THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Wednesday, January 31, 2024

Five Levers of Change: Money and Credit

Today’s blog posting is adapted from the book, Economic Personalism, which you can get free from the CESJ website, or from Amazon or Barnes and Noble.

As we have seen in the previous postings on this subject, the meaning and purpose of life — becoming virtuous to become more fully human — requires that people have power. As a rule, to have power, people must have private property. In order to have private property and be secure in its possession, people must have access to the means of acquiring and possessing private property, and that requires access to the just and responsible use of money and credit.


To use money and credit responsibly means that we must know the fundamentals of a just money and credit system. Given that, we understand that all money — particularly the currency — must be:

·       Asset-Backed, based directly on something with a tangible, measurable value sufficient to meet the requirements of consideration in a valid contract (this precludes a government issuing currency backed with its own debt),

·       Elastic, expand and contract directly with the needs of the economy,

·       Stable, not subject to fluctuations in value, and

·       Uniform, all units of currency have the same value.


Using money and credit as a lever of change to move to a just economic system assumes these fundamentals as a given. Applied properly, the right form of money can provide the financing for working models demonstrating democratized money power and universal access to capital ownership. To achieve this goal, we would want new money backed by productive assets, and no-interest (but not “no-cost”) credit to be channeled to productive business projects in ways that create new owners of the new capital being financed.

The power of money and credit as a lever for change is illustrated by what happened when adequate money and credit became available for industry, agriculture, and commerce. When commercial banking was reinvented during the Renaissance and central banking was invented with the establishment of the Bank of England in 1694, economic development accelerated enormously.  Contrary to popular belief, the Bank of England was not originally established to act as the British government’s banker, but to provide “accommodation” (i.e., adequate money, credit, and reserves) to member commercial banks.  In any event, the effect of a new monetary system, even one flawed in some essentials, can be seen in the following chart:


In the United States, the introduction of the leveraged Employee Stock Ownership Plan (ESOP) in the 1950s demonstrated the power of capital credit. When repayable with future corporate profits, capital credit can turn non-owning workers into owners without harming the rights of existing owners.


For example, Mid South Building Supply, Inc., in Springfield, Virginia, U.S.A., the world's first 100% bank-financed buyout by all the workers, is a successful example of universal capital ownership financing. A similar method of purchasing capital on credit repayable with future pre-tax corporate profits could be extended to every child, woman and man. Under “the Economic Democracy Act,” CESJ's proposed economic reform package, no-interest (but not “no-cost”) loans would be made, with the right to borrow to purchase qualified investments (e.g., newly issued, voting, full dividend payout shares) allocated equally to each citizen through local commercial banks.

Instead of traditional collateral or the seller’s loan guarantee as used at Mid South, loans would be secured with private sector capital credit insurance and reinsurance. See CESJ, “Universalizing Capital Ownership: How Article 17 of the Universal Declaration of Human Rights Can Save the Economy,” (accessed May 8, 2020).