Tuesday, September 18, 2012

Distributism Yet Again, VII: Reforming the System

In yesterday's posting we noted that neo-distributists (as they seem to be calling themselves these days, at least when they don't use "distributivism") rely heavily on redefining the basis of the natural law in order to achieve their goals and "beat" the system imposed by reliance on past savings to finance new capital formation. We won't go into all the problems that this creates (not the least of which is the creation and maintenance of a totalitarian government to impose a system directly contrary to human nature), but, instead, propose a reform of the system, rather than its destruction.

The real solution, as Kelso pointed out, is to shift from using past savings based on reductions in consumption as the financing for new capital formation, to future savings based on increases in production. This can be done by turning contracts for the future delivery of marketable goods and services into money by offering the contracts in trade either to other merchants or to a bank that will issue a promissory note that can be used as money. This creates a private sector asset-backed currency that can replace the current government debt-backed currency.

As Dr. Harold Moulton proved in his alternative to the Keynesian New Deal, The Formation of Capital (1935), periods of rapid capital expansion have always been financed with future savings, not past savings. There is no need to rely on the rich either for jobs or as the source of redistributed wealth, except in the short term as an expedient on the way to an ownership society.

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