Friday, September 28, 2012

News from the Network, Vol. 5, No. 39

It was news that shook the world. The terrible threat of a bacon shortage due to drought and diversion of feed grains to manufacture ethanol for automobile fuel (can't use hydrogen, no sir, not after the Hindenburg explosion killed millions of people, stick with safe oil and coal that have never taken any lives) spread terror among cholesterol-lovers everywhere.

Fortunately, however, the world is saved. It was a false alarm, evidently spread by the National Pig Association of the United Kingdom. No doubt the Empress of Blandings, thrice silver medal winner in the Shropshire Agricultural Show fat pig contest (even though she's a gigantic Berkshire hog), can breathe — or grunt — easier. And she's purtier 'n "Hogzilla" or his competition.

The rest of us . . . well, we're still stuck. "Quantitative Easing III: This Time It's Personal" is restricting virtually all new discretionary money creation to political instead of productive purposes, i.e., the purchase of massive amounts of "toxic" mortgage-backed securities so that the taxpayers can prop up the investments of the speculators who gambled on the bubble. There is still no credit available for non-owning people to purchase capital and repay with the profits of the capital. No, all new money creation must go to finance "social needs" . . . which means whatever the government decides it means.

The irony is that at nowhere near the cost of QE III (to say nothing of I and II) we could have gotten Capital Homesteading — and solved a multitude of other problems at the same time. All is not lost, however. We're still making progress toward a Capital Homestead Act that can be put into place as soon as the politicians realize that what they're doing has never worked and can never work:

• On Wednesday, September 26, Tomasz Pompowski, a journalist who covered the fall of the Soviet Union interviewed Michael D. Greaney, CESJ's Director of Research, on "The Polish Hour" radio show for later broadcast. Transcriptions of the show will be available in English and Polish.

• Also on Wednesday, members of the CESJ core group met with the president of a group concentrating on promoting a better understanding of Catholic social teaching and applying it to solving social problems. A valuable outcome from the meeting was to highlight the need for supporters of the Just Third Way to communicate some very difficult concepts better.

• Over the past week we obtained two relatively rare (if obscure — and thus extremely inexpensive) 19th century books from the perspective of the "Banking School" that is the "direct ancestor" of binary economics. A quick initial review of the books suggests that two of the reasons the "Currency School" triumphed were, one, the inability of Banking School supporters to pull together and present a unified political front or strategy to oppose Sir Robert Peel's initiative with the Bank Charter Act of 1844, and, two, confusion over the basic principles of the Banking School. As a result, the world's monetary systems have been run on what are essentially the wrong principles ever since.

• CESJ is currently working on preparing a "Master Bibliography" of works relating to the Just Third Way. While the project is designed as a "perpetual work in progress," we expect to have a computer file ready for distribution by the end of October. When the CESJ website upgrade is completed, we will be posting the bibliography on the website, with periodic revisions. Like many CESJ materials, we expect the bibliography will be freely available at no cost, although "free will offerings" that will go to the support of the CESJ publishing program are encouraged at any time.

• Friday, September 28, 2012, members of the CESJ core group had a telephone conference with a community leader in Cleveland who has expressed interest in hearing more about the potential of the Just Third Way to revive distressed urban areas. The meeting was arranged through the intensive efforts of Monica W.

• As of this morning, we have had visitors from 51 different countries and 50 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the United Kingdom, India, South Africa, and Australia. People in Portugal, Romania, Hungary, Zambia, and Spain spent the most average time on the blog. The most popular postings this past week were "Aristotle on Private Property," "Thomas Hobbes on Private Property," "Distributist Classics — and More!," "News from the Network," and "Raw Judicial Power: Dodge v. Ford Motor Company."

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

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Thursday, September 27, 2012

A New Look at "Quas Primas," III: The Magna Charta of Humanity

In yesterday's posting we decided (I decided, coming out from behind the editorial screen) that what Pius XI meant by the "Reign of Christ the King" is conformity of our laws and institutions (and, yes, our personal behavior) to the precepts of the natural law, chiefly through widespread capital ownership. Pius XI was not talking about the establishment of a theocracy, or even conversion of the world to Catholicism (in that encyclical, anyway). The United State government was, in this understanding, originally based on "Catholic" political theory. (To see how far we've deviated from this, take a look at William Crosskey's Politics and the Constitution in the History of the United States. Chicago, Illinois: University of Chicago Press, 1953.)

Heinrich Rommen appears to agree with this analysis in his book, "The State in Catholic Thought," although he studied Suarez more than Bellarmine. Rommen was a student of Father Heinrich Pesch, S.J., the founder of "solidarism" (at least the Christian version of it), was (with other students of Pesch) a member of the Königswinterkreis in Germany before it was suppressed by the Nazis. It was headed by Father Oswald von Nell-Breuning, S.J., who, with Father Gustav Gundlach, another member of the group, was called to Rome by Pius XI to consult on Quadragesimo Anno — of which about half talks about how important it is for ordinary people to own capital.

Blessed Pius IX also spoke well of the United States, as did Leo XIII's Apostolic Delegate, Cardinal Satolli, who declared that the Gospels of Christ and the Constitution of the United States are the Magna Charta of humanity. Leo XIII also gave a virtual endorsement of the American political system in Testem Benevolentiae Nostrae in 1899, at the same time condemning the application of democratic methods to the determination of religious doctrine and Church governance.

Leo XIII also seems to have used the U.S. as a model in writing his encyclicals (Testem Benevolentiae Nostrae is an "Apostolic Letter," not an encyclical), particularly in light of Lincoln's Homestead Act and Leo's insistence that everyone should be put in the position of being able to own capital. (In context, it is clear that Leo was using "land" in a way that includes capital, where in binary economics we include land under capital — mere semantics — besides, he specifically stated that the rights of private property apply to both landed capital and non-landed capital.)

Unfortunately, by the time Leo XIII wrote, things were already on the downturn. Rerum Novarum was written in 1891, but by 1893 at the Columbian Exposition Frederick Jackson Turner believed that the "frontier" was then effectively closed as most of the available land had been taken.

In accordance with his "frontier hypothesis," Turner believed that the end of "free" (i.e., available) land meant the end of democracy, a judgment borne out by history when land per se was not replaced with the availability of other forms of capital as, e.g., Judge Peter S. Grosscup (one of Theodore Roosevelt's "Trust Busters") recommended.

