s initiative, whom [sic] teaches finance at Pitt, and she has contacted Norm Kurland regarding observations about ‘uncertainty’ and ‘risk’ of stock ownership by the average US citizen, and she has been completely turned off to CESJ’s concepts because she recieved [sic] a flippant ‘read the material’ response.

So much for my initiative; hope CESJ’s rude response has not hurt my relationship with this person.

chris dorf

It was not clear at the time why Mr. Dorf did not first attempt to raise his concerns privately with Dr. Kurland, at least to ascertain the facts surrounding his accusation, and determine whether there might have been a simple misunderstanding. Most people would agree that before broadcasting a charge that could potentially cast a negative light on another person’s reputation, the decent (and fair) thing to do is to go to that person and talk it over. CESJ’s Code of Ethics (see Appendix C), while not part of the governing rules of the Kelso Binary Economics Discussion Group, offers some guidance in such a circumstance:

 7. Compassion. If you have problems with the personality or behavior of any member of CESJ, avoid even subtle criticisms of that person with others. This breeds distrust and divisiveness. Take him or her aside privately and discuss your observations and concerns on a one-to-one basis in an atmosphere of mutual respect, solidarity and compassion.

Second, one would think that Mr. Dorf, having made such a public accusation on behalf of his friend, would have presented some specifics regarding Dr. Kurland’s alleged offense — such as the name of the person he offended, when the offending behavior occurred, and what was actually said — not to mention some evidence that such an offense actually happened.

To date, Mr. Dorf has never responded to requests for specific information regarding his accusations, which were made by several members of the discussion group who also happen to be members of CESJ.

Upon receipt of Mr. Dorf’s posting, Mr. Joseph Recinos (CESJ’s Director for Latin America) sent the first e-mail requesting clarification:

 Chris:

Ask Norm or Michael directly to [sic ] their emails to check what happened. I have not seen the emails. Do you have copies of the correspondence back and forth from her? Joe

In reply to this, Mr. Dorf stated:

Joe, I do not have access to the emails; just her statements, and she is a lot put off, by the response she got when honestly enquiring into the work of CESJ. chris.

Dorf had still given no clue as to the identity of the “she,” the nature of the inquiry, or when the aforementioned inquiry and “putting off” took place.

Avans Leaps Into the Fray

At this point Mr. Alan Avans, another member of the Kelso Binary Economics Discussion Group, inserted himself into the discussion. Not concerned with facts or explanations, Avans posted his gratuitous comment:

“CESJ needs new leadership. Norm and Michael aren’t cutting it. Regards Alan.”

There were two puzzling aspects to Mr. Avans’ unsolicited remark. First, coming from a sporadic participant in the discussion group, Avans’ reference here to CESJ’s Director of Research Michael Greaney seemed a little out of left field, particularly in that prior to Mr. Avans’s comment, Michael Greaney had not been participating in that discussion, nor had his name even been mentioned in it.

A little background on Mr. Greaney is in order. As a Certified Public Accountant with a Masters in Business Administration, Mr. Greaney has been a Senior Field Accountant with the American Red Cross, consulted with the Export-Import Bank of the United States rescheduling loans, served as Medical Center Auditor at Georgetown University Medical Center, auditor with the Federal Election Commission, and as Director of ESOP Administration for Equity Expansion International, Inc., an “Investment Banking Firm for the 99 percent.” In addition to numerous magazine and journal articles on economic history and economic and social justice, Mr. Greaney has contributed articles to The Encyclopedia of Catholic Social Teaching, The Encyclopedia of the Great Depression, and the upcoming Encyclopedia of Politics in the American West.

Mr. Greaney was associate editor and contributing author to Curing World Poverty (1994) published by Social Justice Review, co-author of Capital Homesteading for Every Citizen (2004), and author of In Defense of Human Dignity (2008), Supporting Life: The Case for a Pro-Life Economic Agenda (2010), and The Restoration of Property (2012). Mr. Greaney has also edited a series of economic classics, including William Cobbett’s The Emigrant’s Guide, William Thomas Thornton’s A Plea for Peasant Proprietors, and Harold G. Moulton’s The Formation of Capital.

Germane to the discussion at hand, Mr. Greaney writes a daily blog on the Just Third Way, Binary Economics and Capital Homesteading, incorporating commentary on Catholic social teachings, monetary and tax theory, Thomist philosophy, Kelsonian expanded ownership finance, Distributism and Neo-distributism, and a host of other topics. He contributes to the Kelso discussion group daily summaries and links to these blogs, inviting others to comment. We do not recall whether Mr. Avans has ever commented on Mr. Greaney’s blogs or other CESJ writings.

Neither Dr. Kurland nor Michael Greaney have any idea who Alan Avans is, or why he seems to bear them such malice. From the tenor of his comments and after “googling” the name “Alan Avans,” we believe Mr. Avans to be a “distributist,” that is, a proponent of the philosophy and loose economic system developed by G.K. Chesterton and Hilaire Belloc. Mr. Avans never made clear just what, precisely, Dr. Kurland and Mr. Greaney were not “cutting.”

Secondly, why Avans, who is not a member of CESJ, felt it was any of his business dictating how CESJ should be run, and who its leadership and spokespeople should be, remains a mystery, and in any event seems rather presumptuous to us.

A Fruitless Search for the Facts

At this point the accused, Dr. Norman Kurland, sent Mr. Dorf an e-mail:

Chris, I have no idea what you’re talking about or when this “exchange” happened. I don’t recall talking to your professor friend from the University of Pittsburgh. Mike Greaney is not here, and I will check whether he recalls responding to her. However, what you describe as rudeness is not the way we react to people who are seeking answers.

We consider ourselves to be teaching a new economic paradigm and what you describe is contrary to CESJ’s Code of Ethics. Read them at http://www.cesj.org/about/codeofethics.htm.

What is your friend’s name? Did she call or email us? When? If she contacted us by email and we responded, then I can forward to you our response. Then I can determine whether she is correct and deserves an apology.

Norm

To this, Mr. Dorf responded, “She does not want to talk any further. chris dorf.”

Thus, Dr. Kurland stood accused publicly of a vague offense, which took place at an unspecified time, for which Mr. Dorf presented no evidence, against a person Mr. Dorf refused to identify.

Ms. Dawn K. Brohawn, CESJ’s Director of Communications (a co-founder and officer of CESJ and Norman Kurland’s daughter) then sent an e-mail to Chris Dorf, to let him know how seriously CESJ took his friend’s complaint, and of our sincere wish to understand, and possibly remedy, the situation:

Chris,

This [is] a highly disturbing charge that you’re making, since CESJ endeavors to respond politely and thoroughly to any inquiry. Norm is willing to spend hours trying to explain our concepts and answer questions, and as you know, Mike is quite detailed in his responses to “honest” inquires. We never simply tell someone, “read the material,” although we might suggest that an interested party read specific articles or books that would give a more in-depth or detailed explanation.

Believe me, we want to win over converts in academia to the Just Third Way and Capital Homesteading, not insult or drive them away.

I have just asked Norm whether he recalls talking with a finance professor from Pitt, and he had no idea what or who you were referring to. I have placed a call to Mike Greaney to see if he knows anything about what you’re saying.

What is your friend’s name, when did she call, and with whom did she claim to speak?

Sincerely, Dawn

Mr. Dorf did not respond to Ms. Brohawn’s e-mail. The next day (March 26, 2013), after being apprised of the situation, Mr. Greaney sent his own e-mail:

Mr. Dorf:

In your posting of March 25, 2013 in the Kelso Binary Economics discussion group, you accused CESJ’s president Dr. Norman Kurland of giving a “flippant response” (i.e., “Read the material.”) to a friend of yours who teaches finance at the University of Pittsburgh. Dr. Kurland’s “rude response,” as you claimed in your posting, came after she raised an “honest enquiry” relating to issues of “risk” and “uncertainty” (which I am presuming had to do with how the Capital Homesteading program might put the savings of non-owning citizens at risk).

You then stated that you “hope CESJ’s ‘rude’ response has not hurt my relationship with this person.”

By your own admission you have no real evidence that Dr. Kurland in fact behaved rudely toward this person, of what language both parties used in the exchange, or even that such an exchange took place. In other words, you based your accusation in a public forum on what one individual allegedly told you. You do not even appear to have asked for proof that this person’s allegation was truthful or accurate, or that there may have been a misunderstanding on her part.

At the very least, your public accusations are one-sided and not the actions of a fair-minded person. You did not even allow the accused the opportunity to question the accuser, much less know her identity.

Even worse, by using this forum (whose sole purpose is for inquiry and debate on the ideas of Kelso’s binary economics, the Just Third Way, and Capital Homesteading) to air your negative judgments of Dr. Kurland, you have apparently re-awakened the ire of people such as Alan Avans, who seems to have his own ax to grind. As a result of your accusation, Mr. Avans has called for Dr. Kurland’s resignation as president of CESJ.

As CESJ’s Code of Ethics states: “If you have problems with the personality or behavior of any member of CESJ, avoid even subtle criticisms of that person with others. This breeds distrust and divisiveness. Take him or her aside privately and discuss your observations and concerns on a one-to-one basis in an atmosphere of mutual respect, solidarity and compassion.” You could have tried raising your concerns with Dr. Kurland in private before going public.

To the extent that your comments have shut the minds of others from further explanation and exploration of the Just Third Way, binary economics and Capital Homesteading, you have damaged the mission of CESJ. To the extent you have unfairly characterized the person and work of someone who has devoted his life to pursuing justice for every person and to teaching a new paradigm to anyone interested in learning, you have hurt not only that person, but his work.

Michael D. Greaney Center for Economic and Social Justice

Mr. Dorf did not respond directly to Mr. Greaney. Instead, later that same day (March 26, 2013) Mr. Dorf forwarded Mr. Greaney’s email to Rodney Shakespeare, Steve Nieman, Robert Crane and Alan Avans, and possibly others “blind copied,” outside the Kelso Binary Economics discussion group, with the subject line hinting at his martyrdom: “Guess CESJ has finally banned me . . .”

Apparently during that time Chris Dorf (along with several other Kelso BE discussion members, including Norman Kurland) had his postings bounced back by the Kent State University listserve. Without first attempting to ascertain the facts, Mr. Dorf leaped to the conclusion that CESJ had banned him from the Kelso Binary Economics Discussion Group.

For the record, Mr. Dorf has never been “banned” either from CESJ (which he has never joined) or from the Kelso Binary Economics Discussion Group (which he has left several times of his own accord). He has on several occasions announced that he was leaving the Kelso Binary Economics Discussion Group “forever.” This generally has followed after someone has pointed out to Mr. Dorf that what he was saying or advocating had little if anything to do with binary economics and seemed to consist largely of ad hominem attacks. Chris Dorf and his postings have always returned after several months, sometimes days, to the forum unimpeded by CESJ, Norman Kurland or the moderators of the discussion group. (“Forever” evidently is not as long as it used to be.)

The “Banning” That Never Was

Upon receiving Chris Dorf’s email announcing that that he had been “banned by CESJ,” Rodney Shakespeare leaped at the opportunity to launch a new campaign against CESJ, Norman Kurland, Michael Greaney and Dawn Brohawn. Shakespeare sent a response to Chris Dorf, Steve Nieman, and Dr. Robert Crane. Shakespeare would now enshrine Chris Dorf’s false speculation with the new labeling of CESJ and its leadership as “the Exclusive Brethren”:

Hi Chris, Steve, Bob,

I was once privileged to be allowed to attend a ceremony of the Exclusive Brethren (an extreme subset of the Plymouth Brethren). I adored the singing but it was all terribly sad because it was only too clear that, in practice, nobody could join, people had been expelled, and the young, repelled by intolerance, had left so that the particular EB group I saw could not survive for long.

So it is with cesj because cesj’s strategy is wrong, its psychology is wrong and its policy is wrong.

i) The strategy is wrong because it relies on successful contact with, say, one person in high position who could, in theory, then fully implement the policy. But even Senator Russell Long could not do that.

ii) The psychology is wrong because it is negative and, in particular, Exclusive. Cesj eschews contact with other people and groups. Expelling Chris is about as spiteful and stupid a thing as could be done. iii) The policy is wrong because there is no major cesj policy which, within a reasonable time, could ever hope to address the disastrous American economic (and social) situation and the USA is rushing into fascism — just think of those 1.6 billion dum-dum bullets!

To take but one aspect of the eight uses of the interest-free money supply, the only thing which could conceivably, and immediately, save the USA from fascism is a huge programme of public capital projects (cf. the 1930s) plus the other six/seven possible uses.

