Yesterday we looked at what we believe to be the main problem with offering a course in Keynesian economics to religious leaders: Keynesian economics is based on unproved — and un-provable — assertion. Keynes built a towering and complex superstructure on a foundation not merely of sand, but of quicksand.
This is bad enough, even if the assertions are true. There is another problem, however, in that the assertions on which Keynes based his system are, in some cases, demonstrably false, as is the case with his assumption that the only way to finance new capital formation is to restrict consumption below what is produced, accumulate the surplus as money savings, and then finance new capital formation. Dr. Harold G. Moulton’s monograph, The Formation of Capital (1935) disproved that Keynesian dogma for all time.
That, however, might be a bit beyond ecclesiastics who want something a little more obvious on which to base a rejection of the world’s most widely accepted economic system. This brings in the second grounds for our believing the course as described is a serious mistake. That is, the conflict between the unproved assumptions on which Keynesian economics is built, and the natural moral law proved by reason and supported by the evidence of our senses.
This is best illustrated by Keynes’s violation of the fourth pillar of an economically just society. Keynesian economics violates every one of the four pillars, of course, as well as each of the three principles of economic justice (participative justice, distributive justice, and social justice) on which the four pillars are based. Thus,
A limited economic role for the State. Keynes insisted on as much government control as possible.
Restoration of the rights of private property. Keynes defined private property out of existence by giving the State total control over money and credit.
Free and open markets as the best means of determining just wages, just prices, and just profits. Keynes declared that the State should set prices, wages, and profits.
We will not give arguments or present evidence to support our claim that Keynes violated the three pillars we just listed — at least, not here. We want to get to the key point, and Keynes’s most obvious violation of a fundamental precept of the natural law: the right of every human being to own capital. This is the fourth pillar of an economically just society:
Widespread direct ownership of capital, individually or in free association with others.
What was Keynes’s position? We already gave it above:
“The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the War, could never have come about in a Society where wealth was divided equitably.”
What is the natural moral law, Catholic social teaching on this? In our opinion, Pope Leo XIII stated it best:
“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.” (Rerum Novarum, § 46.)
We could go on at great length, as our readers know, and prove that Keynesian economics violates every single principle of economic justice and every one of the four pillars of an economically just society — and we have, in many other writings. Only the one is needed to make our point here, however.
So, we agree that it would be greatly beneficial for ecclesiastics to learn about economics. It should, however, be an economics consistent with the natural law and thus with Catholic social teaching.
In our opinion, of course, this would be Louis Kelso’s binary economics embedded in CESJ’s Just Third Way, especially since it can so easily be shown to be in conformity with the Aristotelian-Thomist concept of the natural law discernible by reason alone, not faith in unsupported assertions, regardless who might make them.