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Wednesday, September 26, 2012

A New Look at "Quas Primas," II: The Reign of "Christ the King"?

Given the background we looked at in yesterday's posting, one possible interpretation of Quas Primas is that Christ rules as "king" (an equivocal term, as His response to Pilate made obvious: "Are you a king?" "That is your word for it.") through our personal adherence to the precepts of the natural law and by conforming the laws and institutions of the nation (as well as our personal behavior) as far as possible to them.

This makes sense if we stop to think about it. Within the Aristotelian/Thomist framework, the natural law is based on God's Nature, self-realized in His Intellect. You might not be able to tell much about God, but if you accept that God made man in "His image and likeness," you can conclude that what the general consensus of humanity accepts as good and in conformity with human nature must be good and in conformity with God's Nature.

God is therefore the "personification" of the natural law; i.e., God doesn't simply do good, He is good. If we believe Jesus to be (as the Creed has it) "consubstantial with the Father," i.e., part of one God in three divine Persons, then Jesus — being as fully God as God-the-Father — is also the personification of the natural law.

That being the case, Christ "rules" as "king" of the universe by providing us the perfect example of compliance with human nature, and thus the Divine Nature with which He is "consubstantial." Christ is king and lawmaker not because He passes laws, but because He is law itself. What human courts and governments can say only metaphorically (and correctly only when they adhere to the precepts of the natural law), Christ says as a simple statement of fact: "I am the Way, the Truth, and the Life." Christ rules humanity as king when we adhere to the precepts of the natural law, the most basic of which is that good is to be done, evil avoided.



The principal way in which we conform ourselves to human nature is by exercising our rights in such a way as to acquire and develop virtue.  In society, the most important rights — and thus the most important means of acquiring and developing virtue — are life, liberty (freedom of association/contract) and . . . property.

Why?  Because (as Daniel Webster observed) "power naturally and necessarily follows property."  "Power" is defined as "the ability for doing."  Thus if you don't have property, you can't "do."  If you can't "do," then you can't acquire and develop virtue, so what's the point of society if nobody owns, as in socialism, or only a few own, as in capitalism?

Does this mean, however, that non-Christians, or even non-Catholics have no place in what Pius XI called "The Reign of Christ the King," and described as "the peace of Christ in the Kingdom of Christ"? Nothing could be further from the truth.

Given that 1) Christ (with the Father and the Holy Spirit) is the personification of the natural law, 2) He rules the universe through our compliance with the natural law, 3) the natural law is written in the hearts of all men (and women and children if you insist on inclusive language), then anyone who conforms him- or herself to the precepts of the natural law as far as he or she is honestly able is being ruled by Christ as king. You don't have to accept Jesus as Savior or even as God or even, frankly, ever have heard about Him in order to be subject to His rule and obey Him.

We are not talking here about whether non-Christians can be saved, but what is the proper basis for civil government in the temporal order. Pius XI was explaining that the basis for a just civil society is the natural law as that term is understood by the Catholic Church. Given that, even an officially atheist State, as long as it recognized and protected the natural rights of its citizens (including freedom of religion), would in that sense be ruled by Christ the King.

Rulers must conform materially to the natural law, or they do not rule justly and can be replaced, or even the form of government changed. Aquinas said pretty much the same thing in De Regimine Principum ("On the Governance of Rulers").

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Tuesday, September 25, 2012

A New Look at "Quas Primas," I: 17th Century Politics

At first glance, nothing seems further from the Just Third Way than an obscure encyclical from the early 20th century establishing a new religious feast. At second glance, it seems even further removed, for all it talks about is how Christ is the king of the world, which certainly doesn't appeal to non-Christians, and, frankly, not to many Christians these days. Pius XI's 1925 encyclical Quas Primas ("On the Feast of Christ the King") comes across as the very antithesis of everything for which the Just Third Way stands.

Let's take a third glance at the encyclical, however, especially from a "non-Catholic" but natural law point of view.

What's interesting about this encyclical (and the Feast of Christ the King it established) is that Pius XI appears to have been integrating the political philosophy of then-Venerable Robert Cardinal Bellarmine into his social doctrine. Pius XI was a student of the political and religious effects of the Reformation, and Bellarmine was one of the key players in the Counter Reformation. He was a genius of such vast learning that some of his opponents believed his name to be a pseudonym for an entire group of scholars.

Outside of Catholic circles Bellarmine (when he is mentioned at all) is best known as the man who got Galileo "off" in his first trial. More importantly, Bellarmine was the chief opponent of the divine right of kings as promulgated by Sir Robert Filmer (Patriarcha, or, The Natural Power of Kings) and King James I/VI of England/Scotland in the early 17th century. While many people aren't aware of this, Bellarmine's philosophy was incorporated into that of John Locke and Algernon Sidney.

There was a difference, however. Where Sidney mostly got Bellarmine's philosophy right, claiming that he disagreed with Bellarmine on religious grounds but fully supported his political philosophy, Locke distorted Bellarmine's work. Paradoxically, Locke then used the undistorted version in developing his own theories — among which he stressed the importance of private property in capital as the foundation for a stable political order.

Of course, Sidney had no "patron" for his Discourses Concerning Government. Locke did have a patron. He was paid by Lord Shaftsbury for his Two Treatises on Government. Locke's distortions of Bellarmine's thought might be explained when we realize that Shaftsbury was a violent anti-Catholic. He was the prime mover behind the "Titus Oates Conspiracy" that resulted in the judicial murder of nearly 20 people, including Saint Oliver Plunkett, Catholic Archbishop of Armagh, and accused hundreds of others, including Samuel Pepys (at that time a member of parliament) and the Queen, whereupon the scheme fell apart.

Locke and Oates got pensions. Sidney got beheaded.

Some authorities believe that Algernon Sidney had more influence than John Locke on America's Founding Fathers. They would thus have gotten a reasonably accurate idea of Bellarmine's political thought, which was then integrated into the Declaration of Independence and the Constitution.

Father John Clement Rager, however, made a good case in The Political Philosophy of Blessed Robert Bellarmine (1926) that George Mason of Gunston Hall (the "forgotten founder") knew Bellarmine's writings first hand rather than merely through Sidney and Locke. Mason (who was not a Mason . . . good barroom bet, there) drafted the Virginia Declaration of Rights in a way that based it on natural law — especially (surprise!) the importance of the natural right of access to the means of acquiring and possessing private property.


