As we saw in the
previous posting on this subject, the problem with the solution to social
problems that Fulton Sheen advocated is that it causes another problem . . .
such as, where does anyone get the money to purchase capital to become an owner
without violating someone else’s ownership?
We cannot make society a free-for-all in which people take what they
want when they want it. All that means
is “might makes right,” especially in economics and finance.
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| John Paul II |
No, as Pope John
Paul II reminded us, the economic common good should be circumscribed “within a strong
[albeit limited] juridical framework which places it at the service of human
freedom in its
totality, and which sees it as a particular aspect of that freedom, the core of which is ethical
and religious.” (Centesimus Annus, §
42) Most important, ownership of capital must be democratically distributed (not redistributed) throughout society as the chief support for both individual
freedom and
institutional integrity.
We can summarize
these “four pillars of an economically just society” as:
1. A limited economic role for the State,
confining the State to enforcing contracts, setting standards, and
protecting property rights of everyone, as well as lifting all economic
and legal barriers to universal ownership participation as a fundamental human right. This is
consistent with Paragraph 17(1) of the “Universal Declaration of Human Rights”:
“Everyone has the right
to own property alone as well as in association with others.”
2. Free and open markets within
an understandable and fair system of laws as the most objective and
democratic means for determining just prices, just wages and just profits (i.e., the “bottom line” or residual
after meeting all costs for producing marketable goods and services),
3. Restoration of the rights of
private property,
especially in corporate equity
and other forms of business organization, including the right of corporate owners
to receive their proportional share of profits, and share in the governance of an enterprise,
and
4. Widespread
capital ownership, individually or in free association with
others.
The question then
arises, if the rich have a virtual monopoly on existing accumulations of
savings, how are the non-rich to become owners of the capital they need so desperately?
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| Harold Moulton |
The answer is to
shift the financing of new capital from past
savings (past reductions in consumption), to future savings (future increases in production). Future savings can be
accessed, when past savings cannot, by making a promise to be redeemed at
some future date, that is, by “extending credit,” credit being just another
name for “money.”
Nor is this some
kind of utopian fantasy. In a response
to the Keynesian New Deal, Dr. Harold G. Moulton,
president of the Brookings Institution in Washington, DC, from 1928 to 1952,
described in The Formation of Capital
(Harold G. Moulton, The Formation of
Capital. Washington, DC: The Brookings
Institution, 1935, 75-84) how future savings can be accessed through the expansion of
commercial bank credit.
Moulton’s work provided the basis for Kelso and Adler’s second collaboration, The New Capitalists (1961), showing how universal access to
capital ownership could be financed with future savings, freeing economic growth from
the “slavery” of past savings.
The process is
actually quite simple and straightforward.
When the capital purchased on credit is put to work producing marketable goods and services, and a
profit is
realized from the sale of what is produced, part of the profits can be used to redeem the promise — repay the
credit — by means of which the capital was purchased. In this way the capital pays for itself out of its own future
earnings. Using this method of finance, people without capital can become owners of capital without taking anything from anybody else.
The issue of
collateral can also be handled in a way that makes it possible for every
otherwise qualified borrower to obtain capital credit. Instead of using
traditional accumulated wealth (by definition a monopoly of those who are
already rich) to secure a loan, Kelso and Adler proposed using capital credit insurance
and reinsurance, with the “risk premium” already charged on all loans used as
the premium on an insurance contract.
In this way it is
possible for “as many as possible of the people to become owners” (Freedom Under God, 29.) without
violating the rights of existing owners, as the capitalists fear or
redefining human nature to exclude private ownership as a natural right, as the socialists demand.
With widespread private property in capital to guarantee everyone’s “freedom under God,” everyone can achieve the
highest freedom “by acting within the law of [our] being and choosing between good
things in order to attain the fullest enrichment and flowering of [our]
personality.” (Freedom Under God, 29.)
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