Social Justice, III: The Laws of Social Justice

Last week we posted some comments from a correspondent regarding the effectiveness of the Just Third Way movement in getting things in place and changing the system. We pointed out what we thought was the wrong way to go about these things, so this week we'd like to lay out the right way to bring about revolutionary social change.

Given the adherence of CESJ to the principles of both economic and social justice, our tactical and strategic initiatives must not only be directed to the end of establishing and maintaining an economically just society, but be in conformity with what Father Ferree called the "laws and characteristics of social justice." Absent that, we are no better than anyone else who yields to the temptation to declare that (for us at least, because our goals are right, just, etc.) the end justifies the means.

CESJ cannot, therefore, abandon any of its principles, either of economic or social justice, without, like the hero in a Greek tragedy or today's global economy, bringing about its own destruction by the means chosen to preserve it.

Ideally, every member of CESJ should have read and internalized not only The Capitalist Manifesto and The New Capitalists, but Father Ferree's Introduction to Social Justice. We have summarized the basic principles here — but this is not a substitute for reading Father Ferree's pamphlet:

THE LAWS OF SOCIAL JUSTICE

Like any other human activity, social justice must operate within certain parameters, or it ceases to be social justice. It may be something very good, or it may even be something bad, but if it does not adhere to the "laws" of social justice or conform to its characteristics, it is not social justice.

I. That the Common Good Be Kept Inviolate

In all private dealings, in all exercise of individual justice, the common good must be a primary object of solicitude. To attack or to endanger the common good in order to attain some private end, no matter how good or how necessary this latter may be in its own order, is social injustice and is wrong.

II. Cooperation, Not Conflict

Given the uniqueness of each human person, the particular good of each individual is different. Any particular good that is falsely made into an ultimate principle must necessarily be in conflict with every other particular good. Only cooperation, organization for the common good, can make a real society. This does not mean overriding or ignoring individual goods, but integrating them into the whole effort.

III. One's First Particular Good is One's Own Place in the Common Good

The first particular good of every individual or group is that that individual or group find its proper place in the common good. As Father Ferree put it, "It must be admitted that this is not the way most of us think at the present time, but that is because we have been badly educated. It must be admitted also that to carry out such a principle in practice looks like too big a job for human nature as we know it; but that is because we are individualists and have missed the point. Of course it is too big a job if each one of us and each of our groups is individually and separately responsible for the welfare of the human race as a whole. But the point is that the human race as a whole is social." (We think "political" in the Aristotelian sense is a better word here, but let's not quibble.)

IV. Each Directly Responsible

Every individual, regardless of his age or occupation or state of life, is directly responsible for the common good, because the common good is built up in a hierarchical order. That is, every great human institution consists of subordinate institutions, which themselves consist of subordinate institutions, on down to the individuals who compose the lowest and most fleeting of human institutions.

Since every one of these institutions is directly responsible for the general welfare of the one above it, it follows that every individual is directly responsible for the lower institutions which immediately surround his life, and indirectly responsible for the general welfare of his whole country and the whole world. This is the principle of subsidiarity.

V. Higher Institutions Must Never Displace Lower Ones

No institution in the vast hierarchy that we have seen can take over the particular actions of an institution or person below it. This, too, comes under the principle of subsidiarity, although this is the aspect most often ignored.

VI. Freedom of Association/Contract (Liberty)

If every natural group of individuals has a right to its own common good and a duty towards the next highest common good, it is evident that such a group has the right to organize itself formally in view of the common good. This is yet another aspect of the principle of subsidiarity . . . but this should be obvious by this time.

VII. All Vital Interests Should be Organized

All real and vital interests of life should be deliberately made to conform to the requirements of the common good.

But wait! There's more! Tomorrow we will look at the characteristics of social justice, that is, move from the form to the substance. In other words, in social justice, we must not only look good, we must actually do good.

#30#

News from the Network, Vol. 5, No. 17

This cycle's crop of candidates for office seem to be more intent on proving how evil and stupid The Other Guy is than in coming forward with something that will solve the growing problems we face today, both in the United States and abroad. That being the case, it is important that everyone in the Just Third Way movement start looking to see if there's any way to start opening doors to prime movers or potential prime movers — or even to people who can get us to people who can open the door to a prime mover. In our efforts to leave no stone unturned in our quest for economic and social justice, here's what we've been doing this week:

• This has been mostly a winding down week from the intense activity of last week that had the eighth annual rally at the Federal Reserve, the annual meeting and celebration of CESJ (Twenty-eight years and still going) and our usual client work and other mundania.

• We are preparing an informal guide to help people focus on the door-opening initiative so critical to bringing the Just Third Way to the attention of prime movers and potential prime movers. We hope to have something drafted next week.

• We are initiating contact with some of the local colleges and universities to discuss the possibility of having interns, either during the summer or during the school year. Especially in an election year we have a number of projects from which both CESJ and the interns would benefit greatly.

• A number of new contacts have come forward interested in how to advance the Just Third Way within the current system. At present, this means the "JBM S-Corp ESOP," the closest thing in the law to the Just Third Way, somewhat analogous to a Capital Homestead Act within a single company. We hope to prepare a guide showing the advantages a JBM S-Corp ESOP has over regular S-Corp ESOPs and C-Corp ESOPs.

• Reaction to many of the recent postings on this blog has been very favorable, and is reflected in a measurable increase in readership.

• As of this morning, we have had visitors from 63 different countries and 51 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Canada, India, and Pakistan. People in the Netherlands Antilles, Mexico, France, the United States, and Hong Kong spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Guide to Capital Homesteading," "Aristotle on Private Property," Network News, and "The Keynesian Cargo Cult: Rot Bilong Keynes."

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

Social Justice, II: Individualism, the Wrong Path

Yesterday we looked at some commentary on CESJ's effectiveness in getting the "One Percenters" even to discuss the Just Third Way. The problem with the critique, however, was that while it focused more or less on the principles of economic justice, it ignored the principles of social justice. We have to keep in mind at all times that the end does not justify the means.

For example, some people think that the way to achieve a society characterized by widespread ownership of capital is to take from the rich and give to the poor. That's one way . . . except that you don't establish a society in which we restore property for some only by violating it for others. Others redefine capital or private property or liberty or some other natural right — or the natural law itself — thereby achieving the desired goal by establishing it as a fiction.

No, you can only achieve the desired end of the Just Third Way by making sure that your means are fully consistent with your ends. You can't take short cuts, even with the best motives in the world. Thus, the strategy our commentator from yesterday laid out is a virtual archetype of the sort of social activism against which CESJ co-founder Father Ferree warned, and which he saw was ultimately ineffective.

Is it useful? Yes — in its place, but it is not the panacea for social ills that the activists of the 1960s or the Tea Partiers or Occupiers of today believe. It is a short cut that can lead to a permanent detour as people start to focus more on maintaining "the movement" or preserving "the organization" than in reaching the goal the movement or organization was established to reach. As Father Ferree explained,

"The favorite 'social technique' of our own time is the 'peaceful' demonstration, especially when media coverage is likely or can be arranged. Subsidiary aspects of the demonstration are boycotts, sit-ins, organized lobbying pressures, single-issue 'advocacy' and then — crossing an invisible line which is hard to define and harder still to hold — civil disobedience, violent demonstrations, and, ultimately, terrorism!

"Despite the social intent of all such techniques, and their almost universal arrogation to themselves of the terms 'Social Justice' or 'Justice and Peace,' these techniques are all radically individualistic. There are several criteria which can be applied to test this:

"1) They are directed immediately to some specific solution already determined in the mind of the 'activist'; they are never a willingness to dialogue with other and differing opinions on what the problem really is.

"2) They are always intensely concerned with the methodologies of pressure, not with those of competence in the matter in question.

"3) They all require 'time out' from the day-to-day social intercourse of life, and raise the question of how many objects one can juggle at any one time without dropping some or all.

"4) Any 'demonstration' is by definition a demand on someone else to do something. It takes for granted that whatever is wrong is the personal work of someone else, not the common agony of all; and it always knows exactly who and where the someone is.

"All this can be summed up in the observation that the 'social activist' as we have seen them so far, is an earnest amateur by profession.

"This is not to say that such 'professional amateurism' is always wrong. It is wrong as a normal methodology. If it obeys the same principles which would permit a just war, or the insurrection against an entrenched tyrant, more power to it! But it is a hopeless and hence unjust substitute for the patient and full-time organization of every aspect of life which we have seen in the necessary implementation of Social Justice." (Rev. William J. Ferree, Forty Years After. . ., p. 38.)

Was our critic wrong, then? No — but he or she wasn't completely right, either . . . and it's that "completely" that renders the effort ineffective, as we shall see when we pick up this series again next week.

#30#

Social Justice, I: Introduction

Most of the postings on this blog have dealt with the binary economics aspect of the Just Third Way. Having just had our eighth annual rally outside the Federal Reserve and the twenty-eighth CESJ annual celebration, the question came up as to the effectiveness of the effort to implement the Just Third Way, especially a Capital Homestead Act. As one correspondent declared rather forcefully (names have been changed to protect the guilty),

"Why, I ask, are we not part of this national debate on economics? After 40 years, we are not even mentioned as a potential or even possible solution. We do not have the attention of the system! Why can we not see that? We are less than ignored. We are ridiculed! Even the impressive Russell Long victory was really not a victory for democratic economics as it was ultimately perverted by the crooked Congress (funded by the 1%). We cannot beat them without calling them out to the American people.

