certain theories of sovereignty and the understanding of money found in the tenets of the British Currency School, adopted by the Keynesians, Monetarists, Austrians, and just about everybody else. Small wonder that Belloc's Restoration of Property is a grim effort that ultimately offers nothing practicable — as Belloc admits in his Preface:
It is customary in presenting any political thesis to include an element of hope. Professional politicians always make a point of prophesying success and even more respectable and sincere reformers love to exaggerate the changes of their ideal and even to affirm its ultimate victory as certain.Keep in mind that these words were written three-quarters of a century ago, and the situation has, if anything, gotten much worse than Belloc ever appeared to imagine or fear. The degree of economic, social, and legal dependency so contrary to the Just Third Way has increased to the point where the powerless condition is not only accepted, most people — especially our leaders and policymakers (to say nothing of academics) — consider it normal.
This has always seemed to me great folly. Wisdom consists in the appreciation of reality. If you approach a most difficult task under the illusion or the pretence that it is less difficult you may strengthen your supporters by the drug of illusion but you weaken them much more by persuading them to work in the void.
Respect for reality compels me to say that the Restoration of Property when that institution has all but disappeared is a task almost impossible of achievement. If it were quite impossible of achievement it would not be worth while wasting breath or ink upon it. It is not quite impossible of achievement; at least, it is not quite impossible to start the beginnings of a change. But the odds against a reconstruction of economic freedom in a society which has long acquired the practice and habit of wage slavery is difficult beyond any other political task. (The Restoration of Property, op. cit., 11-12.)
Evidently we can neither move forward nor stay where we are. The only solution that many people, including Belloc, see is to dismantle modern civilization, making it more manageable by cutting it down to size, down to a more "human scale." Is, however, there a reasonable alternative consistent with human nature? A just third way above and beyond both capitalism and socialism, and that doesn't require us to regress to subsistence farming, artisan crafts, or hunting and gathering? (It is notable that the strongest advocates of the "small is beautiful" approach have rarely, if ever, been absolutely dependent on subsistence agriculture or handicrafts to meet their consumption needs.) We believe that there is, in fact, a "Just Third Way" that does not require that we sacrifice centuries of progress in order to bring everyone down to the same level of misery. This requires a better understanding of power and property.
Unfortunately, these days "power" is a dirty word, and "property" is well on its way to becoming one. This is hardly surprising, when we consider Daniel Webster's dictum that "power naturally and necessarily follows property." In the United States, a country explicitly founded on the belief in the sovereignty and personhood of each and every human being, and the idea that the State derives all of its powers from "We, the People," matters have reached such a pitch that even the U.S. Supreme Court bestows and withholds personality, apparently when and where it will.
This has the effect of making every citizen a "mere creature of the State" (see Pierce v. Society of Sisters, 268 U.S. 510 1925) whether we are referring to outright socialism or the Servile State as the halfway house on the road to complete State control. People lose sight of the fact that the State must be limited to its proper role as a very specialized social tool charged with the care and maintenance of the common good. This it does best and consistently with the Just Third Way by limiting its economic operations, policing abuses, and providing a level playing field as a government of the people, by the people, and for the people — not an economic or State elite.
As Belloc noted, the State best cares for the common good by providing an opportunity for ordinary people to become owners of the means of production, and in maintaining the order necessary to a stable social order. As he stated,
There must exist in some form the State. A sufficiently large unit for the development of the arts and the better complexities of life must be organised. Its power must be appealed to for the satisfaction of justice, the prevention of internal disorder and for the arrangement of defence against external aggression. In general the State must exercise some restraint upon the ideal economic freedom of the family or freedom itself cannot be guaranteed. (The Restoration of Property, op. cit., 15-16.)In other words, "property" does not mean doing what you will with what you own. On the contrary, as is the case with democracy itself, true economic freedom consists of limiting the exercise of your rights of private property in order to maintain your absolute right to be an owner. In short, you cannot use your possessions to harm yourself or others, or the common good as a whole. This is how we can speak of each human being having an absolute right to private property, but limited rights of private property . . . as long as the exercise of private property is not defined in any way that undermines the absolute — natural, inherent, inalienable — right to be an owner in the first place.
As one of the founders of the distributist movement, Belloc recognized the fact that widespread ownership of the means of production is essential to a healthy society. This is consistent with the natural moral law. As he said, defining "economic freedom" as ownership of an adequate stake of income-generating assets, "Economic freedom can only be a good if it fulfils some need in our nature." (Ibid., 21.) He first explained why private property is important. He then presented a general program for achieving the goal of expanded capital ownership.
From the first there were serious problems with Belloc's proposals. This is not surprising from the grimness of his outlook — and, unfortunately, given his definition of money, ironically the same as Bagehot and Keynes, a definition contrary to the natural moral law, as we will see in subsequent postings. Not the least of these was the paradox that he proposed measures that he did not believe could be successful or would work in the current state of society. This, in and of itself, is contrary to social justice.
