Distributivism? Human Nature And Systems Design (Demo)

Norm and Steve,

    We need not only new vision but new missions to actualize the vision.

    For the sake of argument, let us assume universal acceptance that increasing broadly-owned production would provide a proportionally even greater increase in broad consumption and thereby require more production in an unending cycle.  This is Say’s law and is ignored by Keynesian economics.

    Let us further assume universal agreement that investment in production can come from money loaned from banks based on rational expectation of profits from future production, rather than only from the collateral of already accumulated wealth.

    What good are these assumptions if: 1) the GNP of a country and its official wealth are not measured by increase or decrease in production of real goods, and 2) those who can invest for long-term production would rather invest in the short-term profits from buying and selling stock and debt instruments totally unrelated to production.  

    The Carey Center for Democratic Capitalism has just issued a report showing that trillions of dollars of investment funds, including “workers’ 401k property”, are sitting idle because the money managers are waiting for prospects of making a quick buck.    

    The question becomes how one can assure that in a capital intensive economy money from whatever source is directed toward real production in accordance with the “real bills” doctrine.  How could one assure that under Capital Homesteading the three hundred million investors in America would not merely throw their money into the present system of vicarious investment by the professionals who have no interest in economic growth.

    From an economic perpective the banking system and its manipulators are immoral because they operate in an imaginary world where money is the ultimate value not merely a measure of value.  One can distribute and redistribute this imaginary value but in the end it seems to be a giant ponzi scheme, in which derivitives are merely the most extreme example. 

    Moral people may claim to be moral by making everything more transparent, but their effective morality is limited because they operate within a bankrupt system that survives, and only temporarily, by increasing the concentrated ownership of both economic and political power.

    Keynesians answer that the government can avoid revolution by printing money directly for consumption and by redistributing wealth through taxation of those who own wealth, which eventually must result in inflation and have even a negative impact on production.

    In my view, the challenge to developing acceptance of a new paradigm based on binary economics and the Just Third Way is the assumption that there is no alternative to the current system even if in theory there is.  The counter-argument is Capital Homesteading, but a counter-counter argument might be that this could result in 300,000,000 Americans following investment counselors advice to invest in more of the same.

    President Reagan said that the answer to Communism is to turn every American into a little capitalist, but that is just the first step in developing something beyond socialism based on envy and capitalism based on greed.  You both think there is reason for hope, one based on the goodness of human nature and the other on the goodness of systems design.  Surely both are essential.

Peace, prosperity, and freedom

through the interfaith harmony

of compassionate justice,

Bob

—–Original Message—–
From: Norman Kurland <thirdway@cesj.org>
To: Steve Young <steve@cauxroundtable.net>
Cc: transcendentlaw@aol.com <Transcendentlaw@aol.com>
Sent: Tue, Nov 13, 2012 8:07 am
Subject: Re: Distributivism?

Steve,I hope you’re right that the Republican Party realizes it “needs a new socio-economic vision and [our] time may be at hand.”

How do we feel about joining forces with today’s Distributists?  We agree with the founding fathers of Distributism — Chesterton and Belloc — that the institution of private property in land, natural resources and ever-advancing technologies is essential to a just and democratic market economy.  Kelso and Adler in their first book acknowledged the sound criticisms of the injustices and inequities of “capitalism” by Belloc, as well as by Popes Leo XIII and Pius XI.  But neither Belloc nor Chesterton offered a non-conflictive strategy and non-coercive means for achieving the worthy goal of democratizing future access to capital ownership of the means of production as a fundamental human right.  And none of the modern-day intellectuals who call themselves Distributists, as far as we can see, do any better.  Not only did Kelso and Adler offer practical reforms to our basic economic institutions to lift financial, tax and inheritance law barriers to greater equality of opportunity for every citizen to become an owner.  More important they did so in a systematic manner that protects the property rights of current owners, as you can see from our summary of the proposed Capital Homestead Act at http://www.cesj.org/homestead/summary-cha.htm.

Many of today’s Distributists advocate redistributist methods that threaten to violate traditional rights of private property.  Under Capital Homesteading, all the reforms proposed would instead (a) restore and protect traditional rights of private property, especially in corporate equity, for future as well as current capital owners, (b) restore free, competitive and non-monopolistic markets for determining just prices, just wages and just profits, (c) limit the economic powers of the State, and (d) lift all barriers to equality of opportunity for every citizen to become an empowered and participating owner of productive capital assets, making the State increasing dependent economically on its citizens and reversing currently dangerous trends toward increasing citizen economic dependency on income redistribution by the State.  If today’s Distributists can agree to these four essential pillars for growing a more just, free and democratic economic system, we would be delighted to join forces with them to promote passage of the Capital Homestead Act.  Lincoln would have loved that.  So would Ronald Reagan.  And I’m sure the same can be said of Chesterton and Belloc.