"WE HAVE TO OUT THE 1% AND CALL THEM WHAT THEY ARE . . . ROBBER BARONS! We should publish a list of them . . . brand them for what they are . . . break down our argument for change into individual elements. See them for what they are, a faceless minority hiding behind even more faceless corporations doing their bidding. We should be working hand in glove with the 99% converting them over from socialism to binary economics. That is where our time should be spent . . . not in trying to get their leaders to pass the litmus test, of ideological purity according to CESJ. We should become a virus in the system and not a flea crawling across its back."

This is a fairly accurate statement of the goal of economic justice and the standard means chosen to reach goals in our society. The problem here, however, is that the strategy and the tactics do not take into account the fact that CESJ is the Center for Economic and Social Justice. People can be up to speed on the Kelsonian principles of binary economics and the necessity of implementing and maintaining the four pillars of an economically just society.

To refresh our memories, the three principles of economic justice are,


  • Participation (the input principle which demands as a fundamental human right, equal opportunity for every person to contribute to the production of society's marketable wealth both as a worker and as an owner of productive assets),

  • Distribution (the outtake principle which holds that the contribution of labor to the economic process should be compensated at the market-determined rate (or "just wage") for each particular type of human contribution to the production of marketable wealth. This principle dictates that the contribution of capital should be compensated by the "just profit" generated by the project or enterprise), and

  • Harmony (the feedback principle that balances and restores participation and distribution within the economic system. This principle was referred to by Louis Kelso and Mortimer Adler as the "principle of limitation" and by others as "social justice," as it calls for the restructuring of the economic system to restore participative and distributive justice),

The four pillars of an economically just society are:

  • A limited economic role for the State,

  • Free and open markets within an understandable and enforceable legal system as the best means for determining just wages, just prices, and just profits,

  • Restoration of the rights of private property, especially in corporate equity and other forms of business organization, and

  • Widespread direct ownership of capital, individually or in free association with others.

So, you say, what's the problem? That is what we'll look at tomorrow.

#30#

A Better Way to Save, V: Capital Homesteading for Every Citizen

We've addressed this particular issue from so many directions and in so many ways that it starts to get a little difficult to try and pique people's interest and get them excited about the Just Third Way. That being the case, we hope we'll be forgiven if we simply outline an alternative to what Louis Kelso and Mortimer Adler called the slavery of past savings. If the previous postings on this blog or in this series haven't done the trick, we'll need a little more time to see what can hook you.

The basic problem with using past savings to finance new capital formation is that, by definition, existing accumulations are a virtual monopoly of the wealthy. That being the case, traditional rights of private property dictate that whoever finances new capital owns the new capital. Obviously, then, under the current system the rich are going to get richer, and the poor are going to get poorer.

That is, unless you take the dishonest expedient that underpins Keynesian economics and "re-edit the dictionary," changing what it means for a right to be a right. This makes everything simple. If someone else has something you want, you just re-define his or her rights, stick a gun or the equivalent in his or her face, and claim it for your own. As Keynes explained the simplicity of his philosophy,

"It is a peculiar characteristic of money contracts that it is the State or Community not only which enforces delivery, but also which decides what it is that must be delivered as a lawful or customary discharge of a contract which has been concluded in terms of the money-of-account. The State, therefore, comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contract. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time — when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of money has been reached that Knapp's Chartalism — the doctrine that money is peculiarly a creation of the State — is fully realized." (John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt, Brace and Company, 1930, 4.)

Any Aristotelian or Thomist will instantly grasp the incredible, even breathtaking scope of Keynes's claim. If true, Keynes's declaration not only abolishes private property, but free association — liberty — by claiming that the State can alter the terms of any "money contract" at will simply by changing the definition of a thing. Keynes was evidently unaware that all contracts are "money contracts," involving the exchange of the present value of existing or future marketable goods or services — "consideration" — or no contract exists.

The power to change the definition of a thing is the power to change the thing's "substantial nature" — its essence. Keynes was, in effect, claiming that the State, if not a god per se, is at least something with the power of God to change truth through transubstantiation.

This has led to the situation in which the great mass of people has become convinced that all benefits flow from the State. No recourse is to be had from any other source for anybody or any thing. The fact that this declaration directly contradicts Catholic social teaching is deemed irrelevant. As Pope Leo XIII clearly stated, ""There is no need to bring in the State. Man precedes the State, and possesses, prior to the formation of any State, the right of providing for the substance of his body." (Rerum Novarum, § 7.)

As we have seen, flawed ideas about money, credit and private property prevent people from implementing a viable solution to today's economic crisis and the increasing State control over their lives: "We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners." (Ibid., § 46.)

By supporting a "Capital Homesteading" program that would enable every child, woman and man to acquire capital that pays for itself out of future profits on credit without redistributing existing wealth, we can empower people to resist the unjust inroads of the State. That, of course, leads us into a brief description of Capital Homesteading.

Capital Homesteading is an analogue of the nineteenth century American programs enacted to bring about a broad distribution of the ownership of land. It expands the concept to include ownership of advanced technologies, including management, marketing and distribution systems, through equity shares in enterprises capable of competing without special protections within a free and just global economy.

A "Capital Homestead Act" would be a national economic policy based on the binary growth model, designed to lift barriers 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, 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.

The chief means for doing this would be a tax-deferred "Capital Homestead Account." Under "Capital Homesteading," a citizen's tax-sheltered capital asset accumulation account, similar to an Individual Retirement Account (IRA). Each capital homesteader's account would be able to receive 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.

#30#

A Better Way to Save, IV: The Purpose of Production

Last week we saw that Keynes was faced with something of a conundrum. How, at one and the same time, do you decrease consumption to accumulate savings to finance new capital, and increase consumption to justify new capital investment? Harold Moulton gave the answer to this "economic dilemma" in his counter-Keynesian monograph, The Formation of Capital (1935), but we suspect that Keynes — while he probably read it — completely ignored it because it pointed out the fallacies of the past savings approach.

Keynes had his own solution: produce goods and services that are not marketable! Classical economics assumed as a matter of course that if someone engaged in productive activity, it was with the intent of bettering him- or herself. As Pope Leo XIII agreed,

"It is surely undeniable that, when a man engages in remunerative labor, the impelling reason and motive of his work is to obtain property, and thereafter to hold it as his very own. If one man hires out to another his strength or skill, he does so for the purpose of receiving in return what is necessary for the satisfaction of his needs; he therefore expressly intends to acquire a right full and real, not only to the remuneration, but also to the disposal of such remuneration, just as he pleases. Thus, if he lives sparingly, saves money, and, for greater security, invests his savings in land, the land, in such case, is only his wages under another form; and, consequently, a working man's little estate thus purchased should be as completely at his full disposal as are the wages he receives for his labor. But it is precisely in such power of disposal that ownership obtains, whether the property consist of land or chattels. Socialists, therefore, by endeavoring to transfer the possessions of individuals to the community at large, strike at the interests of every wage-earner, since they would deprive him of the liberty of disposing of his wages, and thereby of all hope and possibility of increasing his resources and of bettering his condition in life." (Rerum Novarum, § 5.)

Keynes said (in essence), baloney. Screw the market. Liberty and private property? Feh. The private sector isn't in charge, anyway. The State is in charge of everything, and has been (according to Keynes) for at least 4,000 years. State save us! The purpose of production is not consumption. Neither Adam Smith nor the popes knew what they were talking about. The purpose of production is to pile up wealth to reinvest in capital to provide jobs to realize effective demand to justify the capital that produces the wealth to pile up. As Keynes pontificated,

"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." (John Maynard Keynes, The Economic Consequences of the Peace (1919), 2.iii.)

Of course, there has to be enough production of marketable goods and services to keep people sufficiently contented not to overthrow the government or start burning economists at the stake. The problem is to get sufficient effective demand into the hands of consumers to allow them to buy the marketable goods and services that keep them alive, and yet decrease consumption to provide savings.

Yes, but how?

Simple. By creating money that pays for production of non-marketable goods and services! Paying for the labor to produce non-marketable goods and services increases the effective demand that allows consumers to buy needed goods and services, but does not increase the supply of those same goods and services. Further, you can create all the money you want to do this and it won't cause inflation because the new money is only paying for goods that aren't sold! The fact that the price level rises is, according to Keynes, due to "other factors." It's not "true inflation."

That's the theory, anyway.

Okay, what sort of non-marketable goods and services did Keynes say we should produce in order to get the economy rolling again? Oh, anything, just as long as the goods are not meant for use, or were to be destroyed in some fashion after manufacture without adding to what is available in the market — pyramids, cathedrals, even war if the politicians can't think of anything sufficiently useless on which to spend money.

The massive waste of lives and resources that such a program entails is irrelevant as long as you gain your immediate end. Mounting debt, depleted resources, ruined lives — these are long run problems. We're only interested in the short term. In the long run, as Keynes claimed, we're all dead. Screw tomorrow. We Want It Now.

Of course, we could always address the Great Savings Dearth by doing something that actually helps people save instead of allowing the government to waste. We'll take a look at one possibility starting tomorrow.

