A New Look at Reparations

There has been more talk in the Unites States of reparations for slavery recently.  Ironically, this is at a time when the foundations of the economy and therefore of the tax base are rapidly eroding for everyone except the rich and those who have political power — usually the same people, as has often been the case throughout history.

The Right Reverend New Dealer

 

To this day there are people who insist that the “New Deal” of Franklin Delano Roosevelt not only saved the United States from the Great Depression (ahem, Part III, there having been two previous phases, the first from 1873 to 1878, the second from 1893 to 1898), it was also THE perfect social program and should be duplicated today as in (for example) the so-called “Green New Deal.”

The War on Private Property

As we saw in the previous posting on this subject, the dominance of Msgr. John A. Ryan over the interpretation of social teaching — achieved by shifting from reason to faith (meaning personal opinion heavily influenced by socialism) — meant that any who opposed socialism were ipso facto heretics instead of simply mistaken or even right when Ryan was wrong.  Ryan’s influence even extended to having his students hint that Fulton Sheen was a “traitor to Christ” for saying things that Ryan didn’t want to hear.

You Ain’t Heard NOTHIN’ Yet!

If you’ve seen Monday’s podcast and yesterday’s blog posting, you may be starting to wonder if this is serious or if we made it all up.  We can assure you that we’re completely serious and absolutely none of this stuff is made up.  As the great biologist J.B.S. Haldane almost sort of said after the editors and science fiction writers got through with it, “The universe is not only stranger than we imagine; it is stranger than we can imagine.”

“Do We Agree?”

To answer that question briefly — and accurately — no, “we” don’t . . . if by “we” is meant G.K. Chesterton and G.B. Shaw.  The reference is to their final, er, “debate (for want of a better word) in November of 1927.

Still Not Really About Religion

As we saw in the previous posting on this subject, the backwash from the Second Vatican Council didn’t really have much to do with what most people think of as “religion,” but with seizing the opportunity to advance a relatively new concept of religion that had been messing things up for the previous century and a half.

The Rights of Man

We’re tempted to begin this posting with our usual, “As we said in the previous posting on this subject”  . . . so we will yield to temptation and begin by saying that in the previous posting on this subject, we asked the question whether material wellbeing is the sole end of existence, such as the Fabians and other socialists claimed, or if there was something more.

The Fabian Flood

As we saw in the previous posting on this subject, President Franklin Delano Roosevelt got the New Deal implemented using some rather shady tactics.  Don’t just take our word for it, however.  Anyone who wants to get a somewhat different perspective than is given in the Keynesian history books and current political rhetoric can read, e.g., Amity Shlaes’s The Forgotten Man (2009).  She’s obsessed with the stock market as somehow  being an economic indicator, but don’t let that stop you from the getting the real value the book has to offer.

The Un-Natural New Deal

As we saw in the previous posting on this subject, Catholics — or at least some of them — finally seem to have made the grade and become part of the mainstream by the 1930s . . . depending on what is meant by “mainstream” and a few other things, like “making the grade.”  With Msgr. John Ryan and Fr. Charles Coughlin leading the way, however, everything looked just peachy-keeno.

The New Double Deal

As we saw in the previous posting on this subject, serious efforts had been made to try and deal with the rapid spread of socialism and moral relativism in both Church and State, but very little had been effective.  It seems that when dealing with the worldly, St. Paul was right about being as sly as serpents — albeit still honest and truthful — for adherents of the new things have never let truth or even common civility stand in their way.

How Not to End Racism or Be Socially Just

As regular readers of this blog are aware, we have examined the thought and works of noted social justice advocate Msgr. John A. Ryan (1869-1945) of the Catholic University of America.  We wanted to measure the consistency of Msgr. Ryan’s social justice doctrine with the Just Third Way understanding of social justice.  We also looked at Msgr. Ryan’s activities in regard to Ven. Fulton J. Sheen, who seems to have been a special object of attention by Msgr. Ryan.