Here below is one of 39 Just Third Way blogs by Michael Greaney mentioning our position on Distributism as advocated by Chesterton and Belloc, and the difficulty he has had in carrying on rational discussions with modern Distributists:

Warm regards,
Norm

A Blog of the Global Justice Movement

Monday, December 20, 2010

The Problem With Distributism

No horse is so dead that you can’t continue to beat it. (Mmmmmm. Dead horse.) Anyway, for years, even before starting this blog, we’ve gone into great detail and explained at great length exactly where classic distributism and the Just Third Way differ, and where they agree. It doesn’t seem to help. The silence remains deafening — or nearly so.As a whole, Latter Day Distributists (at least those who don’t run away chanting the “I’m not an economist” mantra/copout) may agree that both distributism and the Just Third Way share substantially the same goals: an economically and politically just society characterized by widespread ownership of the means of production. On the whole, however, the LDDs and those sympathetic to their position, such as a determinant number of supporters of Major Douglas’s “social credit” and Henry George’s program, agree that those who support the Just Third Way “just don’t get it.” Where we aren’t already beyond hope, we’re just being stubborn by refusing to abandon our position in the face of repeated assertions, contradictory definitions, and lack of argument from the LDDs & Friends.

That being the case, we are clearly being Deliberately Evil by not coming over to the Light Side and agreeing completely with everything someone else says, with or (more usually) without proof or argument. Of course, the human sacrifices we carry out as the high point of every quarterly board meeting may have something to do with that, too, as well as the ritual cannibalism and the high cholesterol Béarnaise Sauce. (Mmmmmmm. Have a friend for lunch.)

That’s why when, over the weekend, we received a question about distributism, we made our response the core of today’s posting. Of course, there is that little matter about not wanting to work any harder than we have to, plus the fact that (believe it or not) we have other things to do. So, to cut to the chase, our correspondent asked (slightly paraphrased to protect both the innocent and the outstandingly mistaken),

A quick glance over The Distributist Review blog revealed a number of things that caused me concern, e.g., links to some questionable sites, a number of ads and links that don’t seem completely consistent with the natural moral law, and a set of “progressive” goals that appear to have the potential to lead people away from the natural moral law based on God’s Essence which is self-evident in His Intellect, not His Will, that is the basis for the Christian, Jewish, and Islamic understanding of social justice from an Aristotelian perspective. I found this both disconcerting and mystifying, given the many references to Catholic social teaching, which is based on Thomism, or a “Christianized” Aristotelianism, just as orthodox Jewish and Islamic social teaching are based on the Aristotelian analyses of Maimonides and Ibn Khaldûn, respectively. This demonstrates to me just how easy it is to get good Catholics — or sincere believers in any religion — going off in the wrong direction. My question is, how did Chesterton a) define distributism (without all the add-ons that seem to have come later), b) get economics so wrong, and c) how did he get hijacked to something so far off the range?

(BTW — despite the “cowboy talk” about getting far off the range, our correspondent is not from Texas, nor are we confirming that “he” is really a “he.” There’s no sense in opening him up to the sort of “arguments” we typically get.)

Okay, here goes (and that’s really three questions . . . but we don’t charge by the word, so that’s all right). “Distributism” is easily defined, all the more because Chesterton and Belloc insisted that there is no specific program involved, only general guidelines: A policy of widely distributed ownership of the means of production, with a preference for small landholdings and enterprises. When enterprises must be large, the ownership should be broadly distributed.

This is simple, and very close to the Just Third Way. The problem comes in when Latter Day Distributists start insisting that the small landholdings and enterprises are a mandate, not apreference . . . and then the fun starts.

The problem is that Chesterton and Belloc made a fundamental error with respect to finance. This is understandable, for neither one was an economist, financial expert, lawyer, or accountant. Had it been explained to either of them, we are convinced that either one would instantly have seen the problem and corrected it. It was one of those small errors that lead to big problems in the end. Regular readers of this blog can probably guess what it is already: the fixed belief that new capital formation cannot be financed except by cutting consumption, accumulating money savings, then investing. (Vide Dr. Harold G. Moulton, The Formation of Capital, 1935).

This can go in one of two ways. If we shift our understanding of the natural moral law from the Intellect to the Will, we simply redefine private property, money and credit, banking, and so on, in order to get what we want. The substantial nature of private property changes from a right inherent in every human being by nature with socially determined exercise of that right, to a grant from the State. This allows redistribution of “ownership,” which ceases to mean anything. As John Locke pointed out a number of times in his Second Treatise on Government, you can’t really be said to own anything if someone else (the State or a State substitute) can take it away at will.