#30#

News from the Network, Vol. 5, No. 16

Despite the wild fluctuations in the stock market (and everything else — shall we have another discourse on "The Great Hotdog Hoodwink" now that a 69¢ one-pound package of hotdogs is a $1.79 12-ounce package?) there are definite signs of hope. People seem to be waking up to the need for some serious reform, although they remain unsure what to do about it. To let them know that there are things that can be done, we've been continuing our efforts:

• The Rally at the Federal Reserve Board of Governors building today in Washington, DC went very well. There was only a moderate number of hitches (meaning the things that went wrong were either someone else's fault, or happened to someone else). The event opened with remarks by Rev. Robert Brantley, leading into a rousing rendition of "16 Bills" sung by Dr. Scott Holmes, which (if you haven't heard it), can be found here. (If you don't care for protest songs, tune in to this, which is pretty cool, too.) Scott followed with "People and Things," a piece, like "16 Bills," by Dawn Brohawn.

• Scott's songs were followed by a dramatic reading of a skit by Barbara Olson of Las Vegas, Nevada, "Abraham Lincoln and Miss Liberty." Michael D. Greaney read the part of Abraham Lincoln, while Jackie Woodman of Cleveland read Miss Liberty, appropriately garbed as the Statue of Liberty.

• Bob Brantley then introduced the keynote speaker, Norman G. Kurland, president of CESJ. Norm gave a brief statement as to why we need a Capital Homestead Act and read a statement of support from Pollant Mpofu, an advisor to the Labour Party in the United Kingdom.

• Dave Hamill of the Coalition for Capital Homesteading gave a talk on how Capital Homesteading would help the "small" businesses that provide the bulk of production of marketable goods and services throughout the world, and how it would stimulate effective and lasting — unsubsidized — job creation.

• Monica Woodman gave a presentation of what adoption of a Capital Homestead Act would mean for solving the home mortgage crisis. While some things could be done in the current legal and economic environment, a permanent and just solution to the problem will be found only in Capital Homesteading.

• Joseph Recinos, back in town briefly from traveling in Central America, gave his reflections on why Capital Homesteading is needed globally as a way of establishing and maintaining economic justice for all on a basis of liberty and private property.

• CESJ's "Poet Laureate" Dawn Brohawn then gave a talk on how just "one simple act" — specifically, signing and introducing the Declaration of Monetary Justice to legislators and politicians at all levels of government for adoption as a non-binding resolution — would greatly advance the Just Third Way.

• Jerry Peloquin then gave a brief reflection on the need to revive Washington, DC economically, especially Ward 8 and other distressed areas.

• Scott Holmes finished off with a rendition of "The Just Third Way," accompanied by Jerry on drums.

• According to the Krause Publications e-newsletter, the economy is so bad that coin collectors are divesting themselves of relatively scarce items to make ends meet. Not the great rarities, of course — few ordinary collectors have those — but the "key" items around which someone typically builds a collection. While there's always the hope that it can be replaced when things get better, you have to realize the significance of people selling their "trophies of the hunt" — half the fun of collecting anything is the search for a scarce item and the pride of having a complete set of something. This is a better economic indicator than anything coming from the economists or government, and argues that the so-called "recovery" is an illusion.

• The American Catholic bishops have castigated Representative Paul Ryan's budget proposal for not having a provision that provides adequately for the poor. (The Washington Post, 04/18/12, A2.) While we agree that Mr. Ryan's proposal doesn't address either the needs of the poor or the nation as a whole, it's at least better than the current system — with or without any mandates that violate individual consciences. Not being raised is the possibility that there might be a proposal — such as Capital Homesteading — by means of which the poor can take care of themselves, capital ownership for all can be financed without government subsidy or redistribution, the tax base rebuilt, government spending brought within reasonable limits and the debt paid down.

• ACS Books ("American Chesterton Society Books"?) has published The Hound of Distributism, edited by Richard Aleman, president of the Society for Distributism. Hound appears to be available only in Amazon's "Kindle" at the notorious $9.99 price. According to the one posted review (as of 04/18/12), the book is a collection of essays that rehash old material to the point of redundancy, or (as the reviewer put it), "I was left with the feeling this is a book by Distributists, published by Distributists, sometimes focused on Distributists and, I suspect, for Distributists." If you have $10 you want to invest in reading something you can get for free from other sources by doing a little searching on the internet, you might want to buy The Hound of Distributism, but be warned. Judging from our past experience with a number of the authors whose approach to the natural law is somewhat flexible, their thought is not completely consistent with the Just Third Way. We're just letting you know, however. You can form your own opinion.

• As of this morning, we have had visitors from 63 different countries and 50 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, India, and Pakistan. People in the Netherlands Antilles, France, the United States, the United Kingdom, and Indonesia spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Guide to Capital Homesteading," "Aristotle on Private Property," "Why Did Nixon Take the Dollar Off the Gold Standard?" and "The Situation in Greece."

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

A Better Way to Save, III: Keynesian Forced Savings

Well, tomorrow is the Big Day. Not for taxes . . . that was Tuesday. If you've been following this blog, you will have seen one or two postings urging you to come and support the push for a Capital Homestead Act at a rally in front of the Federal Reserve Board of Governors building on Constitution Avenue from 11:30 am to 1:30 pm. We'll be demonstrating in favor of monetary and tax reforms to correct the problems caused by adherence to the principles of Keynesian economics and, to a lesser degree, all the schools of economics that accept the "currency principle" as a given.

We have graphic evidence in the form of the condition of the global economy that manipulating the money supply in accordance with the principles of chartalism or Modern Monetary Theory does not work. It is a variety of socialism based on redistributing existing wealth through inflation, leading inevitably to the Servile State.

We define inflation as a rise in the price level resulting from more units of currency "chasing" the same or a declining amount of production relative to the increase in the money supply. Yes — we are fully aware that Keynes defined "true" inflation as a rise in the price level only after full employment had been reached. That's nice. Ordinary people end up paying more for less whether the inflation is "true" or not.

Inflation by any name, however, is a key element in Keynesian economic policy. Taking as a given (as Keynes did) that new capital formation cannot be financed except by cutting consumption, the problem becomes how to both increase consumption to justify the new capital, and reduce consumption to pay for it? This is the past savings paradox that Harold Moulton termed "the economic dilemma" in The Formation of Capital (1935).

Keynes believed he had solved the problem with inflation, even if he refused to call it that — an example of his creative "re-editing of the dictionary." It (allegedly) works like this. A rise in the price level forces consumers to pay more for less. Since Keynes defined "saving" solely as reductions in consumption, this qualifies as "saving." Keynes called it "forced savings."

The consumers, however, do not realize the benefit of this type of "saving." Instead, the "savings" accrue to producers in the form of increased profits. (If producers realize too much profit, however, the government taxes it away to redistribute back to consumers in the form of entitlements, job subsidies, legally mandated wage and benefits packages, and welfare.) Producers then (allegedly) use the savings to finance new capital formation. This (allegedly) creates new jobs that (presumably) generate enough effective demand to keep the economy running at full employment.

The problem that even Keynes saw with this was that you cannot continue on a course of producing more and consuming less forever. It doesn't make sense, as even he acknowledged. Whether or not Keynes wanted to admit it, however, Moulton knew what he was talking about. You can't cut consumption and increase consumption at the same time. The numbers just don't add up.

Never fear. Keynes had an answer. We'll conclude this series next week — after the rally tomorrow at the Federal Reserve.

#30#

A Better Way to Save, II: Keynesian Looking Glass Land

Yesterday being "Tax Day," the vast bulk of "Human Interest Stories" centered on the personal income tax. Typically these stories have focused on how much of each year an average person has to work before he or she stops working for the government and starts working for him- or herself — "Tax Freedom Day."

This year something new has been added: How people are being stupid to use the tax system to "force savings" by overpaying to get a big refund. According to a flurry of articles that appeared in newspapers and on the internet, there is a big push on to nip this sort of thing in the bud. Without even bothering to google the subject, we've seen "IRS Uses Tax Day to Push Consumers to Save" which despite the title argues against using the tax system to accomplish the desired end. Then there was the condescending "Admit It — It Feels Good."

The bottom line here is that we have to overcome a national savings dearth . . . but ordinary people shouldn't use the tax system to save. As one of the articles concluded,

"None of this is going to solve the national savings dearth. Most personal saving in the U.S. will continue to be done by people with lots of money to spare. These experiments, instead, are aimed at making individuals a bit more financially secure, a creative attempt to promote a culture of saving in a country with too little of it."

Why? This doesn't make sense. If the tax system has been distorted to encourage saving, why is the IRS upset when people use the tax system to save?

Actually, it makes perfect sense. Under the currency principle illusion that the only way to finance new capital formation is to cut consumption and save, the more or less logical conclusion is that only the rich have the capacity to save in the amounts required by increasingly expensive advanced technology. If the poor or non-owning classes save, this reduces consumption, and makes the new capital financed by the rich less feasible.

In the Looking Glass Land of Keynesian economics, the tax system and the monetary system are combined in the joint endeavor to reach full employment — of labor, not of all resources. The primary task of private industry (under government control, if necessary) is not to produce marketable goods and services that, in accordance with Say's Law of Markets as applied in the real bills doctrine, can be exchanged through the medium of money for what others produce. Rather, private industry's job is to create jobs in order to sustain effective demand to absorb what technology produces.

