The OTHER Irish Disaster

No, this is not a posting on the situation at the University of Notre Dame, where the president, the Rev. John Jenkins, C.S.C., has openly flouted explicit instructions from the U.S. Bishops' Conference and directives from the Vatican, and ignored "hints" from prominent Catholics and petitions from concerned students, faculty, alumni, and friends of the University in extending an invitation to Mr. Obama to speak at this year's Commencement. This is, rather, another attempt to reach the powers-that-be in Ireland and alert them to the possibilities offered by Capital Homesteading and the Just Third Way for solving the current economic crisis. This is a slightly edited version of a letter we sent to Dr. Alan Barrett of the Economic and Social Research Institute (ESRI) in Dublin, www.esri.ie, the leading think tank in Éire.

Dear Dr. Barrett:

The article in yesterday's Irish Independent, prepared from a review provided by your organization ("Republic's Economy is Fastest Shrinking in Developed World") gives a much-needed warning about the direction in which the current economic crisis is leading not only Ireland, but the world. Paradoxically, your statement quoted at the end of the article to the effect that it is too early to decide whether the proposed measures will be adequate suggests that there is hope — if only because what you said indicates a certain openness of mind to innovative solutions that are both financially feasible and ecologically sound.

In view of that, I would like briefly to introduce the work of the Center for Economic and Social Justice ("CESJ"), www.cesj.org, to you, and then suggest some possible areas of cooperation between your organization, and our all-volunteer think tank and its interfaith membership.

CESJ was founded in 1984 by a small group of Jews, Christians, Muslims, and others who came together on the basis of a set of shared values based on the natural law tradition of the west to promote the economic justice principles developed by Dr. Louis O. Kelso and Dr. Mortimer J. Adler, and the social doctrine of Pope Pius XI as analyzed by "America's greatest social philosopher," Father William J. Ferree, S.M., Ph.D., who was one of CESJ's co-founders.

Kelso and Adler's work is best set forth in the two books they co-authored, both with misleading titles but profound thought, The Capitalist Manifesto (1958) and The New Capitalists: A Proposal to Free Economic Growth from the Slavery of Savings (1961). Louis Kelso is best known as the inventor of the Employee Stock Ownership Plan ("ESOP"), a financing vehicle that has resulted in more than 11 million workers becoming part owners of the more than 11,000 companies for which they work. Mortimer Adler, as you are probably aware, designed the "Great Books" program at the University of Chicago, Illinois, and was considered the premier American Aristotelian of the 20th century.

Father Ferree was, at different times, president of Chaminade College in Honolulu, Hawaii, Rector of the Catholic University of Puerto Rico, and Chairman of Dayton University. His most important work was his doctoral thesis, The Act of Social Justice (1941) in which he explained Pope Pius XI's revolutionary breakthrough in the field of social morality. At the time of his death in 1985, Father Ferree was hard at work on a new book intended to integrate the economic justice principles developed by Kelso and Adler into the social teachings of the Catholic Church.

After reviewing the work of your institute as described on your website, I believe that an approach CESJ calls, "The Just Third Way," especially as embodied in our "Capital Homesteading" proposal, might have much to offer you. In particular, we have specific proposals designed to address the problem areas targeted in the article in the Irish Independent:

Unemployment. Demand for capital and labor follows increased consumer demand. Economic growth and thus job creation thus results from increases in consumer spending, as Dr. Harold Moulton demonstrated in his 1935 monograph, The Formation of Capital. Consistent with "Say's Law of Markets," which states that production equals income, and thus supply generates its own demand, and demand generates its own supply, the Just Third Way addresses the problem of unemployment by opening up democratic access to capital credit for new, financially feasible investment. As new capital is formed and financed in ways that allow first the workers, and then every citizen to share equitably in the ownership of the new capital, jobs are created first to produce the capital, then to supply labor for the new or expanded productive enterprise. The wages paid during this process increases consumer demand, which leads to additional new capital formation and more job creation. Additionally, when companies can obtain financing for new capital by selling shares to the workers and other citizens instead of retaining earnings, all earnings above working capital needs can be paid out, further increasing consumption income and thus effective demand, once the workers and other citizens have paid for their shares out of dividends.

Housing. The Just Third Way would address the housing and building trades crisis with a new ownership/financing vehicle called the "Homeowners' Equity Corporation" ("HEC"). A HEC is a proposed for-profit stock corporation whose shareholders would be homeowners in danger of foreclosure. HECs — and there should be many, to provide redundancy, lower risk, and ensure competition in a community — would purchase distressed properties at the current market value. HECs would obtain acquisition loans from commercial banks, which in turn would discount the loans at the central bank at a rate reflecting transaction costs and a revised risk premium. The homes could then be leased at a realistic market rate to their former owners or new tenants. The tenant would earn shares in the HEC as lease payments were made sufficient to cover debt service, maintenance, and taxes. When the acquisition loan for a particular property was fully paid, the tenant could exchange his or her HEC shares for title, or continue as a tenant/shareholder at a reduced lease payment, sufficient to cover maintenance and property taxes. Financing the purchase of properties through the central bank and its member banks would cost the taxpayer nothing and be the first step in restoring a currency backed by hard assets instead of government debt.

Deflation. The Just Third Way addresses the twin evils of inflation and deflation by the same method. In classic banking theory, money can be created at will without inflation if (and only if) the money is used to finance capital projects that pay for themselves out of their own future earnings. Because money can be created through the banking system and backed up by the central bank for as many financially feasible projects as are brought to commercial banks for financing, there is no danger of deflation. Because the money created for capital investment is canceled once the loan by means of which the money was created is repaid, there is no danger of inflation. There is always enough money, and the price level remains stable. The need to accumulate savings to use as collateral is eliminated by using capital credit insurance, backed up by a capital credit reinsurance pool to spread risk even further, instead of concentrating the risk in individual borrowers, lending institutions, or the State.

Government debt. The Just Third Way's Capital Homesteading proposal includes a complete reform of a nation's tax system. Much of the complexity found in the tax systems of many countries results from the basic assumption of Keynesian economics that capital formation cannot be financed except out of accumulated savings. While Keynes' assumption contradicts classic banking theory as well as historical fact analyzed by Dr. Harold Moulton, the world's tax systems reflect the presumed necessity of favoring the wealthy in order to induce them to save and reinvest their income to finance capital formation and thereby create jobs. This greatly reduces consumption income, and the government inflates the currency to increase effective demand so that "excess" production can be cleared. This lays the foundation of the erroneous Keynesian belief that there is a necessary trade-off between inflation and unemployment. This also greatly reduces the tax base, forcing the government to borrow both to meet its expenditures as well as to cause inflation to increase consumption and maintain the desired number of jobs artificially. Without the need to reduce the tax base by favoring the rich or make up for the decrease in effective demand by inflating the currency through government borrowing, the State can begin following sound, non-politically motivated monetary and fiscal policies and begin paying down debt without risking the harm that Keynes was convinced would result.

If these brief descriptions of some of our proposals intrigue you, I invite you to pay a visit to the CESJ website, www.cesj.org. I would draw your particular attention to the free download available of our book, Capital Homesteading for Every Citizen, as well as the paper on the HEC. If you have any questions, or if you would like to discuss anything on the website or grounds for possible future collaboration, you will want to make contact with Dr. Norman G. Kurland, president of CESJ. Dr. Kurland can be reached via e-mail telephone using the information given on the website.

Dr. Kurland's concern for justice for the poor has been evident since his work in the Civil Rights movement in the American south in the early 1960s, continuing through his collaboration with the late labor statesman Walter Reuther of the United Auto Workers in Reuther's "Citizens' Crusade Against Poverty." Later, Dr. Kurland was instrumental in persuading the late Senator Russell Long of Louisiana to champion the Employee Stock Ownership Plan ("ESOP") invented by Louis Kelso.

Dr. Kurland also served as Deputy Chairman for the Presidential Task Force on Project Economic Justice under President Ronald Reagan, and presented the report on CESJ's efforts to promote economic and social justice in a 1987 private audience with His Holiness Pope John Paul II, more fully described in CESJ's "accomplishments brochure." Most recently, Dr. Kurland has developed the concept of the "Natural Resource Bank" which would have the capacity to vest all inhabitants of a region with a direct, definable private property stake in the land and natural resources. Dr. Kurland was also influential in developing the HEC, described above.

Thank you. We look forward to hearing from you.

The State is God, God is the State, Part VII

As we saw in the previous posting in this series, putting even the safety of the State above the natural law leads ultimately to disaster. When we put the State above God, as the Newsweek article and advertisement suggested, the situation is, if possible, even worse. We reach almost the absolute nadir, however, when we base the natural law on our understanding of or belief in something we regard as being a revelation from God, rather than on the common consent of all mankind as to what constitutes "good."

The chief problem is that, if God is just, the precepts of the law cannot be binding on anyone who does not believe in a particular religion. It doesn't matter if the religion is officially recognized as an arm of the State, is believed by virtually everyone, or is the product of one individual's interpretation of what he believes to be a revelation from God. This is because the validity of the precepts relies on faith in a specific revelation (an expression of God's Will), not a conclusion based on human reason. To be punished for violating a precept based on a faith that you don't have is, obviously, a grave injustice, as faith in a particular revelation is, ultimately, a personal choice and an exercise of free will.