A distributist who goes this route may end up with widely distributed ownership (although that is doubtful, as the necessary increase in State power will usually prevent this from happening), but the “ownership” won’t mean anything. As Keynes quite accurately pointed out, within the past savings paradigm, ownership must be concentrated in order to accumulate money savings, and the small owner eliminated (General Theory, VI.24.ii). This is the antithesis of distributism. Within the past savings paradigm, if ownership is widespread, then people will use their ownership income for consumption, which presumably dries up the pool of loanable funds, bringing economic growth to a halt.

The solution within the past savings paradigm for anyone who has any concern whatsoever for his fellow man is to redefine the natural law, especially regarding private property. As the reasoning inevitably goes, private property may be a right, but (contradicting explicit papal teachings, e.g., Rerum Novarum, §§ 5-6) it is not an “absolute right.” The State (or some State-substitute) has the duty to redistribute wealth by some means (usually manipulation of the currency or outright confiscation and redistribution) when people are in need. “The rich” therefore have no right to the income from what they own, except for what is necessary for reinvestment and what some authority has decided is a just return. (Of course, “enjoyment of the fruits,” i.e., income, is the essence of private property . . . except that they’ve redefined private property!)

This is shoddy reasoning, and leads to the economic situation we see today, an economy that, ostensibly arranged for the benefit of everyone, with entitlements, family allowances, welfare, high fixed wage and benefits packages, etc., etc., etc., in reality functions exclusively for the benefit of the wealthy. It is no coincidence that the U.S. just experienced its most profitable quarter in history . . . with the vast bulk of profits in the financial services industry — those whom Pope Pius XI called the despotic economic dictators, who, while they don’t, as a rule, own, control money and credit, so that none may breathe against their will. (Quadragesimo Anno, §§ 105-106)

The stock market is booming. Unemployment is near 10% . . . officially; near 20% “unofficially.” To a mind that believes the State can do anything just by re-defining truth (John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt Brace, 1930, 4), this is not happening because it cannot be happening. There must be a hidden conspiracy somewhere preventing the economy from working for the benefit of all: the rich, whose greed prevents others from enjoying the income and standard of living that God decreed for them.

The other way this can go is to insist that the rights of private property are sacred and must not be infringed upon — which is absolutely correct. Unfortunately, those who take this position also do a “little” unconscious re-editing of the dictionary, as Keynes called it, and make three fundamental errors. 1) They continue to insist that existing accumulations of savings are essential to finance new capital formation. 2) The right to property — that which comes under the natural law and thus is absolutely part of human nature — is redefined as effectively inhering only in an elite. 3) The rights of property — the socially determined exercise of property (but always without prejudice to the underlying natural right to be an owner) — are redefined as absolute. That is, 2 & 3 reverse the natural order, and effectively negate the natural law as surely as those who redefine it in the other direction.

Those people in the first group, i.e., those who redefine natural rights explicitly (which includes most Latter Day Distributists), necessarily view those in the second group (those who reverse the natural order) as heartless fiends who selfishly insist on their rights of property to the detriment of others‘ right to life. Those in the second group necessarily view those in the first group as idealistic blockheads who would sacrifice the common sense of the natural law (including private property) to a disastrous social theory that can only lead to economic disaster.

The two sides could easily be reconciled if they could be brought to understand that 1) money is anything that can be used in settlement of a debt, 2) existing accumulations of savings are not essential to the financing of new capital formation, and 3) widespread direct ownership of the means of production is essential to the functioning of Say’s Law of Markets and its application in the real bills doctrine to finance widespread acquisition and possession of private property in the means of production.

We have tried on a number of occasions to make this clear to people on both sides of the aisle, but have typically gotten one of several (non)responses:

1) A polite dismissal for questioning the principal tenet of the religion of past savings,

2) No response whatsoever,

3) A pitying shake of the head and a statement to the effect that we could be refuted on every point . . . but that they aren’t going to take the time to do so. (Vide Milton Friedman’s refusal to debate the Kelso ideas in response to an invitation from Norman Kurland),

4) An outraged attack claiming that we are anti-distributists, anti-social crediters, anti-Catholic, anti-histamine, or whatever else comes to hand.

What we don’t get is honest debate, or even argument. A leader in the distributist movement once exacted a promise from this writer not to judge distributists too harshly. That was approximately two and a half years ago, and a number of efforts have been made to reach out to the distributist movement, as well as other movements that consider themselves affiliated with distributism in some fashion.

There has been no response. In consequence, our opinion of distributism is as high as it ever was,i.e., that except for being enslaved to past savings, it is about as close to the Just Third Way as it is possible to get within the current system. Our opinion of distributists, however, is lower than ever before.

