In the previous posting we discovered that, to understand Capital Homesteading (particularly as a Pro-Life economic agenda) we have to reject outdated notions of money and credit, as well as discredited Malthusian concepts of scarcity. Once we separate the in-depth thinkers from the not-so-in-depth thinkers and get over that admittedly revolutionary Pons Asinorum, we can get on to the even more radical ("radical" in terms of today's ossified thinking, that is) particulars of Capital Homesteading.
Throughout history the rich and powerful have owned the things that produced the wealth. When land and people produced wealth, the rich and powerful owned land and people. Today what produces most of the wealth are land and technology — "capital," that is, non-human (non-person) things. This is why Kelso and Adler (mistakenly, in our opinion) characterized the modern economy as capitalist. In particular, technologies such as machines, robots, rentable structures, and advanced information systems are replacing people at their workplaces and threatening their family incomes.
Obviously, then, the people who own the land and the technology (productive capital) are today's "rich and powerful." Due to flawed thinking about money, credit, and scarcity, many people accept the concentration of ownership of the means of production as a given. Unfortunately, this results in a state of society in which too few people own income-producing wealth (capital) and too many people own nothing. The result is a society in which many people owe more than they own, and the great mass of people are utterly dependent either on a private elite (as in capitalism), or a State elite (as in socialism). The tragedy is that many otherwise thoughtful people reach the conclusion that this situation is somehow normal or consistent with the natural moral law.
The bottom line is that anyone is economically vulnerable if he or she doesn't own — as private property — a just and adequate private property stake in the land and technology that produce most of today's wealth. To make matters worse, economic power is tied closely to political power. Political power comes from property (the rights and powers of ownership) and the means to acquire possess private property in the means of production: capital. In today's global economy, the most significant forms of capital are in advanced technologies. These can be and in many cases are directly owned, but most capital today is owned through unique social tools called corporations — the ownership of which (due to how capital formation is financed) is highly concentrated in the hands of a very few people.
When ownership is concentrated, power is concentrated. This is why a few people are very powerful, and most people are virtually powerless. The wealth-producing power of an individual worker — as "pure labor," sans technology — has not increased appreciably over the last thousand years. Poor people and most non-property-owning workers can only produce insecure subsistence incomes from their jobs. Some people, however, profit from the work that technology can do by owning shares in the companies that use that technology. These people become rich and powerful because they own the things (capital) that produce most of our wealth.
In a democratic and just economy everyone should have an equal opportunity and equal access to the means to own shares in companies that use advanced technology. The U.S. economy, for example, should have programs that lift artificial tax and credit barriers to help every American become an owner of American Industry. Every family could then earn income from jobs and income from capital that each family member would own.
The question is, how?
Today many people, even the poor, can buy consumer items such as cars, TV sets, clothing, and homes on credit. These purchases are not, however, "capital": income-earning property. Borrowing for such things makes the debtor more economically vulnerable than otherwise. Meanwhile, every year America adds about $2 trillion worth of new productive assets in both the public sector and private sector, or approximately $7,000 for every man, woman, and child. The way we finance these new assets creates few new owners and widens the gap between the "haves" and the "have-nots."
Constrained by bad definitions of money and other flawed institutions, the usual solution takes two forms. One, capitalism is "socialized," and the State takes over control of the economy indirectly by mandating prices, wages, interest rates, and so on. Two, the State takes over direct control of the economy — socialism by any name. This can be done through subsidies and bailouts of businesses considered too big to fail, or by taking over actual ownership (control) of companies.
Whether by socializing capitalism or by implementing socialism outright, those in authority (usually the State, but it could be a private elite) circumvent institutional flaws by redistributing existing wealth. This is not only ineffective and counterproductive, it is inadequate even within its own framework and works only for a short time. Redistribution is usually carried out either directly, through the tax system, or by manipulating the currency through inflation or deflation, depending on whether the State wishes to favor debtors or creditors, respectively.
There is, however, an alternative to the current system that is neither socialism nor capitalism. This "Just Third Way" would be a free enterprise economy, generating private sector profits — but with ownership of the new growth systematically flowing to every individual citizen. With access to capital credit repayable with the full pre-tax earnings of the capital itself, everyone could gain ownership in America's expanding technological frontier. We wouldn't have to take away wealth from those who already own capital, or rely on an allegedly beneficent and all-powerful State to distribute largesse to the presumably needy and those deemed sufficiently worthy.
An application of the principles of the Just Third Way is called "Capital Homesteading," as in the title of the book, Capital Homesteading for Every Citizen. The Capital Homesteading concept has been developed into a specific proposal called the "Capital Homestead Act," which we will look at in the next posting in this series.