News from the Network, Vol. 1, No. 14

There have been some very positive happenings this week within the Global Justice Movement. This is a much-needed counter to the increasingly gloomy economic and political news that seems to flood in continuously.

• On Saturday, November 22, 2008 Norman Kurland gave a short speech at the Washington, DC, "End the Fed" rally. While the Washington event seems to have had the worst weather of any of the 39 rallies, it was also reportedly the best attended, with approximately 200-300 people showing up in bitterly cold temperatures. Norm's speech, unfortunately, had to be somewhat shortened due to rapidly falling temperatures as the sun went down, but he was still able to deliver a message that addressed many of the important points of the Just Third Way. The focus of the Just Third Way is not the destruction of institutions, but their reform to make them more consistent with the principles of the natural law. Thus, by "End the Fed," we mean bringing an end to the Federal Reserve as it now operates, and restoring it to its original purpose of providing liquidity to the private sector, not financing government deficits. A video clip can be seen here.

• On Monday, we got a telephone call from a writer for The Wanderer, a national Catholic newspaper. The October 23, 2008 issue of the paper carried some remarks about CESJ, the Central Bureau of the Catholic Central Union of America, distributism, and georgism, as well as the interfaith composition of CESJ and the First Social Justice Collaborative in August that could have been interpreted negatively. It took us time to prepare a response, but apparently within hours of receiving CESJ's letter and package of materials, the Wanderer started to take steps to correct the information once they had our side of the story. The Wanderer's quick and decisive action in this matter should transform a potentially embarrassing incident into an opportunity to help spread the effort to restore the natural law as the basis for a sound economy and a just social order.

• The writer from the Wanderer also requested a review copy of our latest book, In Defense of Human Dignity. The writer expects to get it reviewed fairly quickly. If anyone who has access into an established newspaper or journal would like a review copy, please let us know. We can provide a "two volume" e-text, or (if you don't mind waiting for regular mail, especially at this time of year), we can send a regular bound copy. If you want to get a copy even faster, it can be ordered from Amazon and Barnes and Noble. In Defense of Human Dignity is currently ranked 58 on Amazon's list of 100 most popular books on the natural law. Since Heinrich Rommen's The Natural Law and Dr. Charles Rice's 50 Questions on the Natural Law are 9 and 8, respectively, it's in good company.

• Walter Fauntroy is continuing to make great efforts to get Norm to the powers-that-be. It's difficult to tell sometimes in Washington just how successful this seed planting will be, but we hope to find out soon. Walter's efforts can be used as a model for others who want to see real changes introduced into the system, and illustrate the importance of Number 17 on the CESJ Code of Ethics: "There are three keys to gaining acceptance of revolutionary ideas: persistence, persistence, and persistence."

• As of this morning, we have had visitors from 31 different countries and 40 states and provinces in the United States and Canada to this blog over the past two months.

As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Keynes Reigns, or, A Meltdowner's Nightmare

We won't be posting tomorrow — another reason to give thanks, no doubt — so here is another "twofer" that went to both the Washington Post and the Wall Street Journal in response to their lead articles in this morning's editions. Due to the dreary sameness of the Keynesian approach — there are only so many ways to try and make it not sound like a disaster — very few changes in wording were necessary to adapt the letter to both newspapers.

Mindless adherence to discredited Keynesian economics is beginning to give off a definite stench of decay — to say nothing of highlighting the incredible absurdity of the belief that we can get out of the hole we're in by digging it deeper. ("U.S. Moves to Revive Consumer Lending," Washington Post, 11/26/08, A1, A10) True, if the promised portion of the $800 billion for the "credit markets" is lent for hard consumer assets such as land and housing, the new money will at least be asset backed.

As we've seen with the original $700 billion allocated to salvage the sub-prime mortgage crisis, however, there doesn't appear to be any solid reassurance that the hundreds of billions intended for home mortgages will actually find its way there — or will do so by bailing out Fannie Mae and Freddie Mac, reinforcing and rewarding their substandard lending practices. If the recent past is any guide, the purely inflationary $200 billion for student loans, car loans, and credit card debt will also expand, leaving people about to lose their homes holding the bag. The little add-on for "small business" loans — a good use of credit — seems likely to be ignored.

There is a way out of this mess, and it won't cost the taxpayer anything or increase the federal debt. Based on the good use of credit, that is, extending credit for the purchase of things that generate their own repayment, a program called "Capital Homesteading for Every Citizen" (from the book of the same title) has the potential to turn the economy around dramatically within a very short time. Capital Homesteading demonstrates that credit can be used for good, increasing the aggregate wealth of the economy, instead of passing on our debts to future generations.

Keynesian economics is as bankrupt as the system it is allegedly intended to save. It's about time we (and our leaders) started looking at something realistic instead of exempting ourselves from intellectual influences and slavishly following the ideas of a defunct economist.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Bailout or Buyout?

A short time ago we got an e-mail from one of our loyal readers. He asked, "Why cannot shares of the companies be issued to all citizens for the government bailouts? Banks can do all administrative matters as part of the bailout."

This is an excellent idea — which is why we've been pushing that idea all along, from the Conrail situation that helped bring the ESOP into existence in the early 1970s down to the current situation with the automakers.

