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.