According to
historian Frederick Jackson Turner, the loss of America’s land frontier meant a
complete change in the American character as well as the gradual Europeanizing
of the United States. As Turner saw it,
the end of “free” land meant the end of democracy as well as the unique
American character that made the country great and, as Abraham Lincoln put it,
the last, best hope of earth.
The question now
becomes how to make a slick political slogan into something meaningful and (if
you’ll pardon the expression) make America great again — or great in the first
place, depending on your personal views in the matter. Nor does it have to be restricted to
America. True greatness of any country
consists in how well its institutions promote what Aristotle called “the good
life,” that is, people acquiring and developing virtue: “habits of doing good.”
Having given the
meaning and purpose of life and the secret of the universe, a program to make
America (or anywhere else) great again should be easy (and American) as (apple)
pie . . . conveniently ignoring for the sake of the argument that apples aren’t
particularly American, but probably developed in or around what is now
Kazakhstan in Central Asia, but we digress.
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| As Central Asian as Apple Pie |
To begin, let’s
list the three main elements that inhibited or spurred America’s rather
astounding rise to greatness in the first place:
Bad (as in really, really bad): human chattel slavery.
We could go on for a few (thousand) pages how bad slavery is. Right now we’ll settle for saying it offends
against human dignity at the most fundamental level, and prevents or greatly
inhibits both slaves and masters from leading the good life of virtue . . .
which (as we noted above) is the whole meaning and purpose of life and the
secret of the universe.
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| Sir Robert Peel: invented modern police and the Currency Principle |
Bad: One really, really lousy financial system.
What good is a financial system that not only is grossly inadequate for
the country as a whole, even in the aggregate, but limits even its inadequacies
to the rich, leaving everyone else completely out of the picture? Face it, the Currency Principle (as opposed
to the Banking Principle) is not any way to run a financial system. Or anything else.
Good with Some Bad: Focus on internal
development. This is good because a
country’s first concern should be whether its own citizens are meeting basic
wants and needs. This was bad in the
United States because of the way people were increasingly meeting their basic
wants and needs: a wage system job. Wage
slavery was replacing chattel slavery as the opportunity to own land or a small
business disappeared, and wasn’t being replaced by the opportunity and means to
own a small piece of a big business.
We don’t need to
talk about chattel slavery. Okay, we do,
just not now or in this discussion. What
we need to focus on today in the here and now is how to fix the system and make
America (do we have to keep adding “or anywhere else”?) great again. That means looking at ways to make people
owners of the vast commercial and industrial frontier so that internal economic
development can be carried out to the advantage of everyone, not just a
socialist or capitalist élite, and
take care of the money system at the same time.
Now, keep in mind
that the two good things we need to do to fix the two bad/good-with-some-bad
things must be done at the same time, not in sequence. All you accomplish by doing only one is to
think you’ve fixed the problem, when all you’ve done is put off the final conflict
(boy, that sounds apocalyptic).
And what are the
two things? One, fix the money and
credit system, and, Two, end the wage (slave) system. Fortunately, we can do one by doing the other
(or maybe it was doing the other by doing one).
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| Leo XIII: People should own capital. |
First, and
foremost (again, we’re just listing this first, both have to be done at the
same time), arrange matters so that (as Pope Leo XIII put it in § 46 of Rerum Novarum), “as many as possible of
the people . . . become owners.”
The fact is, as
technology advances, it displaces human labor from production. We mentioned this in the first posting of this
brief series, but it’s a good thing to repeat it. Technology doesn’t create jobs in the
aggregate, it destroys them. Yes, there
are “new” jobs created to operate the technology, but (everything else being equal)
the net result is a reduction in the amount of human labor to produce
marketable goods and services. That’s
the whole reason for adopting machinery in the first place: to produce more at
less cost.
And that means
that as technology advances, the value of labor relative to technology goes
down . . . at the same time that owners of labor need to increase their income
to be able to purchase the goods and services available . . . otherwise, demand
falls, goods remain unsold, and production goes down, reducing the need for
human labor even more.
The
solution? As Louis Kelso noted more than
half a century ago in an interview in Life
magazine (for you millennials, Life
was a magazine. . . and it was printed on "paper" with pictures and everything), if the machine takes your job . . . buy the
machine! That way, you get the income
the machine generates, and you now have enough to live on instead of hoping
somebody will give you a handout or you’ll save a rich man’s life and he’ll
make you his heir in gratitude (it happens all the time in Horatio Alger
novels and clones).
Of course, not
all of us can get the chance to save a rich man’s life, and, frankly, there
aren’t enough rich men that need saving to go around. We need to have some way that doesn’t depend
on the rich that will enable people who are losing their wage system jobs to
the machines can buy the machines . . . but without taking anything from
anybody else. Especially any rich people
who might happen to need saving. You
never know. . . .
That leads us
directly into Two: fix the financial system.
The way it works now, only the rich who really don’t need the money can
borrow money to buy more and more capital.
That’s no help, because all that does is put more and more people out of
work. If the rich really wanted to help,
they’d start consuming (spending) more instead of reinvesting it to make even
more money that they can’t possibly spend.
And why are the
rich the only ones who can borrow money to buy new capital? Because they stole it from the rest of
us? No, because they have collateral,
that is, past savings.
You see, the best
way of financing new capital is not to accumulate savings. All that does is reduce demand and make any
new investment that much less likely to be successful.
No, the best way
to finance new capital is to promise to repay money out of the future profits
of the very new capital being financed that a commercial bank backed up by a
central bank creates! The rich have done
this for centuries . . . ever since the founding of the Bank of England in 1694
(actually long before that, but we do need a central bank in there to reduce
risk and for a number of other purposes, such as ensuring a uniform and elastic
currency).
“All you have to
do” (in this case we’re serious, although those words are usually a danger
sign) is make certain everybody, that is, every child, woman, and man, has the
right to participate in new money creation for financially feasible capital
projects on an equal basis with everyone else.
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| "Consumer credit rates? Even I am offended!" |
That’s pretty
important, because most people in the developed countries have incredible power
to create all the money they want . . . for consumption, not for production,
and at rather high rates of interest that would make even Shylock blush. It’s called “consumer credit,” and money is
created in the millions, billions, possibly even trillions of dollars worth
every day, by buying with credit cards, on account, or any of the other ways
invented to get you to part with money you don’t have.
The problem is
that most of us ordinary people don’t have the collateral essential to
participate in new money creation for capital projects. That’s why Kelso figured that it would be a
good idea to replace traditional forms of collateral with capital credit
insurance and reinsurance, buying an insurance policy that would pay off in the
event the borrower defaulted on the loan.
And how can this
be done? By turning a contract to repay
the purchase of capital out of future profits (called a “bill of exchange”)
into money (called “money”) — which is what commercial banks and central banks
were invented to do (a different kind of bank lends out past savings; a
commercial or central bank actually creates money out of existing assets,
usually contracts, i.e., bills of exchange).
In this way the entire financial system can be reformed simply by
changing how money is created, and thereby shifting from a money supply backed
with government debt, to one back with private sector assets.
There is, of
course, much more to this, which can be found in the description of Capital Homesteading on
the CESJ website.
#30#