The mechanisms are already in place, legally, to link the bailouts of individual companies to something like an ESOP (or an ESOP). We think priority in ownership ought to go to the workers, then suppliers and customers, and then the general public. This is what Capital Homesteading is designed to do. Banks and other financial institutions could handle the administration of each individual's Capital Homestead Account, but before the enactment of a Capital Homestead Act, it might be feasible with what we have in law already to set up S-Corp ESOPs that pass through full voting and dividend rights to the beneficial shareholders, and combine it with a supplier and consumer co-op. It might still require some additional enabling legislation for members of the general public to get shares on credit, tax deferred, but the bones of the proposal already exist.

All it takes is for the powers-that-be to listen to us and take us seriously, instead of trying to bloat up the amount and number of bailouts so that corporate executives can continue to fly to hearings in their private jets.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Problama for Obama

We've been a little busy, so the Washington Post and the Wall Street Journal have been getting off easy. The gloves are off, now — allowing for slight changes, we just sent the following letter to both of them:

President-elect Barack Obama is, in a sense, correct in that the United States — and the rest of the world — needs "economic stimulus." ("Obama Eyes $500 Billion in Stimulus; Paulson Weighs Ramping Up Aid Again," WSJ, 11/24/08, A1, A15; "Democrats' Stimulus Plan May Reach $700 Billion," Washington Post, 11/24/08, A1, A14.). Unfortunately, the Keynesian tactic of creating money to spend on non-productive consumption and government spending is exactly the wrong thing to do. It tries to solve the underlying problems by making them worse. If he is genuinely seeking a viable solution, Mr. Obama is thinking much too small.

Mr. Obama should not be asking for a mere $500 or $700 billion, but for $2 to $3 trillion. Instead of creating money to spend on consumption, rescuing gamblers, and increasing State ownership of private industry and infrastructure, however, as much money as is necessary can be created in a non-inflationary manner if it 1) results in investment in new equipment, technology, rentable space, or anything else that is "self-liquidating," that is, pays for itself out of future income, and 2) ownership of the investments is put in the hands of people who will use the income a) to repay the original acquisition loan, and b) afterwards spend the income on consumption.

Each year the U.S. economy adds between $2 to $3 trillion in new plant and equipment, rentable space, and infrastructure. Currently it does so in ways that concentrate ownership. If money for new investment were to be created by the commercial banking system and the central bank instead of relying on past savings, all new investment could be financed out of "future" or "forced" savings. Spending for investment that is broadly owned by people who will use the income first to repay their acquisition debt and thereafter for consumption instead of reinvestment would provide a lasting stimulus instead of a one-time infusion of questionable benefit. Investment that creates new owners increases ongoing demand for capital goods as well as consumer goods, and adds to aggregate savings (savings = investment) instead of increasing an already gargantuan public debt.

A program called "Capital Homesteading for Every Citizen," from the book of the same title, details how Mr. Obama can turn this country and the rest of the world around. The "Full Ownership and Employment Act of 2009" would be a good place to start. If Mr. Obama wants to spend money, he should do it wisely, not in ways that make the situation worse.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

News from the Network, Vol. 1, No. 13

Most of this week has been spent in meetings preparing for various events, and in responding to questions from various commentators. Unfortunately, some of the commentators become increasingly vague when asked for specifics of their critiques, and when pressed for details, unfortunately take refuge in ad hominem attack without presenting an argument based on reason. Not unnaturally, responding to this sort of thing takes a great deal of time that could be more productively spent doing something else . . . like writing blog entries. Nor can we leave the comments unanswered, for that would give the impression either that we did not have an answer, or that the critics were correct in their statements, some of which truly approach the surreal. Given that, then, here is this week's "hard" news.

• Norman Kurland will be speaking at the Washington, DC, "End the Fed" rally tomorrow (Saturday, November 22, 2008) outside the Federal Reserve Board of Governors building in downtown DC at 1 p.m. Norm will make the case that neither CESJ nor the Just Third Way advocate abolishing the Federal Reserve System, but rather reforming it to conform to its original purpose, with the addition of Kelsonian binary economics. Recommended reforms would terminate the State's power to monetize deficits and restrict all new money creation to productive projects, with self-liquidating zero-interest credit extended in ways that makes new owners out of people who currently own little or nothing in the way of capital. More information about the "End the Fed" rally can be found on their web site, http://endthefed.us/. Similar events will be held throughout the country on the same day. Reverend Walter Fauntroy is making space available at the New Bethel Baptist Church in Washington, DC for the organizing and planning group of the DC "End the Fed" event tonight (Friday, November 21, 2008) after 6 p.m. Everyone is invited to both events.

• CESJ met with Mr. Chris O'Connor of the Colonel John Fitzgerald Division, Ancient Order of Hibernians (AOH) of Arlington, Virginia, on Thursday, November 20, 2008, to present CESJ's Just Third Way as something that might assist the AOH in carrying out part of its social service mission. Mr. O'Connor is currently reading Michael D. Greaney's book, In Defense of Human Dignity (available from Amazon and Barnes and Noble), and was provided with copies of Curing World Poverty (1994), Capital Homesteading for Every Citizen (2004) and Father William Ferree's Introduction to Social Justice (1997).

