A little over
four years ago (on December 13, 2012, to be exact), we whipped out a quickie
posting on the purpose of production in real life, versus the purpose of
production in the economics of John Maynard Keynes. As the introduction to the link to the
posting on FaceBook was just a trifle long but substantive, and the posting has
proved one of the most popular on the blog, we decided to repost it with a few
additions. After all, one reader, J.C.
(not that one),
recently commented on this particular posting,
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| Without the Just Third Way |
Lol, can’t make too much
sense now can we? 😉 People will come around,
all in God’s time. Thanks for opening my eyes by the way and your thoughtful
answers to all my questions. When I first started learning about this stuff I
was angry. Angry that people lied to me, angry at myself for being deceived,
angry that people are still being deceived. Now I’ve come to understand, at
least in a small way, why “these things must come to pass.” Matthew 24:6 And
now, when the tides turn we will have these wonderful well researched books
you’ve given to humanity!
Disclaimer for Religious Folks with a
Territorial Imperative for Their Faith and Who Jettison Reason: Now, we’re
not a Catholic group, or even a religious organization. We just happen to use a lot of Catholic
social teaching in what we’re doing because 1) it’s based on the natural law
common to every human being, and 2) it agrees in principle (and most of its
applications) with the Just Third Way.
If something is true, it’s not just true for some of the people, it’s
true for all the people. Don’t shut
non-Catholics off from Catholic social teaching.
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| Leo XIII, the Just Third Way Pope |
So, having made
that disclaimer, we begin by noting that back in 1891, Pope Leo XIII said
something so obvious that many people — especially economists — have managed to
ignore it completely:
It is surely undeniable that,
when a man engages in remunerative labor, the impelling reason and motive of
his work is to obtain property, and thereafter to hold it as his very own. If
one man hires out to another his strength or skill, he does so for the purpose
of receiving in return what is necessary for the satisfaction of his needs; he
therefore expressly intends to acquire a right full and real, not only to the
remuneration, but also to the disposal of such remuneration, just as he
pleases. (Rerum Novarum, § 5)
If you know
anything about binary economics (or just plain common sense), that passage is
going to give you a sense of “déjà vu all over again.” Why?
Because it’s a fancy way of (re)stating the first principle of
economics. This, as Adam Smith put it a
trifle more succinctly, is, “Consumption is the sole end and purpose of all
production.”
Fancy that. The pope 😇 and Adam Smith 😠 agree on something. Next thing you know, the pope 😇 and Karl Marx 😈
will agree . . . oh, wait. They already
do, on the definition of socialism: “the abolition of private property.”
Now, however,
things get a little sticky.
To the modern
economic mind, shaped in large measure by the thought of the Great Defunct
Economist, John Maynard Keynes, the purpose of production (at least by capital
. . . which Keynes denied was independently productive) is not
consumption. Nope. The purpose of production from capital is not
consumption, but reinvestment.
Reinvesting the earnings of capital will finance new capital formation,
which will create pretend jobs to siphon off what capital produces for the
benefit of non-productive labor.
Of course, as Louis
O. Kelso pointed out, if labor is becoming less productive, and capital is
becoming more productive, the obvious thing to do is to open up the means
whereby owners of labor can also become owners of the capital that is
displacing their labor. As Kelso said in
an interview in Life magazine in
1964, “If the machine wants our jobs, let’s buy it.” He meant the machine, not the farm.
Keynes, however,
didn’t think that way. No, since (according to Keynes) labor is the only thing
that is truly productive, then, except for what is needed for reinvestment and
to encourage owners of savings to reinvest their savings in new capital, everything
belongs to labor.
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| Pius XI, the Other Just Third Way Pope. |
Keynes’s program,
however, comes into direct conflict with Catholic social teaching, which
insists that owners of capital have as much right to the fruits of ownership as
the owners of labor — and vice versa. As Pope Pius XI explained,
[I]t 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.)
Evidently there
are some problems with Keynesian thought, at least from the perspective of
Catholic social teaching . . . and thus for Catholics and others who rely on
Catholic social teaching to guide them in coming up with a just approach to
establishing and maintaining an economy that works for everybody, not just a
private sector élite (capitalism) or
public sector bureaucracy (socialism). The biggest problem is how to get
economists and politicians to see that maybe things aren’t quite as Keynes
believed.
If we can produce
a blog on that subject for your consumption, we’ll post it tomorrow.
#30#