It is a basic characteristic of social justice as discerned by the Reverend William J. Ferree, S.M., Ph.D., that what we propose to effect necessary changes in the social order must be effective. (Introduction to Social Justice. Arlington, Virginia: Center for Economic and Social Justice, 1997, 51-52.) As "political animals," humanity is, obviously, constrained to act politically. Politics being the art of the possible, we should never waste our time trying to accomplish something that, however virtuous we may believe it to be, we have already decided is impossible. Instead, our efforts must be directed to organizing with like-minded others so that barriers that prevent full participation in the economic common good can be eliminated, not raised.
Then, while this was obviously not Belloc's intent, it was clear that the remedy he proposed is manifestly contrary to justice. That is, he advocated imposing disabilities on the rich to bring them down to the level of the poor, rather than lifting barriers that prevent the poor from participating in the economy on the same terms as the rich. Obviously, something that calls itself the Just Third Way necessarily rejects anything that relies on injustice to achieve its ends.
Still, while Belloc's proposed solution would have imposed barriers instead of eliminating them, raising barriers against full participation in the common good is not, in and of itself, contrary to justice. Laws, customs, traditions, and so on, impose barriers all the time in order to define the exercise of humanity's natural rights. While natural rights are inalienable, that is, each human being has the full spectrum of such natural rights as life, liberty, property, and the pursuit of happiness inherent in his or her being as a part of human nature, no one may exercise his or her rights, however absolutely held, in any way that harms another individual, a group, or the common good as a whole — or even him- or herself.
Belloc had it backwards. He was right that the rich enjoy financial advantages that the poor do not. The poor suffer harm through their inability to gain equal access to the means of acquiring and possessing private property: money and credit. The proper course of action, however, is not to inflict harm on the rich to make them "equal" to the poor. Two wrongs do not make a right. Such a program smacks not of justice, but of revenge. Neither can we change the definition of natural rights such as life, liberty, and property in order to justify imposing limits on some, but not on others, or abolishing the right as a natural right.
Instead, the financial institutions of society should be restructured to open up democratic access to money and credit so that the poor have an equal opportunity with everyone else to become rich. The idea is not that the rich should be made poor, or forced to pay for presumed crimes against humanity when they have broken no human law.
Ultimately, the goal of the Just Third Way is to establish and maintain an economically just society. We can define an economically just society as one that meets four essential "pillars" that uphold and protect the dignity of the human person. These four pillars are:
1. A limited economic role for the State. The State is a specialized tool designed to assist humanity in caring for and maintaining the common good. Only in extreme cases or for expedience can we justify using the State to care for and maintain individual goods. The State's role should be limited to providing a "level playing field," enforcing contracts, and policing abuses.
2. Free and open markets as the best means for determining just wages, just prices, and just profits. Humanity's natural right of liberty — free association — means that people should be free and un-coerced either by other individuals or groups, or conditions, to use their personal judgment as to the value of their labor, their capital, and the marketable goods and services produced by means of their labor and their capital.
3. Restoration of the rights of private property, especially in corporate equity. The business corporation, a legally recognized expression of humanity's freedom of association, while designed to make it possible for many people to own a single asset and make the enjoyment of ownership of the means of production more widespread, has been used to concentrate ownership and restrict the rights of minority owners to control and other fruits of ownership, such as their just share of the income.
4. Widespread direct ownership of the means of production. This "pillar" can be regarded as the fatal omission of every economic system in the world today — and the one Belloc directly addressed, although inadequately and with a faulty understanding of the institutions of money and credit.
It is all very well, of course, to say that we want an economically just society, and that an economically just society consists of the four pillars. Nevertheless, despite our great desire, even our need to establish what Belloc variously calls the Proprietary or Distributist State, we must not, indeed, cannot do it by means that contradict the goal itself. We cannot, for instance, take what belongs to one simply because we wish to give it to another. We would thereby destroy property for some for the benefit of others — and make all property insecure in the process. Nor can we change the meaning of "property" in order to achieve the form of our goal but without the substance.
And what is the substance? That Belloc himself accurately identified and defined. As he said (and keep in mind that "ownership" and "control" are the same in all codes of law), "It is obvious that whoever controls the means of production controls the supply of wealth. If, therefore, the means for the production of that wealth which a family needs are in the control of others than the family, the family will be dependent upon those others; it will not be economically free." (The Restoration of Property, op. cit., 14.)
Therefore, in contrast to many so-called proposals today, however, whose proponents assert that people should just not be greedy and should share what they have, the Just Third Way does not go against human nature. Instead, the Just Third Way is designed to act in conformity with human nature, that is, with the natural moral law. That means such inalienable rights as life, liberty, property, and the pursuit of happiness, based as they are on human nature, cannot be ignored or circumvented. Further, humanity being "political" by nature (a combination of individual and social), it makes no sense just to give orders without working to reform our social structures to make doing the right thing optimal or even possible.