An expulsion is not an occasion upon which anybody else should make a boast. But, forgive me, the boast is very relevant to the expulsion and the cesj situation. Because of the wide proposed uses of the interest-free supply, a willingness to converse with anybody without ‘expelling’ them, and the expression of anything but a parochial view, I am swamped out with invitations etc. This Friday is the first filming for my own TV programme (with a wide-ranging remit); last month I had two weeks in one country; before Christmas, a week in another; in May I go to Iran for a week; in June to Indonesia for two weeks; and then there is a probably visit to Turkey in September.

I also average, at the moment (it has been higher) one TV or radio interviews per day (some in the studio, some on the telephone or Skype). Yes, most of it cannot be about aspects of binary economics but, without the wide uses of binary economics, plus willingness to talk to anybody, there would have been nothing. It’s as simple as that – binary width plus willingness to talk sums it up.

Bob says he cannot copy to kelso_binary_economics@listserve.kent.edu, (and this sort of thing is not unknown – I have a similar problem with one group) but, on the other hand, when Exclusiveness Reigns……

Rodney

PS. Michael Greaney’s email is hopeless. He doesn’t seem to know what rudeness is – his, and Norm’s, incapacity to understand that they continually antagonise people lies somewhere on the autistic spectrum.

The cork was now out of the Shakespearean bottle, and the vitriol began to flow. Dorf’s false accusation of his “expulsion” was now an accepted dogma in spite of (or possibly because of) the fact that it never happened. Shakespeare continued using the non-event to justify and prove other claims he now asserted — none of which had anything to do with whether or not CESJ had ever banned, banished, or expelled anyone for any reason.

Shakespeare’s Conditional Expulsion

Indeed, of the recipients of Mr. Dorf’s e-mail, only Rodney Shakespeare has ever been “expelled” from the Kelso Binary Economics Discussion Group (not, please note, from CESJ). Participation in the Kelso Binary Economics Discussion Group is conditional on acceptance of and adherence to rules of civil debate. As the “Welcome” message to new members states:

This discussion group or “online seminar” will discuss Louis Kelso’s theory of binary economics, comparing it to alternative economic models of development, or paradigms. Paradigms, or world views acceptable for teaching in academia, largely influence public opinion and the mindsets of leaders who shape the laws, policies and institutions that in turn determine the quality of economic life for every citizen, enterprise, community, region, and nation within the overall global economy.

Critics and advocates of other system theories are welcome to challenge the logic of binary economics and offer more just or efficient models of development — as long as they are consistent with private property, free markets and limited government, and are aimed at promoting maximum efficiency and wealth production, sustainable growth without inflation, and the maximum diffusion of capital ownership and economic power among all members of the human community. . . .

While vigorous debate on the subject of binary economics will be encouraged, any of the co-moderators will have the right to remove any postings that in his judgment contain personally insulting, libelous, abusive, obscene, discourteous language, or that deliberately disrupt discussions with repetitive messages or “spam” (after contacting the participant privately to remove the offensive posting and subject to reversal by either of the other two co-moderators).

Under these terms cited by the late Kemp Harshman, the moderator of the Kelso Binary Economics discussion group who suspended Rodney Shakespeare, Mr. Shakespeare is welcome back after he apologizes for his abusive language and damaging accusations leveled at other members of the group, most notably, Norman Kurland, Michael Greaney and Dawn Brohawn.

Adding Old Gas to New Flames

Having received no response from CESJ to his insults, Shakespeare sent out another e-mail containing a list of seven points he claimed “the Exclusive Brethren” (“cesj”) have been ignoring. Addressing his e-mail to “All”,” Shakespeare had now spread his harangue against CESJ to at least ten people who had not been privy to Mr. Dorf’s original complaint or CESJ’s repeated requests for specific information concerning the alleged incident. (Some of the email recipients included people at various universities and NGOs, as well as someone from the world-renowned Mondragon Cooperative.) As we will see, Shakespeare subsequently denied that he had made anything “public”:

Dear All,

I have a moment to briefly clarify the key aspect of why cesj has now become EB (Exclusive Brethren) and not BE (Binary Economics). It is that cesj wilfully refuses to recognise what is obvious to everybody else namely that ALL of the following are major productive capacity to which full access must be granted to everybody in the cheapest possible way:

houses, state and private (a continuous supply of warmth, shelter, cooking facilities, bath for 100 years…. – only lunatics think a house is a consumer item)

micro credit (e.g., small piece of land for chicken coop, or tricycle-taxi. And will cesj please explain why it has over 5,000 signatures from micro credit recipients on its Statement of Vision yet cesj refuses to support interest-free loans for micro-credit?)

public capital projects (water, sewage, roads. Alas, cesj thinks that water and sewage provision are consumer items….)

environmental capital projects (Will cesj explain why a mangrove-crested sea barrage should attract interest-bearing and not interest-free loan money?)

clean electricity generation (Does cesj know that the desire to use interest-bearing, rather than interest-free, money stops the UK from generating cleanly 10 percent of its electricity supply from just one project?

small businesses and farms

students (students are the second factor in the creation of wealth. The failure to recognise interest-free loans for students makes cesj a laughing stock)

It is preposterous for any binary economist not to recognise that ALL the above are forms of productive capacity.

In these seven respects cesj is completely out of touch with reality – a disconnection with reality is the main feature of the Exclusive Brethren (who do have, however, lovely singing which is listened to only by themselves….)

Rodney Shakespeare

This seems to have been the e-mail that inspired Mr. Steve Nieman to comment:

Somehow, binary economics (dual income) theory is being lost in what the daily lives of most people are like. To me, economists can be compared to clergymen who think they know who God is or how that power (energy) can be defined. It is the ultimate blasphemy.

Economics is so complicated, it is so intertwined with the guts of what it means to be a human–that anybody who claims to know exactly what to do when it comes to worldwide application of money/credit is not to be trusted.

We all have to move humbly, remembering that Life often works in mysterious ways. Iron-fisted, brain-based reasoning (if only it were so: it would be sooo [sic] easy!) just doesn’t cut it in the world of flesh-and-blood humans.

I know this drives Michael Greaney crazy. I admire Mike, and he’s sooo [sic] much smarter than me (and I say this with great respect). But somehow (the track record is available to all), binary economics as it’s being sold in these United States of America–most people ain’t buying.

This discussion so far, as open as it is, is healthy, as long as nobody takes themselves too seriously. It goes beyond agreeing to disagree: Working collaboratively means supporting those who really care, even if the energy is put in a lot of effort in directions somebody else doesn’t agree with. Do we have the patience to wait and look for the results?

Bottom line perhaps is: Are a lot of people being genuinely helped and their lives made better by changes that occur in the field?

Steve Nieman

p.s. Socialism and capitalism are not neatly and clearly divided. It’s like everything else in Life–not always in crystal focus…

Dr. Norman Bailey, formerly the Chief Economist of the National Security Council on International Affairs during the Reagan Administration, pointed out the illogic of confusing capital and consumer goods. Dr. Bailey emphasized that the distinction is an important one, particularly at a point where advancing technology and globalized labor market make it critical that, as quickly as possible, people without capital become capital owners earning capital incomes:

I am an economist with as many or more advanced degrees and publications as Shakespeare and I object to being labeled as “insane” if I consider, as I do, that a house lived in by the owner, and not rented out, is a consumer item. It does not produce income, it costs money, as any homeowner can enlighten Mr. Shakespeare. For some time now the production of goods has become ever-more capital-intensive and therefore less labor intensive. That being the case, if future economic, political and social chaos is to be avoided, there is no other solution than greatly expanded ownership of productive capital by the population at large, or ever-increasing numbers of serfs to the state. There is no poverty in Mondragon; the Alaskan natives are the wealthiest indigenous peoples in the world; industrial conflicts in Costa Rica are rare, largely due to the solidarist associations, and so on and so on.

Shakespeare replied to Dr. Bailey’s common sense response by misstating some facts and raising a few more straw men:

A discussion seems to be going on but without cesj having the courage to debate with me face to face. ALL the seven matters listed in the email below are issues of the wide spreading of productive capacity to everybody in society.

As far as I am aware there has been one attempt (by Norman Bailey) to deny that a house is productive capacity (he also objects to being called insane for making that denial). But the Kelsos say a house is productive capacity and cesj is supposed to forward Kelso policy and not contradict it. Is Bailey alleging that the Kelsos are insane?

Thus the Kurlands, Greaney and Bailey are deliberately rejecting one of the biggest planks of Kelso policy whilst lecturing everybody else on upholding Kelso policy.

All four of them are scared of debating, one by one, the seven issues in the emailbelow.

Rodney Shakespeare.

PS  The Kelsos proposed (a chapter in their last, most authoritative book, Democracy and Economic Power, 1986 & 1991) that housing have interest-free loans.

PPS Nobody (including me) is attacking cesj in public fora (as alleged by Dawn K). Cesj is ignored as irrelevant, like the Exclusive Brethren.

In reply, Dr. Bailey patiently clarified his previous comments:

It’s really very simple. A consumer good or service is so-called because it is consumed. A capital good is used to produce consumer goods or other capital goods. The fact that shelter is a necessity is irrelevant. Food and clothing are also necessities. Are they also to be, for that reason, considered capital goods? Even if a consumer good is purchased with an interest-free loan it must be repaid from savings. A loan to purchase a capital good can be repaid from future earnings of that capital good. When a barber purchases a pair of scissors it is for the purpose of using that tool to cut people’s hair (a service), for which he will get paid. If he uses what he gets paid for the haircut to purchase a sandwich, he does so for the purpose of consuming it. I don’t recall Kelso writing that a house purchased to live in is a capital good, but if he did he was simply wrong. The distinction between consumer and capital goods is absolutely basic and fundamental to the whole concept and practice of expanded CAPITAL ownership, NOT ownership of consumer goods, perishable or not, essential or not.

A New, Big Plank of Kelso Policy

Shakespeare’s claim that interest-free loans for homes used as primary residences is “one of the biggest planks of Kelso policy” seems insufficiently supported in Kelso’s writings, either those with Mortimer Adler or with Patricia Hetter-Kelso.

The chapter covering the subject of interest-free loans for homes consists of five pages in Democracy and Economic Power. One of these is a full-page graphic. There is also nearly half a page of notes and a chapter title. At best, then, the material addressing a house as a capital asset covers barely 3½ pages of text in a 170-page book, not counting the index. It is not mentioned at all in Two-Factor Theory, The New Capitalists, or The Capitalist Manifesto. Nor is it mentioned in Ashford and Shakespeare’s Binary Economics: The New Paradigm (1999).

In any case, whether the Kelsos had switched from their earlier position that viewed houses as consumer items (unless they are rental property), to the position that they are capital goods that should be purchased with new, asset-backed money and interest-free money, is irrelevant. The germane question is whether such a policy makes any sense, from the standpoint of feasibility and capital repayment.

An Appeal to Authority

At this point, the reader should note where Mr. Shakespeare starts to build the case that a house is a capital good, because the Kelsos said so. (This was twenty years after Louis Kelso and Patricia Hetter had stated the opposite position in their book Two-Factor Theory: The Economics of Reality (1967), to say nothing of Louis Kelso’s two earlier books with Mortimer Adler.) As Shakespeare later made his case:

Dear All,

It is pleasing that there is debate about the first item in the list of seven i.e., interest-free loans for housing because housing is productive capacity/capital.

1. Chapter Ten of Democracy and Economic Power (1986, reprinted 1991) is about interest-free loans for housing and it begins:-

“The most important form of productive capital most consumers traditionally acquire, or seek to acquire, is a home. A residence is a capital structure – “a dwelling machine”, to use Le Corbusier;s phrase. It produces marketable wealth…”

The trenchant, elegant text goes on to explain that a house produces living space and use pleasure. If a consumer does not own a house he has to rent its equivalent.

A house produces shelter, warmth, bath, kitchen etc. over one hundred years or more. It is a big producer of goods for human existence, just as a farm is a producer of fruit, milk etc., and a factory is a producer of widgets. Norman Bailey, who is thanked for debating, is confusing the producer (i.e., house, farm, factory) with what is produced (shelter, fruit, widget). However, the key point is that the Kelsos say a house is productive capacity and if they say it, they say it. End of subject.

It would thus be helpful if cesj, eternally lecturing others about forwarding Kelso policy, would start by admitting that it does NOT forward major Kelso policy.

2. Turning to the second item — micro credit.

Will cesj please explain why it has over 5,000 signatures from IIRD micro credit recipients on its Statement of Vision yet cesj refuses to support interest-free loans for micro-credit?

Of course, this matter will be easily settled if cesj clearly states that it supports interest-free loans for micro credit (but with administration/training charge). As far as I know, it does not.

Rodney Shakespeare

Shakespeare’s insistence that a house is a capital item because the Kelsos said so, takes the debate out of the realm of reason and logic, and into the realm of faith and infallibility.

