Whither Venezuela?

 After spending most of the first part of this week bemoaning the effect of AI on readin’ and ritin’ after viewing several videos on the subject — we ain’t got no information on no ’rithmetic — we decided to surrender to the machine (while reserving the right to criticize such dependency at such time as we are no longer pressed for time and can take the time to write something ourselves) and steal a summary one of the AI programs generated for a proposal the Center for Economic and Social Justice (CESJ) put forward a number of years ago and dusted off in light of what we can euphemistically call “recent events.”

A Way to Finance “Green” Infrastructure

As we saw in the previous posting on this subject, one way to “lure” people back to work when they are (at least temporarily) better off not working, is to make them an offer they can’t refuse, or at least would be extremely foolish to turn down.  The offer we suggested, of course, is that it would be beneficial to offer workers a piece of the action, that is, part ownership of the companies that employ them.

Citizens Land Cooperative

As we noted in the previous posting on this subject, distributism as presented by G.K. Chesterton and Hilaire Belloc had the right idea: a wide distribution of private property in capital, by which they did NOT mean a redistribution of what belongs to someone else.  (See the final comment in What’s Wrong With the World (1910).

A Just Third Way to Finance Green Infrastructure

As we saw in the previous posting on this subject, there is a problem with having government pay for infrastructure . . . especially when we expect government to pay for everything else!  Of course, what is really at issue is that “the government” doesn’t actually pay for anything.  Either it collects taxes or borrows money . . . which it is supposed to repay by collecting taxes.

Project Economic Justice: The Role of the Corporation

Today we conclude our posting of the “strategy paper” that led to the Presidential Task Force on Project Economic Justice, “Project Economic Justice: A Beachhead for Regional Infrastructural Reform,” which will be followed on Monday by the first part of President Reagan’s speech to the Task Force:

Chocopalypse Now, II: Making the World Safe for Chocolate

In our previous posting on this key world issue, we noted we would post a solution to the coming Chocolate Apocalypse.  First, of course, we reminded our readers that a true world shortage of cocoa is not really likely — possible, of course, but not likely . . . if we get to work now to make the world safe for chocolate.  This was essential, because a number of the comments we received on FaceBook indicated that some people intended to kill themselves if chocolate disappeared.

Chocopalypse Now, I: The Cocoa Crisis

Late last year it was announced that the venerable Wilbur Chocolate Company in Lititz, Lancaster County, Pennsylvania, would close its factory there at the end of December, although keeping the shop and museum open (and moving the manufacturing elsewhere).  The closing gutted the economic life of the downtown area.  Taking more than a hundred jobs away also took away a lot of other business.

Water on the Brain

Back in 1897 English novelist Louis Tracy (1863-1928) published An American Emperor: The Story of the Fourth Empire of France.  Very briefly, a very rich American (in the popular English fiction of the day, there were two types of Americans: the bold rich entrepreneur, and the bold poor frontiersman, both of which were present in An American Emperor) has the idea, for various complicated and romantic reasons, of spending his millions to benefit humanity, specifically the Republic of France.

How to Distort Anything

Everybody is jumping up and down about the stream of videos on which Jonathan Gruber, the “Obamacare Architect,” is caught saying that Americans are stupid, and other words to that effect.  What they seem to be missing is that this attitude is nothing unique.  Do an internet search using the words “Americans are stupid,” and you’ll be amazed at how many matches pop up.

Capitalist Socialism, II: The Citizens Land Bank

In yesterday’s posting we saw that the United States could easily go the way of ancient Rome.  No, really.  If we really understand that Rome didn’t really “fall,” but slowly decayed and transformed into the Medieval world as conventional government spent itself into oblivion trying to meet every need, and then the modern world (where governments are spending themselves into bankruptcy trying to meet every need), it becomes comprehensible.

Capitalist Socialism, I: “Private Capital for Public Works”

One of the most serious signs of decay of the more or less cohesive classical Roman Empire and its transformation into the more inchoate “Christendom” of the Middle Ages composed of increasingly nationalistic groups was the takeover of State functions by private individuals.  Mostly this was the defense of the Empire, and the responsibility for raising and equipping troops (hence the rise of feudalism), but it included maintenance of infrastructure as well.  This turned the rich into the real rulers, an aristocracy, as distinct from the nominal rulers, the emperor (when there was one), and the local senate.

Dos and Don’ts of Urban Renewal

Evansville, Indiana, has reached a deal to construct a $74 million convention center that is expected to revive the downtown area and bring in new business and infusions of cash.  This is pretty much the standard pitch when something of this scale is planned, whether a convention center or a sports arena.

How Everyone Can Own Land Directly

Let’s take a brief break from the series on Poland.  Not that Poland is unimportant, but we noted in yesterday’s posting that there is a way in which all Poles can own — and own directly — the land and natural resources of Poland.

Mountain of Trash

An article in today's Washington Post is "déjà vu all over again." Rama Lakshmi's report from New Delhi ("In India, a Mountain of Trash Means a Living," Washington Post, 11/21/11, A7) on the plight of the people at the bottom of the social and economic scale who make their livings mining recyclable material from the garbage heaps highlights the fact that, however beneficial non-polluting alternate energy systems may be for the environment and the economy, it doesn't do much for the people who stand to lose what little they have as they are displaced by advancing technology.