The great advantage to basing the natural law on what you believe to be God's Will, however, is obvious: you can do anything you want. All you have to do is assert your personal faith decision (or lack thereof), and convince enough people to go along with your idea(s) and interpretation(s). Basing things on your belief in, personal interpretation, and acceptance of a particular expression of God's Will removes any reliance on an objective standard (the common consent of all mankind as to what constitutes "good"), undermines reason (common sense), and allows you to stigmatize anyone with whom you disagree (or who disagrees with you) as forcing his morality on you, or as a liar for believing in something different from what you believe, or any other accusation you choose to make. This is because believing something makes it true, and all morality becomes "situational," as the Humanist Manifesto put it.

This might explain the anxiety of the federal government and such popular journals as Newsweek to make certain that people are convinced that belief in the "Christian God" (or, ultimately, any god) is outdated, outmoded, old-fashioned, and just plain ignorant, if not downright stupid. After all, you have the State there to provide your every need, even determine what is right and wrong by feeding you from websites that are the modern equivalent of the fruit of the tree of the knowledge of good and evil.

If people believed in an objective standard of right and wrong, as embodied in, for example, Christianity, Judaism, and Islam (whether or not you are a religious believer or adherent of any faith), the State would lose its power to dictate what it wants people to believe. Convincing people that the natural law is based on some superstitious religious believer's interpretation of a questionable expression of the Will of a God who probably doesn't even exist, is a significant victory in the struggle to establish the State as the sole authority and exclusive benefactor for all humanity. Attempts to persuade people to do what is right within a framework that bases the natural law on faith are instantly termed "forcing your morality on others" — which it is, for where there is no objective standard of morality (the natural law based on the common consent of all mankind as to what constitutes the "good"), everything is personal opinion.

Unfortunately, many religious believers have fallen into the trap of claiming that the essential precept of the natural law, "good is to be done," is because "God said so" (Will) rather than "God is so" (Nature or Intellect). The former claim can easily be rejected as a matter of personal belief, and thus opinion. The latter is impossible to reject, for, if man is made in the image and likeness of God, and the content of the natural law lies in the common consent of all mankind as to what constitutes the good, it can hardly be considered "personal," whether or not you believe in the God in whose image you are presumably made. That is because the law is being based not on an opinion or religious belief, but on an observable fact: what mankind has assumed to be good in all times and places. Specific religious belief, or any religious belief at all is not necessary to accept the truth of what can be subjected to objective verification.

Thus, the basis for the natural law, Will or Intellect, is not an obscure or esoteric point that has no relevance to modern life. Many of the enormous problems that afflict the modern world can be traced directly to people's unyielding conviction, bolstered by their personal faith, in their own, self-created religion, that usually turns into some variety of worship of the State. This is why the modern Nation State finds it necessary either to undermine independent religious belief beyond its control, or to establish legally an official State cult, enforced by law, with civil penalties attached to non-compliance. In either event, the State itself becomes the final authority on everything, or, as Marx put it (more or less), the State is God, God is the State.

The State is God, God is the State, Part VI

At the end of the film Judgment at Nuremberg, based on the third session of the Nuremberg trials after the Second World War, Ernst Janning (played by Burt Lancaster), a German judge who has been condemned to life imprisonment, says to the American Chief Judge Daniel Haywood (Spencer Tracy), "We did not know it would come to this." Judge Haywood replies with the line that closes the film, "Herr Janning, it came to this the first time you condemned a man you knew to be innocent."

Ostensibly a story about the conflict between patriotism and justice, Judgment at Nuremberg is actually a stark reminder of the dangers of using anything other than human reason's discernment of the natural law to determine the standards against which to measure human behavior. The judges of the Third Reich had convinced themselves that, because their country was in serious danger (which it was), any expedient was justified to use in saving it, including judicial murder, if by doing so they could remove some individual or group which their leaders had identified as the source of the danger.

Maximilian Schell, in what may be his most brilliant, if unsympathetic role as defense counsel Hans Rolfe, in an almost fiendishly accurate portrayal of legal positivism bases his case on everything except the actual guilt or lack thereof of the defendants.Rolfe , in fact, does not even dispute their guilt. He admits it, as do the defendants themselves.Rolfe , however, diverts attention away from the question whether the laws that the judges of the Reich enforced were in conformity with the natural law, and raises the question as to whether the people who were put to death were guilty of breaking the unjust laws.

When Rolfe begins making his case that the judges of the Reich had to enforce unjust laws to save Germany, it becomes too much for Ernst Janning, portrayed as one of Germany's premier legal scholars and jurists before the war. In a scene that might be interpreted as a personal redemption, Janning repudiates Rolfe's defense argument and admits he knew he was doing wrong when he did it, that he despised himself for every unjust decision. Janning makes it clear that he acted not out of a sense of justice, but out of fear — for his country, but most of all for himself. Janning and the other German judges are sentenced to life imprisonment.

As the real German jurist Dr. Heinrich Rommen pointed out in his book on the natural law, however, positivism has become so engrained in western culture over the past eight centuries that it nearly always manages to overcome human reason and natural law concepts of right and wrong for the sake of expedience. As Chief Judge Haywood and Defense Counsel Rolfe are collecting their papers at the end of the trial, Rolfe bets Haywood that all the defendants will be released within five years, due to the perceived necessity of obtaining Germany's help in the Cold War against the Soviet Union. Haywood compliments Rolfe on his handling of the case, predicts that he will go far . . . and declines to take the bet. At the end of the film, after Haywood has visited Janning as the American judge is on his way to the airport, a title card appears on the screen, confirming that all the defendants had indeed been released after serving only a few years of their life sentences.

While Judgment at Nuremberg used an obvious situation to make its point, the very obviousness of the point obscures it. People assume that what was done was wrong because "the Nazis" did it, not because it was wrong by nature itself. To this day we find many people asserting that there must be some flaw in the German national character that allowed them to give in to Hitler. They forget, ignore, or never knew that every tendency, even the philosophy itself that led to Hitler and the Holocaust is still with us today, and is much stronger and more pervasive now than then.

Basing political, social, or even individual acts on anything other than a sound understanding of the natural law derived from the common consent of all mankind as to what constitutes "good" inevitably results in disaster, regardless how much danger you might think you, your group, or your country is in. In the Gospel of John, the High Priest Caiphas is depicted as being concerned for the survival of the nation state of Judea . . . in which he was an important figure. In reference to Jesus, Caiphas declares that it is better that one innocent man should die than that the nation should perish, and is instrumental in trumping up charges against Jesus and in rousing the mob to demand Jesus' execution. Within a generation, Judea had ceased to exist.

The State is God, God is the State, Part V

If we assume that man creates God in man's own image and likeness, then (logically) man, not God, is the supreme ruler of the universe and the only standard for determining what is good or evil. Reality depends not on some objective actuality, but on subjective opinion. Everything becomes relative, based on the opinion of whoever can force others to accept his or her version of reality — for it becomes, ipso facto, reality by the mere fact that people "agree" on it. Black can become white, and up can become down, simply by convincing people that such is the case. You only think the Emperor is walking down the street naked, because your consciousness hasn't been raised and your perceptions corrected.

We can therefore easily understand the attraction that basing the natural law (and thus the social order) on the Will has for many people. In essence, you can do anything you want, as long as you have enough faith in your own interpretation, enough of an ego to maintain your position in the face of all argument and evidence to the contrary, enough inventiveness to dismiss objective facts and truth, and enough power to force others to comply with your will.

It is no accident that Leni Riefenstal's chronicle of the rise of the Nazi Party in Germany was titled, The Triumph of the Will. Nazism, which Dr. Rommen considered the culmination and necessary outcome of basing the natural law on the Will, nearly succeeded in imposing its personal morality on the whole world, and in destroying all notions of an objective moral standard that applies to every human being.

This is, in fact, why socialism, national or otherwise, is condemned by the Catholic Church, which bases its understanding of the natural law on the common, reasoned consent of all mankind as to what constitutes the good. It is not because socialism seeks the abolition of private property. Abolition of private property, acknowledged by Karl Marx as the essence of socialism, is nevertheless "only" a symptom of a much deeper problem: misunderstanding the nature of reality, of which God's Intellect, not any statement of His Will (however firmly believed), is the ultimate expression.

As Pope Pius XI stated in Quadragesimo Anno ("On the Restructuring of the Social Order"), 1931, "If Socialism, like all errors, contains some truth (which, moreover, the Supreme Pontiffs have never denied), it is based nevertheless on a theory of human society peculiar to itself and irreconcilable with true Christianity. Religious socialism, Christian socialism, are contradictory terms; no one can be at the same time a good Catholic and a true socialist." (§ 120).

The final issue we will consider in the next posting on this subject is why this is so, and why we can't simply base the natural law on our personal faith in something we believe to be a statement of God's Will without measuring it against the standard of human reason.