The "conservative" elements of the Virginia Convention forced some changes that partly undermined this by insisting that men only become (politically) equal "when they enter into a state of society."  At least they left property in, even if they corrupted this critical social good by claiming that you can own human beings.

The addition to the Virginia Declaration was clearly to preserve the basis of slavery (Mason, a slave owner, was opposed to slavery!), but Jefferson (who used the Virginia Declaration as a model) managed to retain the full natural law basis, even though explicit language condemning slavery was removed from the Declaration of Independence — and he wimped out by not including property explicitly among our natural rights.

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Monday, September 24, 2012

How to Get Everything You Ever Wanted

It's easy to get everything you ever wanted. All you have to do is be big and strong enough to take what you want, or find some kind of leverage with someone who is big and strong enough to get it for you. This used to be called "bullying" and "toadying," respectively. Today we call it "social justice."

Oh, it's not real social justice, of course. The genuine article is directed toward reforming the common good and making it possible for all people to participate in social life to the best of their abilities. Real social justice is best understood as reforming our institutions, our "social habits," to provide equality of opportunity.

The new social justice isn't directed at the common good at all, nor toward any kind of equality. It's directed at the individual benefit of the bully, and his or her collection of lackeys and flunkeys who receive enough to motivate them to provide the muscle to intimidate or force others to do the will of the bully.

In today's civilized society bullies and their sycophantic lickspittles are not quite as crude as in days of yore. Besides, the trouble with wearing iron pants and carrying a club is that you might meet someone who has an actual sense of justice and who insists on smearing you over the landscape as you have smeared others.

No, today's bullies have to be a trifle more clever in how they gain and maintain power over others. According to the popes, this has most often been done by shifting the basis of the natural law from God's Nature, self-realized in His Intellect — and therefore discernible by reason alone — to a private interpretation of something that they believe to be God's Will. This is so subtle that most people don't even know it's been done or even understand it, so they can't take any effective action against it.

Let's take the case of the neo-distributist lackey, who sucks up to the government or a powerful rich person to see if the bureaucratic or plutocratic bully can be persuaded to pound a few of the lackey's enemies into a bloody pulp — metaphorically speaking, of course, for the neo-distributist eschews violence against anybody except those he or she dislikes. Besides, people sometimes fight back, and you can get hurt.  It is thus increasingly common to see something justified because Chesterton, Belloc, or the pope said so, rather than to present an argument or give evidence not that somebody said so, but that something is so.

We have even seen instances in which explicit papal statements were altered to provide the "evidence" that something is true because "the pope said so," e.g., § 46 of Rerum Novarum changed from " as many as possible of the people" to "workers" to fit in with the belief that labor alone is responsible for all production — and, incidentally, suck up to organized labor. Not the ordinary worker without power. The union bosses who say who can work and for how much.

What's happened is obvious. The doctrine of papal and magisterial infallibility has been interpreted to mean that something is true because the pope or the Church (or Chesterton or Belloc) said so, rather than the pope or the Church (or Chesterton or Belloc) said so because it is true — and then proceeded to explain why.

No, the neo-distributist tends to clinch all arguments by asserting that something is true, then proceeds to change definitions — what Keynes called "re-editing the dictionary," which is something that not even God can do — if backed into a corner. When that doesn't work, they generally resort either to ad hominem attacks (both abusive and circumstantial), or silence.

Most astonishing is the adoption of principles and doctrines that explicitly contradict the principles laid out by Chesterton and Belloc. For example, the works of Arthur Penty, who was booted out of the movement for claiming that distributism and socialism are effectively the same and for advocating the elimination of technology as much as possible, is now enshrined as a distributist. E. F. Schumacher, a Marxist and disciple of Keynes, is somehow today a distributist saint.

But it gets you what you want.

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Friday, September 21, 2012

News from the Network, Vol. 5, No. 38

According to Mohammed El-Erian, CEO of Pimco, Benjamin "Deer-In-The-Headlights" Bernanke (I mean, come on, have you looked at any of his recent photographs?), is trying to use the Federal Reserve to inflate the currency in order to stimulate growth because the alleged benefits outweigh the anticipated risks ("Fed Wants Inflation Now, Will Clean Up 'Mess' Later: El-Erian," CNBC, 09/21/12).

This is another instance of "Déjà vu all over again." We have inflation; it's a "statistical illusion" that we don't. Food and fuel, two of the most significant personal expenditures most people have, are not included in the Consumer Price Index. Combined with the Keynesian fantasy that inflation and unemployment are a necessary trade-off (a fixed and erroneous belief rooted in the past savings assumption that the only way to finance new capital formation is to cut consumption and save), the stage is being set for yet another Keynesian "Depression within the Depression," precisely as Harold Moulton predicted in 1935, and which took World War II to get us out of. It didn't work in the 1930s, it hasn't worked so far in the current "recession," so what are they going to do? The same thing that hasn't worked before!

Of course, they could go with Capital Homesteading, but it's never been done before! . . . . Okay, so it has, partially, with Lincoln's 1862 Homestead Act, but Bernanke isn't getting paid to risk his job. He's getting paid to, uh, hmm, well, uh, . . . . okay, I'm not sure what he's getting paid for, but his job is gone anyway, no matter who wins the election. If Obama wins, he has to blame Bernanke when things still don't work, and if Romney wins, he has to blame Bernanke for things not having worked. Either way, he's road kill.

• The Universal Peace Federation has posted the report of the roundtable discussion on "The Just Third Way: Rebirth of the International Market System." The report is being circulated and the link sent out to an estimated readership of 10,000 world leaders, scholars and thoughtful people from all walks of life.

• Tom Hoefling, presidential candidate of America's Party, this week endorsed the idea of an "Economic Manhattan Project". As posted on the campaign's website, Tom declared, "If elected, I will immediately launch what amounts to an economic Manhattan Project. I will get every one of our best minds in a room and not let them out until we have a workable plan, ready to implement. We must replace the socialist New Deal with the American Deal, with liberty at its core, and justice for all." When questioned on a blog talk radio as to who might be a candidate for this role, Tom answered, "Why people like [CESJ's] Michael Greaney and Dr. Norm Kurland if they would accept." Tom, also mentioned the audio recording of the conference call of August 28, 2012, when Norm Kurland explained the Capital Homesteading concept.