Technological displacement is one of the most serious problems associated with technological advancement and economic growth in which everyone does not have an equal opportunity to participate. While alternate sources of energy are clearly desirable on the "macro scale," these and similar changes can and frequently do have a devastating effect on those who rely on the old system to make a living.

The solution is not to stop progress, however, but to figure out a way in which those displaced by advances in technology can benefit from those advances. In the case of the people who mine the trash heaps for recyclable materials, the answer is obvious, and was given by the late Louis Kelso in an editorial in a 1964 issue of Life magazine: "If the Machine Wants Our Job, Let's Buy It." How this principle can be applied in the situation you described is relatively straightforward:

First, rather than have the new energy plant owned by the government or a few rich domestic or foreign investors, it should be owned — and owned directly — by everyone in the area served by the power plant. This can be done by setting up a "Citizens Land Bank," or CLB. The CLB is a proposed ownership and financing vehicle that consists of a private joint stock corporation that is owned by everyone in the area by granting each citizen and permanent resident a single, no-cost, non-transferable, voting and fully participating share in the CLB. A CLB would take immediate title to all land and infrastructure currently owned by government, and gradually acquire other land and infrastructure as it comes on the market.

Second, change the basic method of finance for such financially feasible new industries. Instead of relying on rich domestic or foreign investors, bond issues, or inflationary government spending, finance the operation by drawing bills of exchange and either discounting them with other businesses and individuals, or at commercial/mercantile banks, that can rediscount the bills at the central bank. Collateral can be in the form of commercial capital credit insurance and reinsurance instead of the usual existing accumulations of wealth.

Third, give the displaced trash miners priority in getting jobs at the new energy plant.

Fourth, for those miners that the new plant cannot absorb — and 300,000 workers is far too many for one plant to hire — make capital credit available to start new enterprises that can absorb the "excess" workers as worker-owners. This is similar to a proposal by William Thomas Thornton, a clerk in the East India Company, in 1848 in A Plea for Peasant Proprietors. Thornton proposed that the Irish affected by the Great Famine of 1846-1852 be given the opportunity to become owners of land and other capital as a permanent solution to the problems that caused the Famine.

This is a very broad and sketchy outline of a proposal that we call "Capital Homesteading for Every Citizen" (from the book with the same title), that we believe has the potential to turn the global economy around in 18-24 months, but can effectively end world poverty except on an individual basis.

It's at least better than mining trash for a living.

#30#

Columbus Day, 2011

This is the day when everybody gets together unofficially (officially this past Monday), to celebrate the (fourth) European discovery of America by Christopher Columbus in 1492. Maybe fifth or third, it's hard to say. It could be the sixth, seventh, or eighth. It depends on which source you take as authoritative. Some recent research suggests that the first settlers came from the east, not west, and became "the First Americans" until displaced by the next wave from Asia. Do we believe that the Welsh settled North America, giving some of the Indians blue eyes? Saint Brendan the Navigator sailing in a skin boat? (I can't spell the Irish for "skin boat") Leif Ericsson? English fishermen keeping quiet about the Grand Banks to keep poachers away? Does it matter?

Not for our purposes. Let others get into endless arguments about the good or bad of it. We're dealing with what is. And what we're concerned with is how it could have been done better. Because land is a limited resource, people got it fixed into their heads that all capital is also limited, and the only way to get any form of capital is either 1) take it away from somebody else, or 2) cut consumption and accumulate enough "money" to purchase capital from somebody else. In either case, somebody has to do without something, either permanently or long enough that you don't give a damn about it when you finally get it.

As any reader of this blog should be able to tell by now, there is a much better way to finance new capital formation, one that doesn't force anybody to do without: monetize the present value of future production instead of unconsumed past production.

When the European settlers started moving in, things could have been a lot different had they known about the ESOP, the HEC and, especially, the Citizens Land Bank. Everyone, white, red, and black (we abolished slavery in our scenario by never letting it get started — it's written into the bylaws of the CLB) got a single, no-cost, non-transferable, fully participating voting share in the CLB. All groups got together to decide the optimal use of the land to everyone's benefit.

There was a downside, of course. Those damned buffalo are a public nuisance, running free from Canada to Mexico like that, even though they supply meat and hides for the entire population and are a major export. And the passenger pigeon dung piles up in the streets like you wouldn't believe. Those poor European rock doves never could compete, and died out soon after they were introduced.

You get the idea. The good part about this kind of "what might have been," however, is that it still could be. With a CLB, ownership of America's land and natural resources can be vested in each and every citizen as private property as a right of citizenship. There's no reason to curse or blame anybody. Let's get organized and fix things right.

Well . . . maybe except for the passenger pigeon dung.

#30#

A Plea for Peasant Proprietors, Part IV: The Citizens Land Bank

While things are not yet as bad in the world today as they were in Ireland in the 1840s, most people are as dependent on wage system jobs as the Irish were on the potato. Not surprisingly, however, Thornton's observations and remedies can readily be applied to the current situation. If we understand that both land and technology are capital, and that we don't have to confiscate, condemn, or redistribute existing capital for people to become owners of capital, then it is possible for everyone on earth to become an owner of a capital stake that has the capacity to generate an income sufficient to meet common domestic needs adequately. The new capital would not come from existing productive assets, whether land or technology, but from capital that has not yet been formed, that is, financed.