This requires a little sleight-of-hand in a number of areas. Okay, a lot of sleight-of-hand. This is relatively easy to do when you base science on faith, or vice versa. Contradictions can be explained away by accusing anyone who raises a question of being either a knave or a fool, probably (and illogically) both at the same time.

For starters, because no normal person wants to admit that what he or she does is useless, "productivity" is always measured in terms of labor hours. Always. It doesn't matter that technology (capital) is responsible for the bulk of production. The belief that "productivity" can be measured by dividing output by labor hours leads to the ludicrous conclusion that human labor is infinitely productive when it isn't even there. This would be the case in a fully automated factory: (Total Output)/0 = Infinity . . . an irrational number (except in Keynesian Looking Glass Land).

Then there's the assumption that the job of the non-owning masses is . . . to have a job. If "the masses" own, they'll just do something stupid with their capital incomes, like spend the money on food, clothing and shelter. This is why Keynes called for the "euthanasia" of the small "functionless" (his words) investor who doesn't reinvest his or her capital income. If they spend, there won't be enough savings to finance new capital formation to provide jobs for everybody.

Given the assumption that the only way to finance new capital formation is to cut consumption and accumulate money savings (and we're not taking the time right now to prove just how false and damaging this assumption is), economic growth relies on having a small class of rich people, the smaller, the better, who cannot possibly consume all the income their capital produces. Being logical, such people reinvest their excess consumption income in new capital, thereby creating jobs.

Alas — the effect of technology is to replace human labor in the production process. The government is forced to step in and either mandate or subsidize job creation somehow, or there won't be enough effective demand to allow the new capital to pay for itself out of future profits, and then provide more savings to finance new capital formation and create jobs. Thus, in the Keynesian Looking Glass universe, useless jobs are created so that there will be more useless jobs created. The goal of job creation is the redistribution of income/effective demand from the technology that produces marketable goods and services away from the human beings who own the capital and who have a right to the "fruits of ownership," to the human beings who don't own capital, but who consume the marketable goods and services produced by capital.

This creates another problem. If income is redistributed through job creation, then the rich don't have enough savings to finance new capital formation and create jobs. Adding to this Catch-22 is the fact that if non-owners consume the income from their "jobs," then they, ipso facto, aren't saving either. If owners aren't saving, and non-owners aren't saving, then there aren't any savings to finance new capital formation and create the jobs that inhibit or prevent saving.

Houston, we have a problem.

This seems an insoluble paradox, but Keynesian economics is equal to the task . . . if we don't look too closely at the system or ask too many questions. Tune in tomorrow for the next exciting episode in our examination of the magic of Keynesian economics.

In the meantime, consider joining CESJ and the Coalition for Capital Homesteading this Friday, April 20, 2012, for a rally in front of the Federal Reserve Board of Governors building on Constitution Avenue from 11:30 am to 1:30 pm to demand a little tax sanity and monetary justice.

#30#

A Better Way to Save, I: Why Things are Complicated

Regular readers of this blog know that our position on the Internal Revenue Code is that it is unnecessarily complex. Including all the regulations 'n stuff, the whole thing totaled more than 72,000 pages — more than 5.5 million words — in 2011. The reason (at least in our opinion) is that the tax code has been "hijacked" to conform to the demands of Keynesian economics. People must be forced to save so that there will be sufficient financing for new capital formation that will create jobs.

What makes tax paying and tax collection so taxing (sorry) is that Congress has to balance several contradictory demands. Contrary to the principles of chartalism ("Modern Monetary Theory") embodied in Keynesian economics, the tax system has to raise some of the money to run government. It cannot discourage productive activity too much. It has to encourage people to cut consumption and save. It can be (and is) used to distribute pork and encourage politically desirable behavior.

All of this makes for a pretty shaky tightrope to walk. It should come as no surprise that the rope is close to breaking and will (in all likelihood) soon drop the country into bankruptcy — and the safety net has rotted away.

As readers of this blog are aware, things would be much simpler if the tax system were used exclusively to raise money for government to meet legitimate expenses, leaving it to people to meet their own needs through their own efforts. The only exception is in emergency situations when it is expedient (politically prudent) to make a redistribution of existing wealth to keep people alive and in reasonably good health.

To allow people to meet their own needs through their own efforts, the Federal Reserve was established. The original mission of the central bank of the United States was to provide the private sector — "the people" — with an asset-backed elastic currency by rediscounting qualified bills of exchange accepted by member banks representing the present value of future industrial, commercial and agricultural capital. This was to be supplemented with limited "open market operations" in bills accepted by non-member banks or drawn by businesses or individuals.

To prevent the government from being able to use the Federal Reserve to finance operations, the bank was not empowered to accept or purchase government securities, except to retire the National Bank Notes of 1863 to 1913, which were backed by government debt. Within two years, however, the government had figured out a way to monetize its deficits by getting the Federal Reserve to purchase secondary government securities ("bills of credit") on the open market, and by the 1930s had effectively stopped all financing of private sector projects, except for politically motivated bailouts.

The bottom line here is that the income tax that was intended to finance government operations is now being misused to generate savings for private sector investment, while the Federal Reserve that was intended to provide financing for private sector investment is being used exclusively to finance government and politically motivated investment. Consequently, the private sector is starved for financing, and the government has (arguably unconstitutionally) been creating money at a furious rate backed only by its power to collect taxes from a rapidly decaying private sector economy. The question becomes what to do about it.

In the short term, you can join CESJ and the Coalition for Capital Homesteading at the Federal Reserve Board of Governors building on Constitution Avenue in Washington, DC this Friday, April 20, 2012, at 11:30 am to 1:30 pm to rally in support of reforming the monetary and tax systems and the passage of a Capital Homestead Act. In the longer term, you can learn more about the Just Third Way by tuning in to this blog tomorrow.

#30#

"Changes in Income Inequality and Economic Growth"

The last couple of days seems to have generated quite a bit of discussion in the media about how to (re)establish income equality and achieve sustainable economic growth.  The focus seems to be on showing how the proposals currently out of the table really don't do anything other than perpetuate the unjust system that caused the problem in the first place.  The obvious thing to do, then, is to start looking at solutions that are not out on the table (crazy thought) . . . and to join us this Friday outside the Federal Reserve Board of Governors building in Washington, DC (on the Constitution Avenue side) from 11:30 am to 1:30 pm . . . and bring some Spam, Coke, and Hershey Bars to share.

Or you could write letters to the Wall Street Journal and other periodicals to alert them to the fact that there is an alternative to the present system (and send CESJ some donations for Spam, Coke and Hershey Bars):

Dear Sir(s):

Kamran Dadkhah has the right of it in his letter in today's Wall Street Journal addressing "Changes in Income Inequality and Economic Growth." Increasing tax rates to try and equalize income and stimulate economic growth puts the cart before the horse by implying that the economic growth has already taken place so that it can be redistributed — an illogical assumption at best.

I disagree, however, that education works toward equalizing income. On the contrary, education results from having a surplus to spend on education. It does not itself cause the surplus. We would otherwise not have the spectacle of students burdened for decades with unrepayable loans taken out to finance education.

The real key to unleashing people's entrepreneurial potential is to open up equality of access to the means of acquiring and possessing private property in capital: capital (not consumer) credit. The venture capitalist is essential for financing startups and speculative ventures. The way to sustainable economic growth, however, is to finance expansion by discounting and rediscounting bills of exchange drawn on the present value of future marketable goods and services. To generate the mass purchasing power necessary to keep the economy going, it is also essential that ownership of the capital that will produce this wealth is broadly and directly owned by people who will use the income first to pay for the capital, and then for consumption, not reinvestment.

Yours,
Blah, Blah

#30#

News from the Network, Vol. 5, No. 15

The big news this week is next week: the annual "Rally at the Fed," co-sponsored by the Coalition for Capital Homesteading and the Center for Economic and Social Justice. The event will be on Friday, April 20, 2012 in front of the Federal Reserve Board of Governors building on Constitution Avenue from 11:30 am to 1:30 pm. If you are in the area, be sure to drop in. If you'd like to carry a sign or hand out literature, you're more than welcome. If you happen to look like Abraham Lincoln . . . have we got a job for you in this year that marks the 150th anniversary of the original 1862 Homestead Act. By next week all the brouhaha over the centennial of the Titanic going down will be old news, and we can concentrate on keeping this country and the rest of the global economy from hitting the skids. In other news this week:

• CNBC analyst Rick Santelli, evidently the inspiration for the Tea Party movement, seems to have an inkling of what's going on, but evidently has never heard of Capital Homesteading. As reported in The Blaze ("CNBC Analyst Loses It Over Obama's Buffett Rule: 'Absolutely Not!'" Jonathan M. Seidl, 04/12/12), Santelli went on what came across as a rant: "People don't really want to hear solutions. They want to change the dialogue, bait and switch, so we get more worried about what people pay, what's fair! You know what, how are my kid's opportunities affected by how many millionaires there are? I don't see that their opportunities are affected! You know what I see that's going to affect their opportunities? 15.6 Trillion!" As readers of this blog are aware, we're run the numbers, and nothing that anyone is proposing does anything to address the real problem which from a tax point of view can be stated as "erosion of the tax base." In English, people aren't making enough from labor to pay taxes, and the government is creating money to cover deficits. Capital Homesteading would solve the problems and more — but only if it's implemented.

