Monday, November 29, 2010

How to Save the Global Economy, Part I

A journey of a thousand miles, as the saying goes, begins with a single step. Nowhere is this more evident than in the ongoing efforts to present an alternative to the disastrous monetary and fiscal policies dictated by a reliance on Keynesian economics to those who control the world's economies. Last week Mr. Pollant Mpofu decided that sitting around doing nothing was not a good way of dealing with the situation. He sent letters to Mr. Brian Cowen, the Taoiseach (Prime Minister) of Ireland, and Mr. Grant Shapps, British Minister of State for Housing and Planning. The point of the letters was that those who control the world's economies should be looking at Capital Homesteading as a viable alternative to the current mess.

And control they do, whether they admit it or not. As we point out in our foreword to Dr. Harold Moulton's, The Formation of Capital, the unquestioned assumption of the necessity of existing accumulations of savings at the heart of Keynesian economics pervades not only virtually the whole of government monetary and fiscal policy everywhere in the world, but the thinking of ordinary people.

A "free market" tied to existing accumulations of savings is an oxymoron, as Louis Kelso and Mortimer Adler put it in the subtitle to their second book, The New Capitalists: "A Proposal to Free Economic Growth from the Slavery of [Past] Savings." Past savings limits ownership of the means of production either to an already-wealthy private elite (capitalism/Austrian economics), to the State that redefines essential/inalienable rights ("re-edits the dictionary," as Keynes put it in Volume I of A Treatise on Money, 1930) in order to impose socialism without calling it socialism and control the economy for "the people" (socialism/Keynesian economics), or tries to walk a middle ground that ends up satisfying nobody (the "Welfare State"/Chicago/Monetarist economics). The basic flaw in all three arrangements is the common assumption that new capital formation cannot be financed without first saving — "saving" ALWAYS being defined as cutting consumption.

The only question within the past savings paradigm in all three mainstream economic schools is to what degree, if any, the State should intervene to ensure equality of results or keep the lid on to prevent total collapse. The Austrians maintain that no State intervention is acceptable, especially in money and credit. The Monetarists/Chicago schoolers admit some State intervention as an expedient in the short run. The Keynesians advocate total State control through control of money and credit. The Austrians are therefore perceived as heartless fiends, the Monetarists as capitalist dupes, and the Keynesians as saviors of humanity. A "quasi-divine" (un)free market is replaced with a divine, all-powerful State. As one enthusiast put it, "The State is the sole intercessor available to the poor" — neglecting to take into account that the induced inflation and forced savings that are the chief monetary tools of Keynesian economics rob the poor far more effectively than the most heartless capitalist or robber band.

The problem is that none of the three schools take "future savings" into account. Consequently they define money and credit in ways that restrict control of money and credit, and thus ownership of capital to an elite, whether private (capitalism) or public (socialism). All three, therefore, are driving the economy over a cliff, although admittedly the Austrians don't have the pedal to the metal quite as hard as the other two. The only solution is to reorient the economy in accordance with the four pillars of an economically just society:

1. A limited economic role for the State,

2. Free and open markets within a strict juridical order as the best means of determining just wages, just prices, and just profits,

3. Restoration of the rights of private property, especially in corporate equity, and

4. Widespread direct ownership of the means of production, particularly through opening up democratic access to money and credit by breaking the slavery of past savings (the "fatal omission" from all three mainstream economic schools, and is the primary factor that renders today's markets unfree).

What You Can Do

A single voice, crying in the wilderness or not, has little effect. With your help, however, matters might move forward. All you have to do is, 1) Send a brief note to Mr. Cowen suggesting that he look seriously at Capital Homesteading, and 2) Send a link to this posting to your network (and they to theirs) so that others can send brief notes. Mr. Cowen's official e-mail address is Either cut and paste the address from here, or be very careful in transcribing it — Irish follows different spelling rules than English, and you can easily misspell "taoiseach." Here are some samples of the text you might send. We suggest that you modify the text, but it isn't, strictly speaking, necessary. Politicians often simply count the number of letters and e-mails they receive on a certain subject, pro and con, without reading through them.

Subject Line:

Capital Homesteading

Adopt Capital Homesteading

Capital Homesteading Now

Capital Homesteading for Ireland

Crisis Solution: Capital Homesteading

Capital Homesteading for the People of Ireland and the World

Make Ireland a World Leader through Capital Homesteading


DATE (may be omitted)

Mr. Brian Cowen

Dear Mr. Cowen:



I support Mr. Pollant Mpofu's recommendation that you give serious consideration to Capital Homesteading as a possible solution to the present economic crisis and as a foundation for growing a sound economy in the future.




Mr. Pollant Mpofu recently sent you a letter regarding adoption of Capital Homesteading in Ireland as a possible solution for the current economic crisis. I support this initiative and believe that it merits serious consideration, both for Ireland and as a model for the rest of the world.




Kindly add my voice to those suggesting that you give serious consideration to Capital Homesteading as a possible solution to Ireland's present economic crisis.

Sincerely yours,


[N.B.: The Irish and the English use "kindly" where Americans tend to use "please," and vice versa.]


Ireland has the opportunity to lead the world in showing the way to a sound solution for the current economic crisis by giving serious consideration to the adoption of Capital Homesteading. I support this initiative by Mr. Pollant Mpofu.



If you want to compose your own note, keep a couple of things in mind:

Keep it short.

Be respectful.

You're not recommending or endorsing Capital Homesteading, only suggesting that Mr. Cowen take a look at the concept and judge it on its own merits. Thus, even if you don't fully support or agree with Capital Homesteading, you can state in all honesty that it is a proposal that should be given serious consideration.

Avoid any phrases such as, "While I disagree completely with Capital Homesteading, the Just Third Way, truth, love, and justice, . . ." We need to get Mr. Cowen to look at Capital Homesteading, not remain firmly ensconced in the Keynesian camp.


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