Due to the disproved belief that it is impossible to finance new capital formation without first cutting consumption and accumulating money savings (and being careful to realize that "increases in production" and "decreases in consumption" are two different things), new capital has remained a virtual monopoly of the already wealthy. By returning to the Banking Principle and rejecting the Currency Principle, however, it is possible to finance the acquisition of as-yet unformed capital out of "future savings" instead of past savings, thereby making it possible for everyone to become an owner of capital.

There is also the problem of giving the State a broader role than it really should have. Thornton's amended proposal from 1874 does make sense when we take the nature of land and natural resources into account. There's only so much there. How do you ensure equality of opportunity to all and, at the same time, respect the natural right of private property . . . without redefining the substantial nature of private property, thereby abolishing it? As Thornton commented,

"To insist upon the immense benefit to the entire peasantry of these transformations, immediate and prospective, would be but to repeat once again what has already been repeatedly urged throughout this volume. What rather I feel to be incumbent upon me is to admit that completest realization of the benefit anticipated would still fall far short of what I conceive would result from a really perfect land system. According to my ideal on that subject, there should be no property in land save that of the whole nation in its corporate capacity; and those Asiatic countries in which the State, as trustee for the nation, is sole landed proprietor, would, in my opinion, be infinitely to be congratulated, were there but adequate security that the rights involved in the trust would be duly appreciated and judiciously exercised by those who have to administer it."

First things first: keep the government out whenever possible. The government is a very powerful and very specialized tool essential to a well-run social order. That does not mean, however, that the government can do anything and everything better than the private sector. As Thornton himself admitted, unconsciously undermining his amended proposal, "Really, it does look as if private energy were unable to survive the torpedo-like touch of governmental support. Certainly, from Indian railways downwards, every private enterprise languishes which government guarantees." (William T. Thornton, A Plea for Peasant Proprietors. London: Macmillan and Company, 1874, 255.)

In other words, if you want to guarantee failure, get the government involved in what should be private enterprise. The problem is, can the private sector do what it appears that only the State can do?

That raises the question of the State's proper role, which is to ensure that everyone has equal opportunity (not results), and that abuses are corrected and the malefactors punished. The solution is that, instead of vesting corporate ownership of the land, natural resources and infrastructure in the State, why not vest corporate ownership of such capital in . . . a private, for-profit corporation? If owned by every citizen as a right of citizenship by granting each citizen a single no-cost, non-transferable, voting, fully participating share in the corporation, we could achieve Thornton's "corporate ownership" of land without vesting it in the State. Everyone would thereby become an owner of the land.

Tenants who are also shareholders of the land-owning corporation would take leases. As tenants, of course, their rights would be defined by the lease — into which, as owners, they would have some say-so. Having clearly defined rights of property as actual owners and a just leasehold is much more secure than having the State protect the sometimes vague "beneficial ownership" conferred by statute, and infinitely better than the tenancy-at-will that afflicted Irish agriculture throughout the 19th century.

We've embedded these principles in CESJ's proposed "Citizens Land Bank" (CLB) that is a private sector alternative to State ownership of land and infrastructure. A CLB would be a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.

• A social vehicle for every man, woman and child to gain, as a fundamental right of citizenship, a single lifetime, non-transferable ownership interest in all the Bank's assets, share equally in property incomes from rentals and user fees from leases or use of the Bank's assets, accumulate appreciated equity values from enhanced land values, and gain an owner's voice in the governance of future land development.

• An innovative legal and financing tool empowered to borrow on behalf of all citizen-shareholders and service the debt with pre-tax dollars to meet the land acquisition, capitalization and operational needs of the Bank. The CLB shelters from taxation the equity accumulations of citizen-shareholders and protects the outside assets of the citizens in the event of loan default or if the enterprise fails.

• A social tool designed to encourage a just, free and non-monopolistic market economy. It applies the democratic principles of equal opportunity and equal access to the means to participate as an owner as well as a worker. It demonstrates that anything that can be owned by government can and should be owned, individually and jointly, by the citizens.

• A major feature in a proposed national economic agenda known as "Capital Homesteading for Every Citizen," which is designed to reform existing monetary, credit and tax barriers to provide every American an equal opportunity to share in the governing powers and profits from new entrepreneurial ventures, new technologies, new structures, and new rentable space built upon the land. Capital Homesteading offers a "Just Third Way" of reversing unsustainable federal deficits and debt, and revitalizing and growing the American free enterprise system in a sustainable and environmentally sound way.

What a CLB is Not:

It is not socialism or communism (which are systems based on the abolition of private property in the means of production). It does not take away property rights from present owners, nor does it redistribute current accumulations of wealth or income.

It is not the Wall Street model of capitalism (where ownership of the means of production and ownership power are concentrated in the top 1% of society and artificial barriers exclude non-owners from equal ownership opportunities).

It is not a non-profit Community Investment Corporation, Land Trust, Land Bank, Land Foundation, or any other legal vehicle in which ownership of land, natural resources and basic community infrastructure are owned collectively (i.e., where no one has a property stake) or by any state monopoly.

It is not a land monopoly owned or controlled by a small elite of local or outside investors or political leaders.