News from the Network, Vol. 2, No. 17

This has been a very busy week for the Just Third Way. A great many pots seem to be coming to the boil. We suggest that if you read anything in the following news items that interests you and you want to get actively involved in any of the initiatives, make contact with CESJ. Contact information is available on the CESJ website.

• On Saturday, April 18th, CESJ celebrated its 25th anniversary and annual meeting, whose theme this year was "Opening New Doors." The message was meant to convey a strategy for CESJ's network of members and friends to use their personal connections to arrange meetings for CESJ spokespersons with "prime movers" who could help communicate and implement Capital Homesteading and spread the message of the "Just Third Way." CESJ's strategic projects in East St. Louis, Illinois and with the American Auto Worker Ownership Committee's proposal for saving the Big Three Automakers were discussed. President Norman Kurland stressed that we need bold initiatives to reach out to others, particularly prime movers like President Barack Obama and Pope Benedict XVI, to present a new framework for solving major problems in which they can focus their leadership. We recognize that this may require a step-by-step series of contacts that will ultimately lead to a face-to-face meeting with the strategic audience. Such an outreach strategy enabled CESJ to have a private audience with Pope John Paul II and to have been appointed to President Reagan's Task Force on Project Economic Justice.

• On Monday, Norman Kurland, president of CESJ, was interviewed on tape at CESJ's offices by two Manhattan community cable TV shows, one segment for the Paula Gloria show and two segments of Molly Cheshire's show. Both commentators expressed appreciation for Dr. Kurland taking the time to explain some of the intricacies of Louis Kelso's "binary economics," from both the philosophical and practical standpoints, and stated that their understanding of Kelso and Adler's revolutionary breakthrough had been greatly deepened.

• On Tuesday, President Michele Mauder and Chairman Robert Mason of the American Auto Workers Ownership Committee (AAWOC) and Norman Kurland met with Congressional members and staff to present a "democratic, grassroots" proposal for saving and reorganizing the Big Three auto companies. (A fallback position is to target the profitable Jeep division as a national exemplar, since its sole location is in Toledo, Ohio, where rank-and-file workers and UAW local leadership already support the AAWOC strategy.)

The AAWOC, made up of active and retired members of the United Auto Workers, as well individuals coming from corporate management, is proposing a 100% worker buyout of the company through an "S-Corp ESOP." This would allow current workers and retirees to purchase failing auto companies at fair market value from the old creditors after going through Chapter 11 reorganization. This structure would also allow the reorganized companies to avoid all corporate income taxes, reduce rising fixed costs, and have workers begin to take a growing proportion of their compensation from the bottom line, out of profits. One innovation suggested was to allow "Section 1042" treatment for the creditors of the new "S-Corp ESOP" companies. (Under current law, owners who sell their shares to a "C-Corp ESOP" can defer paying taxes on the sale by rolling the proceeds into replacement securities.)

The AAWOC's plan goes beyond the typical ESOP, and embodies features of Justice-Based Management in order to instill a new leadership philosophy and corporate culture based on free market principles of justice. In addition, the AAWOC would like to help the UAW move from being a wage system labor union, to an "ownership union" that would negotiate for maximum ownership benefits, rights and roles of its members.

• On Wednesday, after a week's postponement due to heavy rainstorms, the 2009 "Putting People First" Rally at the Federal Reserve in Washington, D.C. was held by the newly formed "Coalition for Capital Homesteading." Despite a downpour that threatened to wash out the rally once again, the rain abated long enough to allow a lively series of presentations to commence. The rally received the friendly attention of the Federal Reserve security officers who have become familiar with CESJ's annual event. Two video crews covered the event that will be broadcast on CESJ's Youtube channel (JustThirdWay).

Former Congressman and Rev. Walter Fauntroy led the rally as Master of Ceremonies, explaining why we are calling for Federal Reserve policies that "puts people first" by creating capital ownership opportunities for every citizen. The tone of the rally was set with a poem ("Justice Q &A's") read by CESJ's Director of Communications Dawn Brohawn, who had co-authored it with CESJ director Harriet Epstein to commemorate the Fed rally.

Speakers included Mayor Alvin Parks of East St. Louis, Illinois and Mayor Nathaniel O'Bannon of Brooklyn, Illinois, who are part of 11 communities in the Metro East area of Southern Illinois who are introducing a bold community initiative for "energy independence and citizen ownership." This project will launch and develop advanced waste-to-energy technologies developed by the space and defense agencies, using a legal vehicle based on the community investment corporation invented by CESJ, called the "Metro East Citizens Land Cooperative." The MECLC will enable every man, woman and child in the area to acquire lifetime, non-transferable voting shares in this for-profit, professionally managed land development corporation, giving them equal distributions of the corporation's profits from land leasing and the new energy systems.

Also speaking at the Fed rally were Michele Mauder, President and Robert Mason, Chairman of the American Auto Worker Ownership Council, discussing their 100% worker buyout alternative for saving the Big Three Auto Companies. CESJ President Norm Kurland spoke on Capital Homesteading for every citizen, democratizing the Federal Reserve, and the monetary policy changes called for in the "Declaration of Monetary Justice" that was signed by every participant at the rally.

Antonio Betancourt of the Summit Council for World Peace spoke on the global implications of Capital Homesteading for fostering peace and a more equitable global marketplace. Dr. Sheikh Ahmed Subhy Mansour, an Islamic scholar in political exile from Egypt for his human rights advocacy, who heads the International Quranic Center, closed the rally with a benediction calling for Justice as the guiding principle for the world. At the end of the rally, the participants marched around the Federal Reserve and presented the signed Declaration of Monetary Justice to an official of the Federal Reserve for delivery to Chairman Ben Bernanke. (For information on the Fed Rally, to sign the Declaration or to join the Coalition for Capital Homesteading, go to the "Fed Rally" website.)

• Following the rally Mayor Parks and Mayor O'Bannon and some of the speakers went to various meetings on Capitol Hill to present their plans to legislators and their staff. On Thursday, Michele Mauder, Robert Mason, Walter Fauntroy and Norman Kurland held a legislative briefing on Capitol Hill, arranged by Detroit Congressman John Conyers (D-MI), to present the worker ownership strategy. Staffers of Representatives John Conyers and Marcy Kaptur's (D-OH), and Senator Voinovich (R-OH) attended. Rep. Kaptur's legislative assistant suggested that they would get co-signers for a proposal to fund a minority report and feasibility study of the worker ownership proposal, as part of the $7 million contract provided to the Boston Consulting Group. Former Congressman Walter Fauntroy said he would arrange a meeting with Congressman Conyers to open the door to the President's Auto Task Force to present this proposal. In the afternoon, the two mayors, Walter Fauntroy, Norman Kurland and others in the Coalition met with congressional staffers and Senator Roland Burris (D-IL) to generate support for the Metro East Citizens' Land Cooperative project to promote energy independence and citizen ownership.

• As of this morning, we have had visitors from 32 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, with Canada, Brazil, and Finland. People in Egypt and Hong Kong spent the most time on the blog. The most popular posting is still "Cut Us In or Cut It Out" (meaning open up democratic access to capital credit, and stop using the nation's central bank to finance government deficits and bailout failed companies. The next four most popular are on Abraham Lincoln, with the series on "Easter Economics" fast accumulating readers. The rest of the top ten deal with the increasingly obvious flaws in Keynesian economics.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

The State is God, God is the State, Part IV

We are all familiar with the mantras developed by those who adhere to an understanding of the natural law based on a personal interpretation of the Will of God, or whatever happens to be put in the place of God. "God wills it." "It's perfectly legal." "It says in the paper." "According to (my understanding of) the Bible, the pope, the prophet," etc., etc., etc. All of these are expressions of faith, and are valid within a certain context. As precepts for building a just social order and providing an environment within which each human being has the optimal opportunity to acquire and develop virtue and so become more fully human, however, they are sadly lacking. It could even be argued that, for anyone who doesn't manage to break out of "the box" that such dicta construct, they are forever trapped in whatever state or condition others have imposed on them, to be damned or saved as others see fit.

Admittedly, it is very difficult to break out of such a box. Readers familiar with Mark Twain's "children's" novel Huckleberry Finn will recall Huck's agonizing over helping the slave Jim escape, and his decision to help Jim even though, by the precepts of his society, he figured he was sure to go to Hell. Basing the social order on a private understanding of the Bible and economic expedience, as did the people in Mark Twain's fictional south (the reality was somewhat different, although Twain achieved an extremely accurate condensation for his purpose), resulted in a situation in which the moral order was clearly (to the presumably objective reader) turned completely upside-down — and still almost succeeded in preventing Huck from doing the right thing.

As Dr. Heinrich Rommen hinted in the quote we gave in the previous posting, the advantage to basing the natural law on the Will is that accepted precepts become changeable at the will of whoever is doing the interpreting. The notion of an objective standard is eliminated, for anything that comes into conflict with one's personal interpretation is, ipso facto, in contradiction to one's personal faith. This is a position from which there can be no recourse. This is because the Will-based interpreter of the natural law believes he has God's personal assurance that he is correct. Anyone holding a contrary position, despite all the arguments and evidence he brings to the table, is necessarily wrong because he is opposing God's Will as presumably revealed to the Will-based interpreter.