• CESJ held its monthly Executive Committee meeting on Wednesday, November 19, 2008. Norman G. Kurland, Dawn K. Brohawn, Steve Neskis (via telephone), Robert Crane (via telephone), Rowland Brohawn, Michael D. Greaney, and Harriet Epstein attended. Lunch was served after the meeting. Harriet distributed small gifts obtained during her recent trip to Israel, which were greatly appreciated.

• Progress is being made on editing and formatting Harold G. Moulton's 1935 classic, The Formation of Capital. This is an important book, especially in light of the recent spate of bailouts and gross misuse of the commercial and central banking system that led to the present financial crisis. Dr. Moulton may have been the only economist of note in the 20th century who had a deep understanding of money, credit, and banking. Unfortunately, the prescription of Lord Keynes, not Dr. Moulton, was the blueprint for the New Deal and virtually all subsequent fiscal and monetary policy.

• William Cobbett's "long lost" book, The Emigrant's Guide (1829) is almost ready to go to the printer. The book consists of a series of letters written by people classed as "paupers" in England, but who, on reaching America, became owners of productive assets and contributing members of society. As one emigrant enthusiastically wrote to his parents, "America forever for me!" The Just Third Way seeks to make access to the means of acquiring and possessing productive capital as democratic as it was in early 19th century America by promoting Capital Homesteading and reform of the central and commercial banking system. This edition is particularly noteworthy for the addition of an in-depth foreword, extensive notes, an index, and a bibliography.

• Another "long lost" work, Father William Ferree's "Discourse on Social Charity" has been added to the current edition of Introduction to Social Justice (1948) for publication in a combined format. "Social Charity" was taken from what may be the only existing record of a talk Father Ferree gave in 1966 at a Marianist high school in New Jersey. The book is currently in editing and should be ready to go to the printer sometime in the current fiscal year.

• A package has been sent to Mr. A. J. Matt, Jr., editor and publisher of The Wanderer, a national weekly Catholic newspaper, in response to comments by one Dr. Rupert J. Ederer, former professor of economics at Buffalo State University, New York, that were published in the Wanderer's "From the Mail" column on October 23, 2008. Dr. Ederer's comments, while denigrating CESJ's Just Third Way, Chesterton's distributism, and the proposals of Henry George, were vague. Fortunately, CESJ is in possession of some of Dr. Ederer's writings in which he declares that he believes that private property, contrary to natural law theory and explicit teachings of Aristotle, Aquinas, Maimonides, Ibn Khaldûn, and many popes, is "prudential matter," meaning that it is not a natural right. Dr. Ederer hinted that CESJ was somehow subverting Catholic social teaching, which is based on the natural law, as is the social teaching of all religions and philosophies in one form or another. Assuming that Dr. Ederer's innovative views on private property are at the heart of his one-sided dispute with CESJ, a careful explanation of CESJ's position on private property was prepared and sent to Mr. Matt, along with copies of CESJ publications, as well as letters from Vatican officials attesting to CESJ's interfaith efforts to advance Catholic social teaching. Selections from the letter to Mr. Matt will be published on this blog over the coming weeks.

• Mr. Rodney Shakespeare, co-author with Robert H. A. Ashford of Binary Economics: The New Paradigm (1999) has been engaging in an e-mail exchange with various members of CESJ over the issue of whether allowing a government to create money for public works is a basic principle of binary economics, or a barely-tolerable expedient that can only be justified in an emergency. Mr. Shakespeare takes the former position, and, although he is a barrister, has failed to make a case.

• As of this morning, we have had visitors from 33 different countries and 43 states and provinces in the United States and Canada to this blog over the past two months.

As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

"Now What?": Capital Credit Insurance

Last week Slate magazine published a review of a new book by Matthew Bishop and Michael Green, Philanthrocapitalism: How the Rich Can Save the World.

"The Rise and (Potential) Fall of Philanthrocapitalism: Billionaires brought their business sense and ambition to charitable giving. Now what?" as the review by Georgia Levenson Keohane was somewhat cumbersomely titled, focused on how current economic conditions may effect "philanthrocapitalism," and analyzing the effectiveness of a "'movement' of philanthropists has 'set out to change the world.'"

From the point of the Just Third Way, however, the only thing that "philanthrocapitalism" has done is perpetuate an unjust system. "Philanthrocapitalists" probably have their hearts in the right place, and they have admittedly done a great deal of good in the realm of individual charity. What they have left out of their programs, however, is "social charity," the virtue that adjures us to love our institutions as we love ourselves, just as individual charity has us love our neighbor as ourselves.

Philanthropic programs that keep the current system running are not the answer, regardless how much wealth is applied to the task. What is needed is a fundamental restructuring of the social order, as Pope Pius XI, the head of the Catholic Church at the time, explained in 1931 in his "encyclical," Quadragesimo Anno, "On the Restructuring of the Social Order." The program, reiterating what Pope Leo XIII had said forty years previously in Rerum Novarum ("On the Relations Between Labor and Capital"), 1891: "The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners."

The popes did not mean consumer goods, even such "durables" as houses, cars, and access to consumer credit, although these (within reason) are usually good things. What the popes, in common with most political philosophers throughout history, were talking about is ownership of the means of production. In the modern age in most cases that translates into corporate equity with full rights of ownership vested in the shareholder . . . and that will require a massive and fundamental overhaul of the financial system as well as a return to some basic legal and philosophical principles on which the United States was founded.

