Party Like It's 1914, Part I

The Ford Motor Company has announced that it will sell 300 million new equity shares to raise the cash to meet its health care obligations to the UAW. ("Ford to sell 300 million common shares") Aside from the fact that this gives both unions and management tremendous incentive to push for government-run and taxpayer-funded health care (otherwise known as "socialized medicine"), using a company's capitalization to pay expenses unrelated to production is self-defeating for the company, and adds to the inflationary wage/price spiral that has inhibited economic growth and development ever since Keynes' disproved theories became unquestioned economic dogma. Ironically, this has not only happened before, the Ford Motor Company led the way.

In January of 1914 Henry Ford raised the basic wage rate at the Ford Motor Company from $2.34 per day to $5.00 (See Robert Lacey, Ford, The Man and the Machine, 1986). At first limited to certain classes of machinists and widows with children, the increase caused so much envy among all workers that Ford was forced to make $5.00 the basic minimum for everyone. Workers employed at other auto plants and unemployed people from across the country descended on Ford in search of jobs, causing riots that had to be broken up with fire hoses in subzero weather. A number of small businesses located near the Ford plant were destroyed during the disturbances.

Other auto manufacturers were forced to raise their pay rates to keep qualified workers. The increase in pay unlinked to increases in productivity started an inflationary wage/price spiral. Exacerbated by the inflationary monetary policies instituted in the First World War with the hijacking of the new Federal Reserve System to finance government deficits instead of private sector capital formation, Ford's unilateral wage increase eventually resulted in a typical autoworker in 2009 making in wages and benefits more than twice in one hour what an autoworker made in 1909 in an entire week — Saturdays included.

Contrary to the Keynesian fallacy that inflation results in genuine wealth creation, the increase is almost pure illusion. We don't have the time to do in-depth research, so the following figures are necessarily approximate, but they give a good idea of the effect that inflationary Keynesian economic policy and theory have on real income.

According to the Bureau of the Census, U.S. median income in 2007 was approximately $50,000.00, subject to an effective federal tax rate of about 20.7%, which we'll round to 20% (this includes the workers' share of FICA, c. 7.5%). That left approximately $40,000 in disposable income for the "typical" wage earner. This is a lot of money, but what does it mean? The average price of an automobile in 2006 was $22,651, or 45.3% of median disposable income. The average price of a house in 2000 was $120,000.00, or 240% of median disposable income.

In comparison, a Ford worker making $5.00 per day, six days a week in 1914, could expect to take home $1,250.00 — all of it disposable. A Model T Ford "Runabout" in 1914 cost $440 (and was reduced to $345 in 1916), or 35.2% of disposable income. An elderly uncle of mine recalls that his father purchased a farm in Lancaster County, Pennsylvania, in 1906 for $400, or 32% of the lowest-paid Ford worker's disposable income. (I used anecdotal evidence because the Census Bureau only goes back to 1940 for house prices.)

Thus, the modern autoworker can expect to spend approximately 280% of his or her annual disposable income on transportation and housing, compared to the autoworker of the early twentieth century's approximately 70% of disposable income. Using only these crude approximations, we conclude that the autoworker of 1914 was at least 200% better off than his or her modern counterpart.

"But," you are tempted to say, " what about the quality of life, and the vastly increased goods and services available to today's worker?"

To that we answer, if Say's Law of Markets were in operation instead of disrupted and undermined by Keynesian economics, ownership of the means of production was widespread, and all new capital formation financed out of "pure credit" (see The New Capitalists: A Proposal to Free Economic Growth from the Slavery of Savings), production would equal income. Workers' real income would increase rather than decrease as they were able to take advantage of advancing technology and economies of scale as owners as well as providers of labor.

Ultimately, the issue seems to boil down to 1) lack of understanding of money, credit, banking, and finance, 2) bad uses of credit, and 3) defining "power" as control over others rather than control over your own life. We will look at each of these in subsequent postings.

How to Use a Central Bank

Here are copies of two letters we sent last week to the Wall Street Journal and the Washington Post regarding potential sources of new capital for commercial banks that the "stress tests" appear to mandate. As required by letters to editors that hope to have a chance of getting published, we restricted ourselves to the single issue of using the Federal Reserve properly as a source of liquidity for financial feasible industrial, commercial, and agricultural private sector projects. We did not cover the equally important issue of the necessity for widespread direct ownership of the means of production — including financial resources that can be created "out of nothing" and thus have no existing owner(s) — to secure a sound economy.

Widespread direct ownership of the means of production, however, only becomes politically and financially feasible when the central bank is used to create money to finance the acquisition of capital by people who currently own little or nothing in the way of income-generating assets. Pointing out how the Federal Reserve is designed and originally intended to operate is thus only half the battle. The other is to bring programs like Capital Homesteading to the attention of "prime movers" and others who can implement it and deliver its benefits to the people of the United States and the world.

Letters, The Wall Street Journal
wsj.ltrs@wsj.com

Dear Sir(s):

No doubt the authorities making the decisions in response to the so-called "stress tests" regarding the amount of capitalization required by commercial banks believe they are acting in the best interests of the economy and the financial markets. If they truly understood money, credit, banking, and finance, however, they would realize that additional capitalization by foreign or domestic investors, or the taxpayers, is completely unnecessary. The solution already exists and can be implemented without the use of tax monies or government loans.

The Federal Reserve System was established in part to provide the country with a "flexible currency" that would expand when the economy required more money in circulation, and contract in response to the dangers of inflation. Under § 13 of the Federal Reserve Act of 1913, a commercial bank that wishes to make loans that are not covered by its current reserves can discount (sell) qualified industrial, commercial, and agricultural loans to the local Federal Reserve Bank.

The central bank of the United States has the power to create money to purchase these loans, either in the form of Federal Reserve Notes (promissory notes) or demand deposits. The Federal Reserve thereby provides the commercial bank with 100% reserves backing the money created through the discounting process, or (if you will) "instant capitalization." No taxpayer money, foreign investors, or federal bailouts are needed. It is only necessary to stop using the Federal Reserve to monetize government deficits, and start using the central bank for the purpose for which it was intended.

Letters, The Washington Post
letters@washpost.com

Dear Sir(s):

With respect to the additional capitalization requirements for commercial banks proposed as a result of the bank "stress tests," how long will it take the public to understand that increased government involvement in the private sector is not part of the solution, but part of the problem? Ironically, a solution already exists in plain sight.

The Federal Reserve System was established to provide liquidity for the private sector through the commercial banking system without the need for pre-existing reserves (capitalization). Using the Federal Reserve to finance government spending came later, when politicians decided it was easier to fund the United States' entry into World War I by borrowing money from the central bank instead of through taxation.

Under § 13 of the Federal Reserve Act of 1913, a commercial bank can sell (discount) qualified industrial, commercial, and agricultural loans to its local Federal Reserve Bank. The Federal Reserve has the power to create money to purchase these loans, thereby providing the country with an asset-backed currency supported by 100% cash reserves. There is no need for consumers to cut spending in order to save, for foreign investors, or for bank bailouts.

News from the Network, Vol. 2, No. 19

A superficial review of this past week brings to mind noted comedian John Cleese's instructional business video on meetings, bloody meetings. Fortunately, we did not fall into the trap of having meetings just to have meetings, or to attend an event just to rack up points for "busy work." Every meeting and event this week resulted in major progress for the Just Third Way.

• Monday evening the CESJ core group had an introductory meeting with a publisher that promises to be one of the most significant in recent years. Originally scheduled for two hours, the meeting lasted until 12:30 the next morning. The topics centered on the necessity of getting word about the Just Third Way to prime movers not only in the United States, but throughout the world. As long as the meeting went, it was all too short, and many of the discussions were postponed to a time when they could be taken up in greater depth. The importance of the meeting was to establish a relationship with an influential journal that has an international readership and reputation. Subscribers include people who are interested in what is going on in the power centers of the religious world, and how it relates to critical events taking place around the world.

• One of the premier worker-owned companies in the United States, Mid South Building Supply, Inc. of Springfield, Virginia, with locations in Virginia and Pennsylvania, received the ESOP Association's AACE Award in the "Printed Materials, 250 or Fewer Employees" category, and was runner-up in the "Special Events, Promotions, Series, 250 or Fewer Employees" category. Due to the long-standing professional and philosophical relationship that exists between Mid South, and CESJ and EEI, Andrew Tavss, company president, invited Norman Kurland, Dawn Brohawn, and Michael Greaney to be present at the banquet and ceremony, held at the Marriot Renaissance Hotel in Washington, DC. Special mention should be made of Mid South's entry into the 2009 ESOP Employee Ownership Month Poster, designed by Linda J. Lowe. While the poster did not win the contest, many people familiar with Mid South's design, incorporating children's alphabet blocks and a construction crane, felt that Ms. Lowe's composition was more innovative and original than the winner. Unfortunately, we were not able to figure out how to insert the image of the poster on this blog.