The problem is that humanity has an almost infinite capacity to rationalize its own desires — especially when those desires relate to gaining power over others. Anyone who accepts a Will-based interpretation of the natural law inevitably finds it very easy to justify everything he wants to do. He does this by referring to his personal faith, and basing his argument (such as it is) on his conviction that his understanding and interpretation of God's Will is the only one that could possibly be correct. Everyone else's interpretation is necessarily evil and, inevitably, everyone else is as necessarily evil as their interpretations. This is particularly true when others persist in attempting to argue or present evidence to the contrary.

Thus a socialist will find support for the abolition of private property in various expressions of what he believes to be God's Will. A totalitarian will discern a holy command that he or she impose control on the rest of humanity. A capitalist will be delighted to discover that God has decreed capitalism as the only acceptable form of society. An anarchist will be equally elated to realize that God finds an organized society that acknowledges absolutes outside his or her understanding and laws based on them just as irritating as he or she does — and so on. This lends credence to a belief, while nonsensical to anyone who bases the natural law on the Intellect, is nevertheless widespread in today's society. That is, man forms God in man's own image and likeness.

What this leads to we will examine in the next posting in this series.

The State is God, God is the State, Part III

In the previous posting we discovered that basing the natural law on the Will rather than the Intellect almost inevitably results in the formation of a totalitarian State. Moral standards change from absolutes, discerned by reason and confirmed by the common consent of all mankind, to relativistic opinions, valid only for the individual holding that opinion, and then only until he or she changes his or her mind.

Attempting to correct or counter this problem within the framework of a Will-based natural law results in the now-familiar accusation that any attempt to reestablish moral standards is "forcing your morality" on others. This actually has some validity — within this context. Private interpretation of God's Will is necessarily personal and, given free will, a matter of opinion. Moral standards based on the common consent of all mankind, as embodied in, e.g., the Decalogue, however, are the opposite and complete negation of moral standards based on a private interpretation of God's Will, despite the fact that both methods can and, in many cases do, come to similar conclusions as to the content of the natural law.

Assuming an otherwise well-ordered society in which everyone who bases the natural law on the Will accepts the same source as expressing the Will of God and agrees on its interpretation, there should be no major conflicts between the two parties, Intellect or Will, regardless of the basis used for the natural law. The problem comes when the elite in power begins to interpret precepts of the natural law in order to meet an emergency. If the foundation is solid, i.e., there is a clear understanding of the natural law based on the common consent of all mankind and discerned by reason, the expedient developed can be measured against the objective moral standards and adopted, tolerated, or rejected, depending on how well the proposal complies with universal moral precepts.

If the foundation is not solid, that is, understanding of the precepts of the natural law is based on faith and personal interpretation of something the interpreter regards as coming from God (the Will), the expedient may be consistent with universal precepts of morality. It may do the job it is intended to do. It is, however, far more likely that the social order will be thrown into chaos, depending on how far personal interpretation of the natural law based on faith gets from a reasoned conclusion based on the common consent of all mankind.

A house built on rock and a house built on sand may appear identical and each will do the job of providing shelter adequately as long as the sun is shining and everything is fine. Inevitably, however, the rains come, and expose the weakness of anything built on a shifting foundation, such as basing the natural law on the Will rather than the Intellect. As Dr. Heinrich Rommen pointed out in his book on the natural law,

For Duns Scotus morality depends on the will of God. A thing is good not because it corresponds to the nature of God or, analogically, to the nature of man, but because God so wills. Hence the lex naturalis could be other than it is even materially or as to content, because it has no intrinsic connection with God's essence, which is self-conscious in His intellect. For Scotus, therefore, the laws of the second table of the Decalogue were no longer unalterable. . . . an evolution set in which, in the doctrine of William of Occam (d. cir. 1349) on the natural moral law, would lead to pure moral positivism, indeed to nihilism. (Rommen, The Natural Law, pp. 51-51.)

In our next posting on this subject we will examine why the interpretation of the natural law based on the Will is so popular.

The State is God, God is the State, Part II

We noted in the previous posting on this subject that within the Aristotelian concept of the natural law, it is not necessary to believe in a particular deity for the precepts of the law to be binding. The law, as Thomas Aquinas pointed out, is discernible by human reason, and is based on the common consent of all mankind as to what constitutes the "good." Faith in God may illuminate our understanding of the law, but to base any part of the law on faith is to go directly contrary to the law itself. The basic precepts of the law must be "manifestly true" (that is, subject to human understanding through the use of reason), or God or the gods would be inherently unjust — another contradiction in terms.

That is the classic, traditional view of the law. Unfortunately, another view of the matter has become the prevailing belief, superceding in many cases the common sense conclusions of Aristotle, Aquinas, Maimonides, and Ibn Khaldûn. This other view is that something is wrong not because it is inherently wrong (and thus contrary to the natures of both man and God — "against nature"), but because God — or some other authority in the place of God — has so commanded.

In this erroneous view, something is wrong because God (or the Bible, the Qu'ran, the Book of Mormon, etc., etc., etc.) has so declared. This is called "primacy of the Will," meaning that it is only possible to know right from wrong because of your faith in a particular revelation that you regard as the Will of God. Virtue, even knowledge of right and wrong, becomes the exclusive property of a small group of the elect. The elect are, inevitably, a chosen few personally selected by God to understand what is "really" true . . . as interpreted by the elect, of course. The elect is in automatic opposition to the great mass of mankind who, being natural dependents — slaves — and incapable of attaining full human status, must be taken care of or eliminated, as expedience or desire demands.

Primacy of the Will is thus the basis for many of the troubles that afflict modern society. These conflicts fall into two distinct classes. First, of course, are the presumably inevitable clashes that arise because the dependent (slave) class resists the guidance and instruction of the presumed elite, the elite being (depending on the circumstances) government officials, corporate management, academia, the press, or religious leaders. "They" (the dependent class) "can't handle it" — "it" being whatever the elite wants to control. The elite thus has the self-appointed responsibility of seizing power and imposing control and whatever results are desired . . . by the elite, who (in their opinion) have been personally selected for the job by God or whatever stands in place of God. "What's good for GM is good for the country."

Second are the struggles for power among the different elites, as we saw illustrated very well in the Newsweek article denigrating religion juxtaposed with the advertisement featuring the spin-doctored Wizard of Oz. Each elite power group tries to eliminate the competition, either by subsuming the opposing groups into itself, or by attacking it outright. Thus we have the State, usually enthusiastically supported in this effort by the press and academia, either attacking organized religion or setting up an official State religion, whether or not the established church is actually "recognized" as a religion. This also explains why the State at first nearly always opposes organized labor, then grants unions sufficient delegated power to become effective branches of the State to bring management to heel.

Examples are numerous, as this situation exists wherever two or more power groups that take the Will instead of the Intellect as the basis for the natural law collide — as they must. Basing the natural law, the foundation of the social order, on anything other than the Intellect brings automatic conflict of this kind. This is because, rejecting the common consent of all mankind as to what constitutes the good, members of each special interest group will necessarily try to force their understandings of the Will of God (or whatever they have put in the place of God) on everyone else.

Resisting such control means that the offender has insulted the personal faith of the individual or group attempting to impose its private interpretation on the offender, who has thus gone against the divinely-instituted social order, as Thomas Hobbes made clear in Leviathan. Why the imposition by an elite of desired results cannot be effectively countered within the framework that bases the natural law on the Will rather than the Intellect will be covered in the next posting in this series.

The State is God, God is the State, Part I

Most readers of Newsweek magazine dated 04/13/09 probably missed the less-than-subtle irony of the ad between pages 42 and 43 in an issue titled, "The Decline and Fall of Christian America." The ad displayed a photograph of a vaguely 19th century gentleman with "mutton chop" side-whiskers and a blazer with "OZ" prominently embroidered on the right-hand side of the coat. The ad promoted a federal government-sponsored website by querying, "Have you ever wondered how the Wizard of Oz seemed to know everything?" and stating that the website could "make you as all-knowing as the Wizard of Oz."

Right. Evidently the ad agency hired by the U.S. General Services Administration for their "public service message" promoting their own omniscience never actually read The Wonderful Wizard of Oz by L. Frank Baum or saw the 1925 or 1939 film adaptations. There's some excuse for not viewing the 1925 version, as it is considered, in spite of the appearance of the great Oliver Hardy, as the worst adaptation of a book to film in history. Nevertheless, despite the 1925 film's crimes against humanity (Dorothy Dwan — not a misprint — who plays Dorothy, is portrayed as a flapper), the character of the Wizard as a fraud and a conman (although well-intentioned) was retained, and carried over into the 1939 remake.