One of the greatest barriers to full participation in the economic common good is lack of access to the means of acquiring and possessing private property in the means of production. This is so basic a right that George Mason, the "Father of the Bill of Rights," put it in the first paragraph of his draft of the Virginia Declaration of Rights, a document that served as a model for Jefferson's Declaration of Independence a month later:

That all men are by nature equally free and independent, and have certain inherent rights, of which they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.

As Louis Kelso pointed out, the "universal collateralization requirement" keeps more people from becoming owners than anything else. That is, you need money to make money, so that membership in the "club" of capital owners is closed to anyone without sufficient existing wealth to put up as collateral for a loan to purchase income-generating assets.

Rather than simply giving away money to support the current system, then, the "philanthrocapitalists" should fund a capital credit reinsurance pool to take the place of the collateral that the poor don't have. In this way they not only retain title to their wealth, they benefit society and individuals far more than simply funding programs that, despite the great amount of goodwill and effort involved, never seem to make any headway against the seemingly overwhelming problems that afflict the world.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

A Short Course on Banking Theory

A "bank" is defined as a financial institution that takes deposits, makes loans, and issues promissory notes. There are two basic types of banks, the "Bank of Deposit" (deposit bank), and the "Bank of Issue" (issue bank, or circulation bank).

A deposit bank aggregates the savings of depositors and loans them out. The amount of loans that can be made is strictly limited by the amounts that have been deposited. The most common forms of deposit bank are credit unions, savings and loans, and investment banks. A deposit bank is what most people think of when they hear the word "bank." This results in a serious misunderstanding of the greater part of banking theory, which is what underpins the bank of issue, more archaically referred to as a "bank of circulation" due to its function in providing a community with circulating media (i.e., currency).

An issue bank makes loans on financially feasible projects, taking in return a lien on the assets being created and creating demand deposits or currency out of the lien, which backs the deposit or currency ("promissory notes"). As the projects financed by the loans become profitable, the loans are repaid, and the currency or demand deposits are canceled. Thus, assuming that all projects are feasible, the money supply exactly matches the production of goods and services being financed in this manner. (Since we know that all projects are not equally feasible, and some actually fail, capital credit insurance can operate as collateral to replace the money spent without being productive, and the insurance proceeds are canceled in place of the loan that wasn't repaid — thus, the existing pool of savings (the insurance pool) is reduced by the same (or nearly the same) amount that the money supply was increased by the bad loan, countering the inflationary effect of a bad loan with the deflationary effect of canceling money out of existing savings.) The most common form of issue bank today is the commercial bank.

"Fractional reserve banking" is an attempt to combine the existing liquidity (money) that a bank of deposit has with the ability of a bank of issue to create liquidity. A bank using fractional reserve banking can, in theory, loan out 100% of the cash on deposit. Practically speaking, however, if a bank did that, there would be nothing on hand to cover the daily demand for cash payouts. If a bank discovers that, for example, only 20% of its total deposits are likely to be demanded in the form of cash at any time, it can loan out 80%, retaining a "fraction" of its assets in the form of cash reserves (hence "fractional reserve banking"). If the bank has the power to create money, it can (again in theory, practice is somewhat different due to banking laws), it can use its existing cash reserves, and create money in the form of demand deposits by making loans, preferably for assets that will generate cash in the future to repay the loans and allow the bank to cancel the money it previously created. As long as the amount of new money does not cause the percentage of cash reserves to fall below the level required to satisfy the daily demand for cash, everything (in theory) should be fine.

A central bank is a hybrid creature. It is intended to be a bank of issue for commercial banks, but a bank of deposit for a government. Under the distortions that galloped into our financial system as a result of the hegemony of Lord Keynes, however, this has been reversed. The Federal Reserve functions largely as a bank of deposit for commercial banks, but a bank of issue for the State — a recipe for disaster. What we propose is to reform this and return the Federal Reserve to its original purpose by restoring its original character. By instituting a 100% reserve requirement for commercial banks to be solely in the form of cash (demand deposits) or qualified government securities, the Federal Reserve will no longer have any reason to deal in "secondary" government securities to affect reserve requirements — that only applies in fractional reserve banking, not 100% reserve banking. By adding the expanded ownership features of Capital Homesteading, a major (and relatively "painless") reform of the financial system can be carried out, a reform that does not rely on taxing the poor to support the rich, or vice versa.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

For Your Viewing Pleasure: "The Last Laugh"

Here is a link to a video that, in addition to being very entertaining, also manages to summarize in a very pithy and humorous fashion how the sub-prime mortgage crisis kick-started the financial meltdown. Just as we've been trying to say (in less humorous and much more lengthy fashion), the underlying problem was the misuse of credit, coupled with economic power concentrated in the hands of a relatively few people.

When a single individual uses credit unwisely for consumption or speculation, only that individual and those from whom he or she borrowed suffer when he or she cannot pay back the money. When the misuse of credit for consumption, speculation, and government expenditures becomes systemic, however, the entire financial arrangement of society is endangered and private property is undermined. Further, political structures are weakened or destroyed, along with individual and personal sovereignty, social stability, and a country's international position, as Henry C. Adams warned in his 1898 monograph Public Debt: An Essay in the Science of Finance.

By the way, we did not add the Spanish subtitles, although they should be very useful.

