Wednesday, April 15, 2009

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.