Keynes v. Leo XIII

Early this morning we received an e-mail from Argentina from a professor of economics who teaches at the Universidad de San Andreas and is with the International Monetary Fund, in response to a comment we posted in a "LinkedIn" group about Catholic teaching on private property in capital. We had made a reference to the fact that Keynesian economics views widespread ownership of capital as undesirable, and this had been embedded in the New Deal. As Keynes declared in his General Theory of Employment, Interest, and Money (1936), economic policy should be directed, in part, to the elimination of the small, "functionless" investor from the economy, what Keynes called a gradual "euthanasia of the rentier," a "rentier" being a small investor who lives off the income from his or her investments.

Dr. JB's comment was natural for someone who is probably most familiar with Keynes from his most famous work, The General Theory. As a scholar, he asked, "But Keynes wrote his General Theory in 1936! Could you please send me a concrete citation where 'Keynesian economics' is against 'ordinary people having capital'? Regards, J.B."

First off, please note the courtesy of Dr. J's comment. We're used to correspondents who simply blast out that Keynes was right, and that the world is necessarily enslaved to this Great Defunct Economist, whose genius has never been nor could ever be surpassed in this or any other age. So this response was easy. All we had to do was point out that Keynes wrote The Economic Consequences of the Peace, the book that established his reputation, in 1919. In Section III of Chapter 2 of that book, Keynes declared, "The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably."

Since the Universidad de San Andreas is a Catholic institution, we thought we'd also better make it clear that Keynes's whole orientation and basic philosophy is directly contrary to the natural law, and thus to Catholic social teaching. Consequently, we added that Keynes's Treatise on Money, which assumed concentrated ownership as a given, was published in 1930; von Hayek's refutation of the Treatise in part on the grounds of its collectivism, missed the most collectivist/socialist aspect of the entire two volume work, on the second page of volume one where Keynes declared that the absolutist State has the power to alter contracts at will and "re-edit the dictionary," i.e., change the substantial nature of things.

We then added a comment that, in our opinion, internal evidence in the General Theory suggests that Keynes put the volume together in a hurry in an effort to refute the work of Dr. Harold G. Moulton, especially in The Formation of Capital (1935), but without mentioning Moulton's name. It's possible that, as president of Brookings since 1916, Moulton was a force to be reckoned with, and the two pretty much diplomatically "ignored" each other. Moulton's only explicit reference to Keynes that we have been able to find is in The New Philosophy of Public Debt (1943), in which Moulton lambastes the Keynesian notion that there is no danger in having a public debt even twice GDP.

We referred Dr. J to the CESJ foreword to The Formation of Capital, The Capitalist Manifesto (1958), The New Capitalists (1961), Curing World Poverty (1994), and Capital Homesteading for Every Citizen (2004) as offering a viable alternative not only to Keynesian, but also Monetarist/Chicago and Austrian economics. We forgot to mention, however, the all-important subtitle to The New Capitalists: "A Proposal to Free Economic Growth from the Slavery of [Past] Savings."

But wait! There's more! We also referred Dr. J to Dr. MTRDPL, who teaches commercial law at the Catholic University of Buenos Aires. Dr. M has a good grasp of Kelso's "binary economics," and has been working on a Spanish translation of Ashford and Shakespeare's Binary Economics: The New Paradigm (1999).

We also thought that Dr. J might want to get in touch with Dr. Norman G. Kurland, president of the Center for Economic and Social Justice in Arlington, Virginia, who is one of the leading authorities on binary economics. Of special interest to a professor at a Catholic institution of higher learning is the fact that Norm met with Blessed John Paul II in a private audience with members of Polish Solidarity in 1987, and received His Holiness's encouragement of CESJ's work. The late Father John H. Miller, C.S.C., S.T.D., head of the Central Bureau of the Catholic Central Union of America in St. Louis, Missouri, USA, said that Dr. Kurland, while not a Christian, has a better understanding of Catholic social teaching than most Catholics.

Finally, we asked Dr. J (if he felt inclined) to comment on our upcoming republication of William Thomas Thornton's 1848 classic, A Plea for Peasant Proprietors, to which we have added a number of appendices updating Thornton's proposal as a possible solution to the current global economic crisis.

You never know. If someone is bold enough to introduce the Kelso ideas into the IMF and the World Bank, and the Capital Homesteading proposal is adopted anywhere in the world in the next six months, you would see an astonishing turn around in the global economy. (In a good way, of course.)

#30#