It does not provide shares that can be sold, transferred, pledged to others or used as collateral to meet a citizen's consumption needs.

It is not an amateur or unstructured approach to land development or "management by committee."

It is not a vehicle for owning or financing local enterprises competing in the marketplace.

Benefits of a CLB

It would provide a private sector means by which homes, enterprises, rentable space and technologies built upon the CLB-owned land can be broadly owned by workers and other local stakeholders.

It would generate a new source of taxable incomes from new and expanded private sector jobs and ownership stakes.

It would empower each citizen and family with the means to build an adequate and secure income, and with a real voice in the development decisions of the community.

It would provide every citizen with income to contribute to the costs of running an effective local government and providing essential public services, as well as for his or her own well-being.

It would offer hope of eventually eliminating the dependency of any citizen on welfare or charity of others or fear of technological displacement.

How Could We Get the CLB?

Suggest to President Obama that he abandon his half-trillion dollar "job creation" boondoggle to rebuild infrastructure and persuade Congressional leaders to support CLBs as part of a program to accelerate rates of non-inflationary, private-sector economic growth, green jobs and energy independence.

Get your legislator(s) behind a Federal law or executive order that provides comparable tax and capital leveraging features as is presently provided under Federal laws governing employee stock ownership plans (ESOPs) for the benefit of private sector workers and the corporations and worker cooperatives in which they work.

Obtain state and federal exemptions from property taxation on assets held by a citizens land bank.

Finance the rebuilding and development with Federal Reserve monetization of loans made by local commercial banks to enable citizen land banks to acquire development land from current owners and investors.

There. Could anything except Capital Homesteading itself be easier?


#30#

The National Infrastructure Bank Proposal

Give credit where credit is due. According to an Associated Press report published on Yahoo! news, President Obama wants to make a "national infrastructure bank" part of a job creation program. ("Infrastructure Bank Could Be Part of Jobs Program," AP, 09/01/11) As the article opens, "A national infrastructure bank that would entice private investors into road and rail projects could be a major part of the jobs package that President Barack Obama hopes will finally bring relief to the unemployed."

Finally — an idea coming from Washington that we can support, at least in part. Give it a few tweaks, and we'll go for it, 100%. Perhaps the best part (aside from the fact that Obama wasn't waving that finger around — he really ought to practice in front of a mirror a couple of times to see what that looks like) is the recognition that the private sector could finance "road and rail projects," and presumably bridges and other stuff.

So far, so good. What we understand from reading the article and an earlier press release from Ohio Senator Sherrod Brown's office, however, is that the private sector investors will be putting up money for the projects, but the government will own them. This violates a fundamental law of property, that whoever pays for something owns it.

It sounds, however, as if the arrangement might go something like this: private investors put up the money to fund the infrastructure bank's projects. The bank provides financing to pay for new roads 'n stuff. From somewhere (it's not clear where) the bank gets the money to pay interest to the investors, and eventually pays them off, again, from an undisclosed source.

We can understand why Obama and Kerry (who seems to have come up with the plan) are a little leery of talking about the source of funding to pay a return to the investors and ultimately to retire the investment. We assume, of course, that this won't be a return to the rather scurrilous Medieval practice of "beneficia," or "forced loans" that, more often than not, were never either repaid or yielded any return to the "lender." That means that eventually the taxpayer is going to have to come up with the money to pay the interest and principal on the loans.

Translation: Spending is going up. Taxes are going up. The result? Obama's rating in the polls will go down.

We can't support Obama for this and a vast number of other reasons. We don't wish him ill, however. He's got one heck of a hard job to do — and he might finally be appreciating that fact. That's why he might be coming around to the realization that he just might need something new to replace the warmed-over Keynesianism that's ruining the United States and virtually every other country in the world. All it needs is for someone to open the door so that we can give him a few suggestions. Suggestions like —

Bravo! Make it a private sector initiative. That's great! But why limit it only to people who have piles of money? What's wrong with the rest of us getting a piece of the action?

Well, for one thing, if the government is going to own the infrastructure, there's no way ordinary people can get in on it.

We can solve that problem, however, rather easily. Make every citizen an owner of the infrastructure. After all, the idea is that the government owns it on behalf of the people. If that's so, why don't we just own it directly? Too complicated? Have you ever seen the capital structure of, e.g., AT&T? They have to keep accurate and up-to-date lists of shareholders, including how many shares, what kind of shares, different dividend rates, so on, so forth. It's pretty complicated.

So do it this way: give every citizen a single, no cost, non-transferable, fully participating and voting share in the new infrastructure. With only one class of shares, and one share per person, that's pretty easy to track. You'd have to create a private sector for-profit corporation to own all the infrastructure, but you're already talking about a new government institution to finance it, so why not a new private sector institution to own it?

Now — let's talk about that national infrastructure bank concept. It sounds like a good idea, but maybe we can make it better. Keeping in mind the rule of property that whoever pays for something owns it, let's assume that, if somebody owns something, he or she must have paid for it. Doesn't it make sense, then, that the institution that owns the infrastructure should pay for the infrastructure? If we set up a new private sector institution to own the infrastructure (and ensure that every citizen owns that institution), do we really need a national infrastructure bank? Why reinvent the wheel?

