For example, if someone contributes 10% to a productive project, he or she is entitled to 10% of the profits or suffers 10% of the loss, whether the contribution is in the form of land, labor, technology, or cash. If the project makes $1 million, the contributor (or, in archaic financial language, the “projector”) is due $100,000 in justice. If it loses $1 million, he or she loses $100,000.
Socialists often claim that the owners of land, technology, and cash are due nothing except what they put in . . . if that. The agrarian socialist Henry George, for example, claimed that people only have the right to own that which they create by means of their own labor. Since people did not create land and natural resources with their labor, land cannot be owned by private individuals, only by the State in the name of humanity as a whole, and therefore no one has the right to any profit from owning land or the use of land as land.
George’s logical error, of course, was to claim that an abstraction created by human beings — the concept of “humanity” — has rights (e.g., property, taxation, waging war) that individual human beings do not have. As George argued, God granted the right to own land only to human-created “humanity,” not to individuals created by God. George might not have realized it — or maybe he did, with all his talk of “the new gospel” — but his argument put man above God by making a human creation greater than something created by God.
The other error committed by most socialists is to assert that capital created by human labor contributes at most only the labor that went into creating the capital in the first place — the so-called “labor theory of value” based on the theories of David Ricardo that attempted to correct Adam Smith’s presumed error in attributing all production to a combination of land, labor, and technology.
Some socialists, such as Keynes, even claim that technology contributes nothing, but provides the “environment” within which human labor is more or less productive. So why is the owner of capital due anything in the Keynesian system? Why, to finance the technology that provides the environment — a “job” — within which labor can be productive!
But what if the “job” does not allow someone to produce something useful, i.e., a marketable good or service meant for consumption?
Not to worry! The important thing is not the power to produce something useful, but income to generate effective demand for other production. In fact, wasteful production is a benefit to society, as it doesn’t increase the supply of marketable goods and services to the detriment of everyone by lowering prices.
|Keynes, the socialist capitalist|
Prices must be kept up so that owners of capital can provide consumers with fewer goods and services at higher prices in order to allow them to accumulate savings to finance the technology that provides the environment (“jobs”) within which labor can become productive . . . and if anyone can figure out the logic of this in the face of binary economics and the Just Third Way of Economic Personalism he is living in an alternative reality.
Reality, of course, is quite a bit different from Keynes’s grotesque economic fantasy. The fact is that capital really is productive and can even produce without any direct human input . . . which explains why “jobs” seem to be disappearing as technology advances when there should be more jobs than can be filled. No, that is not a reference to the current wave of people not wanting to work for less pay than they get from unemployment.
Getting back into the real world and away from Keynesian economics, however, we acknowledge that the only reason to produce anything is to consume it, and that brings in the difference between investment and speculation, which we will cover in the next posting on this subject.