• On Friday, the CESJ "core group" (Dr. Norman Kurland, Dawn K. Brohawn, Rowland L. Brohawn, and Michael D. Greaney) and Dr. Ahmed Mansour, president of the International Qu'ranic Center of Northern Virginia, attended the National Catholic Prayer Breakfast in Washington, DC. Antonin Scalia, Associate Justice of the United States Supreme Court, delivered the opening remarks, while the Most Reverend Raymond L. Burke, Archbishop Emeritus of St. Louis, Missouri, Prefect of the Apostolic Signatura at the Vatican (analogous to the Chief Justice of the Supreme Court) gave the Keynote Address. The Keynote Address was followed by a spiritual reflection and prayer by the Most Reverend Jean Benjamin Sleiman, Latin Rite Archbishop of Baghdad, while the closing prayer was delivered by the Reverend Monsignor Eugene Morris, Director of the Office of the Diaconate of the Archdiocese of St. Louis.

• Justice Scalia's erudite talk, which was somewhat more in-depth than the usual opening remarks one hears, contrasted the difference between worldly wisdom based on a purely materialist view of life, and the apparent absurdity of Christianity — or any other religion, for that matter — using reason illuminated by faith to understand reality. His Honor related the experiences of St. Paul of Tarsus in Athens, where the Athenians listened to him out of curiosity and their love of novelty, walking away when Paul started talking about miracles, and St. Thomas More, who gave up every worldly advantage for reasons that people of his time and even ours find incomprehensible.

• Archbishop Burke's address explained how true patriotism and love of country must be based firmly on the precepts of the natural law written in the hearts of all humanity. Organized religion has the task of guiding the State to help civil authorities act in accordance with the moral precepts discerned by reason. This does not, however, mean that the Church, Mosque, Synagogue, or Temple dictates or forces civil government to act in specific ways, but interprets the principles of the natural law and helps authorities and ordinary citizens discern and understand how far the civil order is in conformity with the essential precepts of the Law. His Excellency urged prayer and fasting to help open the minds of civil authorities to the principles of natural reason. To this we would add that acts of social charity (loving our institutions as we love ourselves) followed by acts of social justice directed at reforming the institutions of the common good to enable those institutions better to assist each individual in acquiring and developing virtue are a necessary follow-up to such spiritual exercises.

• As of this morning, we have had visitors from 33 different countries and 45 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, with Brazil, Canada, and Romania rounding out the "top five." People in Egypt and Venezuela spent the most time on the blog. The most popular postings are the series on "Easter Economics," with the "State is God" natural law postings coming up rapidly.

Those are the happenings for this week, at least 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." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

Rebuilding After the Quake, Part II

While (according to reports) the Mafia has moved into the rebuilding after the earthquake business in Italy, the most immediate requirement in a relief program is to take care of the material wants and needs of the people involved. Initially that can be taken care of by the various humanitarian and relief organizations. The whole point of a relief program, however, is to help get people back on their feet so that they can once again start providing for themselves out of their own efforts and resources.

Food and clothing can be shipped into the region for as long as it takes to get the area productive again, and should not be a problem. Italy has a high standard of health care, so even with the destruction of hospitals in the area, other hospitals can take over the patient load. Even with respect to shelter, summer is coming, so temporary housing can be used for a longer period than might otherwise be the case.

This will allow the primary focus to be on rebuilding the area's productive capacity, helping it to begin producing wealth as fast as possible, both to begin once more taking care of people's needs and to pay for the rebuilding process. CESJ's "Capital Homesteading" proposal could quickly be implemented, both to provide financing for rebuilding productive capacity, and to build direct ownership into the people in the area so that they benefit materially to the maximum degree possible.

By bringing in contractors from outside region, it should also be possible to begin rebuilding housing, whether repair of damaged historical structures, or new construction that blends into the area's cultural heritage. By using CESJ's "Homeowners' Equity Corporation" or "HEC," such housing can be financed through the central bank using "interest free" loans, and repaid by tenants over time whose rental payments earn them shares in the HEC. The HEC should fit in well with Europe's tradition of commune- or community-owned housing, although in contrast to those approaches, the tenant rapidly becomes an owner through building equity instead of a pile of rent receipts.

Finally (a misleading way of saying, "at the same time") a program similar to that being used to rebuild one of America's most economically devastated cities, East St. Louis, should be implemented, the "Metro-East Citizens' Land Cooperative," so that people in the area will not only share in the rebuilt productive enterprises and home ownership, but gain ownership of the land and infrastructure that in most places is traditionally owned by the local government.

The best thing you can do is to send a link to this posting to the Italian Ambassador to the United States, the Hon. Giovanni Castellaneta, via some of the contacts listed on the embassy's website. You might also want to try sending something to the American Red Cross, your own national Red Cross, or even the International Committee in Geneva.

Rebuilding After the Quake, Part I

The government of Italy has expressed concern that the Mafia, which has allegedly already established a base in the area affected by the earthquake, is working to seize control of the rebuilding process, diverting cash from the rebuilding effort, to lining its own pockets. This not only slows or inhibits traditional forms of assistance, it helps obscure the flaws inherent in doing things in the usual way. Failure can be blamed not on providing the wrong kind of assistance in an inappropriate way (a systemic problem), but on corruption and graft — an individual problem. Before individual problems can be dealt with effectively (individual justice), the systemic problem has to be corrected. That is a job for social justice, which looks not to individual goods, but to the common good, that network of institutions within which the human person carries out the business of daily life and thereby acquires and develops virtue.

While it might not be as widespread in its effects as the tsunami that devastated Southeast Asia, or as politically-sensitive as Hurricane Katrina, the series of earthquakes that have overwhelmed central Italy are fully as costly in human and cultural terms as these other disasters. Thus, we can learn from the mistakes of the past in how similar events have been handled, and implement a solution that is much more efficient, cost-effective, and (above all) more respectful of human dignity than the "usual" type of response, to say nothing of providing automatic checks and balances against Mafia-style corruption in the form of building direct ownership into each citizen and resident of the affected area. Man, as Aristotle observed, pays most attention to that which is his own.

The most immediate need after search and rescue has been finished is to make whatever redistribution of wealth is necessary to provide the survivors with adequate food, clothing, and shelter until the rebuilding process can begin. International humanitarian organizations such as the Red Cross, churches, and governments best handle such immediate relief efforts. Particularly in light of the economic upheavals over the last two years, preference should probably be given to relief efforts by private organizations, individuals, and non-profits instead of governments that are already beginning to be overwhelmed by the needs of their own, economically-devastated citizens.

Such private sector initiatives have, in the past, proven themselves more than equal to such tasks. It is when they try to finance the rebuilding that private resources become inadequate and people begin looking to government to supply funds beyond the scope of most private individuals or organizations. Unfortunately, at this time most governments, as we already pointed out above, are starting to be overwhelmed by the task of trying to take care of the victims of the global financial meltdown.

Further, governments (for all the good intentions that may motivate their efforts) are not really oriented to providing for individuals. By their nature and their specific role as guardians of the common good, governments by necessity look to mass solutions that often leave specific individuals to fall through the cracks. For that reason we should look at private sector alternatives for financing areas suffering from the effects of disasters, whether natural (as with an earthquake), or manmade (as in the case of the global financial meltdown), leaving governments (especially the Italian government) to provide whatever legislation may be necessary to allow the private sector initiatives to operate at optimal efficiency and respect for human dignity.

The Center for Economic and Social Justice ("CESJ") has developed a number of programs and potential financing vehicles that, once the appropriate legislation is in place, can be implemented quickly and tap into the potential of the Italian central bank to create money to finance the rebuilding. This would be financially sound and economically (and politically) feasible as long as the rebuilding is carried out in ways that 1) allow everyone in the area devastated by the quakes to participate in the benefits of rebuilding through direct private ownership of what is rebuilt, and 2) use financing vehicles that allow what is rebuilt to pay for itself out of future earnings.

Some specifics will be covered in the next posting on this subject. In the meantime, you can alert people that there may be a feasible alternative to the usual sort of rebuilding available, and direct them to the CESJ web site and this blog.

Letter to Judge Richard A. Posner

While not widely known as an advocate of worker ownership, Judge Posner has published a number of books relating to economic issues, the most recent of which is A Failure of Capitalism, recently reviewed in the Wall Street Journal. Avoiding the issue whether or not capitalism failed long ago, we sent a letter to His Honor yesterday pointing out some areas in which (according to the review) his analysis of the situation might have left one or two things out. Here's the letter.

Richard A. Posner
Judge, United States Seventh Circuit Court of Appeals
Senior Lecturer, University of Chicago Law School

Dear Dr. Posner:

Earlier today I read the excellent review that Mr. L. Gordon Crovitz wrote of your book, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression in the Wall Street Journal. Admittedly, reading a brief review is not the same as reading the book, but, from my perspective as a Certified Public Accountant, I believe there are four areas you might not have addressed adequately in your analysis.