• On Thursday September 20, 2012, the guest on "America's Summit — Restore the Republic," was former Shell Oil CEO, John Hofmeister. John is currently with "Citizens for Affordable Energy", a group seeking America's energy independence. He was also asked to participate in the formation of an "Economic Manhattan Project."

• Michael D. Greaney, CESJ's Director of Research, has been asked to appear on "The Polish Hour" radio show to be interviewed by Polish journalist Tom Pompowski. The interview will take place on Wednesday, September 26, for broadcast at a later date. The interview will be in English, while transcriptions of the interview will be available in English.

• Tom Pompowski, who recently left the National Bank of Poland to start his own media company, El'ohim Communications, recently published Armia Boga kontra Imperium Zla, "God's Army v. The Evil Empire," the story of the fall of the Soviet Union. The book includes a chapter on Norman Kurland and CESJ.

• Dave H. in Georgia has been reaching out to a number of radio show hosts to sound them out on interviewing members of CESJ's core group to explain the potential of the Just Third Way to turn around the global economic and political mess.

• An initial draft business plan has been developed for Justice University. The second phase of development of the business plan will follow as soon as Bob Brantley, the Project Manager, and others finish their review.

• Wikipedia entries are currently being drafted. We hope to have the first five up on the Wikipedia by the end of September. A final selection of the initial five entries to be posted has not yet been made.

• Guy S. in Iowa and others have formed the OWN Team to surface social media activists to carry out at least one initiative a week to locate prime movers and gatekeepers.

• Russell W. in Connecticut has been reaching out to community, academic and church leaders in the Hartford area to get them interested in sitting down and discussing the Just Third Way.

• Monica W. in Cleveland has been making progress in arranging meetings for Norman Kurland to talk to key people in Ohio about the Just Third Way and the possibility of a pilot "Citizens Land Bank" and "Homeowners Equity Corporation" project to address the home mortgage crisis.

• As of this morning, we have had visitors from 46 different countries and 48 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the United Kingdom, India, Canada, and Australia. People in Romania, Hungary, Spain, the United Kingdom, and the United States spent the most average time on the blog. The most popular postings this past week were "Aristotle on Private Property," "Thomas Hobbes on Private Property," "Distributist Classics — and More!," "News from the Network," and "Own the Fed: Introduction."

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

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Thursday, September 20, 2012

The "Catholic Crutch"

What is "capitalism"? Every time you turn around you get a different answer. This causes problems, obviously, especially now that the socialists caught on and have been playing games with definitions, too. This has results that can only be described as ludicrous.

Our favorite is where Michael Novak, widely considered by distributists as an apologist for capitalism, claimed that what Chesterton meant by distributism is what he (Novak) means by "democratic capitalism." Then Martin Green, an avowed socialist, declared that what Chesterton meant by distributism is what he, Green, means by "democratic socialism." We'll forebear pointing out the obvious contradictions here, and leave it to your own cleverness.

If we define capitalism as concentrated ownership of capital in a private elite, and socialism as concentrated ownership of capital in a State elite (as Chesterton and Belloc did), we can at least get beyond semantics and start addressing the issue, which is lack of ownership of capital by most people, which results in what Leo XIII described as a yoke almost of slavery.

This leads into distributism, vaguely described as a policy of widely distributed property with a preference for small, family owned farms and artisan workshops. (The small is beautiful "mandate" came later, as did the redefinition of natural rights and the influence of Marx, transforming distributism into neo-distributism in a failed attempt to get around the paradox of past savings.)

The problem is that classic distributism incorporates two errors. One, there is no recognition of the "act of social justice," a particular act by means of which the institutions of the common good can be accessed directly. This leaves the door open to intrusive State control, despite the explicit rejection of increased State involvement.

Two, classic distributism assumes as a given the demonstrably false assumption that the only way to finance new capital formation is to cut consumption and accumulate money savings.

On the contrary, as Harold Moulton proved in The Formation of Capital (1935), new capital formation is best financed by using the present value of future marketable goods and services to be produced by the very capital being financed, not by reducing consumption and thus the demand that would make new capital financially feasible.

To get around these errors, latter day distributists fall into the error that Chesterton condemned in The Dumb Ox and start redefining the natural law. They base the natural law on their private interpretation of something they accept as God's Will, rather than God's Nature self-realized in His Intellect, and therefore discernible by reason alone. They slap the "Catholic" label in front of their pronouncements to validate them without going through the trouble of presenting any argument or offering evidence.

In short, by using "the Catholic Crutch," they imply that anyone who doesn't accept their redefinitions is a "bad" Catholic, a dissenter, a liar, a thief, and probably eats pickles with ice cream instead of pretzels with ice cream like all normal people.

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Wednesday, September 19, 2012

Is Universal Healthcare "Catholic"?

Someone recently asked the question whether universal healthcare is consistent with Catholic social teaching. At first glance, this seems like a no-brainer. Caring for the sick is one of what Catholics call "the corporal works of mercy." This has nothing to do with military rank, but means that things like clothing the naked, feeding the hungry, and visiting prisoners are a way of taking care of people's material, that is, "corporal" needs.  They are considered meritorious not just by Catholics, but by all religions that we every heard of.

Is it, however, the proper role of government to provide for healthcare? In a larger sense, is the government the source of all good as many people, including many Catholics, seem to believe? This is a more difficult question, especially when we consider (for example) the social doctrine of Pope Leo XIII. As he said,

"Nature accordingly must have given to man a source that is stable and remaining always with him, from which he might look to draw continual supplies. And this stable condition of things he finds solely in the earth and its fruits. 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.)

We should understand "substance of his body" as including healthcare. Does this preclude State assistance when there is no other recourse? No —

"It is a duty, not of justice (save in extreme cases), but of Christian charity — a duty not enforced by human law." (Ibid., § 22.)

As far as Leo XIII (and all subsequent popes) was concerned, then, there must be available some means by which people can take care of themselves without having to rely on the government. That means is private property in capital. Thus,

"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.)

CESJ has been working on a proposal that would empower people to become owners of capital without redistributing what already belongs to others, in the process vesting them with the economic power necessary to provide for "common domestic needs adequately," including education and healthcare. We propose it in part as a counter to what we're starting to call "Welfare Blackmail," the belief that you must have State assistance or nothing, and must vote in the politicians who promise you the best benefits, regardless of the cost, whether in money or other people's lives.