The War Against Fulton Sheen (Continued)

As we saw in the previous posting on this subject, Msgr. John A. Ryan was the instigator behind the sabotage of the academic career of Fulton J. Sheen at the Catholic University of America in Washington, DC, in the late 1920s and early 1930s.  Nor (as we shall see) did Msgr. Ryan confine his campaign against Sheen to Academia.  As time went on, he was active in extracurricular activities intended to blacken Sheen’s name.

Monsignor New Deal

To hear some people tell it, Monsignor John Augustine Ryan (1869-1945) was not only the greatest social justice advocate who ever lived, he saved the world by inspiring and instituting the New Deal in the 1930s.  Neither claim bears up on even the most cursory examination.  As we saw in the previous posting on this subject, public, academic, and political opinion had shifted away from an ownership system, and was firmly entrenched in the wage system.

Financing Change

One of the most frequently heard questions about the proposed “Green New Deal” is where ire they going to get the long green to pay for it?  For those of you not familiar with 1890s slang, “long green” refers to paper currency — appropriate, since it was in 1893 that the populist leader Jacob Sechler Coxey, a theosophist, proposed measures that many consider the precursor of President Franklin Delano Roosevelt’s New Deal, a rip-off of Theodore Roosevelt’s Square Deal from 1910.

The Formation of Capital

As we saw yesterday, there is a virtually unlimited commercial and industrial frontier that can replace the land frontier and give every child, woman, and man the opportunity to become an owner of productive assets and achieve a level of capital self-sufficiency.  The only question is how to do it . . . and it wouldn’t be through government handouts or programs like the New Deal.

The Significance of the Frontier

A week or so ago in a posting on how to make tax reform even worse, we noted that when the State starts to take over more and more control over people’s lives, not only the State becomes overburdened with duties, but the citizens become overburdened with taxes.  Somebody, after all, has to pay for such things, such as universal basic incomes; money just doesn’t appear out of nowhere.

Why Did the U.S. Go Off the Gold Standard in 1933?

The other day we took a poke . . . or maybe that was a peek . . . at what people mean when they say “gold standard.”  Today we look at why the U.S. abandoned the gold standard in 1933.  It might surprise you.

Let’s Make a Deal, IX: Osawatomie, Kansas, 1910

The United States was in serious trouble in the early 20^th century.  The land frontier was effectively closed, and it had not been replaced with democratic access to other forms of capital.  The financial system was structured in a way that forced small businessmen and farmers to finance growth with past savings, while permitting large corporations to create money at will for growth by offering bills of exchange to banks and other businesses.  Ownership of commercial, industrial and agricultural capital was becoming increasingly concentrated, while the “Trusts” (monopolies) were exercising immense financial and political power.

Let’s Make a Deal, VIII: “A Series of Unfortunate Events”

One of the more burning issues of the presidential campaign of 1912 was the need for fundamental monetary and fiscal reform.  The Panic of 1893 had revealed serious weaknesses in the financial system.  The push for reform, however, was sidelined by the drive to involve the government in direct relief efforts (e.g., Coxey’s Army), and — even more so — by the “Silver Question” during the presidential campaign of William Jennings Bryan.  When the country pulled itself out of the Great Depression of 1893-1898 (by the fortuitous — for America — circumstance of crop failures in Europe and bumper crops in the United States), the push for financial reform was marginalized and forgotten in most circles

The Right Way to Raise Wages (Not)

Today's Wall Street Journal carried an op-ed piece by a professor of economics at UCLA, "The Right Way to Raise Wages" (07/08/10, A17). Unfortunately, it took a while to track down contact information for the author. The Wall Street Journal, ordinarily so careful, gave the professor's name as "O'Hanian," which we naturally read as "O'Hanlon." The gentleman's name is "Ohanian."

Anyway, his proposal is to avoid using the State or the unions to coerce a rise in the wage level. (Agree.) Instead, Dr. Ohanian proposes increases in funding for education and job training to raise worker productivity. (Disagree.) A Kelsonian will instantly see the problem here. Human labor isn't responsible for increases in productivity. Human labor can't do any more than it could 50,000 years ago. Rather, increases in productivity come from advances in technology, not advances in human physiology . . . unless some of those science fiction stories we've been reading or viewing are true. (Well . . . even most of those rely on turning human beings into cyborgs by retrofitting them with advanced technology, e.g., Keith Laumer's A Plague of Demons (1965); any of the Robocop films, the Six Million Dollar Man television series, etc.)

