A Blog of the Global Justice Movement

Tuesday, March 27, 2012

Welfare Blackmail, Part V: Capital Homesteading

As we have seen in this series, the main issue in the HHS contraception mandate controversy is who is in charge of what, and who is the ultimate sovereign. It is a fundamental principle of natural law that the State was made for man, not man for the State. The State's proper role is to help people help themselves, not to provide for every conceivable want and need. The State's job is care of the common good, not every individual good. This is so that the individual may exercise his or her natural rights, thereby acquiring and developing virtue.

The normal means by which citizens acquire and develop virtue is ownership of capital. This not only empowers them economically, removing all justification for State control of the economy, it empowers them with the political power to resist growing State intrusion into their daily lives, whether domestic, through State bureaucrats dictating to parents, or religious, through dictating to organized religion. As one commentator opined,

"No Gulag, evidently, can deter the advocates of state power from believing in their own virtue and in the morality of the power they exercise. We are all Hobbesians now. Virtue is presumed to reside in the state. Its reliance on compulsion is seen as fulfilling, no undermining, morality. Our communicators, oddly employed in the private sector, work tirelessly to ensure that state control is maintained, our taxes stay high, the official message is promoted. The people know, and can only know, a tiny fraction of what Leviathan does, and what they know is what these partisans tell them." (Tom Bethel, "Freedom and Its Enemies," American Spectator, June, 1999, p. 19.)

The issue boils down to whether the State is the guarantor of all individual goods. If so — and the American Bishops seem to have conceded this point — then what constitutes an individual good is a matter of opinion to be decided by whoever has the power to force others to comply. In order to secure the other benefits the State presumably guarantees, the good must be taken with the bad if the majority so decides.

The bishops need to regain the high ground, demanding that the State confine itself to its proper role as guardian of the common good. Unfortunately, they are in a very weak position because, having accepted the idea that the State should provide all individual goods in theory, they can't complain when the State does so in practice.

Nevertheless, the State, because it has a monopoly over the instruments of coercion — the police power — must necessarily be limited to maintaining the institutions of the common good and correcting abuses, regulating but not controlling individuals and institutions. Care for the common good does not, except in cases of extreme need, mean supplying individual wants and needs.

The problem with making it possible for every child, woman and man to have the opportunity to become a capital owner, however, is that liberals typically recognize barriers to ownership, but assume nothing can be done to remove them. Conservatives do not generally recognize barriers to ownership, but assume that restoring the free market will by itself reestablish a just social order.

The single most important barrier to widespread ownership is the fixed belief that it is essential to reduce consumption and accumulate savings before new capital can be financed. Advancing technology, however, both replaces human labor in the production process and, by its high cost, shuts out most people from ownership of capital instruments. This is because only the rich or the State have the capacity to save or create enough money to finance new capital.

Fortunately, the belief that new capital can only be financed out of existing accumulations is utterly false, as Dr. Harold Moulton, president of the Brookings Institution from 1916 to 1952, proved in The Formation of Capital, published in 1935 as the third volume in a four-part series presenting an alternative to the Keynesian New Deal. The vast bulk of new capital is not financed out of past reductions in consumption, but by future increases in production. The present value of future marketable goods and services is monetized and used to finance new capital that pays for itself out of future profits.

Because this method of finance does not rely on the ability to reduce consumption, but on the capacity to own capital, anyone can become an owner of capital without first reducing consumption and accumulating savings. One proposal that embodies this method of finance is "Capital Homesteading."

Capital Homesteading is a national economic policy based on the growth model of binary economics. It is designed to lift barriers to capital ownership in the present financial and economic system and universalize access to the means of acquiring and possessing capital assets. A Capital Homestead Act would allow every child, woman and man to accumulate capital in a tax-sheltered Capital Homestead Account. There would be a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of savings or reductions in current levels of consumption.

Under "Capital Homesteading," a citizen would have a tax-sheltered capital asset accumulation account, similar to an Individual Retirement Account (IRA). Each capital homesteader's account would be the "vehicle" to accumulate annual allocations of interest-free, productive credit and new asset-backed money issued by the central bank and administered by local commercial banks. This new money and credit would then be invested in feasible private sector capital formation and expansion projects of businesses that would issue new shares to be purchased and sheltered in the citizen's Capital Homestead Account. After the "future savings" (future profits) generated by the productive assets paid off each year's Capital Homestead investment (loan), the citizen would continue to receive in the form of dividends the incomes generated by those capital assets.

By vesting each citizen with power over his or her own life through ownership of capital, both the means by which the State controls people's lives and the justification for such control in the first place would be removed. Issues such as the HHS mandate — the whole of the health care bill, in fact — would be moot.

By insisting that the State provide for people's individual goods instead of caring for the common good, the Catholic bishops are simply going to have to accept whatever the State chooses to dish out. By demanding empowerment of people with direct ownership of capital, however, the bishops can achieve the desired end — a decent material life for everyone — but without giving in to State coercion or control.

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