First, there is a need for financial professionals to gain a better understanding of money, credit, and banking. All three areas are pervaded with incorrect Keynesian assumptions that inhibit or prevent optimal functioning of their respective roles in a free market-disciplined economic process. A case in point is the Keynesian dogma that capital formation can only be financed out of existing accumulations of savings, a belief disproved by Dr. Harold G. Moulton of the Brookings Institution in his 1935 monograph The Formation of Capital.

Second, obviously more and better regulation is needed. The problem is that too many people understand "regulation" in terms of "State control." What is needed is not State control, but what accountants call "internal control," or arranging the financial system so that automatic checks and balances are in place. The State's role must be limited to policing the system, not running it.

Third, increasing competition in the system and breaking up financial monopolies is the best way to achieve the necessary degree of internal control. Financial institutions "too big to fail" need to be restructured, not offered taxpayer bailouts. Even more important, no financial institution should combine within itself incompatible functions, as resulted from the lifting of the Glass-Steagall constraints. This allowed the consolidation of commercial banks, investment banks, brokerage firms, mortgage banks, ratings agencies, and hedge fund operators under a single roof. What resulted was the virtual elimination of the checks against abuses that each of these institutions embodied when operated independently in their own self-interest. Proper separation of function also addresses Henry Simons' concern about the dangers of permitting the State to use the central bank to finance government deficits.

Fourth, the public sector should integrate the principles of economic justice found in the binary economics of Louis Kelso and Mortimer Adler, who extended Moulton's insights into sound monetary, fiscal, and other macro-economic policy. At the micro-economic level, the private sector should integrate binary economics' ownership, financial structures, and governance systems.

Simply reading these points, of course, tells you little or nothing. For that reason, I would urge you in the strongest possible terms to review a short monograph titled, "A New Look at Prices and Money," by Dr. Norman G. Kurland, president of the Center for Economic and Social Justice, published in the Journal of Socio-Economics. Dr. Kurland is a 1960 graduate of the University of Chicago law school, where he led the class in "Competition and Monopoly" taught by Aaron Director and Dean Edward Levi. He worked in the Civil Rights movement in the in the early 1960s, and later served as Director of Planning for the "Citizens' Crusade Against Poverty" chaired by the late labor statesman Walter Reuther of the United Auto Workers.

Later, Dr. Kurland headed Louis Kelso's Institute for the Study of Economic Systems, and then became Kelso's Washington counsel. In that capacity Dr. Kurland was instrumental in persuading the late Senator Russell Long of Louisiana to champion Kelso's Employee Stock Ownership Plan ("ESOP"). Dr. Kurland also served as Deputy Chairman for the Presidential Task Force on Project Economic Justice under President Ronald Reagan. He is currently working with the American Auto Workers' Ownership Committee (AAWOC) to present an alternative to the administration's proposal to save Chrysler and General Motors. Dr. Kurland is also principal author of Capital Homesteading for Every Citizen (2004). Capital Homesteading is a comprehensive package of macro-economic reforms to our national monetary, tax, welfare, labor, and trade laws, all consistent with basic free market, private property, and limited government principles.

Obamanomics: Close — But No Cigar

The Portsmouth Sinfonia was an orchestra in England founded by a group of students at Portsmouth School of Art in Portsmouth, England in 1970. The group made a number of recordings and, although they never officially disbanded, gave their last performance in 1979. What made the group a unique cultural phenomenon was its unusual entrance requirement: members were either non-musicians, or (if musicians) using an instrument that was completely unfamiliar to them. The result was a somewhat oxymoronic "community of individuals," each going his or her own way within an incompletely understood or totally misunderstood structure.

A friend of this writer had a collection of all the group's recordings, which we listened to frequently. Because of the group's composition, concerts tended to give vague impressions of the works being performed, rather than completely accurate (or even generally accurate) renditions. The surreal outcome of this otherwise harmless pastime was that after listening to the recordings over an extended period, we noticed that correct performances of the pieces started to sound wrong. We had been listening to the more-than-slightly-off performances for so long that they had started to sound correct.

We see the same thing today in many areas of thought, for example, economics and social justice. People have been listening to, say, Keynesian assumptions and socialism for so long that they now sound like the correct, even only versions of reality. In actuality, however, Keynesian assumptions no more reflect economic reality than socialism is a form of social justice.

Just because so many people have been effectively brainwashed into thinking that existing accumulations of savings are necessary to finance the formation of capital doesn't make it so — especially when the exact opposite can be proven, as Dr. Harold Moulton did in 1935 with his publication of The Formation of Capital. Keynes' assumption about savings and investment has led to the crippling assumption that we need the rich to finance capital formation . . . and to the equally erroneous claim that the only way to obtain anything is to take it from the rich.

Similarly, the belief that having the State take care of each person's individual good somehow takes care of the common good is a profound distortion of the proper role of the State. In concrete form, the common good consists of that network of institutions within which we as "political animals" acquire and develop the virtue, the capacity for which defines us as human beings. We acquire and develop virtue not by having everything handed to us or taken care of by the State, but by working to acquire habits of doing good — virtue, or (literally) "human-ness."

Thus, the State's proper role is to protect individual rights and their carefully defined exercise. The State carries out this role by preserving equality of opportunity, not equality of results, and by policing abuses of the system by people who misuse common institutions or commit crimes as individual acts. The State thereby confirms and maintains the institutions that organized individuals have, through "acts of social justice," formed or reformed to meet their needs, the greatest need being the acquisition and development of virtue.

All of this sounds alien to people who for decades, even centuries have been hearing political and economic theories that sound as if they might be correct, but which fall apart when contrasted to a precisely-defined and well-understood reality. To get a basic understanding of social justice, a good place to start is the 1948 pamphlet by Father William J. Ferree, Introduction to Social Justice, available as a free download from the website of the Center for Economic and Social Justice. To start learning about the "economics of reality," a relatively short book with a misleading title by Louis O. Kelso and Mortimer J. Adler is available as a free download from the Kelso Institute: The New Capitalists: How to Free Economic Growth from the Slavery of Savings (1961).

Either of these short works would help Mr. Obama and the rest of the administration to develop a more realistic approach to the massive problems the United States and the world face. Taken together, Introduction to Social Justice and The New Capitalists have the potential to help Mr. Obama and his administration orchestrate a coherent solution, and to stop playing around with a very serious set of problems when they can't even read music.

News from the Network, Vol. 2, No. 18

After the full schedules occasioned by having the annual demonstration outside the Federal Reserve in Washington, DC, and CESJ's Silver Jubilee in the space of a week, it might seem as if nothing is going on. Very much to the contrary, the number of events is fewer, but their significance is just as great, as the following list of news items should make clear.

• Guy Stevenson, a regular reader of this blog, posted the entire "God is the State" series on the natural law on the America's Independent Party National Committee website, and added videos illustrating some of the points. We also learned that Mr. Stevenson recently subscribed to Social Justice Review, the official journal of the Central Bureau, Catholic Central Union of America in St. Louis, in which many articles that first appeared as postings on this blog are scheduled to appear.

• On reading an article by Dr. Charles Rice of the University of Notre Dame Law School on the selection of President Obama as the annual commencement speaker, we sent an e-mail to Dr. Rice regarding his suggestion that people, instead of attending commencement, go to the famed Notre Dame Grotto at the other end of campus and pray during the ceremony. Dr. Rice responded, saying he was intrigued by our suggestion that others be invited to the Grotto instead of just students, and that people hold "LIFE Parties" on May 17, 2009, analogous to the "TEA Parties" that sprang up spontaneously across the country on April 15. "LIFE," of course, is an acronym for "Life Is For Everybody." We also suggested that if people insisted on hearing a speech, they might invite Dr. Norman G. Kurland, president of CESJ, to speak on the Just Third Way and Capital Homesteading as a "Pro Life Economic Agenda."

• We would like to direct your attention to the reader comment posted under "The OTHER Irish Disaster" by Dr. Max Weismann of the Center for the Study of the Great Ideas in Chicago, an institute founded by Dr. Weismann and Dr. Mortimer J. Adler.

• The Online Edition of the Wall Street Journal of April 29, 2009 carried an article by Alex P. Kellogg on "Chrysler Workers Urge Obama to Support Ownership Push." The article highlighted an interview with Michelle Mauder, who has been spearheading the AAWOC effort to gain 100% of the direct ownership of a reorganized Chrysler for the workers and retirees, instead of a 55% beneficial ownership stake through the UAW. The effort is backed by civil rights icon Walter Fauntroy, a former congressman and ESOP advocate.

• As of this morning, we have had visitors from 32 different countries and 45 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, with Canada, Brazil, and Australia. People in Egypt and Venezuela spent the most time on the blog. The most popular postings are the series on "Easter Economics," with the "State is God" natural law postings coming up rapidly.