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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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Monday, September 17, 2012

Distributism Yet Again, VI: Beating the System . . . to Death

If new capital cannot be financed except by cutting consumption and accumulating money savings, and it is essential that as many people as possible become capital owners, but you must consider private property as sacred, the situation cannot be resolved.

It cannot be resolved, that is, if we stupidly insist that there are absolutes. If we could just get rid of a natural law based on God's Nature and discernible by reason, and substitute our opinion as to what is right and wrong without any reference to what might be good for the people we intend to despoil of clearly ill-gotten gains (they're obviously criminals, anyway, or they wouldn't have more than we have), then fixing things would be easy and simple.

That is, in fact, what today's neo-distributist proposes. He or she has concluded that, to achieve widespread ownership, you must change the definition of certain natural rights such as liberty (freedom of association/contract) and property. This, in effect, restores property by destroying it. It comes as no surprise that the "Reading List" on the website of The Distributist Review as of August 21, 2012 had as many books by Arthur Penty, the founder of "guild socialism" who was ejected from the distributist movement, as by Chesterton and Belloc, combined, and that among the works under "neo-distributism," those by socialists (notably the Marxist E. F. Schumacher, author of Small is Beautiful) and fascists predominated.

And, frankly, why not? It gets you what you want . . . at least in the short term and (as Keynes declared) in the long run we're all dead, so who cares? The observation by Heinrich Rommen becomes a prophecy:

"For Duns Scotus morality depends on the will of God. A thing is good not because it corresponds to the nature of God or, analogically, to the nature of man, but because God so wills. Hence the lex naturalis could be other than it is even materially or as to content, because it has no intrinsic connection with God's essence, which is self-conscious in His intellect. For Scotus, therefore, the laws of the second table of the Decalogue were no longer unalterable. . . . an evolution set in which, in the doctrine of William of Occam (d. cir. 1349) on the natural moral law, would lead to pure moral positivism, indeed to nihilism." (Heinrich Rommen, The Natural Law.  Indianapolis, Indiana: Liberty Fund, Inc., 1998, 51.)

Nihilism, schmeehilism. It's all a lot of nothing, anyway, and we won't be there to see it.

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Friday, September 14, 2012

News from the Network, Vol. 5, No. 37

Conventional wisdom says that September and October are very bad months for the stock market. Sudden downturns and crashes have historically taken place in these months. Thus, the announcement this week by the Federal Reserve that it will engage in "QEIII" may not be quite the stimulus to the economy that is anticipated.

People seem to forget that one of the causes of the Crash itself, that is, the sudden drop in share values in late October of 1929 was the massive money creation for the purchase of shares on the secondary market. This created the illusion of wealth creation, although the rise in prices had nothing to do with the country's capacity to produce or consume. When people realized that there was nothing behind the high values but promises that the companies couldn't keep, values plunged, and kept on going.

Then there's the Euro Crisis, or, How Not to Remedy a Financial Crisis With More Debt.

What we have, in effect, is a "perfect storm" brewing. Governments in Europe are ruining their credit by printing vast amounts of money in an increasingly desperate effort to stay above water, while the U.S. is printing vast amounts of money to float the private sector and fund increasingly expensive government programs of the sort that have bankrupted Europe. As Harold G. Moulton observed seventy years ago, "Unable or unwilling to perceive basic inconsistencies, or to choose between clear-cut alternatives, we drift toward the deep financial waters from which there is no return other than repudiation in one form or another." (The New Philosophy of Public Debt, 1943, 89.)

Something has to give way soon, "and it's that time of year again."

So what are we doing to try and get safely into port before the storm hits?

• Dave Hamill has been reaching out to radio talk show hosts, letting them know about CESJ latest publication, The Restoration of Property, and that people at CESJ are willing to talk about either the book or (more importantly) the concepts behind the book. Barnes and Noble already has the cover image up, although Amazon is lagging a little bit behind.

• The Justice University project is being reexamined for possible implementation. A draft business plan has been written, and some rough financial projections are being developed.

• Highlighting the need for Justice University, recent research by CESJ indicates that misunderstanding of justice is much more widespread and has much deeper roots than previously suspected. It appears that the Slaughterhouse Cases of 1873 marked a watershed for the United States in the understanding of what it means to be a person, that is, someone with rights. Prior to the Slaughterhouse Cases rights were viewed as inherent in human beings — even slaves, although slaves could not exercise their rights (a flabby and flawed equivocation, but it satisfied most of the slave-owning Founding Fathers). After Slaughterhouse, rights were viewed as coming from the State — extending the bad legal decision in the Dred Scott case that applied to slaves to everyone, where the clear intent of the 14th Amendment was to overturn the Dred Scott decision.

• As of this morning, we have had visitors from 49 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the United Kingdom, India, Canada, and Australia. People in Spain, Hungary, Romania, the United States, and the United Kingdom spent the most average time on the blog. The most popular postings this past week were "Aristotle on Private Property," "Distributist Classics — and More!," "Thomas Hobbes on Private Property," "News from the Network," and "Is Private Property in Capital 'Catholic'?"

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

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Thursday, September 13, 2012

Distributism Yet Again, V: Is Small Really Beautiful?

In yesterday's posting we said that reliance on past savings as the only source for financing new capital formation traps an economy — civilization itself, in fact — into a downward spiral and a never-ending cycle of crash-and-burn, slow recovery, then another crash-and-burn. The neo-distributist tells us this is because we're not thinking in "human scale." If we built civilization on a smaller scale, one more in keeping with the human spirit, things would be much better and sustainable. "Small," they tell us, "is beautiful," and the only way to ensure the survival of the species.

Is that, in fact, the case? Or are subsistence economies dependent on past savings locked more firmly into a downward spiral than advanced economies? We contend that, however bad things are today in the advanced countries of the world, it is far worse in those in which "small is beautiful" is not a romantic ideal, but a brutal fact of life, where subsistence agriculture and artisan craft small business is the rule. Absent rigid State control and continuous inputs of financial capital from the outside the local economy, those who control past savings are in charge, and oppress the poor far worse than any modern industrial economy would dare through the imposition of debt and other forms of "legal" slavery.

It is no accident that successful micro-lending operations in subsistence economies without exception get their seed money from outside the local area, and can only be maintained with regular infusions of cash from charitable donors, again from outside the local economy. The local economy simply cannot produce enough surplus to maintain the current level of development, feed and clothe people adequately, and provide for new capital investment even on a "human scale" to raise living standards. Past savings — reductions in consumption — cannot do the job when what is called for is increases in production.