The fact is that you only need a national infrastructure bank if the government is going to own the infrastructure on behalf of the people, not if actual citizens are going to own the infrastructure directly through a for-profit corporation.

But wait! Don't you need the national infrastructure bank to finance the infrastructure?

Actually? . . . No. That's the same as saying, don't you need the taxpayer to fund government spending? Well, yes — but remember: this wouldn't be government spending. The taxpayer wouldn't be picking up the tab.

Who would finance the infrastructure? If the for-profit institution — call it a "National Citizens Land Bank" (infrastructure is fixtures on the land, so the for-profit institution might as well take title to all government-owned land, as well) — is going to own the infrastructure, then, obviously, it should finance it.

How?

The commercial banking system and the Federal Reserve were, believe it or not, invented to do just that — finance capital projects that will pay for themselves by creating money backed by the present value of the capital project. (If you want the theory behind this, go back and read the previous 800+ postings on this blog.) The Federal Reserve was never supposed to finance government spending. No wonder Ron Paul wants to shut it down. We say, don't shut it down. It's an essential tool. Just stop using it the wrong way. If you were using your hammer to hit yourself on the head, would you say that not hitting yourself on the head meant that you couldn't use the hammer to hit a nail on its head?

This method of finance (described in Harold Moulton's The Formation of Capital) could work very easily, and all without costing the taxpayer — as taxpayer — one cent. The National Citizens Land Bank can finance all the feasible infrastructure projects it wants, and very quickly, too, by going to local commercial banks and getting "interest free" (but not "cost free") loans. The commercial bank doesn't have to worry about using its own money for this — this is new money, backed by the present value of the infrastructure. The commercial banks then take the loans and "sell" (rediscount) them at their local Federal Reserve branch.

The Federal Reserve creates a demand deposit (or prints currency, it doesn't matter) for the commercial bank that is equal to the rediscounted value of the loan. The commercial bank then creates a demand deposit or hands over the currency to the National Citizens Land Bank, which uses the money to build the infrastructure.

Once the infrastructure is finished and put to use, the National Citizens Land Bank starts collecting tolls and user fees from the people or companies that use the infrastructure. (Remember: we said that the taxpayer as taxpayer wouldn't pay for this, but somebody could be a user of the infrastructure and thus incur a user fee or toll.) This revenue is used to repay the loan extended to finance the building of the infrastructure, maintenance and administrative costs, and, if there's any profit, is paid out as a dividend to every citizen-owner. Oh, yes — give the National Citizens Land Bank the same sort of tax status as a 100% S-Corp ESOP, i.e., no corporate income tax, but anything paid out to the citizen-owners is taxed as regular income.

As the loan is repaid, of course, the money is cancelled, and full title turned over to the National Citizens Land Bank. In this way infrastructure can be financed without taxpayers being on the hook. Further, since new money is not created unless a project has a present value, the new money is backed by an asset that pays for itself, rather than by government debt for which the taxpayer is obliged to fork over.

There are many refinements that could be added to this, giving the politicians something constructive to do, i.e., figure out ways for citizens to become owners and make some money, rather than how to spend taxpayers' money. Why, for example, have just one Citizens Land Bank? Why not one for each state, or maybe even county? What about only subcontracting with construction companies that have significant — and meaningful — worker ownership? Different management contracts for infrastructure owned by local, county, state, and national Citizens Land Banks?

All this can be figured out later. The important thing is not to get locked into doing something just because you've always done it that way. Maybe things are in such bad shape because we've been doing it wrong. Maybe it's time to start doing it right.

#30#

The Global Natural Resources Bank

We came across this discussion on how to handle private ownership of things, such as land and natural resources, that are in limited supply. Is it possible even to have private ownership of such things? Henry George thought it was not a good idea. Others have maintained that land and natural resources are the only things we can own. Here is how CESJ president Norman G. Kurland responded to this issue from "John."


*****************



John, I'll intersperse my responses below. I love your questions.

Norm

John:

As I get through your book and the other material you sent, some of my curiosity questions may get answered. If that's true, forgive me for taking this direct approach. > >You believe that one value of capital homesteading is that it democratizes capital while leaving undisturbed the present ownership of capital.

Norm:

Not quite "undisturbed." Nature puts a limitation on the rights of private property — the finite life of an owner. Rather than redistributing existing ownership rights, it's easier to change the inheritance and gift tax laws by taxing the estate of the recipient. As proposed, the Capital Homestead Act would enable every citizen to establish from the time of birth a personal Capital Homestead Account that would shelter from asset transfer taxes any gifts or bequests below an accumulation of $1 million and impose a tax on accumulated assets above that exemption level. This hopefully would encourage the wealthy to spread out their gifts and bequests as broadly as possible and thus discourage future monopolies of capital.

John:

A lot of those assets are invested in what I call the common wealth and I particularly wonder how ownership of coal or iron ore or petroleum or diamonds, or buildable land will be affected and what impact the impact it will have on those who do not own it.

Norm:

This is an excellent point where I think Kelso and Henry George can be brought together. As I will point out below, we should separate out (1) treatment of subsurface rights, rights over national parks and nature reserves, scenic coastlines, water, airways and other natural resources, from (2) treatment of surface rights for planning, developing the land and adding infrastructure for building viable, life-enhancing, ecologically sound, energy self-sufficient communities upon the land, from (3) the economic activities that bring people, technology and structures together for the market-based production and market-based distribution of capital goods and consumer goods, including mining rights.

