Thursday, May 25, 2017

Welding Irony, V: A Better, Just Third Way


We’ve been poking holes in the Keynesian paradigm that (we assume) dictated Rep. Tom Snozzi’s proposal to create jobs rebuilding infrastructure.  We’ve looked at the history of prior economic downturns and what brought them to a successful end (production of marketable goods and services in which ordinary people participated as capital owners) or an unsuccessful end (manipulation of the currency, public works funded by increases in government debt, and a world war), as well as the flawed principles that underlie bad economic and monetary policy decisions.
Maybe not spot on, but close enough.
So do we have anything better to offer, or are we just going to carp and criticize?  Regular readers of this blog know the answer, but for those of you who are new, and as a refresher for those of you to whom it is old hat, yes, we have a better alternative.
Briefly, the answer is not to “create jobs.”  As we may have said once or twice, the purpose of production is not job creation, but consumption.  So how do you increase consumption?
Since you can’t consume what hasn’t been produced, then the obvious answer is if you want to increase consumption, you must increase production.
That, however, doesn’t really say anything until we qualify it a little.  This is an issue that you cannot look at in terms of the collective.  You can only look at it in terms of aggregate, that is, mass consumption power . . . and that means looking at every individual, not the collective.
That’s because, ultimately, it doesn’t matter how many people it takes to produce something, but how many people it takes to consume something.  Consumption drives everything in economics, and if people don’t have the means to consume, they not only have no means of participating in economic life, they likely will not be alive long in any event.
And what is the means by which people gain the ability to consume?  By being productive.  As the logic of Say’s Law of Markets has it, if you want to consume something, you must either produce it yourself, or produce something to trade to someone who produced what you want to consume.
WHO owns is as key as WHAT is produced and HOW.
How you produce something is, ultimately, irrelevant.  Labor, land, and technology are all productive in the same sense.  The only problem in the modern world is that while everyone owns labor naturally, most people don’t own enough land or technology to produce enough for them to consume, and land and technology are vastly more productive than human labor — and, just as what human labor produces goes to the owner of human labor, what land or technology produces goes to the owner of land or technology.
Unfortunately, modern economics, trying to circumvent private property, is largely concerned with how best to take what owners of land and technology produce and give it to the owners of labor.  Louis Kelso, however, made what seems the obvious observation, that if owners of labor alone don’t have enough, and owners of land and technology have enough, why not figure out some way that owners of labor can also be owners of land or technology . . . without taking anything from current owners of land or technology?
Kelso figured out a way to do so: using the techniques of “modern” finance (they’ve only been around for 20 or 30,000 years or so, maybe longer, give or take an eon or two) it is possible to purchase newly formed capital — land or technology — that pays for itself out of its own future production, and thereafter yields enough production either for the owner to consume directly, or trade for what he or she wants to consume that is produced by others.
The Center for Economic and Social Justice (CESJ) has worked on applying Kelso’s ideas in a proposal called “Capital Homesteading for Every Citizen.”  The idea is to make it possible for every child, woman, and man to acquire income-generating assets on a tax-deferred basis up to a level of “capital self-sufficiency” (estimated at $1 million in assets) that pay for themselves out of their own future earnings, and thereafter provide the consumption income that drives the demand for production and “creates jobs” naturally at no cost to the taxpayer.
Addressing Snozzi’s specific proposal, CESJ has developed the idea of a “Citizens Land Bank.”  This is an expanded ownership mechanism designed as a for-profit, professionally managed real estate planning and development corporation,
And who owns all of this?
The CLB would borrow on behalf of its shareholders (the citizens of a local or regional area) to purchase land, plan its use, and develop the land for productive purposes.  The citizen-shareholders thus gain a definable ownership interest in local real estate, sharing in appreciated land values, and profits from leases, etc., as well as have a voice in future land development.
To pay for infrastructure, user fees collected by the CLB would replace taxes collected by the government.  This would shift the cost from taxpayers, to anyone who benefits from infrastructure use.
As a for-profit enterprise, rebuilding infrastructure would be transformed from an enormous cost center (and opportunity for graft and corruption), to a profit center, with every user and resident having a direct interest in keeping costs down and quality up.  As one minor example, people rarely spray paint graffiti on what they themselves own, as they have to pay to clean it.
Only those jobs that were necessary to build the infrastructure and maintain it would be “created,” as redundancies would increase costs and lower profits.
The bottom line?  Why create a relatively few jobs artificially at taxpayer expense to generate a bit of consumption income, when you can create a lot of consumption income permanently at no cost to the taxpayer?
#30#

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