Thursday, October 18, 2012

Who SHOULD "Own"?

We recently had someone ask us how the concept of ownership in binary economics differs from that in other schools of economics. For once, that is an easy question to answer, or at least relatively so.

Mainstream economics and virtually all of the minor schools of economics assume as a matter of course that only the State or a private sector elite can or should own capital. The fundamental principle of socialism, as both Karl Marx and Leo XIII agreed, is that only the State should own capital.

Capitalism does not say that only a private sector elite should own capital. The problem is that capitalists assume that only a private sector elite can own capital. Supporters of capitalism generally do not recognize barriers that prevent most people from owning capital.

Foremost among these barriers is the belief that the only way to finance new capital is to cut consumption and accumulate savings. Since most people cannot afford to cut consumption to the degree needed to finance capital that can cost millions of dollars, supporters of capitalism assume that most people should not own, or there would not be enough financing for new capital. They do not believe that widespread ownership of capital is necessarily bad, they just don't think it's practical.

Minor schools of economics, such as distributism, social credit, and georgism, often advocate widespread ownership of capital, but they tend to change the definition of ownership so that ownership no longer means anything.

Binary economics is built on the assumption that capital ownership not only should be widespread, it must be widespread. At the lowest but most immediate level of human needs, only by owning the capital that is replacing human labor can ordinary people hope to gain enough income to meet their wants and needs.

At the systemic level, that is, the whole economy, only widespread capital ownership can generate the mass purchasing power essential to keep the economy running. Government stimulus packages try to generate mass purchasing power artificially by printing money, but the only way to generate sustainable mass purchasing power is by as many people as possible owning capital, and spending the income from capital not on more capital, but on consumption.

At the highest level of human needs, only capital ownership gives real political power. As the American statesman Daniel Webster pointed out in 1820, "Power naturally and necessarily follows property." Without capital ownership, even adults are soon treated as children to be taken care of by their employers or, increasingly, the State.

Thus, binary economics recognizes that widespread capital ownership is absolutely essential in both economic and social terms.

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