Our Feature Presentation

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

The Path Not Taken

By Jether Giacomini, Guest Blogger, Saõ Paulo, Brazil

After the Industrial Revolution, production of goods and services became capital intensive. That is, apparently many people became unable to earn a living solely through their labor power.

At this point, humanity had two paths to follow. One was to devise a way to make everyone an owner of capital instruments, making them able to earn a living in a post-industrial world. Another was not to devise a way to make everyone an owner of capital instruments, letting many of them unable to earn a living in a post-industrial world.

Humanity chose the latter. What happened? Well, what happens if you can't earn a living? You die, you are dependent, you rob (that is, you are dependent, but you coerce somebody to sustain you). Can you believe that humanity chose to die, to be dependent upon people who can earn a living or people who cannot, but steal who can, and rob (another thief or somebody productive through his labor and/or capital)?

Sad, but true. We live in a Culture of Death, our institutions are still very barbaric, they were not perfected, brought up to the design of the U.S. Constitution when advanced industrial economies came into existence. There will be no true capitalist democracy until every household participates in the production primarily through capital instruments. U.S. or U.S.S.R., does not matter in this respect, both chose to not make everyone capable of earning a living in this new society, they chose the other three "alternatives."

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

News from the Network, Vol. 1, No. 12

Most of the events of the week have been in preparation for what we hope will happen, rather than what has happened, making for another “thin” news week. Despite that, there have been a number of significant occurrences . . . we just don’t have enough information, or events haven’t proceeded far enough to have anything to say about them. Here, however, is this week’s roundup.

• Through a connection made by CESJ friend Daniel Moore of Ohio, Norman Kurland has been invited to be a speaker at the Washington, DC, "End the Fed" rally to be held outside the Federal Reserve Board of Governors building in downtown DC at 1 p.m. on Saturday, November 22, 2008. Neither CESJ nor the Just Third Way advocate abolishing the Federal Reserve System, but rather reforming it to conform to its original purpose, with the addition of Kelsonian binary economics. Recommended reforms would terminate the State's power to monetize deficits and restrict all new money creation to productive projects, with self-liquidating zero-interest credit extended in ways that makes new owners out of people who currently own little or nothing in the way of capital. More information about the "End the Fed" rally can be found on their web site. The music can be turned off by clicking on the left button right under the $2 bill halfway down the page. See also the video link to the speech by Adam Kokesh. Similar events will be held throughout the country on the 22nd. Reverend Walter Fauntroy is making space available at the New Bethel Baptist Church in Washington, DC for the organizing and planning group of the DC "End the Fed" event to meet on Friday, November 21, 2008 after 6 p.m. Everyone is invited to both events. To see the effect that Capital Homesteading will have on a typical individual, see the projections developed by CESJ.

• Mr. Timothy A. Dickel, principal of Mater Dei High School in Evansville, Indiana, sent a letter thanking CESJ for its contribution of a copy of In Defense of Human Dignity by alumnus Michael D. Greaney (available from both Amazon and Barnes and Noble), and indicating that a number of teachers have expressed interest in the book as a resource in the school's social justice program. We hope that others will introduce the book (and the ideas) to local schools and libraries.

• On Wednesday of this week, Norman Kurland attended a presentation by the United States Institute of Peace on Abrahamic Alternatives to War: Jewish, Christian, and Muslim Perspectives on Just Peacemaking. Norm reported that their principles appear to be consistent with the Just Third Way, while the techniques of what they call "just peace making" seemed to be similar, up to a point, with those of social justice. The materials available through their web site appear to offer practical strategies for peaceful resolution of religious, economic, political and diplomatic conflicts from the community level on up to the global level.

• As of this morning, we have had visitors from 34 different countries and 44 states and provinces in the United States and Canada to this blog over the past two months.

As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

What is "Property"?

We've been having an interesting discussion over a number of years with a traditional academic (an economist), who has had difficulties understanding some of the principles underlying Louis Kelso's binary economics. After some back and forth, we discovered that this economist — in common with many other economists, and even lawyers — wasn't clear on the meaning of "private property," a cornerstone not only of binary economics, but the entire social order. This economist has the fixed belief that private property does not come under the virtue of justice, but of prudence, that is, whether people are allowed to own is up to society to determine, usually in the person of the State.

Since we're discussing binary economics, let's begin with Kelso's definition of property.

Property is an aggregate of the rights, powers and privileges, recognized by the laws of the nation, which an individual may possess with respect to various objects. Property is not the object owned, but the sum total of the "rights" which an individual may "own" in such an object. These in general include the rights of (1) possessing, (2) excluding others, (3) disposing or transferring, (4) using, (5) enjoying the fruits, profits, product or increase, and (6) destroying or injuring, if the owner so desires. In a civilized society, these rights are only as effective as the laws which provide for their enforcement. English common law, adopted into the fabric of American law, recognizes that the rights of property are subject to the limitations that (1) things owned may not be so used as to injure others or the property of others, and (2) they may not be used in ways contrary to the general welfare of the people as a whole. From this definition of private property, a purely functional and practical understanding of the nature of property becomes clear. Property in everyday life is the right of control.

