What Caused the Economic Crisis?

Taking another break from William Cobbett (he won't mind . . . I hope), one of our loyal readers asked an obvious question the other day: "What caused the economic crisis?" Frankly, I think I'd rather try to understand string theory or turn Finnegan's Wake into a musical comedy than attempt to dig up all the causes of the current economic troubles. The roots of the problem go back several thousand years, and would take too long to explain in a blog posting in a way that wouldn't try someone's patience. We can, however, say what we believe to be the immediate cause of the mess — and a very quick possibility for a solution. So, in "elevator speech" form:

Q: What was the immediate cause of the economic crisis?

A: The immediate cause of the economic crisis was the creation of money for consumption, speculation, and government spending instead of for investment in capital projects that will pay for themselves out of future earnings.

Q: What is the solution to the economic crisis?

A: The solution to the economic crisis is to create money for financially feasible capital investment, and by that means empower every person with the means of acquiring and possessing a capital ownership stake sufficient to generate an adequate and secure income if thrift and frugality are exercised.

Like all "elevator speeches," the quick answer raises more questions than it answers — such as the issue that people are in trouble now, how will making them capital owners in the future do anything to help that? Here's the short answer to that:

Q: What are people supposed to do now, and until they own enough capital to generate an adequate and secure income?

A: Caritas in Veritate states the principles and suggests specific measures that can be undertaken at the present time to keep people alive and healthy in a manner befitting the demands of human dignity, but without prejudice to the need ultimately to empower people with the means to acquire and possess capital of their own.

That is, we need to take care of people now by making whatever redistribution of wealth is necessary to keep people alive and healthy in a manner that respects their human dignity. Do not, however, labor under the delusion that a redistribution of wealth is anything other than a barely tolerable expedient as an emergency measure. Such measures cannot last, and must be replaced at the earliest opportunity with a system that enables people to gain a living income through their own efforts, whether through their labor, their ownership of capital, or both. Society must apply the principles of economic justice. This, as we might expect, raises more questions:

Q: What are the principles of economic justice?

A: There are three principles of economic justice, 1) The principle of Participation (or Participative Justice), 2) The principle of Distribution (or Distributive Justice), and 3) The principle of Harmony (sometimes referred to as Social Justice).

Q: What are the basic things that a society must have to be economically just?

A: To be economically just, a society must embody the "four pillars of an economically just society" in some form: 1) A limited economic role for the State, 2) Free and open markets as the best means of determining just wages, just profits, and just prices, 3) Restoration of the rights of private property, especially in corporate equity, and 4) Widespread direct ownership of the means of production, individually or in free association with others.

That's about all anyone would have time (and the listener the patience) for in an "elevator speech" situation. For anything more, it's probably better to let the great thinkers speak for themselves. Thus, if people want details and specifics, refer them first to Father Ferree's Introduction to Social Justice, an analysis of the social doctrine of Pope Pius XI. It's relatively short, but challenging, as it forces people to question many of their basic assumptions about social justice.

Referring people to Introduction to Social Justice on the CESJ website also takes them (obviously) to the website. There they can find some very in-depth treatments of the principles of economic and social justice as well as specific proposals applying the principles, most especially Capital Homesteading.

You may have to warn people that the material presented on the CESJ website is not a panacea, nor is it easy for someone who might be stuck within certain modern thought frameworks and assumptions to grasp, but the advantage is that a serious investigator can always make contact with us directly via the contact information on the website.