Thus in the feature article of the 04/13/09 issue of Newsweek we have the obvious dethronement of "the Christian God" in America. This is juxtaposed with the promotion of the United States government as an all-knowing, all-wise, and very likely omnipotent replacement, freely offering people the fruit of the modern equivalent of the tree of the knowledge of good and evil . . . with the Being many people regard as absolute good derided as unimportant: "The Christian God isn't dead. But he's less of a force in U.S. politics and culture than at any other time in recent memory." (p. 36.) Evidently the ad agency and the editorial department of Newsweek counted on people not realizing that in the Christian mythos it was not God, but Satan, who offered free access to all knowledge without first properly forming one's conscience and developing man's natural capacity to know right from wrong.

The conclusion of Newsweek simply states the obvious. The "Christian God," who is, by popular rumor, the God of Abraham, Isaac, and Jacob, and thus the Jewish and Islamic God as well, has effectively been a nullity for some time. This is due principally to the rejection of the Aristotelian understanding of the natural law as the basis for civilization, and the consequent decay of the west as well as the confusion rampant in the east.

What is the connection between rejection of the thought of a dead, white, semi-European pagan (well, pagan's not so bad) male, the "decline and fall of Christian America," and the moral, political, and economic chaos that assails the world today?

Everything.

The full explanation is complex and would strike most people as extremely esoteric, but we can briefly summarize for the purposes of this posting. According to Aristotle, "good" is "that at which all men aim." In other words, we can know what is "good" because of the common consent of all mankind that a particular thing is "good." The principles that all mankind perceives, however dimly, as "good" are the absolute precepts of the "natural law" embedded in each human being. That is, if a principle can be shown to be part of the natural law, it is binding on every human being simply because he or she is human.

Thus, precepts such as prohibitions against murder, theft, adultery, false witness, and so on, which members of a particular religion might believe were received from their particular god (as all, ultimately, do, as the noted jurist Dr. Heinrich Rommen pointed out), an individual does not need to believe in that particular religion in order to be bound by the precepts. Such things are prohibited not because some deity said so, but because, being contrary to human nature as perceived by the common consent of all mankind, they are inherently wrong.

Thomas Aquinas, the Christian Aristotelian, in common with Moses Maimonides, Aquinas' correspondent and fellow-Aristotelian, and Ibn Khaldûn, the orthodox Islamic Aristotelian who came a few centuries after Aquinas and Maimonides, refined Aristotle's concept. They concluded, based on the shared belief that God created man in God's own image and likeness, that what the common consent of all mankind regards as "good" must also, logically, be consistent with God's Nature.

Thus, even though a Christian might believe in the divinity of Jesus who delivered the fulfillment of the law, a Jew that the Tables of the Law were handed down on Mount Sinai personally to Moses, and a Muslim in the validity of the revelation to Mohammed by the angel Jibril, belief in any of these things is not necessary to the truth of the precepts of the natural law that they teach. The essential precepts remain true whether or not someone has ever heard of Jesus, Moses, or Mohammed, or read a line of the New Testament, the Torah, or the Qu'ran. Aquinas referred to this as "primacy of the Intellect," meaning that it is possible to know right from wrong by the unhampered and unaided use of human reason.

Unfortunately, there is another view of the matter, one which we will cover in tomorrow's posting.

News from the Network, Vol. 2, No. 16

Perhaps not surprisingly, Mr. Obama appointed a $7 million commission to study how to save the American automakers instead of taking advantage of a proposal to do the same thing much faster and cheaper for $150,000 put forward by the American Auto Worker Ownership Committee. This would appear to be consistent with what seems a definite bias on the current administration's part against ordinary people owning the means of production. This may be rooted in the false Keynesian dogma that only existing accumulations of savings (by definition held by the rich) can be used to finance capital formation. Thus (according to Keynes) the most efficient economy is one where ownership of the means of production is as concentrated as possible with the State controlling the rate of new investment and the rate of return on investment, and anyone who would use investment income for consumption instead of reinvestment (compound interest) is discouraged from capital ownership. Since the Federal Reserve was designed and intended in part to provide the private sector with new money and credit without the necessity of first cutting consumption and saving, Mr. Obama's possible fear that investment capital will disappear if ordinary people own the means of production and thereby gain control over their own lives not only doesn't make sense, it is counterproductive in the extreme.

The power that the Federal Reserve has to create money without inflation for private sector growth and investment is the reason that the Just Third Way is demanding democratizing the Federal Reserve so as to open up democratic access to capital credit (the chief means by which capital is financed and ownership acquired), and to deliver genuine "power to the people" by spreading out control of the central bank system of the United States, taking it out of the hands of the bankers and the State bureaucrats.

• The biggest news this week was the postponement of the rally at the Federal Reserve due to weather. The rally is tentatively rescheduled for Wednesday, April 22, 2009 outside the Federal Reserve in Washington, DC, "Earth Day."

• In the space of one week, a single CESJ member managed to place letters and articles in the Washington Post (4/10/09), the Wall Street Journal (4/13/09), and the National Hibernian Digest (March/April 2009 issue). The placements in the Washington Post and the Wall Street Journal were letters from different perspectives (depending on the particular slant of each newspaper), looking at the recent interference by the Federal Government in the rules established by the Financial Account in an effort to "fix" the "mark to market" rule by making it easier for investment companies to inflate book values of investments without an objective, "third party" verification. This violation of the "pillar" of the Just Third Way regarding a limited economic role for the State exacerbates what may have caused the home mortgage crisis in the first place. The short article in the National Hibernian Digest, the official publication of the Ancient Order of Hibernians in America, Inc. (the "AOH," a fraternal order for Catholic men of Irish birth or descent) gave a short précis of some social action initiatives being considered by the AOH in Northern Virginia in conjunction with CESJ. All three placements illustrate what can be done by individuals who persist in writing letters and articles to newspapers and magazines from a Just Third Way perspective. This can be a most effective way of preparing the ground for opening doors to "Prime Movers," as mention in a newspaper or magazine tends to lend a degree of credibility to CESJ and the whole Just Third Way movement.

• CESJ's twenty-fifth anniversary celebration will take place tomorrow at Lakeside Plaza condominium in Falls Church, Virginia. If you haven't responded by now or requested an invitation, it's too late, but we will try and post a brief report of the celebration in next week's news items.

• Wholesale order forms for CESJ publications from Economic Justice Media will be distributed at the celebration so that CESJ members may take advantage of the member benefit of purchasing publications at the wholesale price. If you are not attending, but would like to purchase publications in bulk (minimum of ten books) at the wholesale price, send a request for an order form to mgreaney [at] cesj [dot] org. CESJ does not sell retail, so individual copies are available to non-CESJ members are available on Amazon and Barnes and Noble, or by special order from most major bookstores.

• The "TEA ('Taxed Enough Already') Parties" that took place this past week, while no doubt motivated by a genuine desire for change, really didn't look at anything other than a return to the old, unworkable system to replace the current failing system. It would have been much better to bring CESJ's tax proposals to the attention of Mr. Obama and others who appear to be floundering by claiming to try and "simplify" the existing system, forgetful of the fact that every similar effort in the past has resulted in enormously more complex and confusing regulations that only increase the inherent injustice of trying to use the tax system for social engineering instead of raising revenue, and imposing the belief that only existing savings of the rich can be used to finance new capital formation on a system designed to accommodate the power of the Federal Reserve to create money for private sector growth and investment, rather than government spending or consumer debt. Three CESJ pieces are particularly recommended, "Steps Toward Tax Justice" from the original version published in The Tax Executive in 1977, "Transforming the Federal Tax System," and "Reforming the Tax System."

• As of this morning, we have had visitors from 40 different countries and 45 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, with Canada, Finland, and Brazil. People in Egypt and Hong Kong spent the most time on the blog. The most popular posting is now "Cut Us In or Cut It Out" (meaning open up democratic access to capital credit, and stop using the nation's central bank to finance government deficits and bailout failed companies. The next four most popular are on Abraham Lincoln, with the series on "Easter Economics" fast accumulating readers. The rest of the top ten deal with the increasingly obvious flaws in Keynesian economics.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

Understanding Easter Economics

We just received a most encouraging and substantive response to our series on "Easter Economics" that we completed yesterday. We realize that repeating the "same old thing" over and over can become extremely irritating to people, especially those who disagree with us. This gives them the escape route of being able to claim that we are being "rigid" in our unnatural insistence on basic principles of natural law. This permits them to feel released from any obligation actually to discuss these matters . . . if they ever had any such inclination in the first place. Every once in a while, however, a light goes on somewhere, proving that, no matter how highly educated someone is, there is always hope for him or her. Here's a paraphrase of the note we received, edited somewhat for clarity and to protect the writer from being attacked with pitchforks, torches, and guns by outraged villagers, capitalists, and socialists. We passed our version by the original writer for comment, so it is substantially the same note.

I have read, reread, and reread the case you make for basing the natural law on Intellect instead of Will which you have made over and over — and now I see! If we make the natural law "changeable" by making it subject to the will, or even His Will, then there are no immutable natural rights. Our inalienable rights to life, liberty and property become disposable at the will of the strongest. If, however, we arrive at an understanding of the natural law through the use of reason, trying to understand the Intellect of God or His Essence or Self Consciousness, this is not changeable. If our natural rights are not immutable and inalienable, then (as you point out) they will be determined by whoever is the most powerful.

