A Blog of the Global Justice Movement

Monday, November 26, 2012

An Alternative to Slavery (Of Past Savings)

Every once in a while it's probably useful to get back to basics. Maybe we ought to come up with a standard posting that can be updated every now and then with a few sentences to make it relevant to the time it's re-posted and then put it up every couple of months or so. It worked for Ann Landers pretty well, didn't it? And she got paid better for rerun material than we get for original works of literature.

In any event, let's take a look today at a very brief explanation of just what this "binary economics" thing is. We're always talking about it, but unless the reader is willing to put in a lot more time than we suspect someone might have, it might not be entirely clear.

To begin, then, "binary economics" (also known as "Two-Factor Theory") is a theory of economics that endorses widespread direct ownership of private property in capital, limited economic power of government, restoration of the rights of private property, and free and open markets as the best means of determining just wages, just prices, and just profits. To achieve this, supporters of binary economics propose significant reforms to the monetary and banking system, the tax system and the capital ownership system.

American lawyer-economist Louis O. Kelso and Aristotelian "Great Books" philosopher Mortimer J. Adler proposed the theory underlying binary economics in the two books they co-authored, The Capitalist Manifesto (1958) and The New Capitalists (1961). The subtitle of the latter book is significant: "A Proposal to Free Economic Growth from the Slavery of [Past] Savings."

Kelso's "binary economics" (or "Two-Factor Theory") derives from the word "binary" meaning "consisting of two parts." Kelso divided the factors of production into two all-inclusive categories. These are 1) human ("labor") inputs and 2) non-human ("capital") inputs. As such, "labor" includes manual, managerial, intellectual, entrepreneurial, etc., inputs. "Capital" includes inputs such as land and natural resources, tools, rentable space, infrastructure, plus intangibles such as patents, artificial intelligence, management systems, to the production of marketable goods and services.

Binary economists contend that the nature and productiveness of capital has increased at a significantly faster rate than that of labor. This became evident at the beginning of the Industrial Revolution when the ability to finance new capital out of "future savings" instead of "past savings" became possible through the reintroduction of commercial banking and the development of the principles of central banking.

At the same time, according to some binary economists, the "past savings" method of financing new technology has engendered a "wage system" in which a determinant number of people receive income solely or primarily from wages paid for labor supplemented with private or State welfare. The "wage system," binary economists assert ("CESJ's Vision for a New Millennium") is common to all economies today, and has led to increasing reliance of citizens on big government, political hostility toward free markets and private property, and extreme concentrations of wealth and power. In this view, Kelsonian binary economics and "expanded ownership" financing methods based on "future savings" offer a "Just Third Way" that avoids the ownership- and power-concentrating aspects of both capitalism and socialism by eliminating the presumed necessity for past savings.

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