Small may be beautiful, but another word for it is stagnation and decay, as either current consumption or future capital formation necessarily suffers. This is inevitably the case in any economy at any level of development that relies on existing accumulations of savings to finance new capital formation. We see it today in the accelerating decay of the global economy trapped in a downward spiral by Keynesian assumptions.

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Wednesday, September 12, 2012

Distributism Yet Again, IV: The Paradox of Property

Yesterday we discovered that classic distributism managed to get into an irreconcilable paradox. That is, given that you presumably cannot finance new capital formation unless you cut consumption and accumulate money savings, only people who can afford to save are able to purchase new capital. In other words, the rich get richer.

On the other hand, if you are seeking to restore private property for some, you cannot logically destroy it for all, regardless of your justification. That is, you cannot say to the rich man that you propose to make him insecure in his property by taking it away so that you may make the poor man secure in what he would then possess. This would make the poor man relatively rich (at least, compared to what he was before), and thus subject to confiscation and redistribution to benefit the formerly rich man who was stripped of his wealth to benefit the formerly poor man.

The only ones who benefit from this approach to social betterment are the ones doing the redistributing, the re-redistributing, and so on: government bureaucrats, who by this means seize power in the State and extend and maintain control over every aspect of the lives of the citizens. Thus, the classic distributist could only sit back and wait for some cataclysm to destroy civilization, which could then be rebuilt to form the Distributist State.

What would actually happen, of course, is that civilization would collapse and, just as happened after the fall of Rome, history would follow the same course that got us into the mess in the first place. Until and unless people give up the fixed idea that the only way to finance new capital formation is to cut consumption and save, capital formation will continue to be a monopoly of the rich, regardless of the level of technology, or how beautiful small might happen to be.

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Tuesday, September 11, 2012

Distributism Yet Again, III: Distributism's "Catch-22"

As we saw in yesterday's posting, today's neo-distributist tends to shift the basis of the natural law from reason to will. This gives whoever can bully others immense power, and seems to account in large measure for the ability of such will-based Catholics to drive their opponents (i.e., anyone who agrees with the Church that the natural law is based on reason) out of the Church in disgust over their tendency to show their love for the poor and downtrodden by spreading hatred of anyone they deem non-poor or insufficiently downtrodden. As Blessed John Paul II observed, however,

"Love for the poor must be preferential, but not exclusive. The Synod Fathers observed that it was in part because of an approach to the pastoral care of the poor marked by a certain exclusiveness that the pastoral care for the leading sectors of society has been neglected and many people have thus been estranged from the Church. The damage done by the spread of secularism in these sectors — political or economic, union-related, military, social or cultural — shows how urgent it is that they be evangelized, with the encouragement and guidance of the Church's Pastors, who are called by God to care for everyone." (John Paul II, Ecclesiam in America ("On the Encounter with the Living Jesus Christ: The Way to Conversion, Communion and Solidarity in America"), 1999, § 67.)

The confusion many people see in Catholic social teaching is probably due to the failure to distinguish between expedients to be taken now to meet conditions imposed by poorly structured institutions (e.g., living wage, State benefits, redistribution), and the "goal necessarily to be sought," that is, widespread capital ownership so that (consistent with the much-abused and even more misunderstood Say's Law of Markets) people can produce with both labor and capital that they own instead of using what belongs to others.

Most simply put, and contrary to Keynes's "restatement," Say's Law is that you can't consume unless you produce. If you want what someone else has produced, you must exchange something that you have produced, either with your labor, or your capital (including land under capital, instead of capital under land as Leo XIII did).

If you cannot produce by means of your labor, Louis Kelso pointed out that you must become an owner of capital to supplement and in some instances replace what you can produce with labor alone.

This brings in the flaw in classic distributism. According to conventional wisdom, you cannot finance new capital formation unless you first cut consumption and save. This restricts capital ownership in most cases to those who can afford to save — the rich. Consistent with the natural law, however, you cannot simply take what belongs to another. That is contrary to the universal prohibition against theft. Nor can you redefine theft to make it okay.

Consequently, Chesterton and Belloc concluded that the "Distributist State" could only be established after the collapse of the existing system — and it had to collapse without help on your part. Classic distributism was caught in a hopeless situation by its own assumptions, for society can neither retreat nor advance in the required directions, and staying where it is cannot be tolerated.

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Monday, September 10, 2012

Distributism Yet Again, II: The "Catholic System"?

One of the more irritating habits of the neo-distributist is the snarky way so many of them have of either suggesting or declaring outright that distributism is a (or, more offensively, the) Catholic system. This shifts the basis of economics from reason and ethical philosophy (morality), to faith in a particular religious revelation.

That is, something is right not because of its inherent goodness, but because you have interpreted something you believe to be from God as a command to do thus-and-so, whether it makes sense or not — that is, the basis of the natural law is shifted from God's unchanging and unchangeable Nature, self-realized in His Intellect, to a private (and possible irrational or insane) interpretation of something you believe to be God's expressed Will.

This is a disaster. "Good" becomes whatever the person with the biggest club says it is. The Leviathan State takes over, and humanity is condemned to perpetual slavery. As Heinrich Rommen explained,

"The perpetual and primary question for the essence of law, alternating between the propositions, 'law is reason' and 'law is will,' was then in opposition to St. Thomas answered by 'law is predominantly will.' If adherents of this school adopt Occam's blunt statement that law is will, then the essence of natural law vanishes. Ethics loses its basis of natural reason and becomes positivist. A rather futile and strange discussion may begin about the question, whether God, in order to be really omnipotent, must be able to will the hatred of Himself. If God's omnipotence was thus exalted the consequence had to be and has been a kind of nihilism in natural ethics, a transformation of the fides rationalis into an emotional faith of sentiment, the negation of natural theology and a one-sided supernaturalism. All too easily the world of politics and economics is then left to itself. This consequence tends to make the Church an obedient instrument of the State, which has the monopoly of nature, world, and power." (Heinrich Rommen, The State in Catholic Thought. St. Louis, Missouri: B. Herder Book Company, 1947, 17-18.)