The Melee Continues

In any event, Mr. Nieman’s e-mail had its due effect. Mr. Avans’ next contribution to this “ important discussion” was to demand once again that Dr. Kurland and Mr. Greaney resign from CESJ:

Michael Greaney is simply trying to suck up to the Tea Party and to those inclined toward the baffling B.S. known as “Austrian” economics. Just as simple as that. Why Norm puts up with Greaney’s BS is beyond rational explanation.

CESJ needs new leadership. Michael Greaney should do the decent thing and just leave CESJ and the entire subject of BE alone.

The only two people I can think of at the moment that are presently proximate to the commanding heights of the thrice mighty CESJ are Blakeway and Crane.

If Norm will do the decent thing and resign, I’m sure we can arrange for John Medaille [sic] to lead CESJ.

It is not clear what Mr. Avans believed to be Mr. Greaney’s “BS,” unless it was Mr. Greaney’s demand for proof of Mr. Dorf’s original accusation against Dr. Kurland. Mr. Greaney was unaware that he was “sucking up” to anyone, whether “the Tea Party [or] to those inclined toward the baffling B.S. known as ‘Austrian’ economics.”

Assuming Mr. Avans has read Mr. Greaney’s daily blogs, he would be aware that Mr. Greaney has written various critiques from the Just Third Way perspective, of the Tea Party and the Austrians, as well as of others, such as today’s Neo-Distributists and socialists. What is common to all these systems, from left to right, is their adherence to the wage-welfare system, as well as their assumption that new wealth can only be financed through “past savings” or by cutting current consumption.

As Dr. Kurland and Mr. Greaney have frequently pointed out in the Kelso Binary Economics discussion group is something all the other schools of economics (including the Keynesians, Distributists and Austrian School) ignore or simply do not acknowledge — a simple reality of business finance that Kelso (and Harold Moulton before him) understood. It is something that businesses and the wealthy have known for centuries, that new capital formation can be financed using the present value of the future earnings (“future savings”), and repaid with the future earnings of the capital investment itself.

And, what all these systems also have in common is that they fail to offer any systemic or realistic means to empower economically every citizen (including the poorest of the poor) and close the wealth gap. They all end up increasing the economic power of the State, and decreasing the economic power of the vast majority of non-owning citizens.

Who is “Blakeway”?

As of this writing nobody here in CESJ has any idea who “Blakeway” is (he is not on CESJ’s membership rolls), nor do we recall ever having heard the name. The “Crane” referred to by Alan Avans is Dr. Robert Crane, a co-founding member of CESJ who is also on the Board of Counselors. Avans’ raising of the name “John Médaille” out of the blue, raised our collective eyebrows, so to speak. The significance of this individual, a caustic critic of CESJ’s positions and members over many years, will be explained later in this paper.

Mr. Dorf then offered the sage observation:

An important discussion that needs to happen. Even religious factions are aligning, as Mr. Greaney seems to represent 1 faction, claiming ‘moral highground’ [sic] as regards the ethics and morality of 1 economic model over another, claiming moral certitude over these matters…George Weigel of the ‘American Enterprise Institute’ comes easily to mind in this regard. chris dorf

It was unclear as to what “important discussion” Mr. Dorf was referring. Consistent with his pattern of making assertions without evidence, Mr. Dorf did not point out which “religious faction” Michael Greaney represents, or indicate where Mr. Greaney had “claim[ed] moral certitude” about anything. Neither did Mr. Dorf, at this or any point in the discussion, retract his original insinuation that CESJ had “banished” him.

To this Mr. Nieman replied:

This is an important discussion and we’ll see how its energy spans (or sputters) out.

I want to respond in more detail but I got to get to the airport.

One point I’d like to make: I’ve got a lot of liberal friends (conservatives, too). But the liberal ones get turned off by some of CESJ’s message constantly beating up on government options.

They vote in elections and support their candidates and the democratic process. They find it hard to believe that everything dealing with the economy has to be done in the private (corporate) sector. They believe that there are some proper and natural roles for government to play. I believe this was Bob Crane’s intent in suggesting legitimate alternative bridges built (or at least considered and debated) between pure binary economic theory and the workings of humans trying to earn a living in the real world.

Steve Nieman

Astonished that a fellow CESJ member, and member of CESJ’s Board of Counselors, would add to the misrepresentations of our positions and hostile tone directed at CESJ, while ignoring the flagrant and unjustified attacks on three of its members who had worked closely with him in the past,10 Dawn Brohawn sent the following email to Steve Nieman:

__________________

10 See “Steve Nieman” biography, http://www.ourunion.org/niemanbio%20copy.html, accessed June 11, 2013.

Steve,

You must be joking … “important discussion”???

I have no interest in fueling this vicious and cowardly mob scene or dignifying it with a response, so I’m addressing this to you alone.

Would you remain so tolerant if the same words were coming out of Norm’s or Mike’s mouth?

Do you really think that Mike Greaney is “sucking up” to the Tea Party/Austrians? Mike and CESJ may agree with the Tea Party’s and Austrian School’s position on free markets, private property and limited economic power of government, while criticizing them harshly for their omission of the fourth pillar: the universal right of access to ownership of the means of production. We can agree with the Occupy Movement on their concern about concentrated wealth and economic power, while pointing out the serious flaws in their logic which would put MORE economic power in the government rather than flesh-and-blood citizens.

Steve, we in CESJ (which I assumed you were part of) are operating from a specific set of values, principles and logical assumptions, honed and refined from the wisdom of many centuries. This framework enables us to pinpoint where we agree and where we disagree with other positions. And just because we disagree with a specific stance on a specific issue, doesn’t mean we don’t respect (and try to treat with respect) an honest person espousing a different position.

Do you really agree with Rodney Shakespeare and Alan Avans that Norm and Mike should do “the right thing” and resign from their “leadership positions” in CESJ. Who would you put in their place as two of the world’s foremost scholars in the Kelsonian paradigm? John Médaille? Rodney Shakespeare? Chris Dorf? Alan Avans? All four of those “gentlemen” have stated their varying degrees of willingness to dilute or eliminate the human right of private property. That automatically puts them outside the paradigm ofbinary economics.

All four leap to the alternative of “public”/government/State ownership before FIRST exploring the alternative of putting economic power in the hands of every flesh-and-blood human being. They have completely ignored what we have stated repeatedly is the necessary and just role of government, and that in the face of an emergency or immediate lack of a better alternative, the government may need to step in with expedients, until a Just Third Way solution can be formulated.

As these four have all rejected one or more of CESJ’s basic principles, what business do they have telling CESJ that we should advocate positions with which we disagree? And what possible relevance do Rodney Shakespeare’s, Alan Avans, and Chris Dorf’s personal attacks on Norm, Mike and CESJ have to do with binary economics, and whether or not BE and the Just Third Way offer a useful, workable and PRACTICAL framework for getting us out of our present mess and on the road to a more just and hopeful future?

Do you agree with Rodney’s dismissal of the Capital Homestead Act as a major policy reform that could address the current financial crisis as well as lead us over the long-term to a more just and participatory economy? If so, I would ask that you or they point out, in the interests of respectful debate, what you think would be a better alternative. If you agree the Capital Homestead Act does offer the best alternative you are aware of, I would hope you would have the courage to state that in this present “discussion.”

Finally, I have to ask, what business do Alan Avans and Chris Dorf (who have never joined CESJ) and Rodney Shakespeare (who never misses a chance in public forums to attack and insult CESJ and any member who disagrees with him) have telling our organization how we should run ourselves? I mean…come ON.

I’m really sorry, Steve, that we in CESJ have failed to help you understand binary economics, the Just Third Way and Capital Homesteading to where you could respond to questions and challenges posed by opponents and those, like your liberal and conservative friends, who are for the moment trapped in a wage-welfare system mindset. Even worse, we have failed to teach you what CESJ means by social and economic justice.

Sadly,

Dawn

Again, as with Chris Dorf, Ms. Brohawn received no response from Mr. Nieman.

I was accused of calling Mr. Kurland a liar. Not true, I merely pointed out the fact that he insists on telling lies about me and has for years. But now, let me set the issue to rest by making a clear and unambiguous statement: “Mr. Greaney is a liar and slanderer; there is no way this collection of lies can be due to a misunderstanding. It is undeniably deliberate and likely pathological.”

An attempt to respond to this logic revealed that Mr. Médaille had left the Kelso Binary Economics Discussion Group on his own accord and had blocked all e-mails coming from Mr. Greaney’s account. Mr. Médaille has never been blocked from the Kelso Binary Economics discussion group, although we would expect him to follow the rules governing participants’ behavior.

Some time after Mr. Médaille’s abrupt departure from the Kelso Binary Economics Discussion Group, we learned from a third party that we allegedly “hate” Mr. Médaille (“I know you hate John Médaille” were the exact words used in an e-mail), had expelled him from the Kelso Binary Economics Discussion Group, and had kicked him off the CESJ Board of Directors.

It is true that Mr. Médaille was a member of the CESJ Board of Counselors, our term for “Advisory Board.” An advisory board is a group of people who have no legal standing or official capacity, but who are expected to use their contacts, experience and wisdom (if any) to benefit the organization.

Mr. Médaille’s initial accusations against Dr. Kurland were made more than a decade ago. His complaint that he had been kicked off the CESJ Board of Directors began soon after he withdrew of his own volition from the Kelso Binary Economics Discussion Group.

Mr. Médaille was removed from the CESJ Board of Counselors after it had become painfully obvious that he had absolutely no intention whatsoever of advancing CESJ’s interests or of benefiting the organization in any way, shape, or form, whether by giving sage counsel and advice, cultivating contacts to promote CESJ’s mission, or soliciting contributions. He was, and remains, openly opposed to the Just Third Way, Capital Homesteading and Binary Economics.

A Non-Issue

A fact that the “critics” willfully ignore (or never bother to inquire about the facts), is that Mr. Shakespeare, who also claims to have been expelled from CESJ, is still listed on the CESJ website as a member of CESJ’s Board of Counselors. He is also still carried on our rolls as a member. Mr. Dorf, on the other hand, never joined CESJ, so it would be impossible to expel or “ban” him from CESJ. And, as we have also mentioned, he has never been banned from the Kelso Binary Economics discussion group.

In short, the facts do not support the despicable claim that CESJ is constantly expelling or banning people, which continues to be cited as proof of all the accusations against the organization and members of its Core Group.

The Challenge Continues . . .

While this paper was in preparation (minor details such as accuracy, fact checking and verifying citations take time), Mr. Shakespeare sent yet another e-mail, announcing that the debate (in which at the same time he claimed we refused to engage) on the seven points he had raised was now “over” before it had taken place. He crowed:

Dear All,

Housing

This debate is now over. It would never have happened if the Exclusive Brethren (i.e., the Kurlands and Greaney) had bothered to read the Kelsos’ last and most authoritative book (Democracy and Economic Power). Quite how the EB claim to be Kelso experts, I’ve no idea.

Micro credit

As far as I know, the Brethren refuse to declare their position on this matter.

Attached is my paper on micro credit which has got through the early stages of selection for one of the world’s biggest and most expensive conferences (IDB, Istanbul, September, 2013). After reading the paper you will understand that the Brethren are only talking to themselves.

Small businesses/farms

This subject is connected with micro credit. As far as I know, the EB have not declared their position.

The EB are always lecturing others about being willing to debate but when a truly big opportunity to debate arrives they run away in terror.

Rodney Shakespeare

When none of the three “defendants” rose to his bait (as we said above, we were taking a great deal of care in preparing this response), Shakespeare sent yet another email, evidently to make certain we were getting his message:

Dear All,

Micro credit

The debate is over. A full paper was sent.

In any case, cesj would not wish to betray the five thousand plus (Statement of Vision signatory) IIRD members and their officers all of whom wish to have interest-free loans for micro credit.

Small businesses and farms

This debate is also over.

With some exception, the underlying principle is the same as for micro credit i.e., spreading productive (and therefore consuming) capacity as quickly and as widely as possible.

It is a tragedy that the Brethren, as always intent on being Exclusive, do not wish to co-operate with the Catholic Distributism movement which favours widespread property ownership (particularly small businesses and farms) but lacks binary knowledge of the technical means (interest-free loans) by which to achieve it.

(4) Environmental projects

The example is a mangrove-crested sea barrage. In practice, with interest-bearing money, such things do not get built.

With interest-free money, the cost is halved or more. (5) Clean electricity generation

The UK has long had a project (Severn Estuary barrage or tidal lagoons) which would cleanly generate up to 10 percent of the national electricity supply. With interest-bearing money, long before the project is completed, the sum becomes un-repayable.

However, with interest-free money, the project, using well-tested technology, is easily financially viable.

Further matters to be debated are interest-free loans for:

• Student loans

• Public capital projects

• Paying off the National Debt

and whether a flat rate of tax has anything to do with binary economics, whether it is progressive or regressive, and whether it was thought up by the Koch brothers.