Then there is the whole issue of the natural right to property and the rights of property — access (opportunity) and use (exercise). It seems almost everyone who is insisting upon "helping the less fortunate" is really misunderstanding this point. Except in extraordinary circumstances, justice only demands equal access, that is, the opportunity to acquire property. Charity then operates for those who "through no fault of their own" can't provide for themselves, as Pope John XXIII's stated in Pacem in Terris. It's a matter of choice whether any individual or society wants to take care of those who won't provide for themselves. As St. Paul said, "those who do not work shall not eat."

Is there anyone else out there who is trying to educate our leaders, Catholic and others, about this critical distinction? Far too much of what passes as "social justice" these days, frankly, is socialistic. This is disastrous. If, as Pope Pius XI stated, socialism is not incompatible with Christianity because it abolishes private property, but because it requires the destruction of the natural law, then socialism by any name (as we saw in the Soviet Union and are seeing in China) destroys the social order. While we assume that many people espousing socialism are sincere in their convictions, are they aware that (however inadvertently) they are prescribing the destruction of the social order that natural law adherents from Aristotle down to Pope Benedict XVI have been trying to rescue for thousands of years?

Now all we have to do is convince the other 5,999,999,988 people in the world, and we might get somewhere. Teaching, learning, organizing and restructuring the social order so that individual justice and charity can operate most effectively and efficiently, however, is what social charity and social justice are all about, not redistribution and worship of the State. If you're anxious to read the two short works by Father William J. Ferree, S.M., Ph.D. on social justice and social charity before they are officially released in a newly edited combined version, you can download the texts of Introduction to Social Justice and the discourse on social charity from the CESJ website.

Easter Economics, Part III: The Solution

As we noted yesterday, traditional schools of economic thought and concepts of individual morality are either incorrect (as with Lord Keynes), or incomplete (as with Aristotle). In the combination of the economic justice principles of Kelso and Adler and the social doctrine of the Catholic Church, however, we have an approach that is both economically and financially sound and (in the truest sense) politically feasible. Kelso and Adler detail the principles of the "economics of reality," while Pope Pius XI and his breakthrough in the concepts of social charity and social justice give us a way of understanding human nature in light of what little we can perceive of ultimate reality.

If we left the Just Third Way in the realm of theory and principle, however, we would never get anywhere. Fortunately, we have proposals that have been developed and refined over the years, and the component parts tested and retested. The proposals for "Capital Homesteading" and the "Abraham Federation," are based on principles of proven effectiveness and morality, and give an efficient and effective way out of the dilemma. Visiting the CESJ website and reviewing the materials found there will demonstrate that the situation is not as hopeless as many appear to believe. It is unnecessary to redefine the natural law, the basic building block of reality, in order to achieve an end to world poverty and offenses against the dignity of the human person under God.

Briefly (for we've described both proposals a number of times on this blog already), Capital Homesteading is a national economic policy based on the binary growth model of Louis Kelso and Mortimer Adler. It is designed to lift barriers in the present financial and economic system and universalize access to the means of acquiring and possessing capital assets.

A Capital Homestead Act would allow every man, woman, and child to accumulate a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of savings or reductions in current levels of consumption. A "preferential option for the poor" would be in the form of allowing everyone to accumulate his or her assets using a tax-sheltered Capital Homestead Account. Tax shelters are usually restricted to the rich, but would now be open to the non-rich, thereby opening up equality of opportunity.

The Abraham Federation is similar to Capital Homesteading, but designed for implementation in countries and economies where there are competing claims for the same assets, usually land and natural resources, and where traditions of private ownership may have been attenuated or diluted over the years. The Abraham Federation would, in essence, create a new form of the nation-state, offering an economic and legal system based on (1) private property in the means of production, (2) free and competitive markets for determining just prices, just wages and just profits, and (3) a well-defined and limited economic role of the State. The constitution and laws of the new nation would also be structured to (4) guarantee each citizen with an equal opportunity to become an owner of productive assets.

Each of these four basic pillars of a genuinely "free and just market system" is essential and interdependent for creating an environment for sustainable and balanced growth. They build moral values into the economic environment, without which free markets become unjust and unfree markets. Take one pillar away and the system will become unbalanced, vulnerable to corruption, monopolies and special privileges, and wasteful of human potential. By integrating these four policy objectives, the tax system and the money-creating powers of the state would be restructured so that every citizen has equal access to "social tools" (like a simple and just tax system, a stable asset-backed currency and an ownership-spreading productive credit system) to acquire and accumulate enough productive assets to meet his or her living needs upon retirement.

In a national ownership-sharing program, citizens would become direct co-owners of land. In addition, they would accumulate and receive dividends and property incomes from direct equity ownership in new technologies, agribusinesses, industries, and rentable space and infrastructure built upon the land. Moreover, by the systematic spreading and sharing of ownership power, one of the basic conditions for any future Holocausts and breeding grounds for terrorists alienation of large numbers of workers would gradually disappear.

Easter Economics, Part II: The Problem

We discovered yesterday that the confusion over "access" (opportunity) and "use" (exercise) with respect to private property allows sincere and well-motivated people to support socialism (albeit under many names) as the "only" alternative to the injustices prevalent in society.

Confusing access and use, however, is why Pope Pius XI and other popes condemned socialism. It is not because socialism abolishes private property (although that is the hallmark of what it means to be socialist), but because socialism is based on "a theory of human society peculiar to itself and irreconcilable with true Christianity." (Quadragesimo Anno, § 120) That is, socialism, by redefining natural rights, destroys the very thing that makes the human person "social," and undermines the foundation of the social order. Socialism shifts the focus from the human person to that of a vague "collective." Socialism thereby directly offends against the dignity of the human person under God.

Thus, the statement, "no one can be at the same time a good Catholic and a true socialist" (Ibid.) is a simple statement of fact. This is because Catholicism relies on accepting a philosophy of natural law based not on Will, but on Intellect. Socialism, on the other hand, takes away the very thing that defines us as human: participation in God's Knowledge reflected in the human person through adherence to the principles of the natural law discerned not by faith, but by reason.

Briefly to reiterate what we have explained many times before, the "universal destination" ("access") of the goods of the world refers to the right each and every human being has to acquire and possess both consumer and capital goods — equality of opportunity. This is the natural right to private property, as St. Thomas and the popes explain carefully and at great length, and which is repeated in Article 17(1) and 17(2) of the Universal Declaration of Human Rights: "(1) Everyone has the right to own property alone as well as in association with others. (2) No one shall be arbitrarily deprived of his property." Thus, no one, absent just cause and due process, can be prevented from becoming an owner of either consumer or capital goods without thereby offending against his or her human dignity at the most profound level.

"Access," however, is distinct from "use." "Use" refers not to the natural right of private property, embedded in human nature by God Himself ("access," which we just described, consistent with natural law principles, as the right to property, or the right to acquire and possess consumer and capital goods), but to the exercise of property, or what one may do with what one owns, how much can be acquired, and even (based on the needs of the individual, groups, and society as a whole) what kinds of goods may be owned . . . as long as the important caveat is observed, reiterated by Pope Pius XII, that the exercise of the rights of ownership may never be defined in any way that negates the natural right to be an owner.

That is why, for instance, even if we decide somebody else owns "too much," we cannot simply and arbitrarily take it away. That would be to take away that individual's right to be an owner, thereby negating his or her natural right "to have a share of earthly goods sufficient for oneself and one's family," which the constant teaching of the Catholic Church assures us is inherent in everyone, not just those whose behavior, race, religion, degree of wealth, club membership, or anything else we approve.

In practical terms, of course, isolating one group (usually "the rich," but more and more these days "the Jews," "the Neo-cons," or any other group against which those doing the complaining have an animus) and confiscating their goods for redistribution to achieve what we imagine is a more equitable arrangement makes possession less secure for everyone. Confiscating and redistributing from any individual or group, whatever the justification or pretext, virtually dissolves all security in property, for the next group that comes into power will, naturally, confiscate from the recipients of the previous confiscation for redistribution among those whom the new people consider more deserving, and so on. Undermining security in property undermines the stability of all of society, for the maintenance of which St. Thomas teaches that we must be willing to tolerate even hideously unjust conditions and laws if the attempt to correct them would destroy the social order, the social order being considered necessary to humanity's social and individual development.

That is why, regardless of the injustice of the system, conditions, or even particular laws, unless the system, condition, or law forces us as individuals directly to perform or not perform some act that violates our conscience, we cannot simply force or coerce others into doing what we believe to be right. We must be prepared to accept the existence of concentrated wealth, poverty, slavery, even abortion, and not take the law into our own hands, as long as we are not forced or be willing personally to participate directly in concentrating wealth, keeping someone poor, enslaving others or owning slaves, or procuring or assisting in the procurement of abortions.

This is why the clear teaching of the Catholic Church is that we cannot simply confiscate and redistribute wealth, kill slave owners, or bomb abortion facilities. Whether we personally believe something to be morally right or wrong, if, in order to correct a situation, we violate the rights of others — which constitutes their human dignity — we become worse than those whom we regard as immoral, the presumption being that, having put ourselves in place as judges over our fellow man, we should know better.