Logically, then, the Church does not and cannot endorse any specific economic model — including distributism. The only question is what system best conforms to Catholic social teaching and respects human dignity and integrates the principles of subsidiarity and solidarity.

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Friday, September 7, 2012

News from the Network, Vol. 5, No. 36

In a news item that should strike fear into the hearts of people everywhere, the Wall Street Journal gave its opinion that yesterday's rise in the Dow of over 200 points was the result of the European Central Bank announcing that it was unleashing its "most powerful weapon": the printing press.

"Printing press money" (which, in these days of electronic transactions, doesn't actually require a printing press, but the mere touch of a button) was — for slightly different reasons — the cause of the hyperinflation in Germany and Austria-Hungary following the First World War, the stock market crash of 1929, and the floundering of economic recovery in the New Deal. Now it bodes well (or ill) to wreck what is left of the European economy, and trigger a drastic downturn in the United States.

All of which is completely unnecessary, as our leaders would see if they could just get their heads out of the Keynesian sand. You cannot dig yourself out of that sand by burying yourself deeper. Only an increase in production in which everyone participates through ownership of both labor and capital has the potential to turn the global economy around, not continually dividing a shrinking pie into smaller and smaller pieces by issuing debt-backed fiat money.

To counter this "Krazy Keynesian Kult" nuttiness, here's what we've been doing for the past week:

• Tom Hoefling, America's Party's candidate for president, once again gave the Just Third Way and Capital Homesteading a lot of time during his regular Tuesday night conference this week. This, of course, is not to be taken as an endorsement by CESJ of Tom's candidacy or anything else; CESJ does not endorse political candidates or engage in lobbying. We just think that any candidate who gives serious consideration to Capital Homesteading is him- or herself a news item — as is the fact that Tom refuses to accept contributions for his campaign. If President Obama or Mr. Romney would take a good look at Capital Homesteading and refuse contributions, we would report it on equal terms.

• Last week a CESJ delegation spoke at a roundtable discussion sponsored by the Universal Peace Federation, an organization affiliated with the Unification Church. We prepared the "executive summary" of the event, and submitted it yesterday to Dr. William Selig, who reviewed it and gave us his opinion that it was "excellent." After some editing, the report should be posted next week. We'll give the link in next week's news items.

• A national Catholic magazine has requested a review copy of CESJ's latest publication, The Restoration of Property. We expect to receive our initial order of books early next week. You should consider purchasing a copy or two on Amazon or Barnes and Noble, and offer to write a review for your local newspaper, focusing on those "small" community newspapers that often are more receptive to readers' contributions — especially for free. We can even send you an electronic file of the cover. Since the book is not religious (it's just a coincidence that it's being reviewed by a Catholic magazine), it should appeal to everyone who sees a problem with the current patterns of wealth distribution. Since the member discount on a single copy of The Restoration of Property is only $2.00, and the shipping from us would be more than that, you help yourself and us by purchasing online.  You also boost the sales ranking with every purchase, making the book more likely to come up in a search. Since the book is $10.00, and both Amazon and Barnes and Noble offer free shipping on orders over $25.00, if you buy 2.51 copies (one for you, 1.51 for a friend and a half and a little bit over), you will definitely save money.

• This past week a correspondent in Germany brought the "Anastasia Movement" to our attention. Based on a series of books by Vladimir Megre, the organization (a word that we use in the loosest possible sense and to avoid repeating "movement" too many times) is characterized as a New Age, minimalist back-to-the-land group. The idea (in very brief and probably misleading summary) is to live one with nature and your ancestors on a small plot of land, raising your own food in a house you build yourself. The problem that CESJ can solve (or at least contribute some suggestions) — and the reason our correspondent brought it to our attention — is how to acquire the land, pay for it, and own it. Reading some of their material, it sounded as if they might be able to adapt Capital Homesteading vehicles like the Citizens Land Bank and the Homeowners Equity Corporation to their needs (to say nothing of Capital Homesteading itself, which could provide the independent income to allow people to live one with nature if they so choose). They might also find the CESJ edition of William Thomas Thornton's A Plea for Peasant Proprietors of interest.

• As of this morning, we have had visitors from 44 different countries and 46 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, India, Canada, the United Kingdom, and Australia. People in Hungary, Spain, Romania, the United States, and Austria spent the most average time on the blog. The most popular postings this past week were "Aristotle on Private Property," "Distributist Classics — and More!," "The Coming Crash," "Thomas Hobbes on Private Property," and "Is Private Property in Capital 'Catholic'?"

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

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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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Wednesday, September 5, 2012

Time for a Third Party Candidate? II: Automatic Defeat?

Is a third party candidate guaranteed to go down in defeat? That is a serious question, especially in social justice. One of the characteristics of the act of social justice is that it must be effective. We are not permitted to carry out an act just to prove how virtuous we are, especially if, by doing something else, we have at least the possibility of doing something good rather than preening ourselves and accepting God's congratulations on not being like those other people.

We saw in yesterday's posting, however, that a third party candidate does not automatically go down in defeat. Any candidate with a halfway decent platform is viable, especially today, when candidates backed by enormous amounts of money vie to see how much it costs to say as little as possible of any value.

The only reason that we can find for the fixed belief that third party candidates are not viable is in the campaign of the last viable third party candidate in the United States. That was Theodore Roosevelt. Exactly a century ago, Theodore ("Teddy" was a nickname reserved for family and close friends) gave both Republicans and Democrats a salutary lesson and the scare of their lives. This was to such good effect that both parties continue (in their own way) to denigrate or excoriate the accomplishments of one of the most remarkable men in American history.

The problem with that is we have no Theodore Roosevelt today. Neither do we have a true Progressive Party, which today is simply another form of socialism — ironic, in that the Progressive Party took over the job when the Populist Party became too socialist, and the Republicans went reactionary in response to the influence of Aldrich and Taft's betrayal of the progressive cause.

Wilson only won the election by adopting progressive reforms, especially the income tax and the Federal Reserve, taking support from Roosevelt. That's right — an income tax and a central bank run on the banking principle to replace the National Bank System run on the currency principle were populist demands since the Panic of 1893.

Republican legend has it that Roosevelt threw the election to Wilson by splitting the G.O.P. Nothing could be further from the truth. Taft and Aldrich drove the progressives from the Republican Party years before Roosevelt was persuaded to run — which he resisted doing as long as there was hope that the Republicans wouldn't all go reactionary. If anything, it was the reactionary "Old Guard" of the Republican Party that handed the election to Wilson by abandoning the party's progressive accomplishments and driving out the moderates and progressives.