Rodney Shakespeare

The only thing new here is Shakespeare’s added points to the “debate” in which he questions whether CESJ’s tax reform proposal “has anything to do with binary economics” (along with his unsubtle hint that CESJ is taking orders from “the Koch brothers”), and “Paying off the National Debt.” We admit some bafflement as to how, almost in the same breath, Shakespeare can proclaim the (non) “debate” over and then list “Further matters to be debated.”

There is also Shakespeare’s puzzling insertion of the Koch brothers into the discussion, when their activities or thoughts have never been any immediate concern of or interest to the CESJ Core Group. This appears to be an effort on Shakespeare’s part to base his case on an ad hominem circumstantial logical fallacy when the specified circumstance — some sort of alleged reliance on or relationship with the Koch brothers — is, as we shall see with a number of Shakespeare’s claims, wholly imaginary.

In response to the above e-mail of Shakespeare’s, Dr. Robert Crane replied by asking the obvious question, “Has CESJ ever said anything against interest-free investment (not loans) for micro-credit or any kind of productive financing?” and noting that CESJ’s tax proposal would “marginalize or eliminate tax-loopholes.” Dr. Norman Bailey, a well-respected and highly credentialed economist, responded to Dr. Crane, “Well put. The whole ‘controversy’ over interest-free mini-credits is pointless and diverts attention from important issues. The environmental an infrastructure rants of Shakespeare are also simple diversions.”

As the reader can note above, Mr. Shakespeare had now inserted a gratuitous charge that we in CESJ “do not wish to co-operate with the Catholic Distributism movement which favours widespread property ownership (particularly small businesses and farms) but lacks binary knowledge of the technical means (interest-free loans) by which to achieve it.”

Later, however, possibly after reading Michael Greaney’s May 3, 2103 “News from the Network” blog where Michael Greaney mentioned three independent exchanges he had had with members of the Distributist movement who expressed to him their dissatisfaction with the socialist direction that Distributist and Chestertonian leadership were taking the movement, Mr. Shakespeare reversed his position in his e-mail of May 4, 2013:

Dear All,

I have been informed that certain members of cesj agree with Distributism (small businesses and farms). That is good news.

Which means that they also agree with interest-free loans for micro credit. That is further good news.

I have also been informed that certain cesj members are preparing a paper (or something) to discuss subjects 1 – 8.

That is also good news but I hope that they will not waste time on discussing (1) housing – main Kelso policy; (2) micro-credit; and (3) small businesses/farms.

So perhaps those cesj members will now kindly focus, for starters, on:

(4) Environmental projects

The example is a mangrove-crested sea barrage.

5) Clean electricity generation

The example is the UK Severn Estuary barrage (or tidal lagoons).

Student loans; public capital projects; paying off the National Debt; and flat rate of tax can be discussed later.

Thank you. [sic]

Rodney Shakespeare

We should note here that except for Distributism’s reliance on past savings and a somewhat exaggerated role for the State — as detailed in Belloc’s An Essay on the Restoration of Property (1936) — we believe that CESJ’s Just Third Way and distributism as originally conceived by Chesterton and Belloc are in substantial agreement. We reject, however, the distortions, and redefinitions, that today’s Professional Chestertonians and neo-distributists have imposed on Chesterton’s and Belloc’s vision.

We have stated our opinion on this for many years. Michael Greaney has been writing articles on distributism since the 1980s. A number of postings on “The Just Third Way” blog offer commentary on the subject. In 2011 CESJ published an annotated edition of William Thomas Thornton’s A Plea for Peasant Proprietors (1848, 1874), with supplementary material comparing Thornton’s proposal, distributism, and Capital Homesteading. In 2008 we published an annotated edition of The Emigrant’s Guide (1829) by the English radical, William Cobbett, whom Chesterton referred to as the “Apostle of Distributism.”

To make certain everyone knew of his self-announced victory, however, Shakespeare sent yet another e-mail on May 8, 2013 while this paper was in the final stages of composition prior to editing, announcing it was time to “move on” . . . and informing “All” that there would be a hiatus, evidently until the next announcement of “Mission Accomplished” (which we received May 17, 2013):

Dear All,

Time to move on.

(4) Environmental projects and (5) Clean electricity generation projects do not, in practice, get built if only interest-bearing money can be used. With interest-free money, they can be built. Moreover, clean electricity projects are very amenable to wide ownership.

Exclusive Brethren cannot refute the above argument.

NB. Since they have now lost the argument over subjects (1) to (5) it is unlikely that their ‘paper’ will ever appear but, if it does, it should be confined to (6) student loans; (7) public capital projects; (8) paying off the National Debt; and (9) the flat rate of tax.

Rodney Shakespeare

PS. There will be a hiatus as I am a main speaker at a huge international conference abroad (not the one mentioned earlier)

CESJ’s Alleged Moral Certitude

Chris Dorf and Steve Nieman have objected to CESJ’s “moral certitude” and our arrogance or presumptuousness in judging the morality of other economic systems. Note that no one in CESJ has ever claimed moral or ethical superiority over other individuals, nor have we ever claimed infallibility.

We in CESJ, however, believe that systems can be judged by the clarity, consistency and consequences of their underlying principles, particularly their principles of justice, and how the application of those principles affects society and the lives of every person within it.

CESJ believes that to eliminate systemic injustice (which includes global poverty), we need to concentrate on applying sound principles of justice for redesigning the “social tools” of the flagrantly unjust current economic system. We are less interested in attacking people who benefit unjustly from the present system or those who attack us because we don’t agree with their view of the world (such as the critics we are taking the time to address in this paper). CESJ as an organization tries to focus its time and resources on developing policies and practical solutions for de-monopolizing economic power and capital ownership, and lifting barriers to equal opportunity and access for every person to own the means to become liberated and empowered.

CESJ and Chris Dorf agree on the injustices in the system, and on the need for economic and social justice. Evidently, however, Chris Dorf and CESJ differ in our definitions of economic and social justice. Mr. Dorf believes that the problem lies with corrupt individuals such as “the greedy rich,” “the corrupt bankers,” and “neoconservatives.”

We agree that guilty individuals and organizations breaking the law or harming others should be punished for their actions (which is one aspect of justice). As we have repeatedly stated to Chris Dorf and others, if they want to spend their time going after evil individuals, they are certainly free to do so.

As stated in CESJ’s founding principles, we believe that the source of social and economic injustice lies primarily not in bad people. Rather, the problem is in bad ideas, defective institutions, and unjust laws that permit and reinforce the bad behavior and evil acts of individuals, groups and even of government itself. Human beings create institutions and laws, and human beings can change institutions and laws through “acts of social justice.” As defined by Pius XI and Fr. Ferree, social justice places a personal responsibility on each of us to organize with other human beings around common values, principles, vision and objectives to restructure defective social institutions.

CESJ’s Alleged Hatred of the State

Steve Nieman appears to agree with those who feel that CESJ is constantly attacking the government and government’s role in solving current problems. CESJ believes that while there is a proper role for the State, which includes policing abuses, lifting systemic barriers and preventing monopolies, this by itself will do nothing structurally to correct the system to diffuse power and accountability. In CESJ’s view the systemic deconcentration of economic power is the most effective way to minimize the abuses of concentrated power, whether by an elite or most dangerously, by the State — which represents society’s monopoly over the instruments of coercion.

In common with political scientists throughout the ages who recognize the dignity and sovereignty of the human person as the basis of society and the common good, CESJ holds that the only sure defense against encroaching State power or that of a private elite, is direct ownership of productive capital (i.e., “private property in the means of production”). “Power,” as Daniel Webster noted during the Massachusetts Constitutional Convention of 1820, “naturally and necessarily follows property.” Property is the ultimate social protection for all natural rights, especially life and liberty.

CESJ’s Alleged Ineffectuality

Typical of those who wring their hands over the evils of the world, but are unable to take action, Mr. Dorf’s usual rejoinder is that those in power will never allow such change to occur. We would point out to the Chris Dorfs, Alan Avanses (and sadly, Steve Niemans) of the world, history has proven that even in the face of overwhelming opposition from the status quo and those in power, people organized around a just cause, sound principles and a good plan, were able to bring about the abolition of legalized slavery, segregation, and apartheid.

It is easy to sit on the sidelines of history and revolutionary change and play “Monday Morning quarterback.” Anyone can criticize others who are engaged in the struggle for economic and social justice as being ineffective, naïve or crazy. True systemic change is not easy and it doesn’t happen overnight. The pace of great social change is dictated by social and economic conditions at the time, as well as the nature of the change desired. However, we believe that systemic change also requires a high level of solidarity among individuals who may have differences on many issues — but who are all willing to work together toward a shared vision — a just cause whose means are just.

A Fundamental Disagreement: Expedients Versus Systemic Change

CESJ has never opposed redistribution, the need-based wage, State welfare benefits, or any other rational ameliorative measure on an emergency basis, as long as those expedients do not violate human dignity, owners receive fair market-based restitution, and that, as demanded by social justice, all steps are taken immediately to restructure the system to eliminate or greatly reduce the need for such measures.

As a case in point, Dr. Kurland was once an advocate of the late Nobel Laureate Milton Friedman’s “negative income tax,” which is pure redistribution, and of State welfare and redistribution directly to the poor (rather than through ever-mushrooming government agencies). Upon learning of Louis Kelso’s revolutionary ideas, Dr. Kurland realized there is a better way. In the current flawed economic paradigms, such redistributive measures are, admittedly, essential for the maintenance of many trapped in poverty. These measures are not, however, solutions. They are permitted expedients on the way to a solution.

Thus, where we differ from those who advocate what the solidarist economist Dr. Franz Mueller rather pejoratively termed “meliorism” is in viewing State welfare and similar programs as temporary measures on the way to a more justly structured economic order. We also recognize the fact that there will always be those for whom the system doesn’t work, or who are just plain unfortunate or incompetent. For these, an adequate and secure social safety net must always be available. This should primarily be private charity, but we recognize the importance of a redundant State system to ensure that no one falls through the cracks.

There are two significant problems with State funding of virtually anything, however. One, despite the belief of Adolf Berle and others, the State is not a productive enterprise. Government devours or redistributes, it does not produce, wealth. Nor can or should a government simply print all the money (“emit bills of credit”) politicians are capable of spending. That is the straight and narrow road to national bankruptcy.

This is true whether the money is in the form of currency issued directly by the State, or bills of credit monetized by the central bank — a difference that makes no difference in any event. Financing the Welfare State drove the U.K. to the verge of bankruptcy before Margaret Thatcher became Prime Minister. The costs of social programs have nearly destroyed half a dozen or more governments in the European Union already.

Two, handing the money power over to the State paves the way the establishment of the Totalitarian or Leviathan State. As Henry C. Adams pointed out more than a century ago:

As self-government was secured through a struggle for mastery over the public purse, so must it be maintained through the exercise by the people of complete control over public expenditure. Money is the vital principle of the body politic; the public treasury is the heart of the state; control over public supplies means control over public affairs. Any method of procedure, therefore, by which a public servant can veil the true meaning of his acts, or which allows the government to enter upon any great enterprise without bringing the fact fairly to the knowledge of the public, must work against the realization of the constitutional idea. This is exactly the state of affairs introduced by a free use of public credit. Under ordinary circumstances, popular attention can not be drawn to public acts, except they touch the pocket of the voters through an increase in taxes; and it follows that a government whose expenditures are met by resort to loans may, for a time, administer affairs independently of those who must finally settle the account.11

_____________________

11 Henry C. Adams, Public Debts, An Essay in the Science of Finance. New York: D. Appleton and Company, 1898, 22-23.

Based on their own words Shakespeare and Dorf clearly support demand-side approaches to using government as the source for providing for people’s economic needs. These policies include such Keynesian approaches as creating artificial demand (purchasing power) through deficit spending, redistribution through the tax system, or by pumping into the economy money backed by ever-increasing government debt. We are not certain what Mr. Avans believes, since we cannot remember any positive statement coming from him to that effect.

The bottom line here is that we in CESJ insist that welfare and other ameliorative measures remain an expedient on the way to a system that embodies Kelso’s three principles of economic justice, and the four pillars of an economically just society.

