Yesterday we looked briefly at the common assumption of all three of today's mainstream schools of economics, that new capital cannot be financed except by cutting consumption, saving, then investing.
Obviously, if we have any respect for the dignity of the human person as manifested in the natural rights of private property and freedom of association (liberty/contract), this restricts ownership of the new capital to those who can afford to cut consumption and save. Especially in light of the sheer expense of new capital in the form of advanced technology, this assumption restricts ownership of the new capital to the currently wealthy — unless, as does Keynes, we redefine private property and freedom of association in order to justify inflation and redistribution, as well as increasing State intrusion into everyone's lives. The State, as one enthusiast put it, becomes "the sole intercessor available to the poor," and everyone is relegated to the status of "mere creature of the State." (Pierce v. Society of Sisters, 1925.)
Such redefinition — whatever you might choose to call it (social justice, solidarity, etc.) — is an offense against human dignity. Possession of natural rights define someone as a natural person, and presumably provide a means of guaranteeing respect for essential human dignity.
In his noted critique of Keynes's A Treatise on Money (1930), Friedrich von Hayek observed that the analysis was collectivist. This claim resulted from the fact that Keynes, in his anxiety to try and guarantee sufficient effective demand through full employment of labor in a wage system redefined both private property and liberty in a way that effectively abolished them as natural rights, making them derived from and dependent on the State.
While correct within its own framework, von Hayek's analysis was flawed by taking the slavery of past savings as a given, as did Keynes. From the point of view of anyone trapped within the past savings paradigm, this refusal to redefine essential natural rights made the Austrians hard-hearted fiends for insisting on property rights of the few, rather than, like Keynes, on the alleged human right to receive wages or welfare at a level sufficient to meet the demands of human dignity.
Thus, at both ends of the spectrum of mainstream economics we see that the past savings assumption leads to unacceptable situations. Either we abolish the natural moral law and redefine basic rights in order to get what we want, or we insist on rights for the few, and the many go begging.
In our next posting in this series (probably Monday), we will look at the specific flaws in von Hayek's analysis as examined by Dr. Harold G. Moulton in his book, The Formation of Capital (1935).
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