Those are the happenings for this week, at least 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." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

The OTHER Irish Disaster

No, this is not a posting on the situation at the University of Notre Dame, where the president, the Rev. John Jenkins, C.S.C., has openly flouted explicit instructions from the U.S. Bishops' Conference and directives from the Vatican, and ignored "hints" from prominent Catholics and petitions from concerned students, faculty, alumni, and friends of the University in extending an invitation to Mr. Obama to speak at this year's Commencement. This is, rather, another attempt to reach the powers-that-be in Ireland and alert them to the possibilities offered by Capital Homesteading and the Just Third Way for solving the current economic crisis. This is a slightly edited version of a letter we sent to Dr. Alan Barrett of the Economic and Social Research Institute (ESRI) in Dublin, www.esri.ie, the leading think tank in Éire.

Dear Dr. Barrett:

The article in yesterday's Irish Independent, prepared from a review provided by your organization ("Republic's Economy is Fastest Shrinking in Developed World") gives a much-needed warning about the direction in which the current economic crisis is leading not only Ireland, but the world. Paradoxically, your statement quoted at the end of the article to the effect that it is too early to decide whether the proposed measures will be adequate suggests that there is hope — if only because what you said indicates a certain openness of mind to innovative solutions that are both financially feasible and ecologically sound.

In view of that, I would like briefly to introduce the work of the Center for Economic and Social Justice ("CESJ"), www.cesj.org, to you, and then suggest some possible areas of cooperation between your organization, and our all-volunteer think tank and its interfaith membership.

CESJ was founded in 1984 by a small group of Jews, Christians, Muslims, and others who came together on the basis of a set of shared values based on the natural law tradition of the west to promote the economic justice principles developed by Dr. Louis O. Kelso and Dr. Mortimer J. Adler, and the social doctrine of Pope Pius XI as analyzed by "America's greatest social philosopher," Father William J. Ferree, S.M., Ph.D., who was one of CESJ's co-founders.

Kelso and Adler's work is best set forth in the two books they co-authored, both with misleading titles but profound thought, The Capitalist Manifesto (1958) and The New Capitalists: A Proposal to Free Economic Growth from the Slavery of Savings (1961). Louis Kelso is best known as the inventor of the Employee Stock Ownership Plan ("ESOP"), a financing vehicle that has resulted in more than 11 million workers becoming part owners of the more than 11,000 companies for which they work. Mortimer Adler, as you are probably aware, designed the "Great Books" program at the University of Chicago, Illinois, and was considered the premier American Aristotelian of the 20th century.

Father Ferree was, at different times, president of Chaminade College in Honolulu, Hawaii, Rector of the Catholic University of Puerto Rico, and Chairman of Dayton University. His most important work was his doctoral thesis, The Act of Social Justice (1941) in which he explained Pope Pius XI's revolutionary breakthrough in the field of social morality. At the time of his death in 1985, Father Ferree was hard at work on a new book intended to integrate the economic justice principles developed by Kelso and Adler into the social teachings of the Catholic Church.

After reviewing the work of your institute as described on your website, I believe that an approach CESJ calls, "The Just Third Way," especially as embodied in our "Capital Homesteading" proposal, might have much to offer you. In particular, we have specific proposals designed to address the problem areas targeted in the article in the Irish Independent:

Unemployment. Demand for capital and labor follows increased consumer demand. Economic growth and thus job creation thus results from increases in consumer spending, as Dr. Harold Moulton demonstrated in his 1935 monograph, The Formation of Capital. Consistent with "Say's Law of Markets," which states that production equals income, and thus supply generates its own demand, and demand generates its own supply, the Just Third Way addresses the problem of unemployment by opening up democratic access to capital credit for new, financially feasible investment. As new capital is formed and financed in ways that allow first the workers, and then every citizen to share equitably in the ownership of the new capital, jobs are created first to produce the capital, then to supply labor for the new or expanded productive enterprise. The wages paid during this process increases consumer demand, which leads to additional new capital formation and more job creation. Additionally, when companies can obtain financing for new capital by selling shares to the workers and other citizens instead of retaining earnings, all earnings above working capital needs can be paid out, further increasing consumption income and thus effective demand, once the workers and other citizens have paid for their shares out of dividends.

Housing. The Just Third Way would address the housing and building trades crisis with a new ownership/financing vehicle called the "Homeowners' Equity Corporation" ("HEC"). A HEC is a proposed for-profit stock corporation whose shareholders would be homeowners in danger of foreclosure. HECs — and there should be many, to provide redundancy, lower risk, and ensure competition in a community — would purchase distressed properties at the current market value. HECs would obtain acquisition loans from commercial banks, which in turn would discount the loans at the central bank at a rate reflecting transaction costs and a revised risk premium. The homes could then be leased at a realistic market rate to their former owners or new tenants. The tenant would earn shares in the HEC as lease payments were made sufficient to cover debt service, maintenance, and taxes. When the acquisition loan for a particular property was fully paid, the tenant could exchange his or her HEC shares for title, or continue as a tenant/shareholder at a reduced lease payment, sufficient to cover maintenance and property taxes. Financing the purchase of properties through the central bank and its member banks would cost the taxpayer nothing and be the first step in restoring a currency backed by hard assets instead of government debt.

Deflation. The Just Third Way addresses the twin evils of inflation and deflation by the same method. In classic banking theory, money can be created at will without inflation if (and only if) the money is used to finance capital projects that pay for themselves out of their own future earnings. Because money can be created through the banking system and backed up by the central bank for as many financially feasible projects as are brought to commercial banks for financing, there is no danger of deflation. Because the money created for capital investment is canceled once the loan by means of which the money was created is repaid, there is no danger of inflation. There is always enough money, and the price level remains stable. The need to accumulate savings to use as collateral is eliminated by using capital credit insurance, backed up by a capital credit reinsurance pool to spread risk even further, instead of concentrating the risk in individual borrowers, lending institutions, or the State.

Government debt. The Just Third Way's Capital Homesteading proposal includes a complete reform of a nation's tax system. Much of the complexity found in the tax systems of many countries results from the basic assumption of Keynesian economics that capital formation cannot be financed except out of accumulated savings. While Keynes' assumption contradicts classic banking theory as well as historical fact analyzed by Dr. Harold Moulton, the world's tax systems reflect the presumed necessity of favoring the wealthy in order to induce them to save and reinvest their income to finance capital formation and thereby create jobs. This greatly reduces consumption income, and the government inflates the currency to increase effective demand so that "excess" production can be cleared. This lays the foundation of the erroneous Keynesian belief that there is a necessary trade-off between inflation and unemployment. This also greatly reduces the tax base, forcing the government to borrow both to meet its expenditures as well as to cause inflation to increase consumption and maintain the desired number of jobs artificially. Without the need to reduce the tax base by favoring the rich or make up for the decrease in effective demand by inflating the currency through government borrowing, the State can begin following sound, non-politically motivated monetary and fiscal policies and begin paying down debt without risking the harm that Keynes was convinced would result.

If these brief descriptions of some of our proposals intrigue you, I invite you to pay a visit to the CESJ website, www.cesj.org. I would draw your particular attention to the free download available of our book, Capital Homesteading for Every Citizen, as well as the paper on the HEC. If you have any questions, or if you would like to discuss anything on the website or grounds for possible future collaboration, you will want to make contact with Dr. Norman G. Kurland, president of CESJ. Dr. Kurland can be reached via e-mail telephone using the information given on the website.

Dr. Kurland's concern for justice for the poor has been evident since his work in the Civil Rights movement in the American south in the early 1960s, continuing through his collaboration with the late labor statesman Walter Reuther of the United Auto Workers in Reuther's "Citizens' Crusade Against Poverty." Later, Dr. Kurland was instrumental in persuading the late Senator Russell Long of Louisiana to champion the Employee Stock Ownership Plan ("ESOP") invented by Louis Kelso.

Dr. Kurland also served as Deputy Chairman for the Presidential Task Force on Project Economic Justice under President Ronald Reagan, and presented the report on CESJ's efforts to promote economic and social justice in a 1987 private audience with His Holiness Pope John Paul II, more fully described in CESJ's "accomplishments brochure." Most recently, Dr. Kurland has developed the concept of the "Natural Resource Bank" which would have the capacity to vest all inhabitants of a region with a direct, definable private property stake in the land and natural resources. Dr. Kurland was also influential in developing the HEC, described above.

Thank you. We look forward to hearing from you.

The State is God, God is the State, Part VII

As we saw in the previous posting in this series, putting even the safety of the State above the natural law leads ultimately to disaster. When we put the State above God, as the Newsweek article and advertisement suggested, the situation is, if possible, even worse. We reach almost the absolute nadir, however, when we base the natural law on our understanding of or belief in something we regard as being a revelation from God, rather than on the common consent of all mankind as to what constitutes "good."

