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| If we ignored your private crusade...good. |
December is a
really bad month in which to blog if you’re trying to focus on things like the
Just Third Way. Today is a very historic
anniversary, and we could tie it in to the Just Third Way, but it would be a
pretty big stretch, and we’d spend more time justifying it than we would on the
subject at hand, which is a bit more immediate.
We get enough flak from people whose personal crusades we’ve forgotten
to mention just because they have nothing to do with what we’re talking about.
Yesterday we
looked at how President-elect Trump’s carrot-and-stick approach to domestic job
retention could be done a little better, cheaper, more productively, and a
trifle more diplomatically. The problem,
however, is that, as the system is currently structured, there’s no real
solution, only stopgaps until the next seam starts to pop. After all, when the institutional “thread”
holding things together is weak to begin with, and then starts to rot, it might
be time to put a new system in place.
And what should
that new system be?
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| Exciting and fulfilling wage system jobs |
A Capital
Homestead Act, of course. Right now
everyone is worried about job loss — and (as we said yesterday) rightfully
so. Most people expect to gain a living
income through a wage system job.
Is that a
realistic expectation, though? As labor
costs continue to rise (can you say “$15/hour minimum wage”?), it becomes
increasingly attractive for companies either to shift operations to low-wage
areas, as Carrier, Rexnord, and a host of others proposed, or replace
high-priced human labor with relatively lower cost technology, despite any
promises or threats. After all, Trump
may threaten, but only Congress can enact a tariff.
Job loss,
however, has its downside for owners as well as workers. If workers have no income, who is going to
buy the company’s products? As we’ve
pointed out a number of times recently, when income drops for human beings,
demand for goods and services also drops . . . and machines don’t buy too many
goods and services, even during the “Christmas Season” (as Advent is known).
The simple fact
is that as labor costs get higher and higher, owners have the choice of going bankrupt, or —
a) Becoming dependent on government
subsidies
b) Shifting jobs to lower cost areas
c) Replacing workers with technology
d) All of the above (meaning all of the
above are choices, not that companies can choose all three at once)
e) Finding a different test to take
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| Fabian Socialism |
The only real
answer is “e” — a way of saying that our leaders are looking at everything
wrong. Having fallen victim to the
Fabian socialist concept of “full employment” that John Maynard Keynes borrowed
and that has been implemented virtually everywhere on Earth, world leaders can
only come up with answers that have the word “job” in them, somewhere:
• Job retention
• Job creation
• Job sharing
• Job market
It’s enough to
try the patience of Job. . . .
So, what’s the
solution? It’s the same one Louis Kelso
gave in an interview in Life magazine
back in 1964: “If the machine wants our job, let’s buy it.” That is, if technology is displacing you from
your job, buy the machine. As an owner,
you will then be the one getting the income from what the technology produces.
And how are you
supposed to do that?
Simple (which
doesn’t necessarily mean easy, but in this case it comes close). For centuries, especially since the invention
of central banking in the late seventeenth century, people have financed new
capital formation (a fancy way of saying putting together a way of producing a
marketable good or service using technology instead of labor or land) by
expanding bank credit (“creating money”), thereby paying for the capital with the
future profits of the capital itself.
In other words,
instead of first saving to buy capital, you buy capital and then save. Since all financially feasible capital is
self-liquidating (meaning it pays for itself, which is what “financial feasibility”
necessarily implies) out of the income it generates, nobody but a fool would
ordinarily save up to buy capital, but would borrow . . . if he or she
qualified to borrow, of course.
And what
qualifies someone to borrow? Being a
nice guy? No, being creditworthy.
And what makes
someone creditworthy? Being a nice
guy? No, having collateral.
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| "If it weren't for bad luck, we'd have no luck at all." |
And that is why
the rich are, as a rule, the only ones who can borrow money to buy
capital. They are, by definition, the
only ones who (as a rule) have collateral.
(There are ways to get around this, but it takes some doing and a lot of
luck. And most of us don’t have that
kind of luck. We’ve got the other kind.)
That’s why Kelso
had another idea: replace traditional collateral with another invention from
the late seventeenth century, which seems to have been bubbling over with all
kinds of new ideas, like chocolate, central banking, chocolate, theories of
representative government, chocolate, the new science of economics, and (of
course) chocolate.
And insurance. In 1688 or thereabouts, commercial insurance
really started to take off in Lloyd’s Coffee House in London in the United
Kingdom even before there was a United Kingdom to insure productive ventures
against loss — the same thing traditional collateral does. Then in 1694 some entrepreneurs formed the
Bank of England to make loans for productive ventures . . . and nobody thought
to put 2 and 2 together to make 4 until Kelso.
Kelso’s
proposal? Allow everybody to become an
owner of the capital that is producing most of the wealth in the world by expanding
bank credit collateralized with insurance instead of existing wealth owned by
the borrower. You don’t need money to
make money, as the saying goes. You only
need access to money to make money, as Kelso explained.
The nuts and
bolts of the system were assembled into the Capital Homesteading proposal of
the Center for Economic and Social Justice (CESJ). That is what President-elect Trump should be
looking at, not trying to force an unworkable system to keep on working by
threatening to punish people. A leader
leads. Only bullies threaten.
#30#
