On Usury and Other Dishonest Profit, Part XXIX

Despite the obvious benefits that accrue to the whole of society from widespread direct ownership of the means of production with the full rights of private property, the question remains, 1) how can a state of society characterized by widespread direct ownership of the means of production be instituted and maintained? Even more crucial in our day and age, how can the economic, financial, and political establishments be convinced 2) of the desirability of widespread ownership, and 3) of its feasibility? This issue has confronted and, to some extent, baffled people such as Henry George, G. K. Chesterton and Hilaire Belloc, and Major C. H. Douglas for the better part of the twentieth century. While each of these developed specific proposals, there are weaknesses in them that affect their political feasibility and, sometimes, financial viability.

Addressing these three questions, Louis O. Kelso and Mortimer J. Adler developed and systematized what became known as "binary economics." The following explanation of binary economics is taken largely from Dr. Norman G. Kurland's short paper, "Binary Economics in a Nutshell."

A careful examination of the principles of binary economics reveals a system of interconnected principles that bridge classical, Keynesian and other schools of economics. Further, Kelso and Adler offer a new "post-scarcity" paradigm for analyzing and correcting structural economic defects that foster such seemingly intractable problems as global poverty, environmental destruction and the widening gap between the haves and have-nots.

In Kelso's system "binary" means "consisting of two parts." Kelso divides the factors of production into two all-inclusive, physically interdependent and market-quantifiable categories — the human ("labor") and the non-human ("capital"). The central tenet of binary economics is that, through the property (or ownership) principle, these two "independent variables" can link marketable outputs from the labor-capital mix directly to incomes distributed according to market-quantified values of all "labor" and all "capital" inputs. There are thus only two modes by which a person can legitimately contribute to production and thereby be entitled to a commensurate distribution: 1) through his own human inputs ("labor" of whatever form), or 2) through his own non-human inputs ("capital" of whatever form).

Binary economics attributes most of the increases in the labor-capital mix of the modern world to capital assets in the form of ever-improving technologies, structures and system designs, and far less to any increased productiveness of human labor. Classical economic theory, on the other hand, regards all output and earnings derived from capital enhancements as if they were produced by "increased labor productivity," thus rationalizing higher and higher pay for less and less human effort.

Binary economics holds that broad-based affluence and economic freedom, as opposed to financial insecurity and economic dependency for the many, would be made possible through the widespread ownership of constantly improved capital assets, including system changes, that are added to produce more and more consumable goods with less and less human input and resources.

In contrast to traditional schools of economics which assume that scarcity — almost always understood as insufficiency (economic scarcity is something else) — is inevitable, binary economics views shared abundance — sustainable economic growth and the equitable distribution of future wealth and income throughout society — as achievable by connecting every person through private ownership of property in ever-advancing technologies, institutional systems and structures.

Professor Robert Ashford was the first to identify three concepts within binary economics that set it apart fundamentally from all preceding economic approaches: "binary productiveness," "the binary property right," and "binary growth." In their book Binary Economics: The New Paradigm, Robert Ashford and Rodney Shakespeare describe these three distinguishing concepts as follows:

1. Binary productiveness. While human beings contribute to economic growth through all forms of labor, capital assets such as machines and technological processes are making an even bigger, ever-increasing contribution to overall output, in relation to that contributed by human labor.

2. Binary property right. The natural right of every person to acquire, on market principles, private (individual and joint) ownership of wealth-creating capital assets.

3. Binary growth. Economies grow steadily larger as private capital acquisition is distributed more broadly among the population on market principles. This highlights the importance of unleashing the unutilized or underutilized capacity of all economic systems to produce in greater abundance.

These components interact and reinforce one another, allowing for maximum rates of sustainable growth within a modern, globalized economy.

Binary economics recognizes a natural synergy, as opposed to an unavoidable trade-off, between economic justice and efficiency within a global free marketplace. Rejecting pure laissez-faire assumptions, binary economics is (as we have been examining in these postings) based on four pillars of a truly free and just global marketplace. To restate them in slightly different ways than we have previously listed them, these four pillars are,

1) limited economic power of the State (whose main role should be to promote justice by eliminating special privileges, monopolies and other barriers to equal participation),

2) free and open markets for determining just wages, just prices, and just profits.

3) the restoration of and universalized access to the full rights of private property, and

4) effective means for democratizing ownership of capital, including universal access to money and capital credit for financing growth and transfers of productive assets.

The theory of binary economics is underpinned by three interrelated principles of economic justice:

1. Participative justice, the input principle which demands as a fundamental human right, equal opportunity for every person to contribute to the production of society's marketable wealth both as a worker and as a fully empowered owner of productive assets.

2. Distributive justice, the outtake principle which holds that the contribution of labor to the economic process should be compensated at the market-determined rate (or "just wage") for each particular type of human contribution to the production of marketable wealth, with capital contributions compensated by the residuals (in the form of "profits" and "rentals") from the sales of marketable goods and services.

3. Harmony, the feedback principle that balances and restores participation and distribution within a market-based economic system to counter monopoly tendencies. This principle was referred to by Louis Kelso and Mortimer Adler as the "principle of limitation" and by others as "social justice" or "restorative justice."

In the next posting in this series we will look at some of the problems that binary economics addresses.