A lot has been going on this week, not the least of which is the annual conference of the ESOP Association in Washington, DC (which we may report on next week, as it is still in progress). The bottom line? Let’s cut to the chase and get to the news items:
• Perth Herald Tribune. If you want to get some non-U.S.-centric news that isn’t filtered through the news agencies (not that there’s anything wrong with them, but they have different ideas about what you might want to hear about), check out the online “Perth Herald Tribune.” An overview of the site reveals that the small monthly subscription fee might be well worth it — and the Mission Statement is derived in part from CESJ’s Core Values!
• Great Game of Business. CESJ’s Director of Communications will be attending a “Great Game of Business” conference in June. Of particular interest to the Just Third Way is the focus on “Open Book Management,” based on the unique idea that if people in an organization know what is going on, they will be more likely to do the right thing. Secrecy may be good or necessary in some situations, but if you want people to do the right thing, it’s probably a good idea to one, let them know what the right thing is, and, two, tell them if they’re doing something wrong. One surprising thing about the Open Book Management approach for any organization is that once in a while “higher ups” find out that they were doing something wrong! Jack Stack, the inventor of the Great Game of Business approach was motivated in part when he discovered that a company policy intended to get people working together was actually forcing them into conflict — a fistfight between managers alerted Stack to the situation.
• Justice University. Plans are afoot to create a ten-session series of classes to teach the basics of the Just Third Way. As currently envisioned, the course will consist of nine classes of material, and the tenth will be an online test. Sessions will be recorded, with the idea being students can go back as often as necessary for review, the goal being for everyone to get 100% on the test, which can be taken as many times as necessary. (There are ways to alter the test every time a student takes it to avoid someone memorizing the correct answers instead of learning the material!)
• Congress Considers Retirement Reform . . . Sort Of. Congress appears to be getting ready to fiddle with retirement law for the first time since 2006. While there are a number of interesting features in the proposals, legislators are still avoiding the elephant in the icebox: everything is still focused on (obsessed with, actually), how to cut consumption and save more effectively. Frankly, consistent with Say’s Law of Markets, the more people cut consumption to save, the less likely they are to have anything to save! Given that production equals income only if the production is consumed, if consumption falls, production falls, and income falls, making it impossible to save! For example, if everyone in an economy cuts consumption by 10%, income falls across the board by 10%, completely nullifying the attempt to save. If, however, people switch to future savings (buying income-generating capital on credit and paying for it out of the income, then spending the income), the saving process does not reduce consumption, but increases production, which increases income. It’s at least something to think about.
• Smith’s Travels. The educational and philanthropic worlds are agog over the munificence (if not magnificence) of Robert F. Smith’s gift to his fellow graduates: picking up the tab for approximately $40 million in student debt. It is an astonishing act of charity, and Smith is deservedly praised for it . . . but there is something of a fly in the ointment. Backstory: in the Preston Sturges film Sullivan’s Travels (1941), a film director playing at poverty to get color for his next film cadges a free meal from the owner of a diner, and then gives the owner $100 (or some astonishing amount of money for a two-bit meal). As the film director and his friends are walking out of the diner, one of them remarks that there’s one diner operator who will now go broke handing out free meals in the hope of getting another hundred dollars. The C-note didn’t fix the underlying problem (people who couldn’t afford a meal), it just made it easier for some to get free meals. Similarly, Smith’s outstanding generosity didn’t fix the underlying problem — the high cost of education — it only made it easier for a limited number of his fellow students to get along within an increasingly unjust system. A real solution would fix three things: 1) make it possible for teachers to teach without having to worry about money, 2) allow students to learn without having to worry about money, and 3) shift Academia from training for jobs that don’t exist to actual education. This could be done with a Capital Homesteading program — which is what Smith might want to consider to make justice fulfill his charity.
|Japan's economy is under attack from internal weaknesses|
• Japan’s Phony Growth. Reports coming out of Japan are that the country exceeded growth projections for the first quarter of 2019 (The Wall Street Journal, 05/20/19, A-9). At the same time, however, capital expenditures continued to decline. This suggests that the “growth” Japan is experiencing consists of spending accumulated savings, the result of past economic growth that was saved instead of consumed. If that is, in fact, the case then the growth is not true growth, but a timing difference that consists of recording past growth in the present period. Another possibility is that consumption is being financed by increased debt instead of depleting past savings. This is worse than simply playing games with recordkeeping, for an increase in consumption or government debt creates a claim on future production without at the same time creating the means to retire the claim, i.e., increase future production. Only debt used to finance new capital formation creates its own repayment, and only by financing in ways that creates new owners of the new capital generates the consumption power to make the investment feasible.