• In the Washington Post today, Charles Krauthammer once again sounded as if he's been reading this blog. We always figured Dr. Krauthammer had something on the ball, and that would tend to prove it. If your paper carries his column, you can read what he says (ignoring the Titanic reference; on principle we're disregarding all of them until after April 15th) about "Free-Lunch Egalitarianism." If you get the Post, it's in the 04/13/12 issue, page A17.

• In today's Wall Street Journal, Anne Hendershott and Christopher White (co-authors of the upcoming Beyond the Catholic Culture Wars from Encounter Books — it's not out, we already looked) had an article, "Traditional Catholicism is Winning." (04/13/12, A11.) What is it "they" are "winning"? As the authors explained, after talking about the Young Turks who have turned into the Old Guard, "[I]t [the "aging generation"] is being replaced by younger men and women who are attracted to the church [we figure the editors changed it from "Church"] because of the very timelessness of its teachings. They are attracted to the philosophy, the art, the literature and the theology that make Catholicism countercultural." This is good news for the Just Third Way and its foundation built on the natural law. Frankly, all religions have been afflicted with a tsunami of relativism from both "left" and "right," all based on redefining natural rights and even the natural law itself, all in a fruitless effort to try and force the teachings of the Catholic Church and other faiths and philosophies to conform to the principles of Keynesian economics or some other currency principle school of economics.

• If you haven't read this month's issue of Inside the Vatican, do so. The article "Catholic Teaching and the Elections" is getting some attention in a few quarters, and it looks to get more.

• If you’re upset by the price manipulation of e-books, give yourself a break and download one of the new titles from Universal Values Media available for 99¢, or splurge and get Don’t You Wish! for $2.99.

• Don't forget the Rally at the Federal Reserve Board of Governors building in Washington, DC on Friday, April 20, 2012, from 11:30 am to 1:30 pm. If you can't attend in person, consider sending a sentence or two of support for Capital Homesteading to thirdway [at] cesj [dot] org that (if we have time) could be read at the Rally.

• As of this morning, we have had visitors from 56 different countries and 48 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, India, and Pakistan. People in the Netherlands Antilles, the United Kingdom, the United States, Indonesia and Pakistan spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Guide to Capital Homesteading," "Aristotle on Private Property," "Why Did Nixon Take the Dollar Off the Gold Standard?" and "The Situation in Greece."

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

The Keynesian Cargo Cult, IV: The Remedy

Cargo Cultists expend enormous energy building fake airplanes without engines in the hope of obtaining Spam, Coke and Hershey Bars. Keynesians use up vast resources printing money with nothing behind it that undermines economic growth and redistributes existing wealth in the hope of bringing full employment. While both groups are obviously sincere and convinced of the truth of the systems they espouse, the fact is that nothing they are doing is guaranteed to or even reasonably certain of bringing about the desired results. It is as dangerous to apply faith to matters of reason, as it is to try to force reason into a framework determined by faith alone. In desperate situations, it changes the basic orientation from hoping for miracles, to relying on them.

This sounds pretty grim, but there is a way out — the Just Third Way. A proposal like Capital Homesteading, while it relies on people being inspired by their faith to work for justice, does not try to force economics or any other science into a predetermined box — any more than science (even Keynesian economics) can be used to dictate purely religious beliefs or doctrines, or "re-edit the dictionary" to change the precepts of the natural law, despite Keynes's declaration.

Through restructuring our institutions, especially our money and tax systems, Capital Homesteading has the potential to make it possible for every child, woman and man to acquire a capital stake sufficient to generate income to meet normal living expenditures. This becomes critical as advancing technology eliminates increasing numbers of wage system jobs, and those with wealth become increasingly resistant to redistribution. Further, current methods of financing new capital formation not only maintain the current position of the wealthy and shut out virtually everyone else from the chance of acquiring and possessing private property in capital, they operate to concentrate ownership of almost all new capital in fewer and fewer hands.

The solution is to establish a national economic policy based on the binary growth model, designed to lift barriers in the present financial and economic system and universalize access to the means of acquiring and possessing capital assets — a "Capital Homestead Act." The Capital Homestead Act would allow every child, woman and man to accumulate a target level of capital assets. Using a tax-deferred "accumulation vehicle" similar to an IRA, the amount would be 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.

Each capital homesteader's account would be able to receive annual allocations of interest-free (but not cost-free), productive credit. This would begin the process of creating new asset-backed money through the central bank, administered by local commercial banks by investing 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) and canceled the money, the citizen would continue to receive in the form of dividends the incomes generated by those capital assets.

There is, of course, much more to it than that. An overview can be found on the website of the Center for Economic and Social Justice under "Capital Homesteading." Take a look at the proposal, and if you like it, join us Friday of next week at the Federal Reserve Board of Governors Building in Washington, DC, at a rally to be held starting at 11:30 am and going until 1:30 pm.

#30#

The Keynesian Cargo Cult, III: Rot Bilong Keynes

Reading yesterday's posting, someone unfamiliar with the intricacies of Keynesian economics might have felt his lip curl a bit with contempt or have experienced a surge of condescension for such benighted beings as Cargo Cultists. After all, it seems the height of naiveté, if not absurdity to believe that prosperity can be restored by means of unthinking adherence to a set of incomprehensible ritual acts and chanting meaningless words. On reflection, however, we might suddenly realize just how closely Cargo Cultism — Rot Bilong Kako (the Way of Cargo) — and its arguments resemble the Keynesian economic analysis, the Way of Keynes.

Every Cargo Cultist can point to a specific time — the Second World War — when cargo flowed into their land in endless streams, and everyone enjoyed a virtual golden age. Even Europeans and Americans admit that cargo was shipped in massive quantities. Cultists conclude that it is only the selfishness of the whites that prevents them from learning the secret rituals of Cargo to be able to summon the unlimited wealth that flows from God's Cargo Workshops.

Cargo Cultists reject the arguments of non-believers because clearly those who profess to debunk the Way of Cargo have an interested motive and want to keep all the riches for themselves. If the Cultist is steadfast and his faith is unwavering, however, he will one day discover just the right formula to recite and the right structures to build to lure the ships and planes to land again and disgorge their wealth.

Similarly, adherents of Keynesian economics can point to a specific time — coincidentally that same Second World War — during which the economy was restored and universal prosperity was established through full employment. Earlier efforts to achieve full employment during the (second) Great Depression had been balked by the refusal of FDR and other leaders to perform the proper rituals and establish the necessary institutions, as Keynes complained in his famous open letter published in the New York Times on December 31, 1933.

Once the war was over, the Keynesian rituals to maintain full employment were continued, and seemed to work for a while. Cracks soon appeared, however, necessitating the development of new rituals. The strain of paying for both the Vietnam War and the Great Society increased the national debt enormously. Given the right formula, however, economists and politicians were confident that full employment (the developed nations' version of cargo), could be permanently restored.

Since the 1970s (when even Milton Friedman declared, "We are all Keynesians now"), much effort and tremendous resources have been expended to duplicate the outward forms of a prosperous society. Just as the Cargo Cultists build bamboo airplanes and warehouses, Keynesians create the usual accompaniments to full employment, e.g., plenty of money, high paying wage system jobs, the creation of gigantic corporations, welfare, entitlements, a well-educated citizenry, and so on.

Like adherents of the Way of Cargo, however, Keynesians fail to realize (for example) that education doesn't generate wealth. Wealth pays for education. The myth that has burdened millions of students with unrepayable debt is that education brings prosperity, rather than that prosperity allows people to become educated.

The problem is, the Cargo Cultists' airplanes, conning towers and docks only copy the outward form of the American military presence in World War II. They assume that these simulations will magically bring the cargo back. Similarly, Keynesians fail to focus on producing the marketable goods and services that bring about full employment naturally. Further, Cargo Cultists limit "cargo" to finished consumer products. Not only do they ignore the necessity of having engines in their bamboo airplanes, Cultists fail to realize that importing technology would enable them to fulfill their material wants and needs through their own efforts.

For their part, Keynesians limit "full employment" to full employment of labor, ignoring the capital ownership that would enable people to meet their own wants and needs without direct government assistance. Increasing government control of the economy presumably takes up the slack for the failure of the system. Keynesians attempt to impose desired results by performing new (and increasingly expensive) rituals that divert efforts and resources away from truly productive activity.

Clearly, what happened in America (and the rest of the developed world) is that, just as John From Jesus Christ became John From America, John From America became John From the Government. John From the Government now decrees what things will be. Mandating the trappings of prosperity and passing many laws will create full employment.

Like the Cargo Cultist who builds an airstrip or a dock, today's economist and politician is confident that if he or she gets a law passed mandating a desired end, or enough "money" (always understood as a State-issued or authorized general claim on the total wealth of society, not as a promise/contract that must be honored) is spent, the desired end will necessarily come to pass. If it doesn't, it's because the proper rituals have not been followed — excuse me! Enough laws have not been passed — there has been insufficient effort (money) put into the program, or a hidden conspiracy (the rich, the capitalists, the socialists, the neo-cons, the Jews, the Muslims, the Catholics, etc., etc., etc.) is preventing the program from working in order to keep all the wealth for themselves.