The chief problem is that, if God is just, the precepts of the law cannot be binding on anyone who does not believe in a particular religion. It doesn't matter if the religion is officially recognized as an arm of the State, is believed by virtually everyone, or is the product of one individual's interpretation of what he believes to be a revelation from God. This is because the validity of the precepts relies on faith in a specific revelation (an expression of God's Will), not a conclusion based on human reason. To be punished for violating a precept based on a faith that you don't have is, obviously, a grave injustice, as faith in a particular revelation is, ultimately, a personal choice and an exercise of free will.

The great advantage to basing the natural law on what you believe to be God's Will, however, is obvious: you can do anything you want. All you have to do is assert your personal faith decision (or lack thereof), and convince enough people to go along with your idea(s) and interpretation(s). Basing things on your belief in, personal interpretation, and acceptance of a particular expression of God's Will removes any reliance on an objective standard (the common consent of all mankind as to what constitutes "good"), undermines reason (common sense), and allows you to stigmatize anyone with whom you disagree (or who disagrees with you) as forcing his morality on you, or as a liar for believing in something different from what you believe, or any other accusation you choose to make. This is because believing something makes it true, and all morality becomes "situational," as the Humanist Manifesto put it.

This might explain the anxiety of the federal government and such popular journals as Newsweek to make certain that people are convinced that belief in the "Christian God" (or, ultimately, any god) is outdated, outmoded, old-fashioned, and just plain ignorant, if not downright stupid. After all, you have the State there to provide your every need, even determine what is right and wrong by feeding you from websites that are the modern equivalent of the fruit of the tree of the knowledge of good and evil.

If people believed in an objective standard of right and wrong, as embodied in, for example, Christianity, Judaism, and Islam (whether or not you are a religious believer or adherent of any faith), the State would lose its power to dictate what it wants people to believe. Convincing people that the natural law is based on some superstitious religious believer's interpretation of a questionable expression of the Will of a God who probably doesn't even exist, is a significant victory in the struggle to establish the State as the sole authority and exclusive benefactor for all humanity. Attempts to persuade people to do what is right within a framework that bases the natural law on faith are instantly termed "forcing your morality on others" — which it is, for where there is no objective standard of morality (the natural law based on the common consent of all mankind as to what constitutes the "good"), everything is personal opinion.

Unfortunately, many religious believers have fallen into the trap of claiming that the essential precept of the natural law, "good is to be done," is because "God said so" (Will) rather than "God is so" (Nature or Intellect). The former claim can easily be rejected as a matter of personal belief, and thus opinion. The latter is impossible to reject, for, if man is made in the image and likeness of God, and the content of the natural law lies in the common consent of all mankind as to what constitutes the good, it can hardly be considered "personal," whether or not you believe in the God in whose image you are presumably made. That is because the law is being based not on an opinion or religious belief, but on an observable fact: what mankind has assumed to be good in all times and places. Specific religious belief, or any religious belief at all is not necessary to accept the truth of what can be subjected to objective verification.

Thus, the basis for the natural law, Will or Intellect, is not an obscure or esoteric point that has no relevance to modern life. Many of the enormous problems that afflict the modern world can be traced directly to people's unyielding conviction, bolstered by their personal faith, in their own, self-created religion, that usually turns into some variety of worship of the State. This is why the modern Nation State finds it necessary either to undermine independent religious belief beyond its control, or to establish legally an official State cult, enforced by law, with civil penalties attached to non-compliance. In either event, the State itself becomes the final authority on everything, or, as Marx put it (more or less), the State is God, God is the State.

The State is God, God is the State, Part VI

At the end of the film Judgment at Nuremberg, based on the third session of the Nuremberg trials after the Second World War, Ernst Janning (played by Burt Lancaster), a German judge who has been condemned to life imprisonment, says to the American Chief Judge Daniel Haywood (Spencer Tracy), "We did not know it would come to this." Judge Haywood replies with the line that closes the film, "Herr Janning, it came to this the first time you condemned a man you knew to be innocent."

Ostensibly a story about the conflict between patriotism and justice, Judgment at Nuremberg is actually a stark reminder of the dangers of using anything other than human reason's discernment of the natural law to determine the standards against which to measure human behavior. The judges of the Third Reich had convinced themselves that, because their country was in serious danger (which it was), any expedient was justified to use in saving it, including judicial murder, if by doing so they could remove some individual or group which their leaders had identified as the source of the danger.

Maximilian Schell, in what may be his most brilliant, if unsympathetic role as defense counsel Hans Rolfe, in an almost fiendishly accurate portrayal of legal positivism bases his case on everything except the actual guilt or lack thereof of the defendants.Rolfe , in fact, does not even dispute their guilt. He admits it, as do the defendants themselves.Rolfe , however, diverts attention away from the question whether the laws that the judges of the Reich enforced were in conformity with the natural law, and raises the question as to whether the people who were put to death were guilty of breaking the unjust laws.

When Rolfe begins making his case that the judges of the Reich had to enforce unjust laws to save Germany, it becomes too much for Ernst Janning, portrayed as one of Germany's premier legal scholars and jurists before the war. In a scene that might be interpreted as a personal redemption, Janning repudiates Rolfe's defense argument and admits he knew he was doing wrong when he did it, that he despised himself for every unjust decision. Janning makes it clear that he acted not out of a sense of justice, but out of fear — for his country, but most of all for himself. Janning and the other German judges are sentenced to life imprisonment.

As the real German jurist Dr. Heinrich Rommen pointed out in his book on the natural law, however, positivism has become so engrained in western culture over the past eight centuries that it nearly always manages to overcome human reason and natural law concepts of right and wrong for the sake of expedience. As Chief Judge Haywood and Defense Counsel Rolfe are collecting their papers at the end of the trial, Rolfe bets Haywood that all the defendants will be released within five years, due to the perceived necessity of obtaining Germany's help in the Cold War against the Soviet Union. Haywood compliments Rolfe on his handling of the case, predicts that he will go far . . . and declines to take the bet. At the end of the film, after Haywood has visited Janning as the American judge is on his way to the airport, a title card appears on the screen, confirming that all the defendants had indeed been released after serving only a few years of their life sentences.

While Judgment at Nuremberg used an obvious situation to make its point, the very obviousness of the point obscures it. People assume that what was done was wrong because "the Nazis" did it, not because it was wrong by nature itself. To this day we find many people asserting that there must be some flaw in the German national character that allowed them to give in to Hitler. They forget, ignore, or never knew that every tendency, even the philosophy itself that led to Hitler and the Holocaust is still with us today, and is much stronger and more pervasive now than then.

Basing political, social, or even individual acts on anything other than a sound understanding of the natural law derived from the common consent of all mankind as to what constitutes "good" inevitably results in disaster, regardless how much danger you might think you, your group, or your country is in. In the Gospel of John, the High Priest Caiphas is depicted as being concerned for the survival of the nation state of Judea . . . in which he was an important figure. In reference to Jesus, Caiphas declares that it is better that one innocent man should die than that the nation should perish, and is instrumental in trumping up charges against Jesus and in rousing the mob to demand Jesus' execution. Within a generation, Judea had ceased to exist.

The State is God, God is the State, Part V

If we assume that man creates God in man's own image and likeness, then (logically) man, not God, is the supreme ruler of the universe and the only standard for determining what is good or evil. Reality depends not on some objective actuality, but on subjective opinion. Everything becomes relative, based on the opinion of whoever can force others to accept his or her version of reality — for it becomes, ipso facto, reality by the mere fact that people "agree" on it. Black can become white, and up can become down, simply by convincing people that such is the case. You only think the Emperor is walking down the street naked, because your consciousness hasn't been raised and your perceptions corrected.

We can therefore easily understand the attraction that basing the natural law (and thus the social order) on the Will has for many people. In essence, you can do anything you want, as long as you have enough faith in your own interpretation, enough of an ego to maintain your position in the face of all argument and evidence to the contrary, enough inventiveness to dismiss objective facts and truth, and enough power to force others to comply with your will.

It is no accident that Leni Riefenstal's chronicle of the rise of the Nazi Party in Germany was titled, The Triumph of the Will. Nazism, which Dr. Rommen considered the culmination and necessary outcome of basing the natural law on the Will, nearly succeeded in imposing its personal morality on the whole world, and in destroying all notions of an objective moral standard that applies to every human being.

This is, in fact, why socialism, national or otherwise, is condemned by the Catholic Church, which bases its understanding of the natural law on the common, reasoned consent of all mankind as to what constitutes the good. It is not because socialism seeks the abolition of private property. Abolition of private property, acknowledged by Karl Marx as the essence of socialism, is nevertheless "only" a symptom of a much deeper problem: misunderstanding the nature of reality, of which God's Intellect, not any statement of His Will (however firmly believed), is the ultimate expression.

