Last week the 10th annual Rally at the
Fed drew attention to some serious problems in the monetary and fiscal policy
being followed by the world’s central banks, especially the Federal
Reserve. Used today almost exclusively
to finance government, they were intended to be the lender of last resort for
the private sector, not the money machine of first resort for government.
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| The Panic of 1825 began with speculation by the Bank of England |
Misuse of the world’s central banks has been a
major cause of the growing wealth and income gap in the global economy. Even if the State created money through the central
bank (or issued it directly) to finance something along the lines of the
“National Dividend” proposed by Major Douglas, it would be money created for
consumption, not production.
Simply printing money and distributing it
equitably would do nothing to solve the problem of the wealth and income
gap. That can only be done by making
people who are not currently productive, productive. No one, however, will produce if the State
simply provides people with an income.
Why bother? It would be more
profitable not to work.
Further, with no provision for retiring the new
money once the marketable goods and services that backed it were consumed, the
effect would be purely inflationary. The
“National Dividend” also assumes that the State has the right to make promises
for other people to keep, which is not the case in a non-socialist economy.
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| Mortimer J. Adler |
The issue of the growing concentration of capital
ownership and the consequent “income gap” has not been addressed in any
feasible way except by Louis O. Kelso and Mortimer J. Adler in their two
collaborations, The Capitalist Manifesto
(1958) and The New Capitalists
(1961). The title of the latter is
significant in light of the banking principle and its reliance on future
savings: “A Proposal to Free Economic Growth from the Slavery of [Past]
Savings.”
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| Louis O. Kelso |
The proposal, again, is simple. As technology (capital) advances, it
displaces human labor from the production process. If owners of labor do not own the capital
that displaces them from their jobs, the essential link between production and
consumption is broken, and Say’s Law of Markets fails to function.
The problem is that, as technology advances, it
becomes commensurately more costly. At
the same time, as the value of human labor falls relative to capital, owners of
labor are less able to accumulate sufficient savings to purchase the
increasingly expensive capital that is displacing them from their jobs and
driving down the relative value of their labor.
It becomes necessary to impose increasing State control on the economy
in a self-defeating effort to raise wages, create jobs, and sustain consumption
at adequate levels.
