On Friday, July 1, 2022, the Republican Governor of Missouri, Michael Parson signed a bill that is designed ultimately to reduce poverty, racism, and a host of other problems in an area encompassing some of the most economically disadvantaged neighborhoods in St. Louis. The initial phase is to form a commission funded by the state of Missouri to study the problem and develop recommendations for implementing what Eugene Gordon of the Descendants of American Slaves for Economic and Social Justice calls “the Heart of America Project.”
Although the study and its report will be funded by the state of Missouri, if Gene’s plan is implemented, the development itself will be carried out on a self-funding or self-liquidating basis. That is, redevelopment of the area will be done by a for-profit Citizens Land Development Corporation (CLDC) on a for-profit basis. No part of the project will be undertaken until and unless it is expected to pay for itself out of its own future profits.
This is standard corporate finance and was applied by Louis Kelso in his theory of economics. Kelso’s goal was to show how everyone in the United States and, potentially, the world, could become an owner of an adequate capital stake. Adequate, of course, is defined as being sufficient to generate a living income in a way that does not require them to cut consumption and save out of current income — which is inadequate in many cases today to meet common domestic needs as it is.
Instead of cutting consumption in the past to generate savings, what Kelso proposed to do is what the rich have been doing for centuries to get richer: increase production in the future. This avoids what Dr. Harold Moulton of the Brookings Institution called the “economic dilemma” and disproved. That is, Moulton noted in his 1935 book, The Formation of Capital, that the typical assumption in finance these days is that the money cannot be found to finance new capital formation unless there has been sufficient decrease in consumption to generate the savings to do so . . . but if there is that great a decrease in demand, there is no reason to finance new capital formation! In other words, if people cut consumption to save they’ll have enough money to finance new capital but no reason to do so, but if they consume so that there are no savings, there is a demand for new capital but no money to finance it.
|Harold G. Moulton|
Moulton, of course, solved the problem that new capital can and should be financed not by cutting consumption in the past, but by increasing production in the future, and that both “past savings” and “future savings” can be turned into money by the expansion of commercial bank credit. So long as an economy has the capacity to produce and the capacity to consume, there need be no lack of financing for as much capital as the economy needs. What Kelso added was that if this method can be used to make the rich richer, it can also be used to turn non-owning citizens into capital owning citizens and do so without them taking cuts in pay or benefits or using non-existent savings.
Thus, as applied in the proposed Heart of America Project, not only is the redevelopment of the area expected to be self-financing or liquidating, it is also expected to turn thousands of non-owning citizens into owning citizens, create jobs, and economically revitalize the area in a way that most of the benefit of development remains in the community itself.
|Senator Karla May|
State Senator Karla May sponsored House Bill 2400/Senate Bill 772 in conjunction with Gene Gordon. Strategically supported by the interfaith Center for Economic and Social Justice (CESJ), a think tank in Arlington, Virginia, the team assisting in drafting a piece of bipartisan legislation that attracted support from both sides of the political aisle and is expected to lay the foundation for economic growth in a way that generates capital income for local residents to supplement and, in some cases, replace wage income for labor.
According to Gene, what makes the CLDC different from typical Community Land Trusts and similar non-profit community development vehicles, is that it will be for-profit, professionally managed and maintained, and will make every permanent resident from birth to death a shareholder with equal voting rights and rights to dividend payouts. Perhaps more simply put, as the local area is re-developed, the CLDC will provide permanent local residents with capital incomes and jobs that will systematically lift them out of poverty and, in the process, free them from a condition of dependency — slavery — on government welfare.
|Norman G. Kurland|
Consistent with Kelso’s vision, the CLDC will have access through local commercial banks to the discount window of the regional Federal Reserve Bank, in this case, the Federal Reserve Bank of St. Louis. Rather than relying on taxpayer funding or tax credits for the billions of dollars needed to redevelop land and infrastructure currently owned by local government the CLDC will monetize future profits generated from leasing the land by using the existing powers of the Regional Federal Reserve Banks. In this way, all local, permanent residents will become owners of income-producing capital assets without the use of existing savings or reducing current consumption.
CESJ President Dr. Norman Kurland added, “We plan to duplicate this project in all fifty states and in all twelve Federal Reserve Districts. We expect it will be equally successful in urban and rural communities, as well as on Native American nations’ land.”
Dr. Kurland originally developed the CLDC concept based on the ideas of lawyer-economist Louis Kelso. Similar legislation was passed in Illinois by State Representative Wyvetter Younge in 2008. She managed to get her bill passed unanimously (114 to 0) in the Illinois House but died before getting it passed in the Senate.