On July 17, 2015, Michael D. Greaney, Center for Economic and Social Justice (www.cesj.org) writes on Catholic365.com:
Government AND capital of the people, by the people, and for the people, every child, woman, and man:
Thanks to Laudato Si’, Pope Francis’s encyclical on the environment, the issue of world government is once again a topic of serious discussion among thoughtful people of all faiths. Without addressing the validity of the scientific concepts to which the encyclical refers, then, I will examine an important, if side issue: the feasibility, even desirability of some form of international authority to enforce protection of the environment. As Francis put it,
“The same mindset which stands in the way of making radical decisions to reverse the trend of global warming also stands in the way of achieving the goal of eliminating poverty. A more responsible overall approach is needed to deal with both problems: the reduction of pollution and the development of poorer countries and regions. The twenty-first century, while maintaining systems of governance inherited from the past, is witnessing a weakening of the power of nation states, chiefly because the economic and financial sectors, being transnational, tends to prevail over the political. Given this situation, it is essential to devise stronger and more efficiently organized international institutions, with functionaries who are appointed fairly by agreement among national governments, and empowered to impose sanctions.” (Laudato Si’, § 175.)
This passage is a cause of grave concern for many people — and rightly so. Given the dismal record of those with concentrated power, people everywhere, regardless of religious faith, have every reason to be cautious of proposals that have the potential to empower some at the expense of others.
Take, for example, the proposal of Garry Davis, a World War II bomber pilot who decided that the way to stop war is to form a world government with the power to arbitrate international disputes. Dr. Norman G. Kurland, president of the interfaith Center for Economic and Social Justice (CESJ), told Mr. Davis that he would either be his greatest supporter, or his strongest opponent — depending on whether Mr. Davis advocated empowering people before instituting any government of world citizens.
Even though he is not a Christian, Dr. Kurland, perhaps the world’s leading advocate of what CESJ calls the Just Third Way, understands the key to Catholic social teaching: respect for human dignity. This includes recognition and protection of humanity’s fundamental rights to life, liberty, and property — and rights require power to exercise.
Dr. Kurland knows that for a society to be just, the people, not government or international authority, must be the source of power. This is true whether the power is political, social, or economic.
That was why, when he was asked to build the case against aid to church schools during the Kennedy administration, Dr. Kurland examined the arguments made by Catholic lawyers — and reversed his position. He found himself in agreement with the principle that power over a child’s education should reside not in government, but in the family. He came to similar conclusions in the civil rights movement and the War on Poverty: power must reside not in government or “the people” as a whole, but in people as individuals.
It was not, however, until he came across the work of lawyer-economist Louis O. Kelso, best known as the inventor of the Employee Stock Ownership Plan (ESOP) and the author, with Mortimer J. Adler, of The Capitalist Manifesto (1958) and The New Capitalists (1961), that Dr. Kurland realized what was missing: universal access to the means of acquiring and possessing capital ownership. As Archbishop Fulton Sheen put it in his “long lost” classic Freedom Under God (1940),
“[I]f man is free because he has a spiritual soul, must there not be an external sign for that inner freedom, viz., something he can call his own on the outside, as he calls his soul his own on the inside? Freedom means responsibility or mastery of one’s own acts, but how can this inner responsibility be better shown externally than by owning some material thing over which one can exercise control? . . . give him something which man can make according to his own image and likeness, as God made man to His own image and likeness, and he will be economically free. That thing is private property. That is why we say private property is the economic guarantee of his liberty as the soul is his spiritual guarantee — the proof that he is free on the outside as well as on the inside; the guarantee that he is the source of responsibility not only as regards what he is, but also what he has.” (Fulton J. Sheen, Freedom Under God. Arlington, Virginia: Economic Justice Media, 2013, p. 30.)
Sheen, however, was only expanding on the principle Leo XIII and other popes stated: respect for human dignity requires widespread capital ownership. That is why in Rerum Novarum, the first social encyclical, Leo XIII declared:
“We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” (Rerum Novarum, §46.)
It is clear, then, whether an international authority, or a local village council, if the source of the power exercised by these bodies is not actual people, and those in authority are not directly accountable to citizens who are independent owners of capital, people have no protection against the abuse of power. In particular, if the people become economically dependent on the State (instead of the State being dependent on the people for its revenue), political democracy will not work. As Lord Acton noted, power tends to corrupt, and absolute power tends to corrupt absolutely.