For that reason, we have developed an outline for a possible program that, we believe, contains the essential elements of a specific program that will 1) restructure some basic institutions in order to make 2) specific actions possible. We have arranged these points in what we think is the proper order, but that depends on what becomes possible and when we can do it, not any pre-determined rigid program from which we cannot deviate. Also, being human, we may have left something off, and invite your inputs and comments. Before commenting, however, please read the expanded explanation of each point in future postings in this series. It may be that your objection has already been answered or your concern addressed.
1. Reform the Myth of Savings
The fixed belief in the minds of virtually all economists and policymakers today is that the only way to finance capital formation, that is, to invest in new income-generating assets, is to cut consumption, save, then invest. This assumption is utterly false, as was proved by Dr. Harold G. Moulton in his 1935 classic, The Formation of Capital. Louis O. Kelso and Mortimer J. Adler integrated Moulton's findings into a sound program of economic reform in their book, The New Capitalists (1961). The subtitle of Kelso and Adler's book sums up the goal in the most succinct manner possible: "A Proposal to Free Economic Growth from the Slavery of Savings."
2. Reform the Money and Credit System
The fundamental change in our money and credit system is to correct our understanding of "money." Money is not restricted to State sanctioned or authorized legal tender. Instead, money is anything — repeat anything — that can be used in settlement of a debt. If we assume that only the State can issue or authorize money, we necessarily assume total State control over the economy, and thus the imposition of a condition of dependency on every citizen, making each one "a mere creature of the State" — socialism. As Meyer Anselm Rothschild is reputed to have said, "Give me control over money and credit, and I care not who makes the laws."
3. Own the Fed
If State control over money and credit through the wrong definition of money leads to socialism, permitting a private elite to control money and credit through the same means leads to the Servile State — the same destination by two different routes. Thus, in contrast to proposals that call for the abolition of the Federal Reserve System, or turning it over to the direct control of the federal government, we advocate putting the "money power" in the hands of the people most concerned with it: the people. The proper functioning of a central bank is a unique social good that cannot, without grave consequences to individual and the common good, be controlled by either a private or a public elite. We propose that every citizen and legal resident in the region served by the Federal Reserve directly own the Federal Reserve via a single, no-cost, non-transferable share in the Federal Reserve. Through the rights of private property, this would establish the accountability of the money power directly to the people, and eliminate what some have called the dictatorship of money.
4. Reform the Tax System
The national tax system in the United States is a national disgrace. The tax code is gargantuan. No one person can claim to understand the Internal Revenue Code, or even a single section of the Code. That being the case, it makes sense to simplify the system — but only if it can be done in a just and fair manner. We must first keep in mind that the goal of the tax system is to raise the revenue necessary for the proper functioning of the State, not social engineering, or to bolster the power of the elite that happens to be in charge at the moment. We propose, therefore, to eliminate most deductions, increase the exemption for non-dependents to $30,000, for dependents to $20,000, eliminate the payroll tax, merge all taxes into a single rate levied on all income (and we mean all income) above the extremely generous exemption level, and set the single rate at a level sufficient to meet all current government expenditures and pay down the debt within a reasonable period of time.
5. Enact the Capital Homestead Act
The goal is to restore private property "in a Society which has almost forgotten what property and its concomitant freedom means." (The Restoration of Property, op. cit., 144.) Following the lead of Abraham Lincoln's 1862 Homestead Act, the Capital Homestead Act would justly and rapidly open up equal opportunity for every man, woman, and child in America to acquire an equal share of the approximately $2 trillion of new capital formed each year in the United States. This would not be inflationary, because the money needed to acquire the new capital would not be created until and unless a financial feasible capital project was located and properly vetted. This is consistent with the real bills doctrine, that money can be created as needed without inflation as long as the money is linked through private property and created in direct response to and in no greater amount than the present value of new capital formation. Every citizen would use an equal allocation of non-recourse capital credit to acquire capital, repay the loan with the income generated by the capital itself, and collateralize the loan with capital credit insurance paid for out of the "risk premium" typically charged on all loans.
6. Accelerate Private Sector Growth
In order to encourage private sector growth in which all citizens, not just a select few, participate on an equal basis with respect to opportunity, we propose that all dividends be made fully tax deductible at the corporate level, although fully taxable as ordinary income at the personal level. This is because existing accumulations will no longer be necessary to serve as collateral for financing new capital formation, and can be put to use stimulating consumer demand naturally, without induced inflation or redistribution through the tax system. This will, in and of itself, provide the basis for a sound economy in which production and consumption income are equalized, and the economy operates without State interference or manipulation.
This is the barest outline of what needs to be done. In subsequent postings in this series we will examine each of the four pillars and the programmatic points in greater detail. By this means we will overcome the unfortunate weaknesses inherent in Belloc's proposal to restore private property, while at the same time not violate any of our essential principles.