To regain the moderate and progressive Democrats, Wilson abandoned his capitalist support base (that was going to Taft in any event) and adopted the progressive platform in all but name. Wilson was aided not a little by the support of William Jennings Bryan, whom Wilson persuaded to endorse him in return for a place in the government. The help of "The Great Commoner" was essential to garner popular support for Wilson, whose "aristocratic" (i.e., elitist) tendencies and support for capitalism were well known, and whose career as an academic was vaguely sinister to ordinary people who were becoming tired of the crazy theories coming, then as now, out of academia. The "absent minded professor" might be a figure of fun, especially in early 20th century science fiction, but someone to keep out of "real life."

Ironically, Bryan (consistent with his growing pacifism) supported Wilson over Roosevelt in large measure because of Roosevelt's "Big Stick" policy, perceived as unnecessarily aggressive and imperialistic. Bryan later resigned as Secretary of State because Wilson gave in to war pressure — where Roosevelt had won the Nobel Peace Prize for his successful efforts to bring a halt to the Russo-Japanese War and get the combatants to the bargaining table.


During the peace negotiations following the Armistice, Wilson allowed himself to be overborne by the other Allies, something it is difficult to imagine happening to Theodore Roosevelt. Consequently, "the Peace" merely laid the foundation for the Second World War — and also established a hitherto unknown economist by the name of John Maynard Keynes as a leading figure.  This led to the adoption of "chartalism" (now known as "Modern Monetary Theory") virtually worldwide within the space of a generation.

Taft never had a real chance at reelection, for which he was heartily grateful. Taft viewed his term as president as an unending nightmare and a personal betrayal of his friend Roosevelt. He seems to have tried to make up for it as Chief Justice of the Supreme Court, and even his opponents said of him that, for someone who made such a substandard president, he made wise and just decisions while on the bench.

Both the Federal Reserve Act of 1913 and the 16th Amendment were considered populist triumphs. They never would have been enacted without the active support of Representative Carter Glass (later of "Glass-Steagall" fame) and William Jennings Bryan when it looked as if Wilson was starting to cave in to the same power centers that had corrupted Taft.

It was only later, when the need to finance the U.S. entry into World War I without raising taxes and the New Deal (a deliberate corruption by FDR of TR's "Square Deal") led to hijacking the Federal Reserve and the income tax to implement the Keynesian theories directly at odds with both institutions, resulting in the gross abuse of both we see today.

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Tuesday, September 4, 2012

Time for a Third Party Candidate? I: What is a "Third Party Candidate"?

As the election draws nearer, and the candidates withdraw further and further from the needs and concerns of "ordinary" people, there is more talk about the viability of a third party. Which "third party" may be an issue, but as long as it's not Republicrats or Democans, they'll take it.

Of course, the usual argument against this sort of wild talk is to declare that voting for a third party is throwing your vote away because there has never been a viable third party candidate, and that voting for a third party candidate ensures that whoever you dislike today will be a shoo-in tomorrow. Let's consider these claims individually. Today we'll look at the claim that there has never been a viable third party candidate.

Really? I suppose that depends on how you define "third party." According to the Wikipedia, we've had three or six (or seven) — depending on how you count — and definitely one "almost and should have won":

George Washington is the only person elected president without a party affiliation. We cannot tell a lie. We don't know whether to count him.

John Adams was the only Federalist president.

The Whigs managed to get in William Henry Harrison. John Tyler, elected as vice president, succeeded Harrison. Tyler started out his term as an independent, but became a Whig once he assumed the presidency . . . but was never elected. Zachary Taylor was succeeded by Millard Fillmore, also elected as vice president . . . Whigs seemed to have a talent for dying in office.

Andrew Johnson was elected vice president as an independent, but became either a Democrat or a Republican (it's complex) on succeeding Lincoln.

Theodore Roosevelt was a progressive Republican while in office, then became an official Progressive when the moderate and liberal Republicans left the G.O.P. in disgust over what they viewed as Taft's betrayal of America.

And you thought this election was confusing.

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Monday, September 3, 2012

A Short Video on Distributism, II: Another Problem and Solution

In last Thursday's posting we noted a few problems we saw in a short video on distributism. Don't get us wrong. We liked the video, especially the presenter's refusal to use the usual neo-distributist tactic of limiting one's self to vague assertions, invented history, and ad hominem attacks. The video, however, gave a contradictory definition of capitalism (pretty hard to do, frankly, given the lack of definition that characterizes the vagary people call "capitalism") and an inadequate understanding of money and credit.

Credit being (as Hilaire Belloc acknowledged) the chief means by which new capital formation is financed, this inserted a serious flaw into the presentation, and leads into the final problem with the video: a failure to distinguish between banks of deposit and banks of issue or circulation. A bank of deposit is defined as a financial institution that takes deposits and makes loans. The most common types of deposit bank are credit unions and savings and loans.

A bank of issue is defined as a financial institution that takes deposits, makes loans, and issues promissory notes. The most common types of issue banks are commercial and mercantile banks, and central banks, which were invented to function as "banks of issue for banks of issue" to ensure an adequate, elastic, stable and uniform currency.

Restricting banking to deposit banking limits the financing of economic growth to what has been withheld from consumption in the past. Using issue banking shifts financing from what has been withheld from consumption in the past, to what can be produced in the future. The rapid economic growth experienced since the 17th century is the result of the reinvention of commercial banking and the invention of central banking.

The problem is that, since most people do not have the collateral that qualifies them to use issue banking, they are forced to use deposit banking if they want to finance new capital. Given the cost of most new capital instruments these days, it is a virtual certainty that most people will not be able to make the effort, much less succeed once they do make the attempt.

Louis Kelso solved this problem with the invention of the Employee Stock Ownership Plan (ESOP). Under current law the ESOP is a way in which employees of a company can purchase the company and pay for it out of future profits.

That addresses the concentrated ownership of existing capital, but not ownership of future capital, which is where the growth — and opportunity — are. CESJ proposes "Capital Homesteading" as a means by which people without collateral can become capital owners by purchasing new equity issues with the full rights of property (including the vote and full payout of profits). This would be done using non-recourse loans secured with capital credit insurance instead of traditional forms of collateral, and paying for the shares using future profits.

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