In the previous posting on this subject, we closed by noting that at some point the noted lawyer-economist Louis O. Kelso asked himself the questions (probably not in these exact words), “If advancing technology makes such superabundance possible, why is it essential for people to have employers to pay them wages for labor that is not necessary for production?”
This, in turn, led Kelso to the key question: “What keeps people from owning the technology that is carrying out the bulk of production, and deriving their income from ownership of capital instead of being limited to wages and welfare?”
As Kelso realized, the single most important factor that prevents people from becoming owners is the slavery of past savings. That is, there is a fixed — and erroneous — belief that in order to finance new capital formation (a fancy way of saying “pay for new capital”) you have to spend less than you make and save the excess. In economic terms, you must produce more than you consume and accumulate the surplus production in the form of money savings.
Now, in a number of previous postings we’ve shown how that is a real bad idea. Today, however, we’re going to look at another really bad idea, the socialist idea that the way to solve the problem of not everyone being an owner is — to abolish ownership!
In other words, the socialist solution is to abolish private property. This does not necessarily mean that individuals are not permitted to have what some socialists insist to this day is “private property,” i.e., title to and use of things. At times this is even recognized as a right . . . but not an inalienable right by nature, at least as traditionally meant in the Aristotelian-Thomist understanding of natural law, and thus in personalism.
Some forms of socialism may allow private ownership, but that is precisely the problem. Ownership is not recognized as a right that every single human being has by nature itself, something God made an integral part of what it means to be a human person. Instead, it may be revoked at any time if the State, community or collective so decides.
Capitalism is not much better. Rather than forbid private ownership of capital per se, capitalism restricts it to a private sector elite. Admittedly, this does have the advantage that an irredeemably “greedy and rapacious” (Adam Smith, The Theory of Moral Sentiments (1759), IV.I.10; The Wealth of Nations (1776), IV.II.9. The illusion of injustice in Smith’s theory is due to the fact that Smith did not allow for the increasing productiveness of capital, and thus the shift of income from production from owners of labor to owners of capital.) capitalist will often do what is good for other people by following his own personal advantage, just as Adam Smith pointed out in his “invisible hand” argument. At the same time, the completely altruistic socialist can destroy an economy trying to do what is good for others.
|Fr. William J. Ferree, S.M., Ph.D.|
Why? Because the greedy capitalist is working with the system in a manner consistent with human nature, although his motives are completely selfish. Meanwhile, the generous socialist is going against the system and human nature, although his motives are charitable, even excessively or enthusiastically so.
Greed is not thereby transformed into a virtue, nor is charity a substitute for justice, even when relabeled “social justice.” What this demonstrates is the strength of institutions — even badly flawed or misused institutions — in influencing human behavior for good or ill.
Although Kelso was not familiar with Ferree’s analysis of Pius XI’s social doctrine, as an attorney and an economist he understood the role of institutions, including the impact of laws on citizens. He was thereby able to identify the “problem behind the problem” that has led to alienating human persons from capital ownership and thus full participation in the common good: access to money and credit.
|Fr. Heinrich Pesch, S.J.|
In this way — probably without intending to — Kelso removed the contradiction inherent in prevailing interpretations of Catholic social doctrine. Previously, both capitalists and socialists had been able to claim with a degree of credibility that Leo XIII and subsequent popes, as well as commentators such as Heinrich Pesch and Chesterton and Belloc, could not really have meant what they said about the importance — even sacredness — of private property for everyone, if only because the method suggested by the popes was not financially feasible.
That being the case, “of course” the demand for widespread capital ownership must mean socialist redistribution, capitalist prudential matter, or both. The most common interpretation in Catholic circles, therefore, was that it would be nice if current owners could be induced to sell or give away their property, but it is highly unlikely that they will do so. They may thereby be forced to redistribute, but only if it does not harm them too much. That this interpretation changed the basis of the natural law from reason to faith was conveniently ignored.
In the next posting on this subject, we’ll look at what Kelso did to get around the slavery of past savings.