As Pope Pius XI stated in Quadragesimo Anno ("On the Restructuring of the Social Order"), 1931, "If Socialism, like all errors, contains some truth (which, moreover, the Supreme Pontiffs have never denied), it is based nevertheless on a theory of human society peculiar to itself and irreconcilable with true Christianity. Religious socialism, Christian socialism, are contradictory terms; no one can be at the same time a good Catholic and a true socialist." (§ 120).

The final issue we will consider in the next posting on this subject is why this is so, and why we can't simply base the natural law on our personal faith in something we believe to be a statement of God's Will without measuring it against the standard of human reason.

News from the Network, Vol. 2, No. 17

This has been a very busy week for the Just Third Way. A great many pots seem to be coming to the boil. We suggest that if you read anything in the following news items that interests you and you want to get actively involved in any of the initiatives, make contact with CESJ. Contact information is available on the CESJ website.

• On Saturday, April 18th, CESJ celebrated its 25th anniversary and annual meeting, whose theme this year was "Opening New Doors." The message was meant to convey a strategy for CESJ's network of members and friends to use their personal connections to arrange meetings for CESJ spokespersons with "prime movers" who could help communicate and implement Capital Homesteading and spread the message of the "Just Third Way." CESJ's strategic projects in East St. Louis, Illinois and with the American Auto Worker Ownership Committee's proposal for saving the Big Three Automakers were discussed. President Norman Kurland stressed that we need bold initiatives to reach out to others, particularly prime movers like President Barack Obama and Pope Benedict XVI, to present a new framework for solving major problems in which they can focus their leadership. We recognize that this may require a step-by-step series of contacts that will ultimately lead to a face-to-face meeting with the strategic audience. Such an outreach strategy enabled CESJ to have a private audience with Pope John Paul II and to have been appointed to President Reagan's Task Force on Project Economic Justice.

• On Monday, Norman Kurland, president of CESJ, was interviewed on tape at CESJ's offices by two Manhattan community cable TV shows, one segment for the Paula Gloria show and two segments of Molly Cheshire's show. Both commentators expressed appreciation for Dr. Kurland taking the time to explain some of the intricacies of Louis Kelso's "binary economics," from both the philosophical and practical standpoints, and stated that their understanding of Kelso and Adler's revolutionary breakthrough had been greatly deepened.

• On Tuesday, President Michele Mauder and Chairman Robert Mason of the American Auto Workers Ownership Committee (AAWOC) and Norman Kurland met with Congressional members and staff to present a "democratic, grassroots" proposal for saving and reorganizing the Big Three auto companies. (A fallback position is to target the profitable Jeep division as a national exemplar, since its sole location is in Toledo, Ohio, where rank-and-file workers and UAW local leadership already support the AAWOC strategy.)

The AAWOC, made up of active and retired members of the United Auto Workers, as well individuals coming from corporate management, is proposing a 100% worker buyout of the company through an "S-Corp ESOP." This would allow current workers and retirees to purchase failing auto companies at fair market value from the old creditors after going through Chapter 11 reorganization. This structure would also allow the reorganized companies to avoid all corporate income taxes, reduce rising fixed costs, and have workers begin to take a growing proportion of their compensation from the bottom line, out of profits. One innovation suggested was to allow "Section 1042" treatment for the creditors of the new "S-Corp ESOP" companies. (Under current law, owners who sell their shares to a "C-Corp ESOP" can defer paying taxes on the sale by rolling the proceeds into replacement securities.)

The AAWOC's plan goes beyond the typical ESOP, and embodies features of Justice-Based Management in order to instill a new leadership philosophy and corporate culture based on free market principles of justice. In addition, the AAWOC would like to help the UAW move from being a wage system labor union, to an "ownership union" that would negotiate for maximum ownership benefits, rights and roles of its members.

• On Wednesday, after a week's postponement due to heavy rainstorms, the 2009 "Putting People First" Rally at the Federal Reserve in Washington, D.C. was held by the newly formed "Coalition for Capital Homesteading." Despite a downpour that threatened to wash out the rally once again, the rain abated long enough to allow a lively series of presentations to commence. The rally received the friendly attention of the Federal Reserve security officers who have become familiar with CESJ's annual event. Two video crews covered the event that will be broadcast on CESJ's Youtube channel (JustThirdWay).

Former Congressman and Rev. Walter Fauntroy led the rally as Master of Ceremonies, explaining why we are calling for Federal Reserve policies that "puts people first" by creating capital ownership opportunities for every citizen. The tone of the rally was set with a poem ("Justice Q &A's") read by CESJ's Director of Communications Dawn Brohawn, who had co-authored it with CESJ director Harriet Epstein to commemorate the Fed rally.

Speakers included Mayor Alvin Parks of East St. Louis, Illinois and Mayor Nathaniel O'Bannon of Brooklyn, Illinois, who are part of 11 communities in the Metro East area of Southern Illinois who are introducing a bold community initiative for "energy independence and citizen ownership." This project will launch and develop advanced waste-to-energy technologies developed by the space and defense agencies, using a legal vehicle based on the community investment corporation invented by CESJ, called the "Metro East Citizens Land Cooperative." The MECLC will enable every man, woman and child in the area to acquire lifetime, non-transferable voting shares in this for-profit, professionally managed land development corporation, giving them equal distributions of the corporation's profits from land leasing and the new energy systems.

Also speaking at the Fed rally were Michele Mauder, President and Robert Mason, Chairman of the American Auto Worker Ownership Council, discussing their 100% worker buyout alternative for saving the Big Three Auto Companies. CESJ President Norm Kurland spoke on Capital Homesteading for every citizen, democratizing the Federal Reserve, and the monetary policy changes called for in the "Declaration of Monetary Justice" that was signed by every participant at the rally.

Antonio Betancourt of the Summit Council for World Peace spoke on the global implications of Capital Homesteading for fostering peace and a more equitable global marketplace. Dr. Sheikh Ahmed Subhy Mansour, an Islamic scholar in political exile from Egypt for his human rights advocacy, who heads the International Quranic Center, closed the rally with a benediction calling for Justice as the guiding principle for the world. At the end of the rally, the participants marched around the Federal Reserve and presented the signed Declaration of Monetary Justice to an official of the Federal Reserve for delivery to Chairman Ben Bernanke. (For information on the Fed Rally, to sign the Declaration or to join the Coalition for Capital Homesteading, go to the "Fed Rally" website.)

• Following the rally Mayor Parks and Mayor O'Bannon and some of the speakers went to various meetings on Capitol Hill to present their plans to legislators and their staff. On Thursday, Michele Mauder, Robert Mason, Walter Fauntroy and Norman Kurland held a legislative briefing on Capitol Hill, arranged by Detroit Congressman John Conyers (D-MI), to present the worker ownership strategy. Staffers of Representatives John Conyers and Marcy Kaptur's (D-OH), and Senator Voinovich (R-OH) attended. Rep. Kaptur's legislative assistant suggested that they would get co-signers for a proposal to fund a minority report and feasibility study of the worker ownership proposal, as part of the $7 million contract provided to the Boston Consulting Group. Former Congressman Walter Fauntroy said he would arrange a meeting with Congressman Conyers to open the door to the President's Auto Task Force to present this proposal. In the afternoon, the two mayors, Walter Fauntroy, Norman Kurland and others in the Coalition met with congressional staffers and Senator Roland Burris (D-IL) to generate support for the Metro East Citizens' Land Cooperative project to promote energy independence and citizen ownership.

• As of this morning, we have had visitors from 32 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, with Canada, Brazil, and Finland. People in Egypt and Hong Kong spent the most time on the blog. The most popular posting is still "Cut Us In or Cut It Out" (meaning open up democratic access to capital credit, and stop using the nation's central bank to finance government deficits and bailout failed companies. The next four most popular are on Abraham Lincoln, with the series on "Easter Economics" fast accumulating readers. The rest of the top ten deal with the increasingly obvious flaws in Keynesian economics.

Those are the happenings for this week, at least 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." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

The State is God, God is the State, Part IV

We are all familiar with the mantras developed by those who adhere to an understanding of the natural law based on a personal interpretation of the Will of God, or whatever happens to be put in the place of God. "God wills it." "It's perfectly legal." "It says in the paper." "According to (my understanding of) the Bible, the pope, the prophet," etc., etc., etc. All of these are expressions of faith, and are valid within a certain context. As precepts for building a just social order and providing an environment within which each human being has the optimal opportunity to acquire and develop virtue and so become more fully human, however, they are sadly lacking. It could even be argued that, for anyone who doesn't manage to break out of "the box" that such dicta construct, they are forever trapped in whatever state or condition others have imposed on them, to be damned or saved as others see fit.

Admittedly, it is very difficult to break out of such a box. Readers familiar with Mark Twain's "children's" novel Huckleberry Finn will recall Huck's agonizing over helping the slave Jim escape, and his decision to help Jim even though, by the precepts of his society, he figured he was sure to go to Hell. Basing the social order on a private understanding of the Bible and economic expedience, as did the people in Mark Twain's fictional south (the reality was somewhat different, although Twain achieved an extremely accurate condensation for his purpose), resulted in a situation in which the moral order was clearly (to the presumably objective reader) turned completely upside-down — and still almost succeeded in preventing Huck from doing the right thing.

