The “slavery of past savings” accounts for Chesterton’s and Belloc’s pessimism regarding the possibility of establishing the “Distributist State.” Given that the savings of the rich are the only source of financing for new capital, and that private property is a natural right that cannot be redefined or abolished (however much the exercise of that right must be defined and limited for the common good), widespread capital ownership can only result from one, the rich voluntarily redistributing their wealth, or, two, a collapse of the system, on the ruins of which a new, more just economy can presumably be built.
Neither contingency is likely. One, the rich are not, as a body, going to divest themselves of their wealth voluntarily. Two, any new system built on the same assumptions as the old will eventually collapse under the weight of its flawed institutions.
Belloc’s proposal to put disabilities on the rich to bring them down to the same level as the poor when it comes to access to capital credit (Hilaire Belloc, An Essay on the Restoration of Property. New York: Sheed and Ward, 1936), is the antithesis of social justice. You do not act in a socially just manner by creating barriers, but by removing them.
The goal of social justice is not to bring the rich down to the level of the poor by imposing restrictions, especially when that requires a vast increase in State power. Rather, the goal of social justice is to lift the poor up to the level of the rich by removing obstacles that inhibit or prevent equality of opportunity.
The Just Third Way incorporates binary economics, which is based on the “banking principle.” The banking principle is in turn based on the legal definition of money: anything that can be accepted in settlement of a debt (“All things transferred in commerce.” “Money,” Black’s Law Dictionary).
“Money” therefore consists of anything that can be conveyed by contract. This includes not only existing wealth, but the present value of future wealth. This is because, while a promise to deliver existing wealth today clearly has value, a promise to deliver as-yet uncreated wealth in the future also has value.
This is because all money is a contract, just as (in a sense) all contracts are money. All contracts consist of three elements: 1) Offer, 2) Acceptance, and 3) Consideration. “Consideration” is defined as “the inducement to enter into a contract,” that is, the thing or things of value being exchanged.
If the consideration consists of existing wealth (“past savings”), the contract is, in broad terms, called a “mortgage.” If the consideration consists of future wealth (“future savings”), the contract is called a “bill of exchange.”
The distinction between past savings and future savings is critical to understanding money, credit, banking, and finance. Financial historian Benjamin Anderson affirmed this when he explained that the first principle of finance is to know the difference between a mortgage and a bill of exchange.
Anyone who has the capacity to enter into a contract and has property in consideration, whether that consideration consist of past or future savings, can offer that consideration in exchange for other consideration, i.e., a marketable good or service, whether that consideration currently exists, or will exist in the future. If the offer is accepted, money has been created.
“Money” and “credit” are simply two aspects of the same thing; “Money and Credit are essentially of the same nature; Money being only the highest and most general form of Credit.” (Henry Dunning Macleod, The Theory of Credit. Longmans, Green and Co., 1894, 82.)
It is therefore possible (as Harold Moulton explained in The Formation of Capital, 1935, preferable) to finance new capital formation using the present value of increases in production in the future, instead of limiting the financing to what can be accumulated by cutting consumption in the past.
Kelso realized that by using future savings to finance new capital formation, people without past savings could become capital owners on the same terms as people with past savings: equality of opportunity. People without past savings could acquire new capital, leaving the rich with their accumulations of past savings intact.
Redistribution of existing wealth (past savings) could be restricted to an emergency short term measure to meet current needs in “extreme cases” (Rerum Novarum, § 22). The social order could restructured through acts of social justice (Quadragesimo Anno, § 76) to remove barriers to the use of capital credit based on future savings. This would enable people without past savings to acquire capital ownership without taking anything away from existing owners, thereby achieving the “necessary goal” of “[t]he redemption of the non-owning workers.” (Quadragesimo Anno, § 59.)