From this understanding of private property within the structure of human law, we go to the institution as part of the natural law. As the universal prohibition against theft of the "fruits, profits, product or increase" from what one owns (i.e., both one's body and one's non-human assets) demonstrates (and the popes have taught), the right to be an owner is part of the natural law. As Dr. Heinrich Rommen, one of Germany's premier jurists before escaping from the Nazis, a student of Father Heinrich Pesch, and a member of the Königswinterkreis (which also included Father Oswald von Nel Breuning, Gustav Gundlach, Franz Müller, and Goetz Briefs), noted,

"Thou shalt not steal" presupposes the institution of private property as pertaining to the natural law; but not, for example, the feudal property arrangements of the Middle Ages or the modern capitalist system. Since the natural law lays down general norms only, it is the function of the positive law to undertake the concrete, detailed regulation of real and personal property and to prescribe the formalities for conveyance of ownership. (The Natural Law, 1947.)

Here we have the basis for understanding why, if private property is "prudential matter," property becomes merely a grant to be given or revoked by society in the person of the State. This necessarily grants overwhelming power to the State, and concentrates that power in the hands of the few rather than the many. Property becomes not private, but a public good subject to centralized administration by the State, granted to individuals or groups, and revoked at will, employed by an elite to gain and maintain control over others, thereby offending against others' human dignity.

Property is important because, except for human labor itself, nothing connects a person to the common good in a more intimate or secure fashion. By denying (abolishing) private property, the human person is cut off from the "ability for doing" that property confers, that is, "power." Without property, the human person is dependent on whoever possesses property, and is subject to control, more or less complete, depending on the will of whoever owns. Worse, without power, the human person is unable to exercise his or her capacity to acquire and develop virtue ("pursue happiness"), and thereby develop more fully as a human being. When power is centralized in the State, as happens when private property is abolished, persons become "mere creatures of the State," to be controlled, used, or disposed of as the State sees fit.

This is because property is not the thing owned, but the set of social relationships that define how an "owner" relates to the thing owned, and to other people with respect to the thing owned. Property confers power because in all codes of law property is the right of control. When control or the right to the enjoyment of the fruits of ownership (income) are taken away, property is abolished.

Being based securely on widespread private property in the means of production — and thus on the natural law — CESJ's Just Third Way provides a blueprint for restructuring the social order in conformity with humanity's true nature, consistent with the natural law, and thus God's divine Nature, on which (in Thomist philosophy) the natural law is based. That being the case, the Just Third Way and Kelso's binary theory of economics are not only consistent with the natural law that provides the basis for every justly-structured society and economy, they offer the most effective means to empower people economically to both just wages and just profits.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

"Where Obama Can Be Bold"

In keeping with our policy of offering unsolicited advice to world leaders, here is a copy of our latest letter to the Washington Post which, in common with virtually other media outlet throughout the globe, is giving truckloads of advice to President-elect Obama. The only difference is that our advice is good.

Dear Sir(s):

While phrasing it in terms of a "what if," Michael Gerson got it right in his column in today's Washington Post ("Where Obama Can Be Bold," A19). The best and wisest form of reparation is to open up equal opportunity to acquire and possess income-generating assets. This would be fully justified not as reparations for slavery, per se, but as fair compensation for the barriers imposed by our social structures on descendants of slaves.

The issue then becomes, should the taxpayer be required to pay? No. That would be as unjust as the barriers a government-funded reparations program would presumably be designed to lift. No one alive today was a slave owner, and most Americans are not descendants of someone who owned slaves in the Antebellum South. Further, the immense demands placed on the taxpayer in the current financial crisis leave no room for something as potentially divisive and costly as cash reparations.

There is, however, a solution — one that would benefit all Americans, and help put the country itself back on a sound financial footing. Consistent with the principles of Keynesian economics, Mr. Gerson assumes that the seed money for a tax-free savings account can only come from existing accumulations of wealth, i.e., the tax base, or savings borrowed by the government.

The fact is, however, that 1) investment can take place without first cutting consumption and saving, and 2) without the necessity of a class of very rich people who can afford to save enough to finance the capital needs of an economy. In his 1935 monograph The Formation of Capital, Dr. Harold Moulton, then president of the Brookings Institution demonstrated that between 1830 and 1930 the bulk of the financing for capital investment did not come from savings, but from the extension of bank credit. The loans were repaid out of "future" or "forced" savings after investment, instead of financed by cutting consumption before investment. In 1958 Louis O. Kelso invented the Employee Stock Ownership Plan ("ESOP") as a means whereby ordinary people could become owners of capital without first having to cut consumption and save, ideally financing the acquisition by proper use of the commercial banking system and a central bank.

Kelso's program, which the Center for Economic and Social Justice later developed into a proposal called "Capital Homesteading for Every Citizen," from the book with the same title, would provide financing for tax-deferred (not free) investment accounts — savings, as every economist knows, equals investment. By financing all of America's capital needs in this way, at present rates of growth, a child born today who received an annual equal right to borrow newly-created money for capital investment could accumulate in the neighborhood of $500,000 of income-generating capital assets by age 65, and increase gross taxable dividend income over the same period by nearly $2 million. Under the tax reforms recommended under Capital Homesteading, a "typical" family of four would pay no income or payroll taxes until aggregate family income exceeded $100,000.