Determining Credentials and Qualifications for CESJ’s Leadership

Shakespeare, Dorf and Avans have proclaimed that CESJ’s leadership knows little or nothing about Louis Kelso’s Binary Economics, and that CESJ and its leaders have done little or nothing to advance Binary Economic reforms over the past 40 decades. Having previously presented a few of CESJ’s accomplishments promoting and applying practical aspects of Binary Economics, we think it is only fair to ask each of the critics (Shakespeare, Dorf and Avans):

a. What books have you read by Louis Kelso and Mortimer Adler, or other internationally recognized experts in the field of Binary Economics, including the leaders in CESJ?

b. What laws and government policies have you introduced at a legislative level to universalize access to capital ownership opportunities to every worker and citizen?

c. What companies have you helped turn into worker-owned companies, without requiring workers to put up a penny of their own savings or take pay cuts to purchase their company’s shares?

d. What new models or practical mechanisms of expanded ownership have you developed to address economic problems at the community, state, national or global levels?

e. What prime movers (on the level of a U.S. President or the Pope) have you introduced the ideas, practical applications and policies of Binary Economics?

f. What is your strategy for moving the world from the present unjust, powerconcentrating, conflict-oriented and dehumanizing wage-welfare paradigms to a new paradigm based on justice and the dignity, empowerment, economic liberation through capital ownership and full development of every human being?

We don’t know if any of these “critics” have ever worked for government at the national level, but one thing is clear. None of them seem willing or able to accept the fact that the State cannot do everything; the State is not Hobbes’s “Mortall God.” It has certain limitations, both practically and constitutionally. The State is not, as one meliorist economist gushed, “the sole intercessor available to the poor.”12

None of them has ever structured innovative ways of broadening ownership through binary economics. Their efforts, in fact, would divert from and dilute binary economics. CESJ’s “Capital Homesteading” proposal does everything they claim they want to do, but without resorting to State-imposed expedients.

The difference is that CESJ would achieve its ends by empowering people directly with capital ownership financed with the present value of the future earnings produced by the new capital itself. This leads to faster rates of capital formation as it releases economic growth “from the slavery of [past] savings,” as Kelso and Adler put it.

Significantly, none of these critics has ever been able to say what, specifically, they object to in Capital Homesteading. The best they have ever been able to do is to raise straw men and divert the discussion into irrelevancies — such as the baseless accusation that CESJ bans or expels people at the drop of a hat . . . that is then used as proof positive that the Just Third Way is somehow flawed.

__________________

12 Dr. Rupert J. Ederer, “Solidaristic Economics,” Fidelity magazine, July 1994, 9-15.

PART V:

CONCLUSION: “Can’t We All Just Get Along?”

This “exchange,” in our opinion, has provided a classic example of how not to debate.

 

PART V:
CONCLUSION: “Can’t We All Just Get Along?”

First, insult and defame your opponent. Next, don’t bother getting agreement from your opponent on the topic/s to be debated, the rules that both sides must follow, or how the debate will be moderated in an objective and fair manner. Refuse to define your terms and then, instead of taking one issue at a time, raise a multitude of complex issues and toss them into a heaping pile of non sequiturs. Finally, before you have received the willing consent of the other party to engage in the debate, announce that you have already won it.

This is simply poor sportsmanship. Such behavior violates what real debate is supposed to be — a scholarly and reasoned competition of ideas in the common pursuit of the Truth.

Aside from, for us, a truly distasteful experience (though hopefully not a complete waste of time), there was an implicit question buried within Mr. Nieman’s comments that deserves serious consideration. It relates to the process of paradigm change, and if and how diverse individuals and organizations can interact effectively and harmoniously to help bring about this change.

Specifically: Can CESJ and our “critics” collaborate in a constructive and mutually respectful way to reform the economic system to bring justice, peace and widespread prosperity through universal access to private property ownership of productive capital?

Absolutely.

From the standpoint of any social movement striving to change an unjust system, it is imperative to unite, as quickly as possible, as many leaders, organizations and committed people as possible who share a clear vision, sound moral values and effective action principles. On that basis we can then develop an agreed-upon plan of action, and work together toward a common strategic objective.

Before effective social action can happen, however, all parties first have to agree to adhere to basic ethical standards, common courtesy, as well as the scholarly process of debate. (See Appendix B, CESJ’s “Code of Ethics,” as one expression of this.) As long as Rodney Shakespeare, Chris Dorf, Alan Avans or anyone else continues to attack other people and organizations with unsubstantiated charges and malicious namecalling, CESJ has neither the interest nor time to interact with that person.

Second, where there are differences on specific principles or on the best means to apply those principles, both sides need to respect the right of the other to hold different views. Either side should be able to use reasoned arguments and respectful persuasion to make their case, but should not try to force the other side through insults, empty charges and name-calling into accepting a position they believe to be wrong, ineffective and potentially harmful. As we said earlier, we in CESJ do not take kindly to intellectual bullying.

“Loosening up” on Principles

Should CESJ compromise on its core principles for the sake of expediting progress? There are those (e.g., Steve Nieman) who believe that we should temporarily “loosen up” (or water down) our moral and professional principles, for the sake of “building bridges.” In Mr. Nieman’s view: “Working collaboratively means supporting those who really care, even if the energy is put in a lot of effort in directions somebody else doesn’t agree with.”

Our question is, what is it that we’re supposed to be working together to advance? Just because someone “really cares” (about what, is another question), is it an effective use of our organization’s limited time and resources to support them in positions we find impractical and unnecessarily divisive, or objectives we believe to be counter-productive and potentially harmful?

As CESJ’s “Core Values” express, we believe that rigorously pursuing the Truth and Justice (to the best of our imperfect knowledge and limited ability) is ultimately more practical in terms of bringing about lasting social change than simply “building bridges” for its own sake. Our experience of many years promoting Louis Kelso’s original vision has demonstrated to us that there is little value, and a lot of time wasted, in trying to collaborate on contradictory objectives or with people who simply want to control others.

On the other hand, if we share common values, principles and objectives with others, but differ on the best ways to accomplish our shared vision, we are always ready to explore and honestly debate best means and tactics. If we are forced by circumstances to deviate temporarily from our principles, we are willing to accept expedients, where there are no other options available, in order to move forward. And finally, we are always ready to change our position or tactics, if others present a well-reasoned and persuasive case for that change.

A Challenge to the “Critics”

As a result of this most recent “debate” with Rodney Shakespeare, we are convinced more than ever that ours is a more complete and coherent system than what he, Chris Dorf, and Alan Avans propose (as best we can decipher what that is).

In this forum and others, we have laid out our alternatives and our reasons for disagreeing with some of Rodney Shakespeare’s positions, including on what constitutes “binary economics.” We still have not heard from any of the “critics” anything resembling a genuine critique on the substance of our positions or proposals. False accusations, name-calling and unsubstantiated assertions do not a valid argument make.

For the benefit of those who have been observing this “debate,” who are interested in learning more about CESJ’s proposals (which cover all the issues raised and more), we have included as Appendix C the summary of the Capital Homestead Act. For more detailed explanations, we also invite you, the reader, to visit our website at www.cesj.org and download a free copy of our book, Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security. We welcome you to tell us specifically what is wrong or inadequate about what we are proposing. You may convince us to change or improve our proposals.

If anyone reading this response feels that what CESJ proposes is positive and practical, we sincerely wish to collaborate with you. We realize that none of us acting alone can change the system. Social Justice places a responsibility on each of us to organize with other like-minded people (not simply “yes men and women”) to realize a more unifying, liberating and humanizing future for every citizen of the world.

Finally, to Rodney Shakespeare, Chris Dorf, Alan Avans, Steve Nieman and anyone else who feels that what CESJ believes in and proposes has little moral worth or practical value, or that CESJ’s strategic approach to changing the economic system is wrongheaded or naive, we say: You are always free to pursue on your own or with others whatever you believe to be right and more effective. Truth, Justice and good ideas will eventually prevail.

APPENDIX A

CESJ CORE VALUES

 

■ There is an ultimate Source of all creation and of all universal and absolute values such as Truth, Beauty, Love and Justice, which represent the highest ends of human actions. Many people call this Source, God.

■ Nothing should stand between God and the human person.

■ There is a hierarchy of human work: The highest form of work is perfecting the social order to elevate each person in his or her relationship to God. The lowest but most urgent form of work is for sheer personal survival.

■ In interacting with nature to promote one’s own perfection, every person must respect the rest of creation. Each human being, a steward of nature, remains responsible for conserving natural forms of existence, each of which is interdependent and shares the same divine origin with humanity.

■ Under the ultimate sovereignty of God, all sovereignty in the social order begins with the human person—not institutions including the family, the State, organized religion, the business corporation, the labor union, or academia.

■ The essential means to achieve the sovereignty of the person include such inalienable human rights as the right to life, liberty, and access to productive property and free markets, equality of opportunity, and the secret ballot. These rights—including the rights of property—are not ultimate ends in themselves, but they are intermediate ends or fundamental means to enable each person to pursue Truth, Beauty, Love and Justice.

■ People create tools, shaped from the resources and energies of nature, to support the economic and social sovereignty of the person. Through private property ownership, each person can become master of the technology needed to realize his or her fullest human potential and dignity.

■ People also create and maintain social institutions as highly specialized “invisible tools” designed to serve highly specialized social functions within a just social order. Institutions, as organized expressions of society’s values and goals, largely determine the quality of each person’s individual and social life. As historical creations of humanity carrying within themselves the wounds of history, institutions are continually in need of healing and perfecting.

■ The highest responsibility of each person is to pursue absolute values and to promote economic and social justice in his or her personal life and all associations with others.

(Updated May 1, 2012)

APPENDIX B

CESJ CODE OF ETHICS

1. Courage. Overcome fear to test your ideas with others or to raise questions about ideas you don’t fully understand.

2. Competition of Ideas. Nobody has a monopoly on the Truth. Resist the feeling that your ego or dignity is being attacked if others severely challenge the ideas you bring to the table. Ideas are meant to be challenged, so that bad or defective ideas can be replaced with better ideas that will advance Truth, Beauty, Love and Justice for the good of all. Challenge will also sharpen our ability to communicate our ideas.

3. Dignity of the Person. In challenging someone else’s ideas, don’t attack or insult the person who advances the idea. Separate the message from the messenger.

4. Tradition. Don’t lightly discard ideas accepted in the past. The burden of persuasion is on the person challenging old traditions or decisions previously debated and agreed upon, not only to point out the errors of the past, but also to offer a better alternative.

5. Inquisitiveness. There may be bad, ignorant or even absurd ideas, but there are no bad, ignorant or absurd questions. Treat every question as a good teacher should, with respect for the person who is seeking to understand the Truth.

6. Enthusiasm. Fear not the heat, excitement or intensity of debate. This passion is healthy and natural for those committed to the pursuit of the Truth. Don’t throw cold water on the normal exhilaration and emotions people feel when they are reaching out to the borders of reason and new ideas.

7. Compassion. If you have problems with the personality or behavior of any member of CESJ, avoid even subtle criticisms of that person with others. This breeds distrust and divisiveness. Take him or her aside privately and discuss your observations and concerns on a one-to-one basis in an atmosphere of mutual respect, solidarity and compassion.

8. Charity. Everyone in CESJ is human and therefore imperfect. To strengthen the unity of the movement, it’s better to strengthen all our members and help them become more effective in reaching out to others, than to exclude or pull anyone down.

9. Solidarity. We should continue to perfect ourselves and CESJ as models for those pursuing Truth, Beauty, Love and Justice for all. This means we need everyone pulling together to attract the rest of humanity to CESJ’s core values and new vision for a more just and humane future for all.

10. Humility. No one is an expert on how to gain widespread acceptance of a truly revolutionary advance in moral philosophy, as represented by CESJ’s core values. We are all amateurs in the process of communicating revolutionary social thought.

11. Patience. As an advocate of new and revolutionary ideas, discipline yourself to the fact that acceptance and implementation of our ideas will necessarily be evolutionary, somewhat unpredictable and highly experimental.

12. Tolerance. Without losing your enthusiasm and passionate commitment to our core values and principles of justice, be patient, friendly and tolerant of others who have not yet internalized these ideas.

13. Maturity. In the “war of ideas,” adjust your level of expectations in our global justice movement to each distinct phase in CESJ’s evolutionary development — the “guerilla war” phase, the “beachhead” phase, the “victory” phase and the “institution building” phase — and to the realities of who and what are committed to carrying out that phase.

14. Commitment. Presume that every other person in our core group is 100 percent committed spiritually and intellectually to the principles of CESJ. But also acknowledge that each of us must be the sole judge of how to allocate his or her limited time and resources to CESJ, as well as to family and other commitments. Therefore, accept graciously whatever anyone has contributed in the past or is willing to contribute in the future.

15. Initiative. If you are ready to propose a new initiative, be prepared to assume responsibility to carry it out, if no one else volunteers.

16. Integrity. Don’t promise what you can’t deliver. If you do commit yourself and then discover that you can’t deliver, ask for help. If you’re uncertain, don’t promise but try your best.

17. Persistence. There are three keys to gaining acceptance of revolutionary ideas: Persistence, Persistence and Persistence.

APPENDIX C

BINARY ECONOMIC MONETARY PRINCIPLES

Defining Money

One simple definition of money is “anything that can be used to settle a debt.”