Pointing out that things like full employment, adequate wages, benefits, education and social welfare are not the causes of prosperity but the results earns the pointer-outer the pity and condescension of the economic and political establishment at best, its contempt and anger at worst. It is useless to explain that paying people for nothing, or increasing the amount of money before increasing the present value of existing and future marketable goods and services (current and future production) only debauches the currency and redistributes existing wealth without creating any new wealth. Noting that neglecting to establish widespread ownership of capital to replace disappearing wage system jobs as technology takes over the burden of production incites rage at such heresy.

All good Keynesians know that all production comes from human labor. Consistent with Holy Writ (Keynes's Old Testament or Treatise on Money (1930), and New Testament, The General Theory (1936)), it is only necessary to create jobs for production to appear. Chapter and verse can be cited to prove that government creates money that causes effective demand, and inflation transfers the savings that result from reduced consumption to producers so they can create more jobs. Anyone pointing out that, per Say's Law of Markets, you cannot purchase what others produce unless you produce something yourself to offer in exchange is considered insane. Keynesians know that government creates all money, or "the banks" do so illegally by usurping John From the Government's power. Consequently, viewing money as a mere symbol of existing or future wealth in which the issuer has a private property stake, as is the case in binary economics, is heresy. Rising prices on the stock market are not an indication of speculative fear or fever, but — again — the cause of prosperity and full employment.

As for the real bills doctrine (an application of Say's Law of Markets and the understanding of money as anything that can be accepted in payment of a debt), any Cargo Cultist could have developed the Keynesian money multiplier that allegedly refutes the doctrine. Instead of realizing that the money supply is increased by commercial banks accepting bills of exchange representing the present value of existing and future marketable goods and services, the government creates some money. The money is deposited, creating "excess reserves." The excess is loaned out, redeposited, loaned out again (less the required reserves), and so on, multiplying the amount of money in the system.

Keynesians ignore the obvious fact that, as explained, there is no actual increase in the money supply through the alleged operation of the money multiplier. There is only a transfer of existing money as checks are deposited, are presented for payment, and clear. The Keynesian money multiplier explains nothing. It is only useful in explaining away the operation of the ridiculed real bills doctrine. Reversing cause and effect and ignoring all evidence to the contrary, the unquestioned dogma is that increasing the money supply brings full employment. Keynesians and others deride the possibility that money is a result of creating a means to convey a claim on the present value of existing and future production — the real bills doctrine, a result of wealth creation, not its cause.

No, Keynesians remain firmly convinced that prosperity can only result if John From the Government establishes full employment (cargo) and the outward signs of prosperity by law, that is, by force. Then wealth production will presumably follow automatically, creating abundance for all. They fail to realize that if the tremendous effort and vast resources that have already been used to try and make Keynesianism work and get something for nothing had been put to productive use, the world economy would not be in the mess it is in today.

#30#

The Keynesian Cargo Cult, II: An Overview of Cargo Cultism

Yesterday I drew an analogy between Keynesian economics and the Cargo Cults of the South Pacific. Naturally, that raises the question of what, exactly, a "Cargo Cult" is, and why I think that Keynesian economics may be a form of it.

According to the Wikipedia and what I remember about Dream Park (1981) a science fiction novel about a futuristic amusement park by Larry Niven and Steven Barnes, the Cargo Cult phenomenon beats any fictional religion hands down for surreal weirdness. The earliest form of it seems to have surfaced in Papua New Guinea in 1871 to explain the trade goods brought by some Russians to the island and distributed by missionaries, creating an entitlement mentality. Cargo Cultism reached its highest development following World War II in the New Hebrides, the Vanuatu Island group, having started there in the early 20th century in response to the French and British colonization and the efforts of missionaries to uplift the natives.

Viewing this as oppression, a leader who called himself "John From" (also "Frum" and "Fram") arose. His full title was "John From Jesus Christ," i.e., a reincarnation of John the Baptist. He is still worshipped as a deity on Tanna Island, where February 15th is celebrated as "John Frum Day." A large number of natives joined "John Frum" and moved inland to escape the missionaries and restore the old way of life, their kastam (customs).

For the first thirty years or so of its history, the movement on Tanna Island resembled the "Ghost Dance" of the American Indians. Before World War II it was called "Vailala Madness," from an anthropological study done in the 1920s of the village of Vailala in Papua New Guinea. It acquired the name "Cargo Cult" when the Americans arrived at the formerly isolated islands in World War II. Natives were recruited to help build airstrips and bases, as well as act as guides, and were paid in kind, with strangely packaged and wonderful new foods such as Hershey Bars, Spam and Coca Cola.

The movement immediately transformed from a millennielist religion that promised a future golden age by restoring a past that never existed if the white man would just go away, to one that promised the good life here and now if the white man would only return — as long as the airplanes and vessels carrying the cargo that the American soldiers were so willing to share kept on coming.

Being intelligent as well as observant, adherents noticed the presence of black soldiers along with white soldiers. Obviously these had to be descendants of natives that island lore insisted had been kidnapped earlier by Europeans to eat or breed as slaves. "John Frum" (the original of which seems to have died or disappeared by this time) shifted from being portrayed as a Caucasian European, to a Black American soldier. John From Jesus Christ became John From America.

When the war ended, the Americans abandoned their facilities and left the islands. This dried up the flow of cargo, and the inhabitants of Tanna Island no longer had the canned (and bottled) goods, or the medicines and other consumer items they had enjoyed during the war.

All was not lost, however. The people of Tanna had put their intelligence and powers of observation to good use, and had carefully noted the arcane rituals the Americans employed to summon cargo from God's Cargo Workshops. They built their own airstrips and warehouses, duplicating in wood, straw and bamboo the control towers and radio shacks and the equipment they contained — sometimes even the personnel — so that they could receive the messages John Frum would send to his faithful followers to signal the day and hour when he would climb out of the volcano known as Yasur (God) and restart the flood of cargo.

These facilities duplicated (at least in outward form without the substance) the technology the natives had seen the Americans use. The simulacra were staffed, and natives went through the proper rituals of signaling so that cargo-carrying planes would land. They built docks to attract cargo vessels and adopted the red cross seen on ambulances and hospitals as their chief religious symbol. Small red crosses surrounded by picket fences dot the island to this day.

The idea is that by duplicating outward forms and anticipated results you can bring about the desired ends. This confusion of cause and effect is a type of "magical" thinking, the "law of similarity" whereby if a thing looks the same, it is the same. Cargo Cultists confused all the things that accompanied the shipments of goods — landing strips, docks, control towers, radio shacks, and so on — and assumed that instead of being effects of the shipments, they were the cause of them.

The rationale is that if the outward forms are duplicated with sufficient accuracy, the cargo will reappear. Americans and Europeans who try to explain the fallacies in the paradigm are treated with pity and condescension at best, with suspicion and hatred at worst. It is useless to point out that the same effort put into productive activities would have made the islanders wealthier than their ephemeral dreams of cargo.

The holy men of the John Frum sect of the Cargo Cults — "messengers" — announced that, if the rituals were followed accurately, John Frum would return from the dead out of the island's volcano, accompanied by ships and airplanes carrying cargo. At that time money would be abolished, livestock slaughtered, and the land left uncultivated because John Frum would provide for all material wants and needs.

Nor is Vanuatu the only location of Cargo Cults. Missionaries in Papua New Guinea made few converts to Christianity until one day they suddenly came in droves — having decided that the best way to learn the secret rituals for summoning cargo was to pretend to join the fake religion the Europeans had set up to hoodwink them.

In 1968 a new cult arose on the island of New Hanover in the belief that the true secret of cargo was held by only one man: President Lyndon Baines Johnson of the United States, word of whose "Great Society" that promised prosperity for all without work must have reached the inhabitants. They rejected the governance of Australia, collected $75,000, and sent a letter to President Johnson offering to buy him if he would move to New Hanover and be their king.

One group restated the story of Adam and Eve to tell of a god named Anus who delivered a cargo of Spam, metal tools, rice and matches to the earthly paradise. When Adam and Eve discovered sex, Anus threw the couple out of the Garden and sent a flood to destroy our first parents.

As Anna Russell would say, I'm not making this up, you know.

In 1974, Prince Phillip, consort of Queen Elizabeth II, paid a visit to a village on Tanna Island. This was the inspiration of another new cult that claimed the prince had originally come from Tanna in another form, and that he will eventually return to rule over them . . . bringing cargo, of course.

In 2006 the Prophet Fred arose, having resurrected his dead wife earlier in the year. Fred's version of the Cargo Cult moves closer to traditional Christianity. This has resulted in violent exchanges with the orthodox followers of John Frum. To this day on Tanna Island, every February 15th natives paint their bodies to resemble World War II USMC uniforms, shoulder wooden sticks as rifles, raise the flag, and perform close order drill in the hope of bringing back unending cargos of Spam and Coke.

#30#

The Keynesian Cargo Cult, I: Reflections on Easter

You think of the strangest things in church when you should be paying attention to the sermon. Yesterday being Easter, the train of thought started from the station when a number of people in the congregation (obviously there for the first time since Christmas) messed up the new responses. Instead of saying, "And with your spirit" in response to "The Lord be with you," they started to say, "And also with you." This turned the response into, "And all-ow-so-ith your spirit."

