Yesterday we started looking at Harold G. Moulton’s vision of the future. What we saw was good and positive. Today, however, we look at something with which we disagree, and why we say that, for all his genius, Moulton would have benefited from a conversation with Louis O. Kelso.
The fact is, most economists and all politicians have a number of blind spots when it comes to “real” economics. One of them, and possibly the most significant, is the idea that all production comes from labor; capital is not independently productive and only enhances labor.
Imagine our surprise, then, when we discovered that Moulton had fallen into this common error. A number of his books were written from the perspective of Say’s Law of Markets, which assumes as a given that production can be carried out by means of land, labor, and capital.
Of course, in binary economics in which we divide the factors of production into the human and the non-human, we would say by means of labor and capital. The point, however, is the same: both the human and the non-human factors of production are productive and in the same way.
To speak of capital only “enhancing” labor is to say that capital is not productive in the same sense that labor is productive, which we know is not the case. We know this by applying the first principle of reason in its form as the principle of identity: that which is true is as true, and is true in the same way, as everything else that is true. Thus (assuming we go by reason), if both labor and capital are productive, they are both productive in the same way.
Yet, in his predictions for the future, Moulton appeared to assume that advancing technology enhances labor, and is not independently productive. Ultimately, of course, this means that — remember, capital is not in and of itself productive given the assumption that labor alone is productive — the owner of capital is stealing from the worker by demanding anything more than what the capital cost him . . . which is exactly the same argument Karl Marx made in Das Kapital (1867), and which was condemned a number of times by the Catholic Church:
Wherefore it is wholly false to ascribe to property alone or to labor alone whatever has been obtained through the combined effort of both, and it is wholly unjust for either, denying the efficacy of the other, to arrogate to itself whatever has been produced. (Quadragesimo Anno, § 53.)
Moulton a Marxist? Given the assumption that labor alone is productive — and that even capital is nothing more than congealed or accumulated labor — we can’t say that Moulton was a Marxist, actually, but that he had fallen into a common Marxist error:
A LOOK AT THE FUTURE (CONT.)
Dr. Moulton has an answer for that, too. He says the greatest single need, in the U.S. and other countries, is “a progressive increase in the efficiency of workmen.” He adds:
“Concretely, a universal increase of 20 per cent in output through better labor performance would mean close to to a 40-billion-dollar increase in American national income.”
Dr. Moulton says this can be achieved without sweating labor, but simply by making it more effective. Management would play its part by providing the most efficient machines and methods. The result, he says, would solve most of the difficult economic problems now before us. He says:
“Simultaneously, real wages could be materially increased, the returns to capital could be enlarged, and prices to the consuming public could be lowered.”
All that is needed to bring this about is clear understanding and support on the part of labor organizations, Dr. Moulton says.
So what can we do to bring Moulton back to the right path? Not of capitalism, but of the Just Third Way?
|Kelso and Adler|
That’s actually pretty simple . . . and something that Kelso and Mortimer Adler accomplished with their second collaboration in 1961, The New Capitalists.
Now, ordinarily we point out that in The New Capitalists, Kelso and Adler brought Moulton’s work into expanded capital ownership. In his 1935 classic, The Formation of Capital, Moulton showed how it is unnecessary, even counterproductive to rely on existing accumulations of savings to finance new capital formation. This is highlighted by the subtitle, “A Proposal to Free Economic Growth from the Slavery of Savings.”
Today, however, we don’t need to bring Moulton into expanded ownership . . . but to bring expanded ownership into Moulton! The answer to increasing real income — “real wages” is a blind alley, a diversion; all income need not be in the form of wages — is to supplement wage income (and in some instances replace it entirely) with ownership income . . . which is the issue Kelso and Adler addressed. And how can workers pay for acquiring capital ownership?
That’s where Moulton came in. The bottom line here is that Moulton needed Kelso and Adler’s insights but didn’t have them, while Kelso and Adler needed Moulton’s insights and got them.
Fortunately, you can also share the benefit of adding Moulton and Kelso and Adler together by learning about Capital Homesteading, an application of the principles set out in the Just Third Way.