Within the traditional framework of individual morality and Keynesian economics, there is no answer to this dilemma. We are forced either to go along with an unjust or intolerable situation, or become worse than those whom we regard, rightly or wrongly, as criminals. Fortunately, however, the Just Third Way has a solution to this otherwise insolvable conundrum. That will be the subject of the next posting.

Easter Economics, Part I: Will or Intellect (Again)

Early today we received an e-mail containing a lengthy article on "Easter Economics" by Charles Clark, composed in memory of the Easter Rising in Dublin in 1916. We found we could agree with a great deal that was in the article, at least all that related to statements of fact or quoted various declarations from the Catholic Church. We had problems, however, with the other things Mr. Clark said.

The problem comes in when Mr. Clark imposes a faith-based analysis and an a priori conclusion based on personal opinion, on Catholic social teachings promulgated under a mandate to apply the principles of human reason as taught by St. Thomas Aquinas. This mandate is contained, among other sources, in the encyclicals Æterni Patris (1879), Pascendi Dominici Gregis (1907), Studiorum Ducem (1923), and Veritatis Splendor (1993).

By redefining basic concepts such as the natural rights to life, liberty, and property, Mr. Clark and others not only change the "rules of the game" without notifying the other players, they change what it means for a thing to be a natural right. Basing their conclusions on faith instead of reason (or, as St. Thomas would put it, on a private interpretations of God's Will rather than the common consent of all mankind as to what we can perceive of God's Intellect), the entire second table of the Law of Moses (accepted by both Christians and Jews as an expression of the natural law) becomes subject to change and reinterpretation. This is just as Dr. Heinrich Rommen, the noted student of Father Heinrich Pesch, S.J., Ph.D. (sometimes described as the founder of "solidarist economics"), claimed inevitably happens in his book on the natural law:

With Duns Scotus (d. cir. 1308), and with the principle of the primacy of the will over the intellect so much emphasized by him, there began inside moral philosophy a train of thought which in later centuries would recur in secularized form in the domain of legal philosophy. The principle that law is will would be referred in legal positivism, as well as in the theory of will in jurisprudence, to the earthly lawmaker (self-obligation).

For Duns Scotus morality depends on the will of God. A thing is good not because it corresponds to the nature of God or, analogically to the nature of man, but because God so wills. Hence the lex naturalis could be other than it is even materially or as to content, because it has no intrinsic connection with God's essence, which is self-conscious in His intellect. For Scotus, therefore, the laws of the second table of the Decalogue were no longer unalterable. . . . an evolution set in which, in the doctrine of William of Occam (d. cir. 1349) on the natural moral law, would lead to pure moral positivism, indeed to nihilism." (The Natural Law, pp. 51-52)

As Dr. Rommen describes Occam's contribution to this process,

For Occam the natural moral law is positive law, divine will. An action is not good because of its suitableness to the essential nature of man, wherein God's archetypal idea of man is represented according to being and oughtness, but because God so wills. God's will could also have willed and decreed the precise opposite, which would then possess the same binding force as that which is now valid — which, indeed, has validity only as long as God's absolute will so determines. Law is will, pure will without any foundation in reality, without foundation in the essential nature of things. Thus, too, sin no longer contains any intrinsic element of immorality, or what is unjust, any inner element of injustice; it is an external offense against the will of God.

As a result, Occam, who sees only individual phenomena, not universals, the concepts of essences, can likewise admit no teleological orientation toward God is inherent in all creation and especially in man; or at least he cannot grant that it can be known. The unity of being, truth, and goodness does not exist for him. Moral goodness consists in mere external agreement with God's absolute will, which, subject only to His arbitrary decree, can always change. (Ibid., 52-53)

If we then — contrary to explicit instructions given by the popes on how to understand Catholic social teaching — take the Will as the basis of natural law instead of the Intellect, nothing is certain. Everything becomes subject to change. The effect is to change the basis of the natural law from reason to faith. This goes from the traditional faith and reason joined together, each one illuminating the other, to forcing a choice that has vested the modern world with acute schizophrenia and posited an irreconcilable difference between science and religion: faith or reason. This schizophrenia is evident in Mr. Clark's analysis:

The Catholic social thought tradition also has a very different conception of equity. The basis of equity in Catholic social thought is the common gift of the earth from God. Thus the minimum equity criteria is that all have a share in this gift so that each will be able to meet their basic, minimum needs. "God destined the earth and all that it contains for the use of all people and peoples. Furthermore, the right to have a share of earthly goods sufficient for oneself and one's family belongs to everyone" (Vatican II, in Dorr, 1992, p. 154). This is not a claim for perfect equality, but that all be insured a decent standard of living. This claim is also put forward in the United Nations Universal Declaration of Human Rights.

Mr. Clark states that, "The basis of equity in Catholic social thought is the common gift of the earth from God. Thus the minimum equity criteria is that all have a share in this gift so that each will be able to meet their basic, minimum needs." By inserting "common" into the discussion in a way never intended by the Catholic Church, Mr. Clark changes the thrust of millennia of natural law theory from, "each human being has, in common with all other human beings, the right to acquire and possess the goods of the earth" (the "analogy of being"), to "each human being must possess an equitable portion of the goods of the world that all own in common" (a restatement of the socialist dictum, "From each according to his abilities, to each according to his needs" — a principle valid for charity, not for justice).

Thus, by misunderstanding essential concepts of natural law, the stated basis for Catholic social teaching, Mr. Clark seems effectively to interpret the passage "the right to have a share of earthly goods sufficient for oneself and one's family belongs to everyone" as meaning the same as "a share of earthly goods sufficient for oneself and one's family belongs to everyone." The passages, however, are different. The latter removes the concept of right, and eliminates the critical distinction between "access" (opportunity) and "use" (exercise). Misunderstanding or reinterpreting what constitutes a "right" changes everything, so that what might seem to Mr. Clark as saying the same thing, actually says two very different things.

By thereby implicitly redefining the right of universal access to the goods of the earth found in the Bible, Catholic social teaching, and the UN Universal Declaration of Human Rights, Mr. Clark implies that a redistribution of the goods of the world based on need, instead of a redistribution of opportunity to acquire and possess the goods of the world, supplemented by charitable redistribution in the event of failure, is the objective of Catholic social teaching. This is not the case, as we will explain tomorrow.

News from the Network, Vol. 2, No. 15

Naturally, the news that banks have booked record profits in the first quarter has buoyed up the stock market. It will probably take a few weeks for people to begin realizing that, just as the stock market (the secondary market for debt and equity) doesn't really gauge the actual economic health of the country, banks and other financial institutions (dealing in pieces of paper that may or may not be backed by hard assets) don't tell us how well individuals and families are doing financially. They are the ones doing well, not ordinary people, especially those who are still without jobs or ownership of capital to generate a living income.

For that reason, it's singularly appropriate that there hasn't been very much going on except preparing for the rally outside the Federal Reserve.

• Obviously, then, the main news this week is a reminder that the annual peaceful rally at the Federal Reserve building in Washington, DC, will take place on Wednesday, April 15, 2009, from noon to 1:30 PM, rain or shine, snow or sleet, sun, moon, or stars. We probably won't stick around too long in the event of a tornado, but we'll be there otherwise.

• Most of the activity this week has involved meetings and preparation for the rally at the Federal Reserve, which hasn't left much time for anything else. The important message, of course, is "Democratize the Fed." This doesn't just mean opening up democratic access to the means of acquiring and possessing a reasonable stake of income-generating assets (in other words, capital credit). Just as important, it also means spreading out ownership of the Federal Reserve itself among every citizen and legal resident of the United States and all territories served by America's central banking system. This is the only just — and effective — method of building accountability into the system and making it difficult-to-impossible for the federal government once again to hijack the Federal Reserve to avoid being accountable to the taxpayers for what the federal government spends.

• Specifically, the rally will help spread the word about how the Federal Reserve, without taxpayer money or adding to Federal debt, could help monetize the building of a "green growth" economy, which would eliminate U.S. dependency on imported oil and create a nation of capital owners by lifting artificial barriers to more equal future ownership opportunities.

• The Capital Homesteading effort will start in one of the most poverty-impacted areas in the U.S., the Metro East Citizens Land Cooperative Project in East St. Louis and its 14 neighboring Metro East (IL) Riverfront Communities. This project will introduce a comprehensive plan for the commercialization of advanced waste-to-energy technologies and the redevelopment of land and real estate. The project will result in 2,100 new jobs and the direct ownership of land and new energy systems by every local citizen as a shareholder in a for-profit Community Investment Corporation/Citizens Land Cooperative.

• There is also a plan to save the American automobile industry. The American Auto Worker Ownership Committee, consisting of active and retired members of the United Auto Workers, along with management, suppliers, dealers, and vested stakeholder, will offer their solution to the crisis in one of America's basic industries. The AAWOC's proposal calls for the reorganization and financing of the Big Three Auto Companies as 100% worker-owned entities through a leveraged Employee Stock Ownership Plan (ESOP) structure. It also proposes a new contract that would transform the United Auto Workers from its outmoded, conflict-based model of labor unionism to a more collaborative, productive and market-oriented "ownership union."