#30#

Posted by Michael D. Greaney at 1:15 PM 

Topics: Distributism, Just Third Way, money and credit

Bob,

The Carey Center is committed to the “past saving” paradigm for financing what Ray calls “democratic capitalism.”  As you know, we share Ray Carey’s goal of moving toward a free enterprise version of economic democracy.  But we think Louis Kelso and Harold Moulton’s advocacy of “pure credit” for financing faster rates of non-inflationary growth through credit repayable with “future savings” is more dynamic way of providing a truly equal opportunity for every child, woman and man in any country to become an empowered and independent capital owner.  What drives growth are customers with money. With new jobs and dividend incomes flowing to the 99% from “pure credit” financing of a nation’s growth assets and the 1% being encouraged to spend more on comsumer goods and services, that added consumption power will attract Capital Homesteading entrepreneurs and citizens generally to turn to “pure credit” to expand their productive capacity through shared ownership. Production and consumption — the two sides of the economic equation — would be in greater balance.  And today’s propertyless and unemployed would obviously over time become less dependent on those who control money and most of the capital accumulations today, as well on those who run government trickle-down “entitlement” programs.

We should not ignore the words attributed to Mayer Anselm Rothschild: “Let me control the issuance of a nation’s money and I care not who makes the laws.”  This is the trap that Ray Carey has to face in trying to reverse the injustices inherent in the highly concentrated power of the tiny ownership elite who today control global capitalism.  The global strategy of the Just Third Way alternative is based on justice and truth and does not depend on the approval of those who today control money power.  The 99% is beginning to wake up and, when they do, they will reject both capitalism and socialism in all its forms, including the flawed Welfare State concoction conceived by Keynes.

As you know, I don’t consider the rich, the greedy and the power-hungry as the enemy.  The injustices under both the capitalist and the socialist systems encourage greed, the hunger to dominate others, class warfare, mass powerlessness and poverty, terrorism and war.  But those systems were not created by God.  Humans created those systems and once humans see themselves as “architects of the future”, humans can and will create a new model based on the Just Third Way that will make the old models obsolete.  As Victor Hugo said, “All the armies of the world cannot defeat an idea whose time has come.”

Will the new system operate perfectly?  Of course not.  Under the proposed Capital Homestead Act (CHA) and any refinements to its features, however, the system itself will encourage and empower every player to be acting in his or her self-interest.  It will also surface new justice-oriented leaders, educators and activists willing to serve the interests of all those affected by the process of making every citizen an owner.These include the decision-makers, entrepreneurs and their advisors in expanding corporations that issue new full-dividend payout shares; the new justice-based investment banks that will be born to serve the new ownership opportunities of the 99%; the lenders and administrators of personal CH accounts at local banks; the 99% of citizens who will become empowered to purchase newly-issued Capital Homesteading shares; the advisors to those citizens; the capital credit insurers and reinsurers that provide a substitute for collateral to set risk premiums to cover the risk of default on CHA credit; the lawyers and financial advisors who become engaged at all steps of the process; the professionals involved in the rediscounting operations of the 12 regional Federal Reserve Banks; the citizen-owners of each of the regional Feds; newly formed ownership unions organized to advise and represent the new CHA shareholders as well as today’s disgruntled shareholders; the Fed itself; and whatever minimalist regulators the Federal Government deems necessary for oversight and policing of the overall CHA process.  Keep in mind that the CHA investment process would sever the financing of all new capital formation from historic dependency on the past accumulations of the rich and super-rich.  The CHA would also protect the property rights of existing owners while avoid engaging in the speculation game of Wall Street, leaving those risks to those who can afford to gamble.

Attached is the script prepared for a top illustrator to help the public understand the process for implementing Capital Homesteading once the comprehensive legislative package is enacted to lift America from FDR’s New Deal, Truman’s Fair Deal and Lyndon Johnson’s War on Poverty, to what some will call “The Just Deal”, our 21st century updating of Lincoln’s homesteading of America’s inherently limited land frontier.  Available for generating widespread citizen, media and academic understanding of the Capital Homestead Act we have made available at http://www.cesj.org (1) a CHA flyer, (2) freely downloadable books by Kelso and Adler as well as our books Capital Homesteading for Every Citizen and Curing World Poverty: The New Role of Property and our republication of The Formation of Capital (1935) by Harold Moulton, former president of Brookings Institution before it became a hotbed of flawed Keynesian thinking and (3) the Summary of the comprehensive reforms to the tax system, the central bank, commercial banks, capital credit insurance and reinsurance, inheritance and gift tax laws, and all other institutions affecting the nation’s future capability to grow a free, competitive and just economy.

In Peace, Prosperity and Freedom, only through Compassionate Justice and Truth,
Norm