The paper “ A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation by Norman Kurland published in 2002 by The Journal of Socio-Economics (Vol. 30, pp.495-515) starts out with following four paragraphs:

What is money? In his 1967 book coauthored with his wife Patricia Hetter Kelso, Two-Factor Theory: The Economics of Reality, the late Louis O. Kelso described money:

Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.1

What is clear from this description is that money is a “social good,” an artifact of civilization invented to facilitate economic transactions for the common good. Like any other human tool or technology, this societal tool can be used justly or unjustly. It can be used by those who control it to suppress the natural creativity of the many, or it can be used to achieve economic liberation and prosperity for all affected by the money economy.

How important is money? Meyer Amschel Rothschild, the founding father of one of the world’s most powerful financial dynasties, has been quoted, perhaps apocryphally, as having said:

Let me issue and control a nation’s money and I care not who writes the laws.2

Such a statement is a reaffirmation of the clear-sighted eighteenth century political insight of Benjamin Watkins Leigh, in the Virginia Convention, who observed:

Power and Property can be separated for a time by force or fraud, but divorced, never. For as soon as the pang of separation is felt, Property will purchase Power, or Power will take over Property.3

The Key to Democratizing Ownership: Beyond “Past Savings” to “Future Savings”

One of the fundamental differences between Binary Economics and all other schools of economics that we are aware of, relates to the underlying assumptions about how to finance growth in the economy — whether by using “past savings” or “future savings.” All of the traditional schools of economics assume that investments in new capital require the use of “past savings” (past accumulations) or the reduction of current consumption. Binary Economics views this baseless yet universally accepted assumption as one of the fundamental reasons for today’s accelerating concentration of wealth and income, and for the huge disconnect in the economy between supply (production) and demand (consumption).

What Kelso and Adler called the “slavery of [past] savings” requires that ownership or control of capital (which Kelso noted is recognized under the law as being the same) be concentrated in the hands of a few. The rationale as Keynes, for example, saw it is that only people whose capital produces far more than they can possibly consume can afford to finance the increasingly expensive capital instruments that are displacing human labor from the productive process.

Within the past savings paradigm, money and credit are presumed to be commodities based on property in the present value of existing marketable goods and services. The only question in the past savings paradigm is whether money controllers in the private sector or the State will control money and credit, and thus control (own) capital. If the former, the arrangement is called “capitalism.” If the latter, the arrangement is called “socialism.”

Thus, the past savings assumption leads inevitably to monopolistic economic power under both capitalism and socialism. There can be no middle ground as demonstrated by the disastrous attempt to maintain the Welfare State that has virtually bankrupted the global economy. Either a private sector elite uses its existing wealth to maintain and extend its power and protect itself from the rapacity of the State, or the public sector elite imposes controls on existing wealth or takes actual title to maintain and extend its power and protect itself from the rapacity of private interests.

Observing how businesses finance their growth, and the wealthy acquire more income-producing capital, Kelso built on the work of Dr. Harold G. Moulton in The Formation of Capital (1935). Dr. Moulton, author of a number of books on economics and finance, was a professor at the University of Chicago and president of the Brookings Institution from 1928 to 1952. One of Kelso’s breakthroughs was to realize that classic banking theory embodied in the banking principle — future savings — could be applied to the problem of how workers and others without capital or existing (“past”) savings can finance the acquisition of self-liquidating capital. By turning the contract to purchase new capital into money based on the present value of the future marketable goods and services the new capital is reasonably expected to produce, and replacing the universal demand for collateral with capital credit insurance and reinsurance, it becomes possible for anyone to acquire and possess capital that pays for itself out of future profits.

The Quantity Theory of Money

Binary Economics is consistent with the Quantity Theory of Money: M x V = P x Q. This is a formulation first expressed by Irving Fisher in The Purchasing Power of Money (1911). This is where M is the total stock of money in circulation, V is the “velocity” of money, P is the average price level, and Q is the number of income transactions (“the real value of final expenditures”).

“Money” is here defined as “anything that can be accepted in settlement of a debt.” This differs from the understanding of money in Keynesian, Monetarist/Chicago, and Austrian schools of economics. It is diametrically opposite to Social Credit, as expressed by Major Douglas., which permits the state to issue new money to all citizens to close the purchasing power gap between aggregate demand and aggregate supply. These schools and their offshoots generally limit money to coin, banknotes, demand deposits, and some time deposits, i.e., “M2.”

Dr. Moulton noted a serious weakness in Fisher’s interpretation of his own formula. Dr. Moulton observed that Dr. Fisher limited his understanding of money to currency, and further limited his understanding of currency to gold. This separated production and consumption, seemingly invalidating Say’s Law of Markets and the real bills doctrine. Dr. Fisher also ignored non-consumption purchases in his theory. As Dr. Moulton explained,

It was argued by Fisher that there was normally a fixed ratio between the volume of money and the volume of credit outstanding, the ratio being determined by banking customs and reserve requirements. It was also held that the velocities of money and credit changed but gradually, as the habits of the people with respect to the use of money were modified.13 Hence the quantity of the basic money, gold, was the decisive factor in the monetary equation; if the supply of gold were increased by a given number of dollars, one could calculate the extent to which the total quantity of circulating media would be expanded, and — assuming that there were no offsetting changes in the volume of trade — the extent to which the price level would rise.

It was the implication of Fisher’s analysis that there was no connection between money and credit, on the one side, and the volume of trade, on the other. The number of monetary units in circulation depends upon the productivity of the gold mines, while the number of units of goods to be exchanged depends upon the productivity of the rest of the economic system. Both the supply of money and the supply of goods find their way into the markets independently of one another. The level of prices is thus a mere arithmetical result, derived from dividing the one by the other. Fisher states that “The history of prices has in substance been the history of a race between the increase in media of exchange (money and credit) and the increase in trade. . . . Sometimes the circulating media shot ahead of trade and then prices rose . . . Sometimes, on the other hand, circulating media lagged behind trade and then prices fell.”14

It must be noted that in Fisher’s analysis it was assumed that money and credit are used only in the purchase of consumer goods. In illustrating the two sides of the equation by means of a pair of scales, Fisher put a bag of gold and a check book on the one side and a loaf of bread, a roll of cloth, and a scuttle of coal on the other. There was no intimation that the supply of money and credit was also utilized in the purchase of production goods, in the buying of securities constituting title to existing capital goods, in paying interest, rents, and profits, or in employing labor.15 Both the illustration, and the implications of the entire analysis ran in terms of the conditions of a pre-capitalistic era.16,17

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13 That is, Fisher assumed that the real bills doctrine, by means of which the amount of money in the economy can be tailored to the present value of existing and future marketable goods and services through private property, is not valid, and that the money supply is determined by the amount of gold available.

14 Fisher, The Purchasing Power of Money. New York: Macmillan, 1911, 246-247, [Note in text.]

“Velocity of money,” a concept that seems first to have been expressed by Sir William Petty in the 17th century,18 is the average number of times a unit of currency is spent in a year. Sometimes “T” is used instead of “Q” in the equation, but the definition does not change. The Quantity Theory of Money equation is also consistent with the laws of supply and demand: as M increases, both P and Q also increase, which, absent actual production by the consumer for the specific product, puts upward pressure on M or V (usually both) to try and keep up with P x Q. This is explained as it relates to binary economics in Dr. Kurland’s paper on prices and money, “A New Look at Prices and Money.”

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15 Nor was it seen that the velocity with which money and credit circulates is necessarily connected with the tempo of business activity. [Note in text.]

16 By “capitalistic,” Moulton meant “a highly complex economic system organized on a pecuniary and profit-making basis.” (The Formation of Capital. Washington, DC: The Brookings Institution, 1935, 13.) In Moulton’s view, this arrangement of the economy requires the functioning of banks of issue and the use of advanced credit instruments, not merely coin, banknotes, and demand deposits.

17 Moulton, Financial Organization and the Economic System. New York: McGraw-Hill Book Company, Inc., 1938, 497-498.

18 William Petty, A Treatise of Taxes & Contributions (1662), § III.18.

Bills, Notes, Money, and Credit

A “bill of exchange” is a private sector contract conveying the present value of future marketable goods and services. Its public sector (“constitutional”) analogue is the “bill of credit.”

Like all money, bills of exchange and bills of credit are contracts. They therefore consist of offer, acceptance, and consideration. “Consideration” is the inducement to enter into a contract, that is, the present value being conveyed between the parties to the contract.

This is why money is legally defined as “anything that can be accepted in settlement of a debt” (“Everything that can be transferred in commerce” — “Money,” Black’s Law Dictionary). It is also why bills of exchange used as money between private individuals and businesses are called “merchants” or “trade” acceptances. When offered to and accepted by a bank of issue, bills of exchange are called “bankers” acceptances.

Only private sector individuals, businesses, or financial institutions can issue bills of exchange. Bills of exchange are based on the present value of something in which the issuer or drawer has a private property stake. This private property stake backs and supports the issuer’s “creditworthiness.”

Only governments can emit bills of credit. Government bills of credit must not be confused with private sector “letters of credit.” Bills of credit are based on the present value of future tax collections to be granted by the citizens, and in which the government does not have a property stake. In essence, a government that emits bills of credit is making promises for other people to keep — but only if they agree by granting the taxes to make good on the promises.

A bill of credit is thus said to be backed by the “faith and credit” of the emitting government. Given the understanding of taxation as a grant from the citizens and not the exercise of a property right by the State, bills of credit are not — contrary to the theory of Georg Friedrich Knapp (“chartalism”) and John Maynard Keynes (“Modern Monetary Theory”) — backed by the “general wealth of the community.”

A bank of issue’s promissory note can be used to back a new demand deposit (checking account) or, rarely these days, back an issue of smaller denomination promissory notes called banknotes. Both of these circulate in the community as currency or currency substitutes. This is why banks of issue were also at one time called “banks of circulation.”

Bills of exchange pass in commerce at their present value. This is usually less than the face value of the contract or “instrument,” although the issuer must redeem the bill at face value on maturity. That is why the first offer and acceptance of a bill of exchange is called “discounting” the bill, and all subsequent offers and acceptances of the same bill are called “rediscounting.”

Say’s Law of Markets

The banking theory and understanding of money and credit in binary economics is based on Say’s Law of Markets. Say’s Law is, in turn, based on Adam Smith’s common sense observation in The Wealth of Nations that, “Consumption is the sole end and purpose of all production.”19

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19 Wealth of Nations, “Part III, Ch. 8, “Conclusion of the Mercantile System.”

According to Jean-Baptiste Say (and plain common sense), it is impossible for consumption to exceed production. If something is not produced, it cannot be consumed. Everything else being equal, then, if someone wants to consume, he or she must produce a marketable good or service by means of his or her labor, capital, or both to consume directly, or to trade to someone else for something of equivalent value that he or she wishes to consume that the other has produced.

Say’s theory, then, was that we do not use “money” to purchase what others produce. Money is only the medium by means of which we exchange what we produce for what others produce. Money is thus a symbol of wealth, as Kelso pointed out, not wealth itself. As Say explained in his refutation of the scarcity-based theories of the Reverend Thomas Malthus,

It is therefore really and absolutely with their produce that they make their purchases: therefore it is impossible for them to purchase any articles whatever, to a greater amount than those they have produced, either by themselves or through the means of their capital or their land.

From these premises I have drawn a conclusion which appears to me evident, but the consequences of which appear to have alarmed you. I had said — As no one can purchase the produce of another except with his own produce, as the amount for which we can buy is equal to that which we can produce, the more we can produce the more we can purchase. From whence proceeds this other conclusion, which you refuse to admit — That if certain commodities do not sell, it is because others are not produced, and that it is the raising produce alone which opens a market for the sale of produce.20

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20 Jean-Baptiste Say, Letters to Mister Malthus on Several Subjects of Political Economy. London: Sherwood, Neely, and Jones, 1821, 2-3.

The Real Bills Doctrine

Say’s Law is applied in the real bills doctrine. The real bills doctrine is that (taking into consideration the velocity of money) as long as the present value of contracts (mortgages and bills of exchange) used as money, whether directly or as backing for currency and demand deposits, is equal to the present value of existing and future marketable goods and services in the economy, there will be neither inflation nor deflation.

As anything with a present value can be used as money, a contract conveying the present value of future marketable goods or services to be produced by new, unformed capital (a bill of exchange) can be used to finance that same capital. The contract can be redeemed as the new capital becomes productive and generates a profit. In this way new capital can be financed using the present value of future increases in production as well as past reductions in consumption.

Say’s Law will not operate when people do not have equal access to ownership of both labor and capital, especially in an economy in which technology is advancing rapidly and displacing labor at an increasing rate. Similarly (and for the same reasons), the real bills doctrine will not operate when private individuals, businesses, or financial institutions issue bills of exchange with no present value, in which they do not have a property stake, or of which the present value has been inflated by speculation. If people cannot own labor and capital, they cannot produce; if they cannot produce, they cannot create money in any form to exchange for what others produce.