• As of this morning, we have had visitors from 43 different countries and 45 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, with Canada, Finland, the UK, and the Philippines. The most popular posting is still the one on Abraham Lincoln and the Homestead Act, although (probably because of the demonstration at the Federal Reserve in Washington, DC on Wednesday, April 15, 2009 — next week) the next three most popular are on the need to reform the central bank of the United States. The rest of the top ten deal with the increasingly obvious flaws in Keynesian economics.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

Depression, Recession, and Bubbles, Part IV: Creating Money for Investment

As we have seen in previous postings on this blog, the only sound method of money creation is to tie all new money creation to the present value of new capital formation, that is to the present value of future production. Unfortunately, virtually all new money creation by the central bank of the United States has been for government expenditures. Because government does not by its nature produce anything, this makes the new money creation purely inflationary.

The present "stimulus" package has the potential to make the present crisis even worse than it already is. By throwing good money after bad, that is, by creating money to make up for losses already incurred, the program is, in effect, inflating the currency two-for-one. While not of the magnitude — yet — of the worthless issues of unbacked currency that kicked off the German and Austro-Hungarian hyperinflation of the 1920s, creating money in this fashion has the potential to ignite a financial meltdown that makes the current one look mild.

It doesn't have to be this way. Immediately implementing a sound program of capital investment financed by the creation of new money in which all citizens can share democratically would start the long process of restoring people's faith in the economy and in the future, without relying on worthless hype and inane pep-talks. CESJ's "Capital Homesteading" proposal fits the bill exactly, with the advantage that the specific steps to be taken and programs that can be implemented are sufficiently well-described to enable any competent legislative assistant in Congress to put together a package enabling the proposal at the earliest possible date.

Of everything that has been proposed to date, Capital Homesteading is the soundest financially, and the most feasible politically. It is a national economic policy based on the binary growth model, designed to lift barriers in the present financial and economic system and universalize access to the means of acquiring and possessing capital assets. The Capital Homestead Act would allow every man, woman and child to accumulate in a tax-sheltered Capital Homestead Account, a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of savings or reductions in current levels of consumption.

Surely such a result is better than having a fiscally and monetarily irresponsible government continue to create money to give to people who have already lost it.

Depression, Recession, and Bubbles, Part III: Creating Money for Consumption

Since the 1930s, money has been created to finance government expenditures, ostensibly to correct the flaws perceived in the private sector. This was added to the money creation for consumer purchases (mostly for homes) in the 1920s. It's almost an afterthought to include the notorious money creation to finance acquisition of speculative shares on Wall Street by people convinced that share values would always go up. Even Irving Fisher, considered by Nobel Laureate Milton Friedman to be "America's greatest economist," was caught up in the speculative frenzy and lost millions. Fisher was bailed out by Yale University to protect his reputation as someone who actually understood money, credit, banking, finance, and — of course — economics.

Clearly Yale's effort to protect Fisher's reputation was successful, if one of our most renowned recent defunct economists could consider him "America's greatest economist." It remains to be seen, however, whether the federal government's current efforts to save the reputation of the financial industry (possibly a misnomer in that the financial "industry" doesn't actually produce anything) will be equally successful . . . at least in the short run.

The problem is that Yale's bailout of Dr. Fisher, and the federal government's bailout of troubled financial companies are fundamentally different. Yale used endowment funds (unrestricted, we assume) to bail out Fisher. That is, Old Eli took some of his boola moolah, existing accumulations of savings donated by Bulldogs past and present, and spent it — which is what savings are for, anyway. This benefited Fisher (and Yale, which benefited by protecting the reputation of their Greatest Economist in America), and harmed no one, except (perhaps) future generations of Yale students who had to pay higher tuition and fees to make up for the shortfall. Far from being inflationary, a bailout using existing savings is deflationary, for it effectively cancels money in the economy that should have been used for genuine consumption instead of to make up for speculative and gambling losses.

The federal government, however, is creating money to bail out companies in danger of going into bankruptcy. The money is not coming out of existing accumulations of savings, but out of the government's power to collect taxes in the future — wealth that doesn't yet exist (and may never, at this rate). Because the money being created is being used to make good losses, the effect is the same as if the money was being created for consumption, speculation and gambling, or to finance a greater government deficit.

Under the "Real Bills" doctrine, when money is created to finance a project that is expected to pay for itself out of future revenues generated by the project itself, the infusion of new money will not be inflationary. The money is created by extending a loan to pay for the project, and secured ("backed") by a lien on the asset being created. As the loan is repaid, the money is cancelled. Service fees and risk premiums charged by the money creator reenter circulation as the money creator pays expenses and distributes profits, so that the amount of money created exactly matches the amount of money cancelled, everything else being equal.

Matters are slightly different if the project being financed does not pay for itself out of future revenues generated by the project itself. In that case, the money creator seizes whatever the borrower put up as collateral, and (hopefully) sells the collateral for enough money to meet its obligation to cancel the money that it created to finance the project. This will also result in no inflation.

The problem with the current government bailouts, and the reason the effort is purely inflationary, is that they are, essentially, creating collateral out of nothing so that the troubled companies can make good on investments that went bad. Unlike traditional collateral, however, the government bailout is not using existing accumulations of savings, as, for example, Yale University did to bail out Irving Fisher, thereby allowing the savings to be put to its "proper" use of being spent.

Instead, the government is, in effect, creating "savings" without first having to save . . . a Keynesian "solution" that operates by doing what Keynes in his General Theory declared was impossible. The money is "backed" by assets that have so little value that they have been called "toxic." Worse, money had previously been created to purchase the toxic assets in the first place. Essentially, then, by bailing out the troubled companies instead of letting them reorganize under Chapter 11 or go decently bankrupt under Chapter 7, the government is allowing two dollars to be created to finance one dollar of gambling losses: the original dollar created by the commercial banking system when, e.g., the toxic home mortgages were "securitized," and another dollar created by the government through the Federal Reserve to replace the first dollar that went down the drain.

The bottom line is that the inflation rate can only accelerate as the program gets into full swing, and money is created to replace gambling losses to the detriment of investment in capital projects that will create wealth instead of throwing it away. A proposal to create money for actual investment instead of to reward incompetence be examined tomorrow.

Depression, Recession, and Bubbles, Part II: When Assets Pay for Themselves

As we saw in yesterday's posting, the current financial crisis and that of 1929 share a common basis: money creation for the purchase of goods that do not generate their own repayment. According to Dr. Harold Moulton, first president of the Brookings Institution (one of America's oldest "think tanks"), all money creation for consumption purposes (including government expenditures), as opposed to investment in new capital formation is inflationary, unnecessary, and counterproductive.

Creating money for non-productive purposes leads to what can only be described as monetary and fiscal insanity. When money is created for things that do not pay for themselves, and yet are treated as capital assets (as in the securitization of home mortgages), prices are bid up as more money becomes available. Because the underlying assets can never generate enough income (or any income at all) to compensate the holders in due course of the securities as the prices go higher and higher, the bubble inevitably and necessarily collapses.

Think "P/E Ratio," or "Price to Earnings Ratio." The P/E Ratio is a tool used by financial analysts to try and determine whether a stock issue is a "good buy." It is a very old technique, dating back to at least the Middle Ages, where a prospective buyer would get an estimate of the value of the future crop to be produced from a plot of land, multiply it times a factor that rarely exceeded 15, and pay that price. The assumption was that the land would pay for itself in 15 years or less, depending on the factor used, and how productive the new owner could make the land. This was referred to as buying land for "15 years purchase," or however many years the buyer and seller agreed was fair — an implicit understanding of the idea of the "time value" of money.

Similarly, an analyst will look at the earnings per share of a company, and divide the price of the share by the annual earnings attributable to that share. Comparing the result with the company's ROI ("Return on Investment") presumably tells the analyst whether the stock is a good buy. If the P/E Ratio is, for example, 15, the pro rata income attributable to a single share will presumably be enough to pay for the share in 15 years, whether paid out as dividends (resulting in current income), or retained in the company (resulting in capital gains and realized income when the share is sold).

This theory, of course, assumes that the secondary market for shares ("Wall Street") accurately reflects share values as representative of the actual worth of a company. Since most investors are fully aware that is not the case — gambling and speculation have a great influence on share values on the secondary market, regardless of the earning power of the underlying company — the P/E Ratio, like most financial "tools," is considered only a handy, "rule of thumb" guide to the real value of the shares.

All of this, of course, assumes that savings have been accumulated before the purchase of the capital asset, and the new owner is simply recovering the cost of what he purchased, and thereafter deriving an income from whatever is produced. When existing accumulations of savings are involved, the damage is limited in scope, as we saw in the "Dot Bomb" collapse, which involved no one other than the people directly involved.

What happens when money is created for consumption or investments that do not pay for themselves is another matter entirely. That involves the whole of the financial system, which rapidly spreads to the whole economy as the consumer spending financed by the new money creation grinds to a halt in response to the sudden disappearance of the new money that was fueling the spending and the consequent inflation. That is what we will examine tomorrow.