The solution is not to distort distribution patterns even more and undermine the natural right of private property, but to spread out direct ownership of the means of production so that people can gain an adequate and secure income from both labor and capital. So we fired off a letter to Dr. Oharian:

Dear Dr. Ohanian:

After reading your op-ed piece in today's Wall Street Journal ("The Right Way to Raise Wages," WSJ, 07/08/10, A17) and looking up your webpage on the UCLA site, I thought you might be open to hearing about another alternative to union bargaining power as a means of raising wages and increasing effective demand. This can be found in the "Capital Homesteading" proposal by the Arlington, Virginia-based Center for Economic and Social Justice ("CESJ"), an application of the "Just Third Way" of economic and social development.

The Just Third Way is based on the "Binary Economics" of Louis O. Kelso and Mortimer J. Adler, detailed in the two books they co-authored, The Capitalist Manifesto (1958) and The New Capitalists (1961). The Just Third Way embodies the "Three Principles of Economic Justice," 1) Distribution, 2) Participation, and 3) Harmony, as well as the "Four Pillars of an Economically Just Society":

• A limited economic role for the State,

• Free and open markets as the best means for determining just wages, just prices, and just profits,

• Restoration of the rights of private property, especially in corporate equity, and (the "fatal omission" from every economy in the world today)

• Widespread direct ownership of the means of production.

As a means of raising wages naturally, without employing coercion by either the State or unions, this last is consistent with the observation by Alexis de Tocqueville in Democracy in America:

In France most of those who labor for hire in agriculture, are themselves owners of certain plots of ground, which just enable them to subsist without working for anyone else. When these laborers come to offer their services to a neighboring landowner or farmer, if he refuses them a certain rate of wages, they retire to their own small property and await another opportunity. ("Influence of Democracy on Wages," Democracy in America, II.vii.)

In other words, if we want wages to rise naturally, employers who currently have an effective monopoly over workers' incomes need a little free market competition instead of union or State coercive measures. Workers — everyone, in fact — should own a capital stake large enough to generate an adequate and secure income sufficient to meet common domestic needs adequately. Wages could then rise or fall to a level reflecting the true market value of the labor being purchased.

To open up democratic access to the means of acquiring and possessing private property in the means of production to people who lack existing accumulations of savings, Kelso "invented" the Employee Stock Ownership Plan, or "ESOP." The ESOP and similar vehicles, such as the proposed "Capital Homestead Account" (a sort of credit-financed "super" IRA), have the potential (as Kelso and Adler put it in the subtitle of The New Capitalists), to "Free Economic Growth from the Slavery of Savings."

By "slavery of savings," Kelso and Adler do not reject the necessity of savings to finance capital formation. On the contrary, what they reject is the disproved dogma, rooted in the tenets of the British Currency School and finding its fullest development in Georg Knapp's "Chartalism," that "saving" necessarily means cutting consumption.

This blind subservience to past savings, while embodied in U.S. tax law, as well as Federal Reserve and federal government monetary and fiscal policy, was completely disproved by Dr. Harold G. Moulton, president of the Brookings Institution from 1916 to 1952. Among other works, Moulton published The Formation of Capital in 1935, the third volume in a four-part series presenting an alternative to the Keynesian New Deal to provide a framework for formulating an economic recovery program.

Before the end of next week we expect to have our new edition of The Formation of Capital (republished with the generous permission of the Brookings Institution) ready for submission to the printer. This edition features a new foreword by Dr. Norman G. Kurland, president of CESJ, explaining the importance of Moulton's work, both in countering today's unquestioned Keynesian policy assumptions, and — more importantly in the long-run — in demonstrating that ordinary people can (and should) become owners of significant capital stakes by using future rather than past savings.

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