John:

It seems to me there will be an economic balance permitting some more (far more) than their fair share if the concern is CESJ's. Were it not for this thought, I would probably give up my fondness for the citizen's dividend (CD)in favor of total support for Capital Homesteading (CH). I still think it would be better to combine financing the CHA with a portion of the CD. That way, there would be no loans to repay.

Norm:

I think there is a way to avoid loans for land acquisition, build equal land ownership rights among all citizens in a "community" as designated by the State or higher governmental authority, and avoid concentrating direct economic power over land, land planning and land rentals in government, mankind's only legitimate monopoly over the means of coercion. As a plausible expedient in today's USA in dealing with surface rights only, the State could designate all "communities" within its border that would be eligible to form Citizens Land Banks (CLBs) (on a one citizen, one-share basis) for planning, developing, redeveloping and renting surface rights on land within each local or regional community's borders. Assuming the Federal and State governments gave the CLB tax treatment comparable to that enjoyed by ESOPs and supported this bottom-up empowerment model over top-down tax, credit and government land rental redistribution (as in the Citizen Dividend advocated by Georgists) models, then government at every level could transfer free to CLBs government-owned land for distributing property rights free to each local citizen. (The operating Jeffersonian principle is that anything that can be owned by the State can and should be owned by the citizens.)

As for privately-owned surface rights in the community, the law could terminate the private ownership of surface and subsurface rights upon the death of the owner and his or her spouse. Thus, title to surface rights would automatically be transferred under that law to the CLB, while leaving the structures upon the land to continue to be owned by whoever inherits those assets and is willing to pay land rents to the CLB.

Because it would use the land for the benefit of the "public" (in a truer sense of the word than if it were the government), the CLB could be granted by the State its power of condemnation under eminent domain. Then the CLB could buy the structures and improvements at a fairly appraised price and either lease back the structures and improvements to the new owner, sell them to others, or tear them down for redevelopment for purposes more beneficial to the citizens.

There is another option to canceling out land surface ownership rights upon death. The CLB might be required to pay the new owner for title to the surface rights. In that scenario, the CLB would have to borrow under the no-interest productive credit policies under the Capital Homestead Act. The loan would be repaid by future CLB rental incomes from all surface rights in the community, including that from users on the free land granted to the CLB from government.

John:

Completely different question: Has anyone extrapolated the projections you do for U.S. citizens to the global population?

Norm:

No, but I would love to get some academics volunteering their time to do those projections.

While I like to develop models that can be realistically launched as prototypes in order to move toward more universal replication, your question provoked me to think more about global applications of the CLB concept. First, I hope we can find a community with some committed binary economics activists to experiment with the CLB concept; e.g., East St. Louis and Carbondale, IL; Washington, D.C. and the Virginia and Maryland suburbs; Orlando, FL; an Indian reservation; the Ozarks in Missouri; the Mississippi Delta; and maybe, John, in your area in New Hampshire. We'll need people with political clout at the State level first.

When we think globally about how to treat subsurface rights, rights over national parks and nature reserves, scenic coastlines, water, airways and other natural resources, one is tempted to conclude that all natural or God-given resources should be owned equally by every human being in the world, no matter where he or she is located. Looking into the future, I can envision a for-profit Global Natural Resources Bank (operating like a global central bank does with its monopoly and "rental rules" over money and credit policy) that would own all natural resources, set the rules for conserving and recycling non-replenishible resources, arrange for market-based rental fees by auctioning to competing broadly-owned corporations and cooperatives the right to explore and extract minerals and market natural resources, and then paying out rental incomes as dividends to each shareholder of the GNRB. But most observers recognize that global politics is not yet mature enough to implement a GNRB that could overcome the incredible barriers today in trying to reach every human being and enroll them as shareholders, getting a free, non-transferable private property share to each one, and then distributing dividends from GNRB rentals of natural resources. The current nation-state system and the very nature of the UN stands in the way. Hence, I would move in stages toward the more ambitious goal.

I would encourage CLBs wherever the politics permit to set working models for the new approach to citizen dividends. I would also propose, for example, that the US (or Canada) establish a for-profit Federal Natural Resource Bank (analogous to the Federal Reserve System in renting money for productive activity) to serve the functions described for the GNRB but dealing only with all natural resources within the boundaries of the US (or Canada). Every man, woman and child from birth to death would receive free as a right of citizenship a single non-transferable share of stock in the FNRB with full private property rights, including voting and dividend rights but without the right to sell or transfer ownership rights. Thus, rental incomes from the natural resources of America would raise the purchasing power of every family and individual, with no government redistribution required. All citizens would also have the money to pay for government services at all levels, but the power over money would flow upwards from a nation of independent capital owners. The government necessarily become more dependent on the economic strength of citizen owners, rather than forcing more and more citizens into lives of economic dependency.

Under a Capital Homestead Act, citizens would also receive rental incomes from the rental by a local CLB of surface rights in the land of their community. And each citizen would be able to accumulate FNRB and CLB shares in a tax-sheltered Capital Homestead Account at their local bank, where he or she would also receive a periodic allotment of interest-free capital credit to invest in newly issued full-voting, full dividend payout shares of a company in which a member of the family works, a company in which they have a monthly billing account, the local CLB, or qualified companies with a solid history of earnings.

