The election of Pope Leo XIV has aroused renewed interest in “Catholic” social teaching . . . which is not “Catholic,” but “catholic” with a small c, as it is based on the natural law common to every human being. Unfortunately, there is a flaw in how these teachings have been presented. This is not a flaw in the teachings, mind you, but in how they are applied, which is a mistake anybody, even a pope or president, can make.
 |
| Pope Leo XIV |
Specifically, Pope Leo XIII (who appears to have inspired Leo XIV) and, later, Pius XI, in common with many experts then and now, assumed as a matter of course there is only one way to finance expanded capital ownership, a pillar of an economically just market economy. Consistent with the flawed Currency Principle that maintains the amount of money determines the level of economic activity, many people believe production can only be financed by refraining from consuming total production and accumulating the excess as money savings. As Leo XIII said,
If a workman's wages be sufficient to enable him comfortably to support himself, his wife, and his children, he will find it easy, if he be a sensible man, to practice thrift, and he will not fail, by cutting down expenses, to put by some little savings and thus secure a modest source of income. Nature itself would urge him to this. We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. (Rerum Novarum, § 46.)
Pius XI reiterated this belief:
As We have already indicated, following in the footsteps of Our Predecessor, it will be impossible to put these principles into practice unless the non-owning workers through industry and thrift advance to the state of possessing some little property. But except from pay for work, from what source can a man who has nothing else but work from which to obtain food and the necessaries of life set anything aside for himself through practicing frugality? (Quadragesimo Anno, § 63.)
.jpg) |
| Pope Leo XIII |
Unfortunately, under this “slavery of past savings” assumption, as labor-displacing technology advances and becomes increasingly expensive, as a rule only the rich can afford to purchase the new machinery and become productive. Many people therefore conclude only those who can afford to reduce consumption without suffering ill effects — the already wealthy — can or should own capital. This is one of the fundamental assumptions of Keynesian economics . . . and one of its most profound errors.
Increasing workers’ incomes by raising wages without a corresponding increase in the productiveness of labor does not solve the problem, for it only increases costs. Increasing costs raises the price level and usually negates the wage increase which caused the rise in the price level in the first place.
Creating artificial jobs for people when machines are producing far more than human labor ever could accelerates this process. Job creation diverts resources from production to unnecessary wages. It transforms human beings from suppliers of labor, an input to production, to non-contributing drones and a drag on the market, economically speaking.
 |
| John Maynard Keynes |
Mandating technology be limited to micro or human scale does not solve the problem either. Without advanced — and increasingly expensive — technology to provide essential goods and services for mass consumption, most people on Earth would die within a very short time.
Fortunately, John Maynard Keynes’s assumption contains inherent contradictions. The most obvious is, if production can only be financed by accumulating unconsumed production, what was the source of the unconsumed production to finance the first production? Ignoring this contradiction for the sake of the argument, another immediately presents itself. How are savings in the form of unconsumed production to be transformed into savings in the form of money if the production is not consumed, i.e., sold in the market?
Keynes disregarded these contradictions and avoided others through his redefinition of Say’s Law of Markets, fallacies of equivocation regarding inflation, limited understanding of money, and dismissal of the natural rights of liberty, private property, and due process. He was therefore able in The Economic Consequences of the Peace (1919) to declare contrary to all evidence and logic, “The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before [World War I], could never have come about in a Society where wealth was divided equitably.”
 |
| Hilaire Belloc |
This, not surprisingly, is yet another Keynesian contradiction. Common sense as well as experience insist wealth must have been unaccumulated before it could have been accumulated. The mere fact of accumulation argues a prior period of non-accumulation, i.e., a time when wealth was divided equitably. Begging the question, however, Keynes implied wealth must be concentrated before it can be concentrated.
Thus, by telling both capitalists and socialists what they wanted to hear — and what they had already assumed to be the case in any event — Keynes justified what Hilaire Belloc called “the Servile State.” Belloc defined this as “the establishment of compulsory labor legally enforceable upon those who do not own the means of production for the advantage of those who do.”
Due to advancing labor-displacing technology, however, today’s global economy is not faced with the problem of forcing people to work who do not want to work. Rather, the problem is creating enough jobs for those who do want to work and providing income for those who do not have jobs. Without mass income there can be no mass consumption. Without mass consumption, neither the private sector elite nor the politicians under their control can maintain their wealth-based power over others for very long.
This necessarily modifies and updates the definition of the Servile State. The modern Servile State, therefore, consists of imposing a condition of dependency upon those who do not own the means of production for the advantage of those who do through wage system jobs provided by a private ownership elite, welfare benefits provided by the State, or a combination thereof.
#30#