As Dr. Heinrich Rommen hinted in the quote we gave in the previous posting, the advantage to basing the natural law on the Will is that accepted precepts become changeable at the will of whoever is doing the interpreting. The notion of an objective standard is eliminated, for anything that comes into conflict with one's personal interpretation is, ipso facto, in contradiction to one's personal faith. This is a position from which there can be no recourse. This is because the Will-based interpreter of the natural law believes he has God's personal assurance that he is correct. Anyone holding a contrary position, despite all the arguments and evidence he brings to the table, is necessarily wrong because he is opposing God's Will as presumably revealed to the Will-based interpreter.

The problem is that humanity has an almost infinite capacity to rationalize its own desires — especially when those desires relate to gaining power over others. Anyone who accepts a Will-based interpretation of the natural law inevitably finds it very easy to justify everything he wants to do. He does this by referring to his personal faith, and basing his argument (such as it is) on his conviction that his understanding and interpretation of God's Will is the only one that could possibly be correct. Everyone else's interpretation is necessarily evil and, inevitably, everyone else is as necessarily evil as their interpretations. This is particularly true when others persist in attempting to argue or present evidence to the contrary.

Thus a socialist will find support for the abolition of private property in various expressions of what he believes to be God's Will. A totalitarian will discern a holy command that he or she impose control on the rest of humanity. A capitalist will be delighted to discover that God has decreed capitalism as the only acceptable form of society. An anarchist will be equally elated to realize that God finds an organized society that acknowledges absolutes outside his or her understanding and laws based on them just as irritating as he or she does — and so on. This lends credence to a belief, while nonsensical to anyone who bases the natural law on the Intellect, is nevertheless widespread in today's society. That is, man forms God in man's own image and likeness.

What this leads to we will examine in the next posting in this series.

The State is God, God is the State, Part III

In the previous posting we discovered that basing the natural law on the Will rather than the Intellect almost inevitably results in the formation of a totalitarian State. Moral standards change from absolutes, discerned by reason and confirmed by the common consent of all mankind, to relativistic opinions, valid only for the individual holding that opinion, and then only until he or she changes his or her mind.

Attempting to correct or counter this problem within the framework of a Will-based natural law results in the now-familiar accusation that any attempt to reestablish moral standards is "forcing your morality" on others. This actually has some validity — within this context. Private interpretation of God's Will is necessarily personal and, given free will, a matter of opinion. Moral standards based on the common consent of all mankind, as embodied in, e.g., the Decalogue, however, are the opposite and complete negation of moral standards based on a private interpretation of God's Will, despite the fact that both methods can and, in many cases do, come to similar conclusions as to the content of the natural law.

Assuming an otherwise well-ordered society in which everyone who bases the natural law on the Will accepts the same source as expressing the Will of God and agrees on its interpretation, there should be no major conflicts between the two parties, Intellect or Will, regardless of the basis used for the natural law. The problem comes when the elite in power begins to interpret precepts of the natural law in order to meet an emergency. If the foundation is solid, i.e., there is a clear understanding of the natural law based on the common consent of all mankind and discerned by reason, the expedient developed can be measured against the objective moral standards and adopted, tolerated, or rejected, depending on how well the proposal complies with universal moral precepts.

If the foundation is not solid, that is, understanding of the precepts of the natural law is based on faith and personal interpretation of something the interpreter regards as coming from God (the Will), the expedient may be consistent with universal precepts of morality. It may do the job it is intended to do. It is, however, far more likely that the social order will be thrown into chaos, depending on how far personal interpretation of the natural law based on faith gets from a reasoned conclusion based on the common consent of all mankind.

A house built on rock and a house built on sand may appear identical and each will do the job of providing shelter adequately as long as the sun is shining and everything is fine. Inevitably, however, the rains come, and expose the weakness of anything built on a shifting foundation, such as basing the natural law on the Will rather than the Intellect. As Dr. Heinrich Rommen pointed out in his book on the natural law,

For Duns Scotus morality depends on the will of God. A thing is good not because it corresponds to the nature of God or, analogically, to the nature of man, but because God so wills. Hence the lex naturalis could be other than it is even materially or as to content, because it has no intrinsic connection with God's essence, which is self-conscious in His intellect. For Scotus, therefore, the laws of the second table of the Decalogue were no longer unalterable. . . . an evolution set in which, in the doctrine of William of Occam (d. cir. 1349) on the natural moral law, would lead to pure moral positivism, indeed to nihilism. (Rommen, The Natural Law, pp. 51-51.)

In our next posting on this subject we will examine why the interpretation of the natural law based on the Will is so popular.

The State is God, God is the State, Part II

We noted in the previous posting on this subject that within the Aristotelian concept of the natural law, it is not necessary to believe in a particular deity for the precepts of the law to be binding. The law, as Thomas Aquinas pointed out, is discernible by human reason, and is based on the common consent of all mankind as to what constitutes the "good." Faith in God may illuminate our understanding of the law, but to base any part of the law on faith is to go directly contrary to the law itself. The basic precepts of the law must be "manifestly true" (that is, subject to human understanding through the use of reason), or God or the gods would be inherently unjust — another contradiction in terms.

That is the classic, traditional view of the law. Unfortunately, another view of the matter has become the prevailing belief, superceding in many cases the common sense conclusions of Aristotle, Aquinas, Maimonides, and Ibn Khaldûn. This other view is that something is wrong not because it is inherently wrong (and thus contrary to the natures of both man and God — "against nature"), but because God — or some other authority in the place of God — has so commanded.

In this erroneous view, something is wrong because God (or the Bible, the Qu'ran, the Book of Mormon, etc., etc., etc.) has so declared. This is called "primacy of the Will," meaning that it is only possible to know right from wrong because of your faith in a particular revelation that you regard as the Will of God. Virtue, even knowledge of right and wrong, becomes the exclusive property of a small group of the elect. The elect are, inevitably, a chosen few personally selected by God to understand what is "really" true . . . as interpreted by the elect, of course. The elect is in automatic opposition to the great mass of mankind who, being natural dependents — slaves — and incapable of attaining full human status, must be taken care of or eliminated, as expedience or desire demands.

Primacy of the Will is thus the basis for many of the troubles that afflict modern society. These conflicts fall into two distinct classes. First, of course, are the presumably inevitable clashes that arise because the dependent (slave) class resists the guidance and instruction of the presumed elite, the elite being (depending on the circumstances) government officials, corporate management, academia, the press, or religious leaders. "They" (the dependent class) "can't handle it" — "it" being whatever the elite wants to control. The elite thus has the self-appointed responsibility of seizing power and imposing control and whatever results are desired . . . by the elite, who (in their opinion) have been personally selected for the job by God or whatever stands in place of God. "What's good for GM is good for the country."

Second are the struggles for power among the different elites, as we saw illustrated very well in the Newsweek article denigrating religion juxtaposed with the advertisement featuring the spin-doctored Wizard of Oz. Each elite power group tries to eliminate the competition, either by subsuming the opposing groups into itself, or by attacking it outright. Thus we have the State, usually enthusiastically supported in this effort by the press and academia, either attacking organized religion or setting up an official State religion, whether or not the established church is actually "recognized" as a religion. This also explains why the State at first nearly always opposes organized labor, then grants unions sufficient delegated power to become effective branches of the State to bring management to heel.

Examples are numerous, as this situation exists wherever two or more power groups that take the Will instead of the Intellect as the basis for the natural law collide — as they must. Basing the natural law, the foundation of the social order, on anything other than the Intellect brings automatic conflict of this kind. This is because, rejecting the common consent of all mankind as to what constitutes the good, members of each special interest group will necessarily try to force their understandings of the Will of God (or whatever they have put in the place of God) on everyone else.

Resisting such control means that the offender has insulted the personal faith of the individual or group attempting to impose its private interpretation on the offender, who has thus gone against the divinely-instituted social order, as Thomas Hobbes made clear in Leviathan. Why the imposition by an elite of desired results cannot be effectively countered within the framework that bases the natural law on the Will rather than the Intellect will be covered in the next posting in this series.

The State is God, God is the State, Part I

Most readers of Newsweek magazine dated 04/13/09 probably missed the less-than-subtle irony of the ad between pages 42 and 43 in an issue titled, "The Decline and Fall of Christian America." The ad displayed a photograph of a vaguely 19th century gentleman with "mutton chop" side-whiskers and a blazer with "OZ" prominently embroidered on the right-hand side of the coat. The ad promoted a federal government-sponsored website by querying, "Have you ever wondered how the Wizard of Oz seemed to know everything?" and stating that the website could "make you as all-knowing as the Wizard of Oz."