This led to remembering what some people (not this writer, who clearly has better things to do) call attendees who show up only at Christmas and Easter: "Christmas Angels" and "Easter Bunnies." From there I slipped into a brief meditation wondering how the Easter Bunny (and, by extension, Santa Claus) evolved from a celebration based on Passover and involving death by torture.

I decided it didn't really matter — which hardly justified not paying attention in church. Belief in a mystical or mythical being who brings you goodies or presents and who expects nothing in return except your childlike faith and belief seems to be a stage of individual development in many cultures. It sets an example of selfless generosity, requiring only a vague "goodness" to qualify as a recipient, and it's not clear that the Easter Bunny even makes that relatively minor stipulation.

Some people have said that it's harmful to a child's development and integration into the real world to believe in Santa Claus and the Easter Bunny. They cite such presumably traumatic events as discovering that "Santa" is Dad in an undershirt and drinking a beer, or that the Easter Bunny got those chocolate eggs on sale at a dollar store.

Somehow I don't recall being devastated by finding out there's no Santa Claus or Easter Bunny. Some things you just accept without attaching any real importance. It's when a childlike belief in a being that distributes wealth is carried over into adult life that the damage is done — such as the bizarre antics associated with the "Cargo Cults" of the South Pacific . . . or Keynesian economics.

Actually, I thought I'd made a brilliant connection when I made the link between belief in Santa or the Easter Bunny, and the "Cargo Cults" and their resemblance to Keynesianism. Then I looked it up on Wikipedia and found out (as with many of my breakthroughs) that somebody had already thought of it. For example, the economist Bryan Caplan called communism the greatest cargo cult the world has ever seen (Commie Cargo Cult, Bryan Caplan, Library of Economics and Liberty EconLog blog February 24, 2011).

The physicist Richard Feynman coined the term "cargo cult science" in his 1974 Caltech commencement speech, and later included it in a chapter in his book Surely You're Joking, Mr. Feynman!, which was on my parents' bookshelf but that I never read. Feynman said that cargo cult science mimics real science (especially by publishing in scientific journals) but lacks genuine experimentation — in other words, a way to get or maintain a Ph.D. without actually having to come up with something that is verifiably true. (I have a whole other posting on how the desire of universities that once focused on education have succumbed to the lure of becoming "research universities," where tuition subsidizes work by overpaid tenured professors who don't profess, writing papers and books for each other, and running up the costs of education to astronomical heights.)

More to the point, in his novel The Trouble with Nigeria (1984), Chinua Achebe criticized the "cargo cult mentality" of the governments of many developing countries. They issue proclamations about how great things are going to be if they're elected, but don't do anything to try and establish the desired state of affairs, evidently thinking that the mere proclamation or the passage of a law or two will, in and of itself, do the job.

#30#

News from the Network, Vol. 5, No. 14

This goes into the "Not-So-Brilliant-Brilliant-Idea" Department. As the news story puts it, "Two former Wall Streeters with sympathies for the Occupy Movement have launched a website to help people dodge taxes. They describe their mission to 'Occupy The IRS' in patriotic terms, using a picture of Thomas Jefferson as their Twitter avatar." ("The Occupy Protestors Have Launched a Website to Help You Dodge Taxes," Business Insider.) As the article explains, "The site, called taxKilla, walks users through the simplest way to dodge taxes: filing Schedule C deductions for a business entity."

Uh, thanks . . . but no thanks. This is an almost sure-fire way to destroy what little is left of entrepreneurial spirit in America. One of the few — the very few — benefits left to being your own boss and starting a business on your kitchen table is the ease of the "Schedule C." The form allows any boob or boobette to try out an idea for a business without first having to set up a separate entity, file with the state, local, or county government (within certain limits for some professions for which you need a license), and a host of other impedimenta. E.g., lots of woodworkers or other artists often make a little extra money and even go into business for themselves using nothing more than a Schedule C, without having to do anything else.

Using the Schedule C to carry out a scam endangers this, and for what? Destroy small enterprise and the last shreds of capital ownership among the 99% to punish the government and the 1%? News flash — they aren't the ones who will go to prison or face loss of tax deductions for small business. Their corporations file taxes for the businesses they own. They won't be hurt one bit. Only the poor schmoe who needed the Schedule C to operate his or her business without going broke hiring lawyers and accountants. Thanks, Occupy. What's next? Abolishing capital credit for people with less than a fortune so we can all be wage and welfare slaves?

Oh, right. Well, to get things back on track, we need a Capital Homestead Act, not an attack on one of the few things in the tax code that's any real use to the little guy. And to get that, here's what we've been doing:

• Charles Krauthammer a plagiarist? It might seem so to a casual reader. Or maybe it's a case of great minds running in the same channel (or fools thinking alike?). Or maybe it's just that President Obama's actions seem so unconnected with reality these days that it's hard not to say something — "deficile est saturam non scribere, nam quis iniquae iam patiens urbis, tam ferreus, ut teneat se." (Juvenal, 1:30-32.) Dr. Krauthammer's column in today's Washington Post (04/06/12) raises some issues covered this past Tuesday on this blog in "Obama's Lack of Vision," even using some of the same language (e.g., "bully" — and we're not talking Theodore Roosevelt here). We're warning you, Doctor. If you don't take the unprecedented and extraordinary step of having a talk with Norman Kurland soon, we'll shake our finger at you — and this time we'll mean it.

• Norm appeared on the Meshorn Daniels show out of Louisville, Kentucky, again this past week, along with Guy S. from Iowa, who has been collecting video and audio clips pertaining to the Just Third Way at a tremendous rate. As we get closer to the web upgrade of the CESJ site, Guy's work will provide an immensely valuable resource as the Just Third Way movement gets into high gear.

• Ordinary we don't put up more than one blog posting in a day (and even that sometimes strains our resources — see below), but this is important. The new article just published in Inside the Vatican, "Catholic Teaching and the Elections," can be an important "door opening" resource as we seek to expand our network and reach prime movers. Use the link to the posting to maximum advantage by "sharing" it on Facebook and tweeting it to your network, using the new gadgets on the blog (to your right). You might even send the link to the various political campaigns to see if you can wake or shake them up.

• A number of people in the Just Third Way network are putting in a great deal of effort surfacing opportunities to get the word out. Norm's interview on the Meshorn Daniels show this week is a case in point. Unfortunately, the "core group" on the ground here at CESJ international headquarters doesn't have the resources — especially time — to follow up on most of these opportunities. Nor is it effective for people outside the core group to try and "sell" the Just Third Way themselves. Even the core group does not act individually, but as a team — no single individual has the whole picture. The best strategy is for people "in the field" to open the door for Norm, and Norm can function as the coordinator to bring different areas of expertise together, depending on what's needed in a specific set of circumstances.

• We also have need of volunteer help in a number of areas. People who propose initiatives and carry them through, like Guy S. and Russell Williams with his radio show, are absolutely critical to the success of the movement — but so are people who put themselves and their resources at the disposal of the movement, and are ready, willing, and able to accept assignments and even possibly "boring" tasks and see them through to completion.

• Currently we are working with an official at a local university to develop a relationship that could get CESJ a number of interns. To make the program more effective, it would be good to be able to offer a small stipend to interns, especially in light of the rapidly rising cost of education and the state of the economy. Keep your eyes open for people or institutions that might be open to funding or endowing an internship or two at CESJ.

• Don't forget the Rally at the Federal Reserve Board of Governors building in Washington, DC on Friday, April 20, 2012, from 11:30 am to 1:30 pm. If you can't attend in person, consider sending a sentence or two of support for Capital Homesteading to thirdway [at] cesj [dot] org that (if we have time) could be read at the Rally, e.g., "Barb S. from Indiana says she just loves Capital Homesteading to pieces and can't wait to get an Act passed so she can start accumulating capital assets."

• As of this morning, we have had visitors from 53 different countries and 50 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, India, and Australia. People in the Netherlands Antilles, the United Kingdom, the United States, Indonesia and Pakistan spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Aristotle on Private Property," "The Crimes of Mitt Romney," "Why Did Nixon Take the Dollar Off the Gold Standard?" and "The Situation in Greece."

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

Inside the Vatican: "Catholic Teaching and the Elections"

"The 2012 presidential election has brought America's economic crisis into sharp focus. Despite ephemeral gains in the stock market and manipulation of unemployment statistics, the economy continues to stagnate. Growth is limited, by and large, to the financial services industry that shifts around existing wealth, and government, which produces nothing. Ordinary people, unable to gain an adequate and secure income by their own efforts, are increasingly dependent on the State for meeting their daily needs."

— "Catholic Teaching and the Elections," Inside the Vatican, April 2012

This month's issue of Inside the Vatican, the world's most well-informed, comprehensive Catholic news magazine on events and developments within the governing body of the Catholic Church, has published "Catholic Teaching and the Elections" by contributing editor Michael D. Greaney, CPA, MBA, Director of Research for the Center for Economic and Social Justice in Arlington, Virginia, U.S.A. The article takes a hard-hitting look at what the major candidates in the upcoming American election fail to offer the citizens of the U.S. and all the people of the world to restore a sound and sustainable economy.

What all the candidates are missing is a program of economic recovery in which all citizens, not just the upper 1%, can participate and benefit. The author outlines a proposal consistent with principles of justice that underpin the social teaching of the Catholic Church and all major religions and philosophies. As Pope Leo XIII pointed out more than a century ago, true economic justice can only be achieved through an aggressive program of expanded capital ownership that does not rely on redistributing existing wealth:

"This great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners."