In the initial stages of a Capital Homesteading program it would be perfectly feasible to double, even triple the amount that individuals whose median net worth fell below a certain threshold could borrow for vetted, financially feasible investments. This would build in an automatic reparations feature without forcing anyone through the humiliating and possibly impossible process of proving that they or their ancestors were sufficiently oppressed to meet bureaucrats' preconceived notions.

Finally, of course, this could all be done without a cent of taxpayer money. It even has the potential to get the government out of the bailout business, thus taking the immense load off the back of current and future taxpayers.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Falling Real Price of Labor

Another letter to the Wall Street Journal, this one regarding the decline in the "real" price of labor (i.e., "wages"), and what could be done about it other than complain.

In his "Ahead of the Tape" column in Friday's Wall Street Journal, Mr. Mark Gongloff directs attention to the falling cost of labor as the economic situation worsens and the number of unemployed increases. ("Cost of Labor Is the Latest Shoe to Drop," WSJ, 11/07/08, C1.) The irony is that, while social reformers and workers have excoriated the laws of supply and demand for centuries, there is a "simple" way to make such economic laws work for the advantage of everyone, instead of to the disadvantage of the majority.

The laws of supply and demand, like other economic laws, are based on observed human nature, and thus the "natural law." When something is in short supply, people tend to value it more highly than that which is common. When a thing is plentiful, people tend to value it less than that which is insufficient. Further, no one willingly pays more than he or she believes something to be worth, or accepts less, in an exchange.

Workers, unions, and politicians concerned with the falling price of labor need to develop a means of raising the price of labor legitimately, without coercion, and without State intervention to set and maintain artificial prices. There is a method available, and was briefly outlined in Alexis de Tocqueville's sociological study of the Jacksonian era, Democracy in America:

In the end the interest of the working class must prevail; for the high wages which they have already obtained make them every day less dependent on their masters; and as they grow more independent, they have greater facilities for obtaining a further increase of wages. I shall take for example that branch of productive industry which is still at the present day the most generally followed in France, and in almost all the countries of the world - I mean the cultivation of the soil. In France most of those who labor for hire in agriculture, are themselves owners of certain plots of ground, which just enable them to subsist without working for anyone else. When these laborers come to offer their services to a neighboring landowner or farmer, if he refuses them a certain rate of wages, they retire to their own small property and await another opportunity. (Vol. II, Book 3, Ch. VII)

De Tocqueville's "mistake" was to presume that the only way workers could save and acquire a capital stake is to cut consumption, save, then invest. As Dr. Harold Moulton proved in his 1935 treatise, The Formation of Capital, that is not the case. Money can be - and was - created by the commercial banking system to finance investment in projects that generated sufficient income to repay the original loans and thereafter furnish income for the new owner of capital. As long as money isn't created for speculation, or government or consumer spending, the effect is non-inflationary, and results in an asset-backed currency.

When we add the thought of Louis O. Kelso and Mortimer J. Adler from The Capitalist Manifesto (1958) and The New Capitalists (1961), we provide the "missing link" between de Tocqueville and Moulton. Kelso (best known as the inventor of the ESOP, "Employee Stock Ownership Plan"), advocated ordinary workers gaining access to the means of acquiring and possessing capital, which translates into democratic access to newly-created money and credit for financially feasible investment (again, not for government or consumer spending, or for speculation, or in ways that concentrate ownership of the newly-formed capital).

The clue is in the subtitle of The New Capitalists: "How to Free Economic Growth from the Slavery of Savings." Creating new money by extending credit for capital investment in ways that make owners of capital out of people who formerly owned little or nothing in the way of income-generating assets, an economy regains its vitality, and growth is fostered in financially responsible ways without undue State action or interference.

A program that meets these criteria is Capital Homesteading for Every Citizen, from the book with the same title. Rather than bewailing the falling price of labor, workers, unions, and politicians should be investigating ways to make the laws of supply and demand work for them, rather than against them.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Supply and Demand for Labor

Probably having had its fill of election news (like most of America), the Wall Street Journal has returned to the somewhat more important question of where people's next meals are coming from, specifically, the projected falls in the real wage rate. The problem is that, while doing a good job of pointing out the danger, the WSJ does nothing to direct people towards a viable solution. Here is our effort to alert them to the possibilities inherent in Capital Homesteading.

Dear Sir(s):

In his "Ahead of the Tape" column in Friday's Wall Street Journal, Mr. Mark Gongloff directs attention to the falling cost of labor as the economic situation worsens and the number of unemployed increases. ("Cost of Labor Is the Latest Shoe to Drop," WSJ, 11/07/08, C1.) The irony is that, while social reformers and workers have excoriated the laws of supply and demand for centuries, there is a "simple" way to make such economic laws work for the advantage of everyone, instead of to the disadvantage of the majority.

The laws of supply and demand, like other economic laws, are based on observed human nature, and thus the "natural law." When something is in short supply, people tend to value it more highly than that which is common. When a thing is plentiful, people tend to value it less than that which is insufficient. Further, no one willingly pays more than he or she believes something to be worth, or accepts less, in an exchange.