As more democratically oriented nations around the world follow the lead of the US or Canada in enacting Capital Homesteading legislation and establishing FNRBs, they can form a commonwealth of combined natural resources by merging each of their FNRBs into a Commonwealth Natural Resources Bank (CNRB) and distributing free CNRB shares to each of their citizens to replace their FNRB shares. And eventually this process will lead to a Global Natural Resources Bank, building ownership power into every citizen on the globe from the community level up. The process will create a world of capital owners and a truly democratic global economy based on principles of economic justice, the ideal needed to sustain development and peace for truly empowered citizens of the global community.

In the final analysis, John, the issue is in whose hands should power (i.e., sovereignty) be placed. Through Capital Homesteading and binary economics and under the only higher sovereignty, that of the Creator, all power should reside in the individual human being, under a system where it can be delegated upwards. The structured diffusion of economic power through universal access to property rights is the ultimate check against the inevitable corruption and abuses of power that result from concentrated power. As the forces of globalization mount, we need people of goodwill like you and others in your human empowerment network to work with us in transforming structures of greed and envy into structures of justice.

Best regards, Norm

#30#

McChrystal Mania, or, Obama's Deliverance

It's the best thing that could have happened for Obama. The Chinese currency situation is looking worse and more inscrutable by the minute. His effort to save individual homeowners from foreclosure has clearly failed miserably. The "official" unemployment rate is ten percentage points below the unofficial rate — and who knows what the real rate is? Even Wall Street, the worst possible measure of the strength of the productive sector, can't sustain a bull market in a bear economy. The United States government has, to all intents and purposes, reached a point of functional overload.

Life, liberty, and property? What are those? As for the pursuit of happiness, a.k.a., the acquisition and development of virtue . . . uh, huh. Anyone who is seriously concerned about the moral breakdown of society seems inevitably to want to use the State to ram a private version of truth, love, and justice down everyone else's throat. How well that recipe for failure works can be seen in today's earlier posting on the career of the supremely individualistic Alexander the Great.

Consequently, Obama desperately needs something to direct attention away from his own complete lack of vision, effective leadership, and his apparent belief that the State can solve any and all problems by simple fiat. I could imagine that the "secret meeting" this morning at the White House consisted of Mr. Obama giving heartfelt thanks to General McChrystal before letting the man know that his Commander-in-Chief is going to throw him to the wolves and (to mix metaphors) crucify him. "Firing" a military commander — especially one who uses foul language! (How could this country ever tolerate a soldier in the line of battle who uses "the F-word"?) — is the only way to 1) save Obama by distracting the public, and 2) save Obama by offering a scapegoat, and 3) save Obama by giving the appearance of actually doing something.

Well . . . Mr. Obama could always do something that has the potential actually to work . . . .

First, officially reprimand General McChrystal. He should never have spoken critically of the administration . . . any more than he should speak uncritically. At least in public. Mr. Obama should, however, ask himself the one question no one seems to be asking: is what General McChrystal said true? If so, what are you going to do about it? You don't make a bad situation any better by ignoring legitimate and accurate criticisms and surrounding yourself with a crowd of adoring lickspittles who hang on your every word and praise you endlessly.

Second, send him back to work. Told that General Grant was behaving scandalously by swearing and drinking whiskey (!!), Abraham Lincoln informed the complainants, "I can't spare that man. He fights."

Third, give the man what he needs to win: an effective counterinsurgency strategy. We suggest a variation on Capital Homesteading — which wouldn't be a bad idea for the United States, either. Widespread direct ownership of the means of production is the best and most effective way to secure each person's natural rights. With the recent discovery of vast mineral wealth in Afghanistan, the country has the potential to make every citizen a direct owner of that wealth through the establishment of a Natural Resource Bank, with every citizen a shareholder. As for the economic growth and development of the rest of the country, make every citizen a direct shareholder in a soundly structured central bank.

Obviously, we can't even outline the basic principles of such a strategy in this short posting, but that's already available in the book, Capital Homesteading for Every Citizen. Why not send something to Mr. Obama and suggest that, instead of looking for scapegoats, he start looking at ways to save this country and the rest of the world instead of his own public image?

#30#

Response to Dr. Michael Novak

We interrupt William Cobbett to bring you an important news bulletin. Due to our not having received the forwarded e-mail until last week and as a result of our e-mail being down, we were not able to respond to Dr. Novak's concerns in a timely manner — but better late than never. Dr. Novak's note to Dr. Robert Moynihan, editor and publisher of Inside the Vatican magazine, was called forth in response to a "newsflash" sent out by Dr. Moynihan on the new encyclical, Caritas in Veritate. What follows are Dr. Novak's thoughts, and our response. Except for the e-mail addresses that have been removed, the text of Dr. Novak's e-mail is as he sent it.

From: Michael Novak
To: Robert Moynihan
Subject: Re: Encyclical, Background, Corrected/Amended

Thanks for this?

What is the meaning of "wealth" in talking of concentrations of wealth? How many families in the US amassing one million or more dollars in their estate keep that wealth for as long as ten years after the death of the principal? Rockefellers happen, but are rare. Things seem different in Europe, with great families going on and on.

