Monday, May 26, 2014

Guest Posting: A Critical Response


Every so often (like every couple of hours or so) we get a response or a comment from someone who seems to have seen a word or two he or she disagrees with in something we said or wrote, and shoots off a comment before checking to see if his or her brain is loaded.  Usually the comment has nothing to do with what we actually said, but everything to do with what the commentator thinks we said, based on unquestioned assumptions of the commentator.

For example, certain emotional elements on both the “left” and the “right” automatically, almost robotically, assume that Capital Homesteading involves an approach to redistribution of existing wealth as a solution to today’s inequalities of wealth and income.

The “left” Emotibots either believe we’re against redistribution (in which case we’re heartless fiends) or for redistribution under another name (in which case we’re lying hypocrites).  The “right” Emotibots either believe we’re against redistribution (in which case we’re impracticable idealists for promoting expanded capital ownership), or for redistribution under another name (in which case we’re lying thieves).

What’s the real story?

We’re for redistribution as a temporary expedient in an emergency, not as a solution to anything except immediate needs.  This is individual charity.  In extreme cases, in which the emergency threatens the common good, some redistribution by the State may be justified until the emergency passes, and acts of social justice have removed the underlying cause(s) of the emergency.

We’re against redistribution as a solution to social, economic, or political problems.  The proper response to social inequalities of all types is to remove barriers to full participation in the common good so that people can become productive and meet their own wants and needs through their own efforts.  This is social justice.

Recently, Mr. Gary Reber (who has been reposting material from this blog as well as publishing his own, original pieces) received a comment from an individual who seemed to take the “right” Emotibot you-people-are-lying-thieves position.  As this individual said, obviously locked into the past savings paradigm,

Reber has been peddling this snake oil all over the internet. Some of us (thank you, [name removed to protect the guilty] and [ditto]) have been refuting his nonsense. My position is that Reber’s group is merely attempting to institutionalize the theft by the elite of what little the middle and working class have left. The vast majority of the members of these classes (and I include myself) lack the skills and knowledge to manipulate any capital assets that are bestowed on them into wealth. They have so many day-to-day bills or past-due debts that they will sell these assets for a song to the sweet-talking snake oil salesmen who set them up in the first place, just so they can survive now. And all those beautiful capital assets will end up just where they do now . . . in the pockets of the elite. Give it a rest, Reber!

Ms. Dawn K. Brohawn sent this response, edited slightly to remove the names of the guilty to avoid giving them more credibility than they deserve, and a few clarifying (we hope) notes added:

A Critical Response

By Dawn K. Brohawn

Hi, Gary,

Just a few thoughts in response to [Critic’s] comments to you:

1) How does [Critic] explain the fact that this so-called “snake oil” we’re “peddling” (i.e., universal worker and citizen access to capital credit to purchase capital assets, with the capital loans being repaid by future corporate profits) has resulted in over 11 million workers becoming beneficial owners of their companies through employee stock ownership plans (ESOPs)? And, without having to put up a cent of their own savings, payroll deductions, or other personal assets? [1]

2) If the leveraged ESOP actually works, and [Critic] will have to prove that it doesn’t work and never has worked,[2] is he prepared to take away what worker-owners have gained through their company’s ESOP?  Will he and his friends declare publicly that they would deny property-less citizens the same (actually, much greater) ownership opportunity offered through the proposed Capital Homestead Accounts? Do he and his blog buddies object to our proposed improvements to go beyond current ESOP law, requiring full distribution of dividends to worker- and citizen-owners, full accountability to the shareholders, and with full voting rights over their shares?

3) Have [Critic] and his cohorts actually read our Capital Homestead proposals (especially the Capital Homestead Summary or the book Capital Homesteading for Every Citizen)? If they had, they would realize that their concerns about the inevitable theft by the elite of capital assets gained by the poor and middle-class, are dealt with by safeguards and internal controls built into the monetary and tax systems as reformed under our proposal.  For example:

a) Presuming that [Critic] et al have ever set up an Individual Retirement Account (which frankly is far more vulnerable to Wall Street manipulation and swings than a Capital Homestead investment), it is similarly designed under the Capital Homestead program so that citizens would set up their personal CH accounts at their local banks. These future citizen-owners would have available to them (at the very least) the advice and expertise offered by the banks (which presumably want to keep their customers AND want to make sure that the capital loans are repaid). The insurance companies providing capital credit insurance on those loans would also be doing risk assessments on the various capital projects that need financing. They too would have a financial incentive to ensure that the loans are repaid.

