Thursday, September 6, 2012

Distributism Yet Again, I: Financing the Future

The problem with most neo-distributists (at least for the purposes of this posting) is the not-so-amiable way many of them have of sneering at, rejecting, or ignoring possible alternatives that do not fit within their particular system(s) of preconceptions. This is a virtual pandemic among neo-distributists who, as a body, are locked in to the assumptions of the "Currency School" of finance, the principal tenet of which is that it is impossible to finance new capital formation without first cutting consumption and accumulating money savings.

Inevitably this results in concentrating ownership (and thus power) either in the hands of a small private sector elite, or the State if what Orestes Brownson called "the insane remedy of agrarian laws" is applied and existing wealth redistributed. Either way the propertyless worker is a dependent — a slave — of whoever controls capital, whether the private capitalist or the State bureaucrat.

The only way out of this is to find some method by means of which ordinary people can acquire capital ownership without first having to cut consumption or rely on State redistribution or redefinition of natural rights such as liberty and property. As Keynes asserted, making the State more powerful than God, the State has the power to "re-edit the dictionary" in an effort to get around the impossible constraints imposed by what Kelso and Adler called the slavery of past savings.

What is the solution? Finance new capital formation not with cuts in consumption in the past, but with increases in production in the future — the "banking principle" found in Say's Law of Markets and applied in the real bills doctrine. That is, shift from past savings to future savings by monetizing the present value of future marketable goods and services and using the money to finance new capital that can be owned and then paid for by people with no savings or capital out of future profits. This is what Kelso and Adler proposed in The New Capitalists (1961), building on the work of Dr. Harold Moulton in The Formation of Capital (1935).

Interesting note for solidarists and distributists — Richard Mulcahy, S.J., author of The Economics of Heinrich Pesch, favorably compared Moulton's analysis of the purpose of economic activity and its application to the wants and needs of "ordinary" people with that of Father Heinrich Pesch. This illustrates the shallowness of much of today's economic thought in Catholic circles, for the work of Kelso and Adler and Moulton has been viciously attacked by some solidarists and distributists for not conforming to (their opinions of) the thought of Father Pesch!


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