Did Anglo-American economists get a voice?

You mention poor Americans in trailer camps. How much do trailers cost? How much do they receive monthly in welfare, including medical care?

Wealth has a cause. Poverty is what you have naturally.

Just a few thoughts.

Also, "justice," -- according to some historical precedent? Or some utopian ideal? Or ---

"Common good," of course (or "public interest" as the American founders preferred); but who defines what the common good is, and how is it imposed upon recalcitrant materials? Does common good entail government action? Which branch of government discerns the common good? Or is that decided by public debate?

August 4, 2009

Dear Dr. Novak:

Please excuse the delay in responding to the questions you raised in your e-mail to Dr. Robert Moynihan. Our e-mail has been down for a week, and a copy of your e-mail was not forwarded earlier.

Most of your concerns are addressed in the orientation book (Every Worker an Owner) and report (High Road to Economic Justice) prepared by the Presidential Task Force on Project Economic Justice in which you participated in 1986 under the Deputy Chairmanship of Norman G. Kurland, president of the Center for Economic and Social Justice ("CESJ"), www.cesj.org.

I believe you became acquainted with Dr. Kurland while you were a professor at Syracuse, and it may have been Dr. Kurland who introduced you to the work of Louis Kelso and Mortimer Adler. Dr. Kurland may also have suggested the term "democratic capitalism" to you, although he has subsequently abandoned it as inaccurate and misleading. Copies of Every Worker an Owner and High Road to Economic Justice were presented to President Reagan and received his endorsement. Later, the books were presented to His Holiness Pope John Paul II in a private audience in 1987, and the principles and programs detailed in them received his gracious encouragement.

A more up-to-date treatment of the principles and proposals from the Task Force can be found in Capital Homesteading for Every Citizen (2004), while we published a treatment of the philosophy and principles as In Defense of Human Dignity (2008).

Your question regarding the common good is answered in Introduction to Social Justice (1948), a pamphlet by Father William J. Ferree, S.M., Ph.D., a co-founder of CESJ who, at his death in 1985, was described as "America's greatest social philosopher" by Father Andrew F. Morlion, O.P., Ph.D., founder of the International University of Social Studies in Rome, and papal confidential secretary. I believe that Dr. Kurland may have been present when you first met Father Ferree in your home.

Father Ferree's pamphlet presents the "common good" in a manner consistent with Aristotle and St. Thomas Aquinas as the network of institutions within which we as human persons acquire and develop virtue, thereby becoming more fully human. Each person, consistent with the "analogy of being," thus has an "analogously complete" capacity to acquire and develop virtue, and therefore fully possesses the common good within him- or herself.

"Common good" (the complex network of institutions, including the rights defining exercise of life, liberty, and property — cf. the Summa IIa IIae, q. 90, a. 2 on whether the law is always directed to the common good) is carefully distinguished from common goods — that in which the State exercises property as an expedient on the assumption that private individuals cannot or should not own such goods, e.g., infrastructure, military arms, and so on. As St. Thomas explains,

Community of goods is ascribed to the natural law, not that the natural law dictates that all things should be possessed in common and that nothing should be possessed as one's own: but because the division of possessions is not according to the natural law, but rather arose from human agreement which belongs to positive law, as stated above (IIa IIae, q. 57, a. 2). Hence the ownership of possessions is not contrary to the natural law, but an addition thereto devised by human reason. (Summa, IIa IIae, q. 66, a. 2)

That is, the natural law merely states that the goods of the earth are not common property ("Thou shalt not steal"), not how goods are to be divided, which is left to human reason. Thus, if human reason deems it expedient that certain goods (weapons of mass destruction, roads, bridges, utilities, and so on) should be owned in trust by the State, and thus in common by all the people instead of individually or in free association with others, this is allowable — as long as individual private ownership of other goods is not thereby obviated.

Every individual has, inherent within him- or herself the power to act directly on the common good by organizing with others in order to correct flaws in our institutional environment and lower barriers to full participation in the institutions of the common good. This is "the act of social justice," described in detail by Father Ferree in his 1941 doctoral thesis, The Act of Social Justice. The State, as Albert Venn Dicey explained in Lectures on the Relation between Law and Public Opinion in England during the Nineteenth Century (1905), passes and enforces laws that the citizens, through acts of social justice, have, in effect, already accepted or are prepared to accept. The State, in a manner that respects personal sovereignty and individual human dignity, thereby acts in accordance with the popular will.

CESJ has developed some proposals that would change common goods currently held in trust by the State for the people, to being private property directly-owned by people, individually or in free association with others. This would be accomplished by devolving ownership through "Natural Resource Banks" and Community Investment Corporations, or CICs, also called "Community Land Cooperatives," in which each citizen would have a defined and direct private property stake in the land, natural resources and infrastructure that many people erroneously believe can only be owned by the State on their behalf. (The "Natural Resource Bank" is not to be confused with the completely unrelated "Land Bank" proposal of John Law in 1705 or the Rentenmark program implemented by Dr. Hjalmar Schacht that operated in Germany, 1924-1948.)

Once you have reviewed these items on the CESJ website, I invite you to give Dr. Kurland a call if you have any further questions or concerns. Contact information is on the website.

Thank you. We look forward to hearing from you.