Last week the 10th annual Rally at the Fed drew attention to some serious problems in the monetary and fiscal policy being followed by the world’s central banks, especially the Federal Reserve. Used today almost exclusively to finance government, they were intended to be the lender of last resort for the private sector, not the money machine of first resort for government.
|The Panic of 1825 began with speculation by the Bank of England|
Misuse of the world’s central banks has been a major cause of the growing wealth and income gap in the global economy. Even if the State created money through the central bank (or issued it directly) to finance something along the lines of the “National Dividend” proposed by Major Douglas, it would be money created for consumption, not production.
Simply printing money and distributing it equitably would do nothing to solve the problem of the wealth and income gap. That can only be done by making people who are not currently productive, productive. No one, however, will produce if the State simply provides people with an income. Why bother? It would be more profitable not to work.
Further, with no provision for retiring the new money once the marketable goods and services that backed it were consumed, the effect would be purely inflationary. The “National Dividend” also assumes that the State has the right to make promises for other people to keep, which is not the case in a non-socialist economy.
|Mortimer J. Adler|
The issue of the growing concentration of capital ownership and the consequent “income gap” has not been addressed in any feasible way except by Louis O. Kelso and Mortimer J. Adler in their two collaborations, The Capitalist Manifesto (1958) and The New Capitalists (1961). The title of the latter is significant in light of the banking principle and its reliance on future savings: “A Proposal to Free Economic Growth from the Slavery of [Past] Savings.”
|Louis O. Kelso|
The proposal, again, is simple. As technology (capital) advances, it displaces human labor from the production process. If owners of labor do not own the capital that displaces them from their jobs, the essential link between production and consumption is broken, and Say’s Law of Markets fails to function.
The problem is that, as technology advances, it becomes commensurately more costly. At the same time, as the value of human labor falls relative to capital, owners of labor are less able to accumulate sufficient savings to purchase the increasingly expensive capital that is displacing them from their jobs and driving down the relative value of their labor. It becomes necessary to impose increasing State control on the economy in a self-defeating effort to raise wages, create jobs, and sustain consumption at adequate levels.