In this brief series we’ve been looking at the contradictions in the Keynesian system that, regardless how plausible Keynes’s approach may sound and how hard Academia and the politicians push it, it is still a recipe for disaster. With all due respect to Rep. Tom Snozzi’s good intentions, what he proposes — creating jobs to rebuild infrastructure — is not only not the best thing to do, but is pretty much the worst.
Perhaps the best way to explain is to take each of the points we raised yesterday, and contrast them with the Just Third Way take on the same issue. For a more comprehensive presentation of the Just Third Way, of course, it would be good to pay a visit to the website of the Center for Economic and Social Justice (CESJ).
· The purpose of production is job creation. No. As we said yesterday, this violates Adam Smith’s first principle of economics, “Consumption is the sole end and purpose of all production.” Producing for any reason other than consumption promotes consumerism, gives greed a plausible excuse, and, because it separates production and consumption, is a primary cause of “the business cycle.”
· The only way ordinary people can gain income is to have a wage system job. No. The solution to advancing technology displacing labor is not to create artificial “make-work” jobs, but to make those people who own only labor into owners of capital as well, supplementing and sometimes replacing labor income with capital income.
|Not the best way to work.|
· Human labor is the sole factor of production; capital at best only enhances the productivity of labor. No. In the Just Third Way, we recognize that human labor is one factor of production and — because of its link to the human person who is the whole reason for production — the more important factor in human terms. Nevertheless, capital (land and technology), the other factor of production, given advancing technology, is more immediate in economic terms, and is responsible for the bulk of production in an advanced economy. Thus, in the Just Third Way, human labor is more important but less immediate, while capital is more immediate but less important. Labor and capital, however, whatever the proportion of their immediate, “physical” contribution to production, are both productive, and productive in the same way.
These bad assumptions led to changes in some fundamental concepts that really are not subject to change, no matter how badly people want or think they need them to change:
· Liberty/Freedom of Association and Contract. No, the State cannot unilaterally change the terms of any contract, much less all of them at will. Rather, “liberty” is a right inherent in each human being that empowers people to enter into fair contracts for any lawful purpose (i.e., “create money”).
· Private Property. No, the State cannot redefine or abolish private property as it sees fit or finds expedient. The right to be an owner — the right to private property — is a natural right inherent in every human being. The rights of an owner (what someone may do with what he or she owns) are socially determined with an eye to the common good, but may never legitimately be defined in any way that nullifies the underlying right to be an owner in the first place.
|All money is a contract, and all contracts are money.|
· Money. Money is not a general claim against the wealth of society issued by the State. Money is anything that can be accepted in settlement of a debt: “all things transferred in commerce.” All money is a contract consisting of offer, acceptance, and consideration . . . “consideration” meaning something of value that is worth something, not government debt that might one day be worth something. Allowing the State to issue money backed by its own debt (or directly, as a debt) again separates production and consumption, making it impossible for Say's Law to function.
· Human Personality. Contrary to the odd idea that the State creates persons, i.e., confers rights, each and every human being who exists has rights by nature, and is thus automatically a “natural person.” The State may define the exercise of rights, but does not grant them, and can only take them away for just cause and after due process.
· Justice. The principle of justice is not “to each according to his or her needs.” That is the principle of charity. The principle of justice is “to each according to his or her inputs.”
· Money Creation. The ideal in the Just Third Way is that everyone who consumes also produces, and everyone who produces also consumes. There will always be special cases, of course, but they should be the exception rather than the rule. Properly understood, money is how one person exchanges what he or she produces, for what others produce, thereby evening out production and consumption. When some produce without consuming, or consume without producing — as happens when the State issues money backed with its own debt instead of the private sector issuing money backed with assets — the system is thrown out of balance.
It really does make sense to get away from a system that relies on overlooking fundamental contradictions to run, and go with something a little more rational — such as what we plan on looking at tomorrow.