Yesterday we
looked at a few of the papal statements underscoring the importance of
widespread private property in capital.
As thinkers through the ages have noted, people are either owners, or
they are owned — one way or another . . . and the worst way to be owned (not
that there is any good way) is to be owned indirectly by having the system or
those who control the system keep people in a permanent condition of
dependency.
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| And what, exactly, does the slave get out of this deal? |
And what is the
best way to keep people utterly dependent on the State or a private sector élite?
Keep them propertyless. This, as
Leo XIII noted, imposes a yoke little better than that of slavery on the
non-owning worker and the worker’s dependents.
If nothing else, the (Servile) State gets all the advantages of slavery without
the odium of sanctioning it, while the non-owning worker lacks even the security
slavery presumably provides, which is probably one reason Aristotle called propertyless workers "masterless slaves."
The real
importance of private property, however, is both individual and social. Individually, private property is the
inherent right every child, woman, and man has to become an owner. Socially, private property is a set of rights
and duties that define how an owner, other people, and the thing owned relate
to each other. Private property thereby
gives the owner a “social identity,” so to speak, vesting him or her with both
personality and the means to maintain and exercise one’s life within the social
unit, the pólis.
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| "Man is by nature a political animal." — Aristotle |
Human beings
being by nature “political animals,” ordinarily acquiring and developing
individual virtue within a social context, private property is thus the primary
means by which people become more fully human, conforming themselves to their
own nature. From a religious
perspective, then, the income aspects of capital ownership (while not
negligible) take a back seat to the “power” aspects of capital ownership,
vesting owners with the means to secure life and liberty, and grow in virtue
(“pursue happiness”).
If the income
aspect of private property were the only reason for advocating widespread
capital ownership, then the socialists and many capitalists would be absolutely
correct: ownership really is onerous. Managing
property is hard work, and it can be risky — very risky. No one is going to guarantee that an owner
will get the income he or she needs or wants.
With respect to income security, the wage and welfare system has the
private property system beat all hollow.
In theory,
anyway. Of course, there is the problem
of treating adults like children, and the fact that the level of redistribution
required by the wage system, whether directly through the tax system, or
indirectly through government-induced inflation and minimum wage legislation,
virtually ensures that eventually there won’t be enough to redistribute.
But income
security is not the main reason for expanded
capital ownership. Paradoxically, of
course, it ends up being the best way to ensure an adequate and secure income.
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| Aristotle: Private property is essential for a virtuous life. |
That, however, is
just an added benefit, especially for those who tend to think only in
materialist terms. Both socialists and
capitalists tend to ignore the fact that the purpose of life is to become more
fully human, which people do by acquiring and developing virtue, not by having
every need taken care of.
So we’ve settled
that, just as Aristotle noted, capital ownership is essential for leading a
life of virtue, “the good life.” The
only question remaining is, How?
Despite papal
suggestions regarding paying workers more so they can save to purchase capital,
it’s virtually impossible to do so, except after nearly a lifetime of scrimping
and saving and practicing heroic economic virtue, i.e., being a miser. The
Catholic Church’s take on that is that people should focus on practicing heroic
human virtue, developing prudence, fortitude, temperance, and justice, and then
completing and fulfilling these human virtues with faith, hope, and charity. And you’re not likely to have the time to be
virtuous if all you do is struggle to make enough income.
This is not a
slam at papal teachings. Any reasonable
person reading the encyclicals should be able to realize that the popes are
only giving suggestions when they say something specific, e.g., pay workers enough so they can save to buy a bit of
land. What if a worker inherits
money? Is he or she allowed to use that
money to buy land? And what if there is
no land for sale? Can he or she buy an
annuity, a small shop, or high dividend-paying equity shares in a sound and
well-managed company?
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| Guys, don't put words into my mouth! |
One almost see
the look of stunned amazement on the face of, say, Leo XIII if he heard how
some people have interpreted Rerum
Novarum as mandating wages as the sole legitimate source of income or for
financing capital formation, or claiming that the encyclical applies only to
land, not any other forms of capital.
Those claims are clearly refuted in the encyclical itself, yet we have
heard people, presumably experts, make those and similar statements, and some
even more bizarre.
No, if there are
better ways to finance capital formation than past savings, and if there are
other forms of capital available besides or in addition to land, no reasonable
person should raise any objection. On
the contrary, since the past savings assumption is what keeps most people from
becoming capital owners, any pope, and any other person with common sense,
would immediately jump on it.
That is why the
ideas of Louis Kelso and the work of the Center
for Economic and Social Justice (CESJ) are so important. As applied in the proposal for a “Capital Homestead Act,”
they are a way for every child, woman, and man to own capital without putting
up a cent of past savings or reducing current income.
The basic principle
is simple:
·
Locate a financially feasible capital
project. “Financially feasible” means
one that pays for itself within a reasonable period of time out of its own future
profits.
·
Go to a commercial bank, present the project to
a loan officer, and the bank can create money backed by the capital project
with which to purchase the project (in other words, buy now, and let the
capital pay for itself later).
·
Collateralize the loan with insurance, using the
risk premium typically added to the cost of the loan as an actual insurance
premium on a policy that pays off if the new capital does not pay for itself.
·
Put the capital into production, repaying the
loan, and afterwards using the income for consumption.
·
Repeat, until every child, woman, and man has reached
a level of “capital self-sufficiency,” i.e.,
owns enough capital to generate an adequate and secure income.
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| Insurance goes back a LONG way. |
Those are the
bare bones. There are, of course, a
number of details, many of them important, but that’s essentially how the
process would work. Nor is it all that
innovative. The rich have been using their
money creation powers to get rich(er) for centuries, while forms of insurance
have been used to spread out and minimize risk as long as civilization has
existed.
For example, four
thousand years ago Chinese merchants would mingle cargos to avoid one person
losing everything if a vessel went down.
Two thousand years ago the merchants of Rhodes paid a fee to reimburse
those whose goods were jettisoned during a voyage.
The difference is
that Capital Homesteading would allow ordinary people to use the same
techniques the rich have always used. Everybody
in society benefits, not just a wealthy or politically powerful élite, and the good life — the life of
virtue — becomes open to all.
#30#