• Retirement Plan Mandate. One of the features of the Democrats’ plan to make America Great Again is to mandate that all workers save a minimum of 6% of their pay to fund their retirement. To keep the plan from being a financial burden on lower-paid workers, there is an intricate and convoluted system of tax credits proposed that would be applied across the board even if someone didn’t owe any taxes, i.e., someone who paid in nothing could still get a refund. Of course, the problem is that this automatically results in an across the board reduction in consumption income — and thus consumer spending — of 6%. This doesn’t sound like much . . . until you realize that a 6% drop in consumer demand from the group that does the bulk of consuming would be a disaster for the American economy. The fact is, the higher the savings rate, the lower domestic demand, something with which Japan has contended for decades as it requires massive exports to keep the economy running, and China and India are cutting deeply into Japanese exports, while the U.S. has been a net importer for quite some time now. A country whose exports and imports are out of balance is in trouble in the mid- to long-term, although it might keep going for some time on inertia and accumulated wealth. At some point, however, redistribution by taxation or inflation is going to give out, and the economy will go into decline. The basic rule is that if people are saving in a country, they must export to other markets to keep up demand, and if people are not saving, they’d better be producing what they consume.
|Dr. Harold G. Moulton
• Savings or Investment? The Democrats’ proposal brings up what Harold G. Moulton of the Brookings Institution called “the Economic Dilemma”: If you save to invest in new capital, there’s not enough consumer demand to justify the new capital, but if you spend instead of savings, you have the consumer demand to justify the new capital, but no financing for it . . . or so conventional thought has it. As Moulton pointed out in The Formation of Capital, however, by shifting saving from past decreases in consumption, to future increases in production, the “Economic Dilemma” resolves itself. There is no need to cut consumption to finance production. Commercial and central banks can create money backed by future increases in production instead of by past reductions in consumption or government debt, and be repaid (and the money cancelled) with future savings: profits generated by producing and selling marketable goods and services in the future. This would bring an economy back into balance by matching production and consumption, instead of throwing it out of balance by reducing consumption to finance production for which no demand exists.
|Louis O. Kelso
• The Fatal Omission. Moulton, however, left out one key factor in his resolution of the “Economic Dilemma.” It’s essential, of course, to finance new capital formation out of future savings rather than past savings, but that does nothing in and of itself to get consumption income into the hands of the people who do the bulk of consuming. That was the paradox addressed by Louis Kelso and Mortimer Adler in their two books, The Capitalist Manifesto (1958) and The New Capitalists (1961). The subtitle of the latter is significant: “A Proposal to Free Economic Growth from the Slavery of Savings.” The idea was that instead of workers competing with advancing technology for diminishing jobs, they purchase the machines that are displacing them and pay for them out of the future increases in production carried out by the machines themselves: standard corporate financial technique. Eventually, of course, everyone would be a capital owner and be able to do whatever work they please without having to worry about whether it generated enough consumption income. One plan for achieving this goal is the Economic Democracy Act.
• Black October. Since 1900, the month of October has not been a good one for the gamblers on Wall Street. More than half a dozen serious “Bear Markets” (downturns) have happened in October, most notably that of 1929. Once again, the economic mavens are hedging their bets as well as their stocks by talking out of both sides of their mouths so that they don’t get caught having said the wrong thing. Of course, all of this could be resolved simply by realizing that the stock market is a secondary market for “used” debt and equity and is hardly an economic indicator . . . unless you’re a “slave of past savings.”
• Hortense and Her Whos. In case you’ve been wondering how you might advance the Just Third Way by introducing it to legislators at any and all levels of government, we’ve made it easy for you, with the “Hortense Hears Three Whos“ initiative. Visit the explanatory website, and consider downloading the postcard to send to people in government. Don’t worry if you think they won’t be open to it, as the postcard is intended to get them to open their eyes.
• Economic Personalism Landing Page. A landing page for CESJ’s latest publication, Economic Personalism: Property, Power and Justice for Every Person, has been created and can be accessed by clicking on this link. Everyone is encouraged to visit the page and send the link out to their networks.
• Economic Personalism. When you purchase a copy of Economic Personalism: Property, Power and Justice for Every Person, be sure you post a review after you’ve read it. It is available on both Amazon and Barnes and Noble at the cover price of $10 per copy. You can also download the free copy in .pdf available from the CESJ website. If you’d like to order in bulk (i.e., ten or more copies) at the wholesale price, send an email to firstname.lastname@example.org for details. CESJ members get a $2 rebate per copy on submission of proof of purchase. Wholesale case lots of 52 copies are available at $350, plus shipping (whole case lots ONLY). Prices are in U.S. dollars.
• Sensus Fidelium Videos, Update. CESJ’s series of videos for Sensus Fidelium are doing very well, with over 150,000 total views. The latest Sensus Fidelium video is “The Four Pillars of a Just Market Economy.” The video is part of the series on the book, Economic Personalism. The latest completed series on “the Great Reset” can be found on the “Playlist” for the series. The previous series of sixteen videos on socialism is available by clicking on the link: “Socialism, Modernism, and the New Age,” along with some book reviews and other selected topics. For “interfaith” presentations to a Catholic audience they’ve proved to be popular, edging up to 150,000 views to date. They aren’t really “Just Third Way videos,” but they do incorporate a Just Third Way perspective. You can access the playlist for the entire series The point of the videos is to explain how socialism and socialist assumptions got such a stranglehold on the understanding of the role of the State and thus the interpretation of Catholic social teaching, and even the way non-Catholics and even non-Christians understand the roles of Church, State, and Family, and the human person’s place in society.
• Shop online and support CESJ’s work! Did you know that by making your purchases through the Amazon Smile program, Amazon will make a contribution to CESJ? Here’s how: First, go to https://smile.amazon.com/. Next, sign in to your Amazon account. (If you don’t have an account with Amazon, you can create one by clicking on the tiny little link below the “Sign in using our secure server” button.) Once you have signed into your account, you need to select CESJ as your charity — and you have to be careful to do it exactly this way: in the space provided for “Or select your own charitable organization” type “Center for Economic and Social Justice Arlington.” If you type anything else, you will either get no results or more than you want to sift through. Once you’ve typed (or copied and pasted) “Center for Economic and Social Justice Arlington” into the space provided, hit “Select” — and you will be taken to the Amazon shopping site, all ready to go.
• Blog Readership. We have had visitors from 36 different countries and 38 states and provinces in the United States and Canada to this blog over the past week. Most visitors are from the United States, the United Kingdom, Canada, Australia, and Argentina. The most popular postings this past week in descending order were “The Obtuseness of Father Brownians,” “News from the Network, Vol. 14, No. 38,” “The Great Collateralization Conspiracy,” “From Need to Greed: The Labor Theory of Value,” and “The Purpose of Production”/JTW Podcast: No Humans Need Apply” (tie).
Those are the happenings for this week, at least those that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we’ll see that it gets into the next “issue.” Due to imprudent language on the part of some commentators, we removed temptation and disabled comments.#30#