Workers, unions, and politicians concerned with the falling price of labor need to develop a means of raising the price of labor legitimately, without coercion, and without State intervention to set and maintain artificial prices. There is a method available, and was briefly outlined in Alexis de Tocqueville's sociological study of the Jacksonian era, Democracy in America:

In the end the interest of the working class must prevail; for the high wages which they have already obtained make them every day less dependent on their masters; and as they grow more independent, they have greater facilities for obtaining a further increase of wages. I shall take for example that branch of productive industry which is still at the present day the most generally followed in France, and in almost all the countries of the world — I mean the cultivation of the soil. In France most of those who labor for hire in agriculture, are themselves owners of certain plots of ground, which just enable them to subsist without working for anyone else. When these laborers come to offer their services to a neighboring landowner or farmer, if he refuses them a certain rate of wages, they retire to their own small property and await another opportunity. (Vol. II, Book 3, Ch. VII)

De Tocqueville's "mistake" was to presume that the only way workers could save and acquire a capital stake is to cut consumption, save, then invest. As Dr. Harold Moulton proved in his 1935 treatise, The Formation of Capital, that is not the case. Money can be — and was — created by the commercial banking system to finance investment in projects that generated sufficient income to repay the original loans and thereafter furnish income for the new owner of capital. As long as money isn't created for speculation, or government or consumer spending, the effect is non-inflationary, and results in an asset-backed currency.

When we add the thought of Louis O. Kelso and Mortimer J. Adler from The Capitalist Manifesto (1958) and The New Capitalists (1961), we provide the "missing link" between de Tocqueville and Moulton. Kelso (best known as the inventor of the ESOP, "Employee Stock Ownership Plan"), advocated ordinary workers gaining access to the means of acquiring and possessing capital, which translates into democratic access to newly-created money and credit for financially feasible investment (again, not for government or consumer spending, or for speculation, or in ways that concentrate ownership of the newly-formed capital).

The clue is in the subtitle of The New Capitalists: "How to Free Economic Growth from the Slavery of Savings." Creating new money by extending credit for capital investment in ways that make owners of capital out of people who formerly owned little or nothing in the way of income-generating assets, an economy regains its vitality, and growth is fostered in financially responsible ways without undue State action or interference.

A program that meets these criteria is Capital Homesteading for Every Citizen, from the book with the same title. Rather than bewailing the falling price of labor, workers, unions, and politicians should be investigating ways to make the laws of supply and demand work for them, rather than against them.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Is it Time for a New Party?

Predictably, the Wall Street Journal is projecting disaster for President-elect Obama. ("Review and Outlook: Obama's Real Opposition," WSJ, 11/06/08, A18.) In this instance, however, it does not appear to be the sort of automatic gainsaying that generally passes for argument these days. Mr. Obama faces a very serious challenge from the entrenched interests in Congress, which the Wall Street Journal, probably with a high degree of accuracy, likens to the great feudal magnates who (contrary to popular historical myths) in many cases managed to subvert or derail the policies and programs of the executives of the day, then known as "kings" and "princes." It wasn't until the early modern age and the rise of the nation state that kings were able in many cases to centralize authority, often at the expense of local autonomy and by means of concentration of power, both economic and political, in the hands of a few.

Mr. Obama performed a near-miracle in bringing together the Democratic Party and getting it behind him. In the process, he had to make promises to a large number of special interest groups, especially the powerful "barons" in Congress. Like the magnates of old, however, all of these have their own agendas, many of which may be at odds with each other, and some of which may even be contrary to Mr. Obama's overall proposal to unify the country around something other than fear or detestation of President Bush.

Somewhat ironically, Mr. Obama may find that salvaging success from his victory may be a much harder task than the victory itself. The Democratic Party managed to pull itself together for the election, but it remains to be seen whether it can stay together long enough for the president-elect to reconcile what at this point seem to be some very irreconcilable interests, any one of which could throw a serious monkey wrench into the works.

If the Democratic Party is on shaky ground, however, the Republican Party is in a shambles. The buzz on the internet yesterday was whether Sarah Palin can pull the Grand Old Party together. With all due respect, Mrs. Palin is probably not the person to do any such thing. Frankly, it may be time for the Republican Party to dissolve itself, and for another party to take its place, one with a more coherent vision and sound strategy.

We realize that this is a touchy subject, especially when the Republican Party is involved. No good Republican (and we have yet to hear anyone describe him- or herself as a bad one) could possibly forget the example of the ill-fated "Bull Moose Party" (officially, the "National Republican Progressive League"), formed by Senator Robert La Follette in 1911. The new party ran Theodore Roosevelt for president in 1912. Roosevelt got 25% of the popular vote, which split the Republican Party, and brought Woodrow Wilson into power on the Democratic ticket.

With the example of the Bull Moose Party in front of them, Republicans are going to be very leery of any such proposal. They are going to have to keep in mind, however, that the Bull Moose Party was formed in opposition to what was perceived as the dinosaur conservatism of the Republican Party controlled by President Taft, but also to oppose the "radicalism" of the Democratic Party; it was construed as a progressive alternative to outdated conservatism and unthinking liberalism.

Neither the Republicans nor the Democrats of today are as unified as those of nearly a century ago. There need be no fear of splitting a party — that's already been done. The Democrats have managed a temporary internal truce in the face of a common "enemy" (who, if precedent is any indication, will be judged much more kindly by history), while the Republicans appear to have dissolved. A truly progressive alternative along the lines of the "American Revolutionary Party" may be just the thing to bring together moderates in both parties. Frankly, neither party has anything to lose by taking a look at the platform.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).