Bills that have no present value, in which the issuer has no property stake, or that have inflated present values are called “fictitious bills.”21 A government bill of credit must therefore be classified as a fictitious bill, for the emitter does not at the time the bill is issued own that which the emitter promises to deliver in the future when the bill matures.

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21 Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). London: George Allen & Unwin, Ltd., 1939, 81-89; also, Harold G. Moulton, Principles of Money and Banking. Chicago, Illinois: University of Chicago Press, 1916, II.234.

Binary Economics and Real Bills

The amount of loans a bank of issue can make is, in theory, limited only by the present value of financially feasible capital projects in the area served by the bank, and on which bills are drawn and offered to the bank. In practice, fractional reserve banking limits the amount of promissory notes a bank can issue. Fractional reserve banking does this by requiring that the bank have on hand or on deposit at the central bank reserves of legal tender currency — an accumulation of past savings — sufficient to meet the transactions demand for cash.

Binary economics would free economic growth from this slavery of past savings by abolishing any fractional reserve requirement and providing that all bills of exchange accepted for pure credit loans made for financially feasible qualified capital projects be immediately rediscounted at the central bank — effectively 100% reserves. The other use of past savings, as collateral for pure credit loans, would be obviated by the use of capital credit insurance and reinsurance.

Pure credit financing of new capital and the replacement of traditional collateral with capital credit insurance and reinsurance would radically reduce dependency on existing accumulations of savings owned by the top 1 percent. This would allow rapid economic growth in which the poorest of the poor as well as everyone else to take advantage of equal ownership opportunities in the future. These opportunities, construed as a “new right of citizenship,” would be secured by means of the monetary and tax reforms offered by CESJ’s proposal for a “Capital Homestead Act.

APPENDIX D

SUMMARY OF THE CAPITAL HOMESTEAD ACT

The Capital Homestead Act: A Blueprint for Redesigning Any Nation’s Economic System Based on Economic Justice and the Logic of Binary Economic Theory

Capital Homesteading is a comprehensive set of national legal and policy reforms based on the logic of Binary Economics and the principles of the Just Third Way (i.e., the three principles of economic justice and the four pillars of an economically just society). We believe it offers one possible model that has the potential to change the legal order at the local, national, regional, and even global levels.

Capital Homesteading is construed as an extension of the nineteenth century American programs enacted as the Homestead Act of 1862 to bring about a broad distribution of the ownership of frontier land. Broad-based citizen ownership was the key to accelerated rates of expansion of the U.S. food production capability compared to other countries the world. But the land frontier by its nature was a limited frontier.

Capital Homesteading rests mostly on systemic changes proposed first by Louis Kelso. These ideas expand the concept of democratized ownership to the unlimited frontier of advanced technologies, including management, marketing and distribution systems, through equity shares in enterprises capable of competing without special protections within a free, just and competitive global economy.

The proposed Capital Homestead Act is a refinement by the Center for Economic and Social Justice (CESJ) of what Louis Kelso in 1965 called “the Second Income Plan” and President Reagan in 1974, based on Kelso’s ideas when he was Governor of California, called for an “Industrial Homestead Act.” Kelso developed a comprehensive set of reforms and a new national economic policy agenda based on the binary growth model. It was designed to lift barriers in the present financial and economic system for universalizing citizen access to the means of acquiring and possessing capital assets. The Capital Homestead Act would allow every man, woman and child to accumulate in a tax-sheltered Capital Homestead Account, a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of accumulated savings or reductions in current levels of consumption. It would serve as a substitute for costly retirement plan now burdening many U.S. companies. And it would substitute over time for the mounting spending deficits from the growing number of government pay-as-you-go entitlement programs whose projected unfunded liabilities threaten to bankrupt the U.S. Government and States like California and Illinois over the next few generations.

Under Capital Homesteading, basic economic laws and policies would be established to encourage national and regional central banks, corporate and individual income tax authorities, commercial and investment bankers, capital credit insurance and reinsurance companies, industrial and community development planners, legal and enterprise financial advisors, and unions to determine the nation’s annual needs for the quantity of money needed for accelerated rates of sustainable private sector capital growth and asset transfers to provide every citizen personal access to capital credit repayable with the projected future pretax earnings of the acquired capital. As a substitute for collateral required in today’s financial world to cover potential risk of default of borrowing for investment, the new system would cover risk through capital credit insurance financed by the pooling of risk premiums on all borrowed money. Only those who have already accumulated large accumulations of past savings today can provide such collateral. This explains why the rich will automatically accumulate most of the growth capital in the world, unless Capital Homesteading reforms are adopted.

Every man, woman and child from birth to death could be granted periodically (at least annually) an equal allotment of asset-backed and privately insured capital credit repayable with future savings. Such credit would flow through a personal tax-sheltered capital asset accumulation trust or “Capital Homestead Account” established at a local bank. Citizens, supported by licensed advisors, would have informed choices of investing their allotment of capital credit in shares in an enterprise for which a member of the family works, or public utilities, for-profit Citizens Land Banks or Community Land Cooperatives, and other approved categories of commercial, industrial or agricultural enterprises willing to issue full dividend payout shares.

Once the citizen’s offer (in the form of a bill of exchange) to purchase new shares on insured capital credit is scrutinized and the offer accepted by the commercial bank lender, the bank would create asset-backed money for the purchase of the shares. The bank,would create the new asset-backed money by approving a promissory note or establishing a deposit account for the borrower. The bank’s discount rate would cover all bank service charges and the risk premium. Commercial banks would immediately rediscount all Capital Homesteading loans for new currency supplied interest-free (since no past savings would be involved) by the central bank, thereby ensuring an elastic, stable, uniform and private sector asset-backed currency to replace the currencies that in most of the world are backed almost entirely by non-productive government debt.

Growth of the economy would no longer be subject to the slavery of past savings, reflected in the subtitle of the second book by Kelso and Adler. (The New Capitalists: A Proposal to Free Economic Growth from the Slavery of [Past] Savings.) Kelso based his revolutionary “pure credit” approach to financing broad-based capital ownership on the 1935 book by Harold Moulton, then president of Brookings Institution, entitled The Formation of Capital. (CESJ republished Moulton’s book, the Foreword of which is at http://www.cesj.org/homestead/reforms/moneycredit/formationofcapital_cesj.pdf. Both Kelso-Adler books can be downloaded free at http://www.cesj.org/publications/freedownloads.html)

Wealthy citizens with large accumulations (who would have the same privilege as non-rich citizens to an equal annual Capital Homestead allotment of capital credit) would be encouraged to spend their savings which would enable the economy to grow even faster or to enable the rich to invest in high risk ventures not eligible for Capital Homestead credit, or to engage in charity and spending for improving the nation’s education and health systems and other investments for the common good.

Dividends on shares financed through Capital Homesteading would be tax deductible at the enterprise level, deferred from personal taxation when used to repay shares held in the purchaser’s tax-sheltered Capital Homestead Account, but taxable when available as consumption income when distributed at the personal level. Thus, the poorest citizen, whether employed or disabled, could continue over their lives to accumulate assets on a tax-deferred basis and over time begin to receive rising capital incomes to supplement consumption incomes from other sources, free and independent from the need for charity or welfare.

Summary of the U.S. Model for Specific Systemic Reforms Under the Capital Homestead Act (Adaptable to any Country)

The Capital Homestead Act is a comprehensive national economic strategy for empowering every American citizen, including the poorest of the poor, with the means to acquire, control and enjoy the fruits of productive corporate assets.

This long-range agenda involves major restructuring of our tax system and our Federal Reserve policies to lift unjust artificial barriers to more equitable distribution of future corporate capital and faster growth rates of private sector investment. It would shift primary national income maintenance policies from inflationary wage and unproductive income redistribution expedients to market-based ownership sharing and dividend incomes.

The Capital Homestead Act’s central focus is the democratization of capital (productive) credit. By universalizing citizen access to direct capital ownership through access to interest-free productive credit, it would close the power and opportunity gap between today’s haves and have-nots, without taking away property from today’s owners.

The Goals of the Capital Homestead Act

As Summarized below, the Capital Homestead Act is designed to:

1. Generate millions of new private sector jobs by lifting ownership concentrating Federal Reserve credit barriers in order to accelerate private sector growth linked to expanded ownership opportunities, at a zero rate of inflation.

2. Radically overhaul and simplify the Federal tax system to eliminate budget deficits and ownership-concentrating tax barriers through a single rate tax on all individual incomes from all sources above basic subsistence levels. It tax reforms would:

a. eliminate payroll taxes on working Americans and their employers;

b. integrate corporate and personal income taxes; and

c. exempt from taxation the basic incomes of all citizens up to a level that allow them to meet their own subsistence needs and living expenses, while providing “safety net” vouchers for the poor.

The “Capital Homestead Account“ (http://www.cesj.org/homestead/creditvehicles/cha-isop.htm) or “CHA“ is the primary tax-sheltered vehicle for the democratization of capital credit through local banks. It would enable every man, woman and child to accumulate wealth and receive dividend incomes from newly issued shares in new and growing companies, without being taxed on the accumulations (including property and shares gained through inheritance, savings, and arrangements like ESOPs, CSOPs and CICs/). In addition to serving as a source of capital credit for corporate workers, CHAs would also provide an ownership-building account for individuals who do not work for profit-making enterprises, such as school teachers, civil servants, military personnel, police, and health workers, and for individuals who have no remunerative employment, such as the disabled, the unemployed, homemakers and children.

The “Citizens Land Bank“ (http://www.cesj.org/homestead/creditvehicles/cha-cic.htm)or “CLB“ (also known as a for-profit Citizens Land Cooperative” or CLC”; previously known as the for-profit “Community Investment Corporation” or “CIC”) allows residents of a community to share in the control and profits associated with land planning and development.

The “Employee Stock Ownership Plan“ (http://www.cesj.org/homestead/creditvehicles/cha-esop.htm) or “ESOP“ channels low-cost credit for financing the needs of business corporations (such as expansion, capitalization and ownership transfers), and links private sector workers to ownership shares and dividend incomes in the companies for which they work. Shares acquired on credit by worker-owners are paid for out of the future corporate profits they help to generate.

The “Consumer or Customer Stock Ownership Plan“ (http://www.cesj.org/homestead/creditvehicles/cha-csop.htm) or “CSOP“ lets customers of utilities share in the governance and profitability of “natural monopolies,” like telecommunications, water and power companies, mass transit and cable television.

Policy Objectives of Capital Homesteading

To meet Social Security and Medicare entitlements, and provide for their eventual phasing out as the mainstay of retirement income for most Americans, and to shift the Federal Government’s role from today’s income redistribution policies to the more limited and healthy role of encouraging economic justice through free enterprise growth, a Capital Homestead program would:

• Promote Private Sector Growth Linked to Broadened Ownership. Recreate in the 21st Century the conditions that resulted from the first Homestead Act of 1862, including full employment, declining prices, and widespread, individual and effective ownership of income generating assets. Set a realistic long-term target, based on the nation’s industrial growth potential, to achieve a minimum Capital Homestead stake for every American family. As an initial measure, this could be geared conservatively toward an equity accumulation (http://www.cesj.org/socialsecurity/projections-cha.htm) of, for example, $150,000 over the next 20 years.

• Stimulate Maximum Growth, with a Balanced Budget and Zero Inflation Rate. Remove barriers to maximum rates of sustainable and environ,environmentally sound, private sector growth to achieve a balanced Federal budget and a zero inflation rate under the Capital Homestead program.

• Establish a Tax System That Stimulates Economic Growth and Jobs, and is More Accountable to Taxpayers. Re-write and radically simplify the existing Federal tax system (http://www.cesj.org/homestead/reforms/tax/kurland_052005.pdf) to automatically balance the budge. Keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing and other basic household living expenses. Make Congress more directly accountable and responsive to all taxpayers. Eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and one-rich families.

For example, a single tax rate on all sources of labor or capital income (http://www.cesj.org/homestead/reforms/tax/taxnotes05-1024.pdf) over exemptions would be automatically set to meet all Federal entitlement and other programs, and to pay down past deficits. To meet personal living costs the basic incomes of all taxpayers up to $30,000 per adult and $20,000 per dependent (or $100,000 for a family of four) would be free from any income or payroll taxes. To increase taxable incomes for all citizens, corporations could escape from the multiple tax on corporate incomes by deducting dividend payouts.

