As
we saw in the
previous posting in this series, Pope John Paul I came across one stumbling
block in the way of implementing a personalist economic order — one that
respects the dignity and sovereignty of the human person, but that takes into
account the rights of all others as well as people’s “political nature.” That is the realization (as Daniel Webster
said) that, “Power naturally and necessarily follows property.” True structural change in a society requires
reforming institutions — “social habits” — through acts of social justice, and
acts of social justice require freedom of association in order to organize
effectively for change . . . and John Paul I did not appear to have any
specific or legitimate means by which ordinary people could become owners of
capital.
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| Webster: Power follows property. |
Yes,
“people power” can be very effective in certain social justice objectives, such
as reforming the political power structure.
That, however, is limited in scope and does not get down to the level of
other institutions, especially private property.
For
example, during the civil rights movement in the 1960s, people organized very
effectively in social justice for political rights. Many people in the movement, however, seemed
to assume that achieving the goal of securing civil rights meant that reform of
all other institutions would come about automatically — which is clearly not
the case.
It
was essential to take the civil rights movement to the next level, and secure
natural rights of life, liberty, and private property as well as the vote. Instead, the vote was used by and large to
secure jobs and welfare, interim measures that in and of themselves actually “perpetuate
the plantation” by turning people from dependents of “Ol’ Massa” into
dependents of the government.
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| Cobbett: Without property, you are a slave. |
So
why bother with civil rights at all? Perhaps
the English radical William Cobbett said it best:
Freedom is not an empty sound; it is not an abstract idea; it
is not a thing that nobody can feel. It means, — and it means nothing else, —
the full and quiet enjoyment of your own property. If you have not this, if
this be not well secured to you, you may call yourself what you will, but you
are a slave. You may twist the word
freedom as long as you please, but at last it comes to quiet enjoyment of your
own property, or it comes to nothing. Why do men want any of those things that
are called political rights and privileges? Why do they, for instance, want to
vote at elections for members of parliament? Oh! Because they shall then have
an influence over the conduct of those members. And of what use is that? Oh!
Then they will prevent the members from doing wrong. What wrong? Why, imposing
taxes that ought not to be paid. That is all; that is the use, and the only
use, of any right or privilege that men in general can have. (A
History of the Protestant Reformation in England and Ireland, 1827, §456.)
That,
of course, is all very well and good, and underscores the importance of what Popes
Leo XIII and Pius XI said about widespread capital ownership. It does not, however, get around the basic
problem of how people are supposed to become owners when they have no savings
and their income is either non-existent or insufficient to allow for saving in
the required amounts.
 |
| The spinning jenny replaced hand spinning. |
And
that creates a problem. When labor is
the primary input to production, technology tends to be simple — and
affordable. Advances in technology at
that level tend to create jobs because labor is at a premium, and anything that
makes production easier also makes labor cheaper and thus more affordable.
At
some point, however, advancing technology “bids down” the premium on labor by
becoming more productive than labor to the point where it no longer pays to add
labor, but to replace labor with technology.
The advantage previously enjoyed by owners of labor shifts to owners of
technology.
Adding
to the problem is the fact that advanced technology, while it can carry out the
same production better and cheaper than labor on a per unit basis, is generally
much too expensive for most people to afford.
As a result, owners of labor displaced by technology in production also
find themselves displaced by owners of technology in income.
The
obvious solution is that people displaced by technology must be put in the
position of somehow receiving the benefits of technology. Several alternatives have been developed over
the past two centuries or so in an effort to do this, such as paying people on
the basis of what they need instead of what they produce, or just flat out
redistributing wealth.
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| Leo XIII: as many as possible should own. |
The
only viable solution, however, is exactly what Leo XIII and Pius XI said: turn
as many people as possible into owners of the technology that is displacing
them. As Louis Kelso once put it, “If
the machine wants our job, let’s buy it!”
This,
however, gets right back to the same problem: how are people supposed to buy
the machines that displace them from their jobs if they don’t have savings, and
suddenly don’t have jobs that pay them enough to be able to save?
The
answer, as Louis Kelso saw it, was to apply basic principles of finance to the
problem. Although most people don’t seem
to realize it, most business enterprises do not first accumulate cash and then
purchase productive technology.
No,
what companies do is sign a contract agreeing to pay for the new capital out of
the future profits of the capital itself, i.e.,
future savings instead of past savings.
The way to finance new capital formation is not by having reduced
consumption in the past, but by increasing production in the future.
 |
| Kelso: replace past savings with future savings. |
There
are a great many complicated sounding institutional and structural reforms that
would be necessary to enable every child, woman, and man to be able to use the “future
savings technique” to be able to purchase “self-liquidating” capital, but that
is the essence. People don’t need to
save first and then purchase capital, which is often insufficient, anyway.
Instead,
people can first purchase capital and then pay for it. As long as the capital can pay for itself
within a reasonable period of time, it doesn’t make any difference how much
capital is purchased. The amount of
capital that can be financed in this way is limited only by the actual capital
needs of an economy, not by what people have managed to save.
Nor
is it necessary to redistribute existing wealth to make everyone a capital
owner or deprive anyone of his or her rights.
The only thing the currently wealthy would lose is their virtual
monopoly over the ownership of future wealth creation — which is not something
they legitimately have, anyway. You own
what you own today. You do not own what
does not exist today.
If
this is so simple, however, why isn’t it being done right now, especially with
the world in such terrible shape? We
will start to look at that in the next posting in this series.
#30#