— Rerum Novarum, § 46

The April 2012 issue of Inside the Vatican may be ordered by phoning 1-800-789-9494 (toll free for USA & Canada); 1-270-325-5499 (for all other countries), or by sending an e-mail to: service@insidethevatican.com. Individual copies are $5.00 to U.S. addresses, and $8.00 to other countries.

Subscriptions to Inside the Vatican are $49.95 in the U.S., and $74.95 in other countries.

Permission to reprint or post "Catholic Teaching and the Elections" on your blog or website should be obtained in writing from Inside the Vatican, which holds the copyright: service@insidethevatican.com.

More information on economic recovery through expanded capital ownership can be found on the website of the Center for Economic and Social Justice under the heading "Capital Homesteading," and in the "CESJ Bookstore."

Please forward a link to this posting to your network.

#30#

Guide to a Capital Homestead Act

By Norman G. Kurland

Recently we were asked whether there was a specific "Capital Homestead Act" drafted. This is a very good question. The answer, however, is no — we don't have a draft of the legislative language.

We are an all-volunteer operation and do not have access to the Congressional expertise in drafting something that will be more comprehensive than Roosevelt's New Deal. The overall package for experts is in the free download of our 1994 book Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security (which is in the process of updating and revision of the estimated annual allotment of capital credit per citizen from $3,000 to $7,000.) (A free .pdf is available in the "CESJ Bookstore.") A more complete summary of the Capital Homestead Act is on the website, as well as one for public education.

These ideas were first conceived and published by Louis O. Kelso in his two books co-authored by the noted American philosopher Mortimer J. Adler, The Capitalist Manifesto (1958) and The New Capitalists (1961) — the latter with the significant and provocative subtitle, "A Proposal to Free Economic Growth from the Slavery of [Past] Savings." These are also available for free downloading from the "bookstore." Kelso conceived the binary theory of economics as well as the "Industrial Homestead Act. He was also the inventor of the Employee Stock Ownership Plan or "ESOP" which has turned over 11 million workers into capital owners of their companies without reducing their take-home pay.

I worked with Kelso for 11 years, first as executive director of his Institute for the Study of Economic System and later as Washington Counsel of Kelso and Co., when he moved from the law into investment banking. My theoretical presentation of Kelso's binary growth model was published by the Journal of Socio-Economics.

What Kelso and I tried to offer were the CHA's specs for a radical overhaul all the tax laws, the monetary laws, corporate laws of the rights of shareholders, the inheritance laws, etc. that systemically control how $2-3 trillion of new job-destroying technologies, new energy systems, new plant and equipment, new rentable space, development of land and natural resources, new physical infrastructure will be financed, even at current conditions, both in the private sector and public sectors.

All laws perpetuating monopoly capitalism and encouraging mercantilist access to the ownership, control and profits from new capital formation would be abolished and all laws favoring speculation over investment by the poor, the middle-class and others in the 99% would be amended to discourage speculation. The Wall Street gambling casino could continue speculating for the top 1% and finding way for them to invest in the most high-risk ventures.

Some specific guidelines for a Capital Homestead Act are:

1. Simplify the tax code to a fraction of its current size so that:

(a) Every citizen could fill out a postcard-sized return to pay taxes at a single rate on income from all sources, which would also serve to justify government vouchers for health, education, housing and other well-being needs of the poor until they begin receiving adequate labor and property incomes from their equity ownership shares.

(b) All "tax expenditures," tax credits, tax exemptions and deductions (except for costs of producing marketable goods and services) would be eliminated on business and personal income-producing work, but each citizen and dependent would automatically be granted a "basic well-being" exemption of $30,000 for non-dependents and $20,000 for dependents for incomes from work, welfare, gifts, dividends, inflation-indexed capital gains, rents, gambling and all other income sources. Hence, a family of four would not pay a single cent of Federal income, payroll or other taxes until their incomes exceeded $100,000. They would pay the same percentage of a dollar of income above $100,000 that Warren Buffett, Bill Gates, and George Soros would pay on their billions earned over their exemption levels.

(c) In addition to exemptions from further payroll taxes (the entitlements to which would be paid out of general revenues), businesses would be eligible to escape from paying corporate income taxes by paying out fully-tax deductible dividends to all their shareholders, adding enormously to the personal federal revenue base at a rate calculated to address the continuing federal deficit problem.

(d) Free from federal corporate tax rates and with the drying up of existing pools of savings, businesses would be encouraged to issue new full-dividend, full-voting shares for financing their growth. This would put millions of shares on the new national market for citizens to purchase with their annual allotment of CHA credit available through tax-sheltered CHAs offered by local banks. The shares would be repayable with the future dividends with backed by private sector capital credit insurance. Bill Gates would be offered the same capital credit allotment as the poorest of the poor.

(e) Local banks would issue promissory notes to purchase ("accept" or "discount") bills of exchange (share purchase contracts) offered by each borrower. Acceptance would be based on the soundness of the business plans of the companies whose shares are purchased with the CHA credit allotment. The discount rate would be set at the present value of the future redemption of the bill at face value, plus a risk premium to cover the cost of capital credit insurance and reinsurance. The bills would then be offered immediately for rediscount at one of the 12 regional Federal Reserve Banks under Section 13, paragraph 2 of the Federal Reserve Act. (This could be done individually, but would be more feasible to "bundle" bills of the same quality in lots as a single instrument.) This is "the real bills doctrine," an application of "Say's Law of Markets" (below).

By this means the Fed would monetize real productive growth in the private sector with an asset-backed currency, instead of government spending with a debt-backed currency. The promissory notes would be repaid (i.e., the borrower's bills of exchange redeemed at full face value) with "future savings." In contrast to past savings that represent accumulated reductions in consumption, future savings represent future increases in production.

Using future savings instead of past savings to finance growth increases the wealth of society by forming new capital (productive assets) and adding the present value of the future marketable goods and services to be produced by the businesses issuing the new CHA shares. The new shares are available for purchase by every man, woman and child citizen in America.

Widespread capital ownership would stimulate private sector growth, create jobs naturally, and generate ownership incomes to provide the mass purchasing power ("effective demand") to keep the system in balance. The increase in effective demand would match the new productive capacity (effective supply) in a way not possible under the current system of monopoly capitalism. This would validate Say's Law of Markets, a common-sense theory that can be summarized as "production equals income, therefore supply creates its own demand, and demand its own supply." (I can only give the conclusion of Say's Law here; the explanation is somewhat complex, but has been covered a number of times on this blog.) Due to their assumption that only past savings can be used to finance new capital formation, both Karl Marx and Lord Keynes rejected Say's Law at the expanse of freedom, justice and shared prosperity.

Instead of "full employment" being an exclusive national economic goal, full production through equal opportunity to share the power and profits of capital ownership as a fundamental right of citizenship would enable America and any other nation that adopts a CHA to demonstrate how economic democracy can help save political democracy to be sacrificed to those who worship the expansion of the power of the State, humanity's only legitimate monopoly. Capitalism and Socialism will wither away to the Just Third Way.

(f) The single tax rate under a CHA would void any future budget deficits, even permit government to begin repaying the existing unsustainable reported debt of nearly $16 trillion from the past as well as meet the more than $60 trillion in projections for Social Security, Medicare, and government retirement incomes kept off the reported debt. A CHA would over time reduce and the eliminate this hidden debt by enabling every citizen to accumulate equity accumulation in excess of these "entitlements." If a CHA were operating, the average child born today would have received $1.6 million in after tax revenues up to age 65, close to $50,000 in after-tax dividend at age 65, backed by an accumulated capital estate of close to $500,000. These are on very conservative growth rates under the CHA compared to the current wage slave, welfare slave, debt slave, charity slave monopoly capitalist system.

(g) The rich and super-rich under a CHA would not lose any property rights on their existing ownership accumulations during their lifetimes. (After all, they have never figured out how to continue to control their assets when they die.) Hence, a CHA would reform the inheritance and gift tax laws to tax the recipients if their combined accumulations after receiving the inheritance or gift exceeded $1 million. This would encourage today's super-rich to spread out their monopolistic accumulations to all members of their families, the workers who helped create their fortunes, teachers, the military, firefighters and police, all public employees, the disabled, artists, inventors, and others they deem worthy directly, instead of funneling their wealth into foundations to keep it concentrated and under the control of an elite.

(h) The only thing the rich and super-rich would lose is their artificial (aided by politicians) monopolistic and mercantilist protections against truly free and open competition in the economy. Gone would be their violation of one of the most fundamental property rights, the right of an owner to receive the full fruits or profits from his shared ownership of a business; under current law a shareholder has no right to a dividend, his shares of profits. Only if those who control the company decide to pay a dividend does a minority shareholder ever receive a dividend, which in moral terms is the equivalent of theft. Gone also would be financing corporate growth out of accumulated cash or outside loans repayable with future government "tax expenditures" or future undistributed profits. This explains largely why the rich continue to get richer, and the 99% are forced into a modern version of slavery. The "deck is stacked" to perpetuate monopoly control and in turn the corruption of political leaders who turn to the top 1% to finance their political careers.

#30#