The major differences between [Critic’s] IRA “investments” and Capital Homestead investments is that 1) the first requires taking money out of [Critic’s] pocket or paycheck, and the second doesn’t (Capital Homesteading does require feasible/bankable capital projects which can be financed with newly created and insured capital credit and asset-backed money issued through the banking system);[3] 2) [Critic’s] IRA invests in secondary shares sold on Wall Street, whose value can be manipulated up or down by greedy hedge fund operators; Capital Homestead investments, on the other hand, are in newly issued corporate shares, with a specific loan amount having to be repaid by a certain date using the future stream of profits generated by the investment. (After the loan is repaid, full dividends are required to be paid to the Capital Homesteader as current income.)

b) The Capital Homestead investments CAN’T be sold before they are paid for (generally over 5-7 years).[4] Since each year every citizen (man, woman and child) will receive an equal allotment of credit to be invested,[5] at no point will they have to use their own assets to acquire their ownership,[6] and, as the annual loans are paid off over time, will begin receiving increasing amounts of capital income.

c) Under Capital Homesteading, labor unions (which now face a shrinking base of members) would be encouraged to transform themselves into “ownership unions” (with a growing member base of citizen- and worker-owners) to help educate, organize and fight[7] for the ownership rights of their members. Furthermore, as our society transforms itself from a wage-welfare culture to a universal ownership culture, people will have the resources and incentives to become more knowledgeable investors, and companies will have to become more transparent and accountable to their shareholders.

Feel free to transmit this to your critics. It’s a shame that they can’t engage in constructive debate without presuming nefarious intentions on our part. However, if they’re sincere about their concerns for improving the condition of the poor and middle-class under what we agree is an unjust system, they’ll read our proposals carefully and base their challenges on what we are ACTUALLY saying — preferably without descending to name-calling.

Own or be Owned,
Dawn Brohawn

Notes

[1] Many people locked into the past savings paradigm overlook the simple fact that most ESOPs are funded without participant contributions.  All contributions typically come from the sponsoring company, and are paid out of profits.  Admittedly, there is massive confusion even among some professionals about the difference between a 401(k) plan, which is funded with participant contributions, and an ESOP, especially when a 401(k) invests in stock of the sponsoring company.  The only real similarity, however, is that both ESOPs and 401(k)s are classified under retirement law as “defined contribution plans.”  The similarity ends there.

[2] Dawn knows that the critic can’t do this, as it is logically impossible to prove a negative.  A proof is that something “is.”  A negative is that something “is not.”  The first principle of reason is that nothing can both “be” and “not be” at the same time under the same conditions.  Dawn is using this means of demonstrating the utter absurdity of the critic’s claims.  We only need one example to prove that the Capital Homesteading concept works, and we have tens of thousands.  The critic must prove that none of these examples even exist, which is both a logical impossibility and completely irrational in the face of the examples evident since the first ESOP was installed in 1956.

[3] Put another way, an IRA is funded with past savings, defined as accumulated past reductions in consumption, while the CHA is designed to be funded primarily with future savings: the present value of future increases in production, without reducing current levels of consumption.

[4] Well, technically CHA assets could be sold before being paid for, if the stream of dividend income is insufficient to pay the cost of the shares.  The acquisition loan would then go into default, and the balance of the loan paid by the capital credit insurance or reinsurance company, which would take possession of the shares, having “bought” them with the insurance proceeds.  The insurance company would probably have no use for the shares with their much-reduced value (if any), and would dispose of them on the secondary market for whatever they could get to recover at least a portion of their loss.

[5] To be precise, what each person would receive is the right to obtain credit for a financially feasible and properly vetted capital project, not the actual credit.

[6] Yes, someone could fund a CHA with existing savings or current wage income and get a tax deduction (that would be “reversed” if the assets purchased with those savings were ever taken out of the CHA), but the CHA is designed to be funded with future savings, not past savings.  All things being equal, it would be much better to spend existing savings or set the money aside as an emergency “rainy day” fund than to use it to fund a CHA.

[7] And protect and maintain.

#30#

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