• Australia’s Prime Minister Re-elected. In a move that surprised everyone, Australia’s “conservative” Prime Minister, Scott Morrison, was re-elected due to widespread fears that it would mean a slowdown or even recession if he were not retained in office. What this means specifically is uncertain, although it is being taken as a sign of growing “Trump-ish Populism.” The simple fact, however, remains that fewer and fewer people are benefiting from economic growth except as wage workers in jobs that disappear as soon as the growth spurt is over or wages rise high enough to justify replacing workers with new technology or shipping the jobs outside the country.
|Ukraine doesn't need Chinese financing.|
• China Financially Invades Ukraine. Duplicating the tactic that has worked so well in Africa and other places, the Chinese have begun investing in Ukraine, which by conventional Keynesian standards is starved for capital financing. This gives China a secure foothold in the country, already plagued with a war to repel the Russian invasion. It is a classic case of what Henry C. Adams (1851-1921) pointed out over a century ago as one of the most serious dangers to national sovereignty: foreign indebtedness. The irony, of course, is that Ukraine has the financial and industrial infrastructure in place right now to make foreign investment completely unnecessary. By financing capital investment by opening the discount window of the central bank to asset-backed agricultural, commercial, and industrial paper accepted by commercial banks (bills of exchange), Ukraine can self-finance all capital investment. By having a program of expanded capital ownership to make every child, woman, and man in Ukraine a direct owner of the new capital, it can also generate the essential consumer demand, and all without an infusion of foreign investment or expansion of government debt. President Zalensky should be giving this serious consideration. Ukraine’s current low-wage and low-price economy can give it tremendous leverage in the global market, but only if they implement sound monetary, tax, and ownership reforms.
|Medieval bankers had a better understanding of money.|
• Negative Interest Rate Fiasco. Europe and Japan seem to have gotten themselves into a mess over the use of “negative interest rates.” To explain, allegedly to encourage commercial banks to lend their reserves instead of depositing the cash with the central bank, the central bank charges a fee to the depositor instead of paying interest. All this does, however, is encourage hoarding by conservative financial institutions, and risky lending by less conservative institutions. The practice is rooted in the Keynesian dogma that commercial banks lend out of reserves, which is not usually the case. Instead, commercial banks create the money they lend by accepting bills of exchange and mortgage securities, and issuing promissory notes to pay for them, the promissory notes being used to back new demand deposits. If central banks (or the governments that control them) want to encourage lending, they need to call a halt to the practice of backing the money supply with government debt and creating money for consumption and speculation. Creating money by lending instead of to lend would ensure a sound method of finance, while financing growth in ways that creates more owners of the new capital being formed would ensure that the consumer demand essential to make the new capital feasible and sustainable would be in place.
|"I WANT SMILE NOW!"|
• Shop online and support CESJ’s work! Did you know that by making your purchases through the Amazon Smile program, Amazon will make a contribution to CESJ? Here’s how: First, go to https://smile.amazon.com/. Next, sign in to your Amazon account. (If you don’t have an account with Amazon, you can create one by clicking on the tiny little link below the “Sign in using our secure server” button.) Once you have signed into your account, you need to select CESJ as your charity — and you have to be careful to do it exactly this way: in the space provided for “Or select your own charitable organization” type “Center for Economic and Social Justice Arlington.” If you type anything else, you will either get no results or more than you want to sift through. Once you’ve typed (or copied and pasted) “Center for Economic and Social Justice Arlington” into the space provided, hit “Select” — and you will be taken to the Amazon shopping site, all ready to go.
• Blog Readership. We have had visitors from 35 different countries and 46 states and provinces in the United States and Canada to this blog over the past week. Most visitors are from the United States, Canada, the United Kingdom, Brazil, and India. The most popular postings this past week in descending order were “Chesterton and Shaw: How to Argue With a Socialist,” “Austrians and Distributists,” “Chesterton and Shaw: the Lost Debate,” “Chesterton and Shaw: ‘A Reply to Mr. Mallock’,” and “News from the Network: Vol. 12, No. 20.”
Those are the happenings for this week, at least those that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we’ll see that it gets into the next “issue.” If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated, so we’ll see it before it goes up.