Saying, however, that “as many as possible of the people [should] become owners” begs the question: how are people without savings and who cannot afford to cut consumption in order to save supposed to become owners without either redefining what “property” means (the natural right to own, plus the socially determined and limited bundle of rights defining use and enjoyment of what is owned, including control and income), or using the power of the State to redistribute wealth belonging to others? Fortunately, such a proposal — CESJ’s “Capital Homesteading” — already exists.
Very briefly, it is possible — even preferable — to finance new capital formation not out of existing savings (by definition a monopoly of the rich), but “future savings.” Where past savings consists of past production withheld from consumption and accumulated in the form of money, future savings consists of the present value of future production embodied in a contract and used as money.
Thus, if the cost of becoming an owner of capital can be met by the capital itself, it is unnecessary for someone to be rich before owning capital. The only thing needed is a financially feasible capital project funded with asset-backed money in the form of capital credit. That is, all that is necessary for someone to become a capital owner is a project that pays for itself out of its own profits in the future, and thereafter pays the owner the income, and a lender willing to accept a bill that can be used to back newly created money.
This, by the way, virtually mandates a complete tax and monetary reform in every country of the world, if only to ensure that the currency units in which workers are paid and owners take profits maintain a stable and uniform value, and a government cannot circumvent its accountability to the citizens by raising money except by taxes granted by the citizens. A government that can function without recourse to taxation can do as it pleases, while one that changes the value of the currency effectively steals from one group for the benefit of another. A worker who is paid $5 for work worth one bushel of wheat, for example, has been cheated if, when he spends that $5, it only buys $2.50 worth of wheat.
When a capital project for which money has been created becomes profitable, the loan principal (which includes a one-time charge to cover bank services and risk of default) is repaid, and the money cancelled, thereby avoiding both inflation and deflation. To protect the lender against default and to prevent the inflationary creation of money for projects that do not pay for themselves, borrowers could be covered by capital credit insurance in lieu of traditional collateral.
I can only give the broadest outline of such a reform of the global tax, monetary, and ownership system here. The potential benefits, however, warrant following up to flesh out the details. Details can be found on the CESJ Web site, http://www.cesj.org/.
We want to look now at the benefits of universal access to the means of acquiring and possessing capital financed with future savings. Foremost among these is supplementing inadequate income from labor, with income from capital as capital replaces labor in the production of marketable goods and services. People need no longer depend on redistribution by the State (civilization’s only legitimate social monopoly that must be subject to checks and balances) or artificial “job creation” in order to survive, but can become economically independent, meeting their own needs through their own efforts.
Financing new capital out of future savings also eliminates the need to encourage consumerism and wasteful or needless spending to generate past savings to make the rich richer. Given, as Adam Smith noted in The Wealth of Nations (1776), that, “Consumption is the sole end and purpose of all production,” production for any other purpose (such as accumulating savings to finance new capital) promotes greed, selfishness, and concentrated ownership by a tiny élite, turning vices into virtues.
Without the justification for profit at any cost to finance new capital, there will be greater incentive to minimize the impact on the environment. For example, because renewable energy sources (such as hydrogen and solar power) are in the long run less expensive than fossil fuels, primary sources of energy can be renewable, and fossil fuels stored for emergencies.
In addition, when the people own the factories, they will naturally want to keep their own homes livable by producing goods and services in as clean and efficient manner as possible. The need for an extra-national authority decreases at the same time that people gain the power to protect themselves against its potential abuse of power.
I could go on about the potential benefits of a Capital Homesteading program that would enable “as many as possible of the people to become owners.” Leo XIII, however, probably said it best:
“Many excellent results will follow from this; and, first of all, property will certainly become more equitably divided. . . . the consequence will be that the gulf between vast wealth and sheer poverty will be bridged over, and the respective classes will be brought nearer to one another. A further consequence will result in the great abundance of the fruits of the earth. Men always work harder and more readily when they work on that which belongs to them; nay, they learn to love the very soil that yields in response to the labor of their hands, not only food to eat, but an abundance of good things for themselves and those that are dear to them. That such a spirit of willing labor would add to the produce of the earth and to the wealth of the community is self-evident. And a third advantage would spring from this: men would cling to the country in which they were born, for no one would exchange his country for a foreign land if his own afforded him the means of living a decent and happy life. These three important benefits, however, can be reckoned on only provided that a man’s means be not drained and exhausted by excessive taxation. The right to possess private property is derived from nature, not from man; and the State has the right to control its use in the interests of the public good alone, but by no means to absorb it altogether. The State would therefore be unjust and cruel if under the name of taxation it were to deprive the private owner of more than is fair” (Rerum Novarum, § 47.)
