It is traditional
in economics and finance to accept the principle that new capital formation is
utterly impossible without saving.
Nobody ever got something for nothing, and nobody ever will. What about gifts and charity, you ask? What about them? If someone gives you a gift or alms, you owe
gratitude. You don’t get something for
nothing.
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| Henry Dunning Macleod |
The traditional
principle of finance is correct. Part of
the problem is that understanding of this whole savings thing is often
incomplete. As a result, instead of
money and credit being at the service of people, people are at the service of
money and credit. By far the great mass
of people are enslaved to savings.
This is ironic,
for money is only a tool. (We aren’t
separating money and credit because as Henry Dunning Macleod said, “Money and
Credit are essentially of the same nature; Money being only the highest and
most general form of Credit.” Henry Dunning Macleod, The Theory of Credit. Longmans, Green and Co., 1894, 82.) It is an offense against human dignity that
anyone either be enslaved to a tool or become a tool him- or herself. As Louis O. Kelso said,
Money is not a part of the visible sector of the economy. People do not consume money. Money is not a
physical factor of production, but rather a yardstick for measuring economic
input, economic outtake and the relative values of the real goods and services
of the economic world. Money provides a
method of measuring obligations, rights, powers and privileges. It provides a means whereby certain
individuals can accumulate claims against others, or against the economy as a
whole, or against many economies. It is
a system of symbols that many economists substitute for the visible sector and
its productive enterprises, goods and services, thereby losing sight of the
fact that a monetary system is a part only of the invisible sector of the
economy, and that its adequacy can only be measured by its effect upon the
visible sector. (Louis O. Kelso and Patricia Hetter, Two-Factor Theory: The Economics of Reality. New York: Random
House, 1967, 54-55.)
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| Louis O. Kelso |
Mere slavery to
savings, while bad enough, is not the whole problem. As technology advances it eventually reaches
the stage where most productive capital cannot be financed by a single
individual with reasonable effort and ability.
At that point ownership of productive technology tends to become
concentrated in the hands of those who control existing accumulations of
savings. This is “capitalism,” a term
first used in this sense by the French socialist Louis Blanc in 1850.
It is only just
that those who provide the financing for new capital formation should own that
capital. Control and enjoyment of what
one produces with what he or she owns are essential rights of property. As Kelso pointed out, “Property in everyday life, is
the right of control.” (Louis O. Kelso, “Karl Marx, the Almost
Capitalist,” The American Bar Association
Journal, March 1957.)
More specifically, “property”
is two things. One, it is the absolute
right inherent in every single human being simply because he or she is a human
being. This is the “right to property.”
Two, property is the bundle
of socially defined and necessarily limited rights that delineate how an owner
may exercise his or her ownership, that is, control and enjoyment of the fruits
of ownership. In general, no one may use
what is owned to harm one’s self, other people or groups, or the common good as
a whole. These are the “rights of
property.”
The injustice
inherent in the capitalist system is not that owners control and enjoy the
fruits of what they own. Being an owner
is as natural to human beings as life and liberty.
 |
| Mortimer J. Adler |
Rather, the
injustice of the capitalist system results from the fact that the methods of
capitalist finance as traditionally misunderstood necessarily exclude most
people from capital ownership. Private
property, technology, the corporation, even the financial system and the banks
are not the problem.
Misuse of these
institutions is a symptom of the underlying problem, not the problem
itself. It is lack of participation in capital
formation and ownership, and thus the inability for most people to be
productive except by labor alone, that is the essential flaw in all forms of
capitalism.
Not realizing
that the real flaw in capitalism is lack of participation in capital ownership,
all forms of socialism abolish private property as a natural right. This is wrong because, as Kelso and Adler
argued in The Capitalist Manifesto (Louis
O. Kelso and Mortimer J. Adler, The
Capitalist Manifesto. New York:
Random House, 1958), their first collaboration, private property is an
inalienable right and an essential prop of human dignity.
In both
capitalism and socialism, then, most people are cut off from ownership of
capital. This, as Kelso and Adler noted,
is a most unnatural state of affairs because it imposes a condition of
dependency — slavery — on anyone who does not have access to the means of
acquiring and possessing private property in capital: a slavery to savings.
The unavoidable
conclusion is that lack of access to money and credit cuts people off from
capital ownership and leads inevitably at first to capitalism or socialism, and
then to a form of what Hilaire Belloc called “the Servile State.” The Servile State is one in which most people
are in a condition of dependency to private employers, the State, or the
combined power of both.
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