• Restructure the Credit and Tax Systems to Encourage Universal Health Care (http://www.cesj.org/homestead/strategies/national/C-HealthcareSum12-07.pdf) through the Private Sector. Capital Homestead reforms, supplemented by health care vouchers for the poor, would provide a sustainable way to finance the health care system. These reforms would empower each citizen and family with the means enjoy and pay for affordable, quality health coverage of their choice. Through market-disciplined, comprehensive health care enterprises that are owned and controlled by health care providers and health care subscribers (patients), the doctor-patient relationship could be restored, while providing greater insurance portability, accountability and lower administrative overhead costs throughout the system.

• Solve the Home Foreclosure Crisis and Make Home Ownership Accessible to all Citizens. Starging in communities with homes whose market values are deflated due to the subprime mortgage crisis, resident-ownerd Homeowners’ Equity Corporations (HECs) (http://www.cesj.org/homestead/strategies/national/homeequitycorp.htm) could receive interest-free credit to buy up the foreclosed properties. As occupants of the homes in default pay the HEC their monthly rents (which could be supplemented with housing vouchers for the poor), these would be applied toward debt service, using pre-tax dollars to pay off the loans that the HEC used to purchase the foreclosed properties. As they make their regular monthly lease payments, these renters would become full owners of HEC shares and their dwellings.

• Stop Federal Reserve Monetization of Government Debt. Terminate use of the Federal Reserve’s powers to create debt-backed money, to support foreign currencies, or to buy and sell primary or secondary Treasure securities. This would reduce excessive Government spending and improve accountability. It would force Government to borrow for deficits directly from savers in the open markets.

• Stabilize the Value of the Currency. Require the Federal Reserve to create a stable, asset-backed currency to encourage ownership by all citizens of productive private sector assets rather than non-productive public sector debt or future ownership monopolies.

• Reduce Dependency on Past Savings for Financing Growth. Require the Federal Reserve to distinguish between “sound” and “unsound” uses of credit, by providing interest-free money to expand bank credit to enable every American to become an owner of a viable accumulation of new income-producing assets. This would reduce America’s dependency on past savings, corporate retained earnings, or foreign government wealth funds advantaged by America’s growing trade imbalances.

Require the Federal Reserve to supply sufficient asset-backed interest-free money and credit through local banks to meet the liquidity and broadened ownership needs of an expanding market-disciplined economy. Such “Fed-monetized” loans (http://www.cesj.org/homestead/reforms/moneycredit/discountwindow.html) would be subject to appropriate feasibility standards (http://www.cesj.org/socialsecurity/safeguards-cha.html) administered by the banks and limited only by the goal of maintaining a stable value for the dollar.

Unsound uses of credit, such as the speculative credit that created subprime home mortgages and the global financial meltdown, would be financed from the accumulations of those wealthy Americans and foreigners who could afford the risk.

• Democratize Ownership of the Federal Reserve. Provide every citizen a single, lifetime, non-transferable voting share in the nation’s central bank and in one of the 12 regional Federal Reserve banks. This will ensure that the Fed’s board of governors is broadly representative of all groups affected by Fed policy, and that power over future money creation is spread widely among all citizens.

• Discourage Monopolies and Monopolistic Ownership. Link all economic reforms to methods that discourage privileged access to monopolistic accumulations of private property ownership of the means of production. Enforce anti-trust laws by providing access to interest-free capital credit to encourage broadly owned new competitors to enhance and sustain market-oriented growth.

• Introduce a Market-Driven Wage and Price System. Gradually eliminate rigid, artificially wage and price levels and other restrictions on free trade that afford special privileges to some industries, businesses and workers at the expense of American and foreign customers of U.S. products. Replace subsidies with interest-free credit incentives to farmers who wish to associate voluntarily in cooperatives and in enterprises jointly owned by farmers and workers, including integrated agribusinesses. The income generated by farmer-owned enterprises would supplement farm incomes and reduce the need for subsidies.

• Restore Property Rights in Corporate Equity. Restore the original rights of “private property” to all owners of corporate equity, particularly with respect to the right to profits and in the sharing of control over corporate policies. Preserve traditional powers of professional managers held accountable by Justice-Based Management corporate governance structures.

• Offer a More Just Social Contract for Workers. A top priority during he next decade would be developing a more just “social contract” for persons employed in the private sector. This would be geared toward establishing maximum ownership incentives. Instead of inflationary “wage system” increases, employees would begin to earn future increases in income through production bonuses, equity accumulations, and profit earnings. These “bottom-line” rewards would be linked to workers’ individual contributions, and to the productivity and success of their work team and the enterprise for which they work.

• Encourage More Harmonious Worker-Management Relations. Promote the right of non-management workers to form democratic unions and other voluntary associations. Instead of promoting the traditional “conflict model” of industrial relations, however, “labor” unions wold be encouraged to transform themselves into democratic “ownership unions.” These ownership unions could become society’s primary institutions for promoting universal access to a free market version of economic justice, while continuing to negotiate and advance workers’ economic interests, including worker ownership rights and Justice-Based Management (http://www.cesj.org/jbm/whatisjbm.htm) policies.

• Encourage Special Ownership Incentives for Those Engage in Research and Development, especially in the search for new and sustainable sources of energy, ecological restoration and labor-saving technologies. Provide sufficient low-cost credit and royalty-free licensing for enterprises capable of commercializing life-enhancing technologies developed for the military and space programs. Subsidize the development of new methods of conserving and recycling non-repleishable  and limited natural resources that are vital to civilization’s long-term survival, at least until suitable substitutes can be discovered and developed. Promote the teaching at all levels of education of universal principles of personal morality and social morality that are based on the inherent dignity and sovereignty of every human person within all institutions of a just social order, including the State.

• Reduce Public Sector Costs. Provide America’s military, policemen and firemen, teachers, and other public-sector workers with a growing and more direct equity stake in the free enterprise system, both as a supplement to their costly pension plans and so that they will better understand and defend the institution of private property. Whenever feasible, transform government-ownerd enterprises and services into competitive private sector companies, by offering their workers (and customers and other stakeholders in capital-intensive operations like TVA) opportunities to participate in ownership, governance and profits.

• Establish Workable Demonstrations of Capital Homesteading at the Community, State, Regional and Global Levels. Launch several Capital Homesteading demonstrations. These would be most effective in areas of high unemployment, such as the for-profit Citizens Land Cooperative now being developed in East St. Louis (http://www.cesj.org/homestead/strategies/community/MECLCv2-07Legis.pdf). Similar projects could be developed on Native American reservations. A major objective would be to evaluate ownership mechanisms, advanced concepts of worker participation in decision-making, and servant leadership developments like Justice-Based Management (http://www.cesj.org/jbm/whatisjbm.htm).

Encourage State and local governments and other countries to promote widespread capital ownership as a basic “Just Third Way” framework (http://www.cesj.org/thirdway/comparison3rdway.htm) for building a sound market economy.

Study the feasibility a national and global citizen-owners “land and Natural Resources Bank” to plan development of Nature’s resources, receive rentals for use of land and natural resources, and distribute citizen dividends among the populations. With the leadership of the United States, urge the United Nations (http://www.cesj.org/thirdway/paradigmpapers/socialdevelopment-un-ppr.htm) and other international agencies to encourage the sue of such economic development vehicles in order to bring about “peace through justice” (http://theamericanmuslim.org/tam.php/features/articles/a_grand_strategy_for_peace_through_justice_in_iraq1/) in such conflict-torn countries as Iraq, Afghanistan, Pakistan, the Sudan, Kashmir, the Democratic Republic of Congo, Somalia, Burma, Sri Lanka, etc. Such an approach could provide a model “Abraham Federation” solution for resolving the conflict between the Palestinians and Israelis.

• Initiate New Challenges for Multinationals. Provide special encouragement to U.S.-based multinational corporations and global financial institutions to become instruments of peach and a more just world economic order, by broadening access to their ownership base to all citizens of the world community. Encourage businesses to open up future ownership opportunities as they begin harnessing the resources of the sea, the airways and other planets.

• Promote a New Global Monetary System. Encourage the convening of a second “Bretton Woods Conference” to consider the implications of the Kelsonian binary economic model (http://www.cesj.org/homestead/reforms/moneycredit/price-money.html) on global currency standards, the feasibility of a signal currency, and more just foreign exchange rates.

The new policy should seek to reform financial markets to address the challenge of global poverty and sustainable development, as well as leveling the playing field among nations for global free and open trade.

Obviously Capital Homesteading is only a proposal. Most of its component parts have been tested and work, at least under present law in the U.S. But the proposal have not yet been adopted by any country as a single blueprint to cover all citizens and to remove the complexity of the current system.

We, of course, remain open to improvements and suggestions. As it stands, as already mentioned, U.S. President Ronald Reagan endorsed the concept when he was governor of the State of California in the 1970s. He also appointed the president of CESJ as deputy chairman of the politically diverse Presidential Task Force on Project Economic Justice.

In 1986 the Task Force produced a unanimous report, High Road to Economic Justice. The Task Force advocated the spread of worker ownership initiatives through Kelsonian ESOPs throughout Central America and the Caribbean. This would counter the growing communist threat in that region. Pope John Paul II encouraged CESJ in its work on the principles on which the proposal is based in two meetings at the Vatican, one with members of Polish Solidarity.

Most critical and timely, we hope that Pope Francis will request that an interfaith team of scholars study and debate binary economic theory, the Kelso-Adler principles of economic justice and the proposed reforms to current monetary, tax, inheritance, labor, welfare and other key economic institutions of the global social order. The goal will be to encourage reforms to provide universal personal access to equal capital ownership opportunities in the future.

This is based on private property rights, as expressed in Article 17 of the Universal Declaration of Human Rights. The pope can then determine whether or not an encyclical should be issues to tach all citizens and leaders the triad of principles of Economic Justice to guide them, in the words of the world design science visionary R. Buckminster Fuller, on how to “make the world work for 100 percent of humanity in the shortest possible time with spontaneous cooperation and without ecological offense or the disadvantage of anyone.”

APPENDIX E

ELEMENTS OF 5-YEAR CESJ/CCH STRATEGIC PLAN TO ENACT THE CAPITAL HOMESTEAD ACT

BACKGROUND: Our strategic plan is guided by a 21st century paradigm (world view) we call “the Just Third Way.” This global system of participatory political economy is organized around universal principles of justice, and is based on the dignity and sovereignty of every human being. This system provides a moral alternative to the power-concentrating and dehumanizing wage-and-welfare systems of capitalism and socialism. The Just Third Way promotes as a fundamental and inalienable human right, access to the means to acquire, possess and enjoy the full rights and powers of private property in productive capital, as well as in one’s own labor. This new paradigm views all social institutions and laws as “invisible” tools and structures for enabling every human person to develop his or her fullest potential. As human creations that are part of the common good, institutions must be constantly corrected and improved to support the dignity, empowerment and full development of every person within a just social order.

To reform and restructure today’s global economic system according to Just Third Way principles, we have developed “The Capital Homestead Act” — a national economic agenda of monetary, tax and expanded ownership reforms based on Just Third Way principles. Its just free market, private property-based reforms are designed to lift barriers to universal access to the means for every person to become an owner of income-producing capital.

1. Strategic Objective: To pass the Capital Homestead Act, starting in at least one country, by 2018. The goals that must be met to achieve this are to:

a. Gain the support of prime movers and communicators for the Just Third Way, as well as their commitment to lead the passage of the Capital Homestead Act legislation.

b. Work as part of the Coalition for Capital Homesteading with prime movers, strategic organizational partners, social entrepreneurs and citizen activists, to build the critical mass of people (2 percebt) committed to the Just Third Way and Capital Homesteading for every citizen.

c. Introduce the Just Third Way, binary economics and Capital Homesteading into academia.

d. Develop working models of Capital Homesteading at the community, national and global levels.

2. The Five Types of Power Needed to Change the System:

Idea Power + Servant Leadership Power + People Power + “Show it Works” Power + Money Power >> CHANGE

3. The Four Concurrent Communication Tracks to Reach the “Tipping Point”: I—Education II—Prime Movers III—Numbers of People IV—Successful Models

4. Strategic Planning Process:

a. Determine and prioritize strategic targets, and actions, people and resources needed to reach them.

i. What people power and resources do we have now to get started?

ii. What additional people power and resources will we need?

iii. How will we get the additional people power and resources?

b. Organize people and resources to carry out agreed-upon actions.

c. Periodically evaluate, refine and adjust actions until strategic objective is reached.

5. Priority Action Steps

a. Open the doors for CESJ/CCH spokespeople (e.g. Dr. Norman Kurland) to present to prime movers (influential leaders) the case for the Just Third Way and Capital Homestead reforms.

b. Individually and/or through CESJ/CCH chapters, through person-to-person or mass communications, recruit other organizations and individuals to join the Coalition for Capital Homesteading.

c. Work with CESJ and community leaders to develop models of Capital Homesteading to solve local problems. d. Help build and sustain CESJ’s and CCH’s strategic, tactical and operational capabilities.