Right. Evidently the ad agency hired by the U.S. General Services Administration for their "public service message" promoting their own omniscience never actually read The Wonderful Wizard of Oz by L. Frank Baum or saw the 1925 or 1939 film adaptations. There's some excuse for not viewing the 1925 version, as it is considered, in spite of the appearance of the great Oliver Hardy, as the worst adaptation of a book to film in history. Nevertheless, despite the 1925 film's crimes against humanity (Dorothy Dwan — not a misprint — who plays Dorothy, is portrayed as a flapper), the character of the Wizard as a fraud and a conman (although well-intentioned) was retained, and carried over into the 1939 remake.

Thus in the feature article of the 04/13/09 issue of Newsweek we have the obvious dethronement of "the Christian God" in America. This is juxtaposed with the promotion of the United States government as an all-knowing, all-wise, and very likely omnipotent replacement, freely offering people the fruit of the modern equivalent of the tree of the knowledge of good and evil . . . with the Being many people regard as absolute good derided as unimportant: "The Christian God isn't dead. But he's less of a force in U.S. politics and culture than at any other time in recent memory." (p. 36.) Evidently the ad agency and the editorial department of Newsweek counted on people not realizing that in the Christian mythos it was not God, but Satan, who offered free access to all knowledge without first properly forming one's conscience and developing man's natural capacity to know right from wrong.

The conclusion of Newsweek simply states the obvious. The "Christian God," who is, by popular rumor, the God of Abraham, Isaac, and Jacob, and thus the Jewish and Islamic God as well, has effectively been a nullity for some time. This is due principally to the rejection of the Aristotelian understanding of the natural law as the basis for civilization, and the consequent decay of the west as well as the confusion rampant in the east.

What is the connection between rejection of the thought of a dead, white, semi-European pagan (well, pagan's not so bad) male, the "decline and fall of Christian America," and the moral, political, and economic chaos that assails the world today?

Everything.

The full explanation is complex and would strike most people as extremely esoteric, but we can briefly summarize for the purposes of this posting. According to Aristotle, "good" is "that at which all men aim." In other words, we can know what is "good" because of the common consent of all mankind that a particular thing is "good." The principles that all mankind perceives, however dimly, as "good" are the absolute precepts of the "natural law" embedded in each human being. That is, if a principle can be shown to be part of the natural law, it is binding on every human being simply because he or she is human.

Thus, precepts such as prohibitions against murder, theft, adultery, false witness, and so on, which members of a particular religion might believe were received from their particular god (as all, ultimately, do, as the noted jurist Dr. Heinrich Rommen pointed out), an individual does not need to believe in that particular religion in order to be bound by the precepts. Such things are prohibited not because some deity said so, but because, being contrary to human nature as perceived by the common consent of all mankind, they are inherently wrong.

Thomas Aquinas, the Christian Aristotelian, in common with Moses Maimonides, Aquinas' correspondent and fellow-Aristotelian, and Ibn Khaldûn, the orthodox Islamic Aristotelian who came a few centuries after Aquinas and Maimonides, refined Aristotle's concept. They concluded, based on the shared belief that God created man in God's own image and likeness, that what the common consent of all mankind regards as "good" must also, logically, be consistent with God's Nature.

Thus, even though a Christian might believe in the divinity of Jesus who delivered the fulfillment of the law, a Jew that the Tables of the Law were handed down on Mount Sinai personally to Moses, and a Muslim in the validity of the revelation to Mohammed by the angel Jibril, belief in any of these things is not necessary to the truth of the precepts of the natural law that they teach. The essential precepts remain true whether or not someone has ever heard of Jesus, Moses, or Mohammed, or read a line of the New Testament, the Torah, or the Qu'ran. Aquinas referred to this as "primacy of the Intellect," meaning that it is possible to know right from wrong by the unhampered and unaided use of human reason.

Unfortunately, there is another view of the matter, one which we will cover in tomorrow's posting.

News from the Network, Vol. 2, No. 16

Perhaps not surprisingly, Mr. Obama appointed a $7 million commission to study how to save the American automakers instead of taking advantage of a proposal to do the same thing much faster and cheaper for $150,000 put forward by the American Auto Worker Ownership Committee. This would appear to be consistent with what seems a definite bias on the current administration's part against ordinary people owning the means of production. This may be rooted in the false Keynesian dogma that only existing accumulations of savings (by definition held by the rich) can be used to finance capital formation. Thus (according to Keynes) the most efficient economy is one where ownership of the means of production is as concentrated as possible with the State controlling the rate of new investment and the rate of return on investment, and anyone who would use investment income for consumption instead of reinvestment (compound interest) is discouraged from capital ownership. Since the Federal Reserve was designed and intended in part to provide the private sector with new money and credit without the necessity of first cutting consumption and saving, Mr. Obama's possible fear that investment capital will disappear if ordinary people own the means of production and thereby gain control over their own lives not only doesn't make sense, it is counterproductive in the extreme.

The power that the Federal Reserve has to create money without inflation for private sector growth and investment is the reason that the Just Third Way is demanding democratizing the Federal Reserve so as to open up democratic access to capital credit (the chief means by which capital is financed and ownership acquired), and to deliver genuine "power to the people" by spreading out control of the central bank system of the United States, taking it out of the hands of the bankers and the State bureaucrats.

• The biggest news this week was the postponement of the rally at the Federal Reserve due to weather. The rally is tentatively rescheduled for Wednesday, April 22, 2009 outside the Federal Reserve in Washington, DC, "Earth Day."

• In the space of one week, a single CESJ member managed to place letters and articles in the Washington Post (4/10/09), the Wall Street Journal (4/13/09), and the National Hibernian Digest (March/April 2009 issue). The placements in the Washington Post and the Wall Street Journal were letters from different perspectives (depending on the particular slant of each newspaper), looking at the recent interference by the Federal Government in the rules established by the Financial Account in an effort to "fix" the "mark to market" rule by making it easier for investment companies to inflate book values of investments without an objective, "third party" verification. This violation of the "pillar" of the Just Third Way regarding a limited economic role for the State exacerbates what may have caused the home mortgage crisis in the first place. The short article in the National Hibernian Digest, the official publication of the Ancient Order of Hibernians in America, Inc. (the "AOH," a fraternal order for Catholic men of Irish birth or descent) gave a short précis of some social action initiatives being considered by the AOH in Northern Virginia in conjunction with CESJ. All three placements illustrate what can be done by individuals who persist in writing letters and articles to newspapers and magazines from a Just Third Way perspective. This can be a most effective way of preparing the ground for opening doors to "Prime Movers," as mention in a newspaper or magazine tends to lend a degree of credibility to CESJ and the whole Just Third Way movement.

• CESJ's twenty-fifth anniversary celebration will take place tomorrow at Lakeside Plaza condominium in Falls Church, Virginia. If you haven't responded by now or requested an invitation, it's too late, but we will try and post a brief report of the celebration in next week's news items.

• Wholesale order forms for CESJ publications from Economic Justice Media will be distributed at the celebration so that CESJ members may take advantage of the member benefit of purchasing publications at the wholesale price. If you are not attending, but would like to purchase publications in bulk (minimum of ten books) at the wholesale price, send a request for an order form to mgreaney [at] cesj [dot] org. CESJ does not sell retail, so individual copies are available to non-CESJ members are available on Amazon and Barnes and Noble, or by special order from most major bookstores.

• The "TEA ('Taxed Enough Already') Parties" that took place this past week, while no doubt motivated by a genuine desire for change, really didn't look at anything other than a return to the old, unworkable system to replace the current failing system. It would have been much better to bring CESJ's tax proposals to the attention of Mr. Obama and others who appear to be floundering by claiming to try and "simplify" the existing system, forgetful of the fact that every similar effort in the past has resulted in enormously more complex and confusing regulations that only increase the inherent injustice of trying to use the tax system for social engineering instead of raising revenue, and imposing the belief that only existing savings of the rich can be used to finance new capital formation on a system designed to accommodate the power of the Federal Reserve to create money for private sector growth and investment, rather than government spending or consumer debt. Three CESJ pieces are particularly recommended, "Steps Toward Tax Justice" from the original version published in The Tax Executive in 1977, "Transforming the Federal Tax System," and "Reforming the Tax System."

• As of this morning, we have had visitors from 40 different countries and 45 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, with Canada, Finland, and Brazil. People in Egypt and Hong Kong spent the most time on the blog. The most popular posting is now "Cut Us In or Cut It Out" (meaning open up democratic access to capital credit, and stop using the nation's central bank to finance government deficits and bailout failed companies. The next four most popular are on Abraham Lincoln, with the series on "Easter Economics" fast accumulating readers. The rest of the top ten deal with the increasingly obvious flaws in Keynesian economics.

Those are the happenings for this week, at least 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." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

Understanding Easter Economics

We just received a most encouraging and substantive response to our series on "Easter Economics" that we completed yesterday. We realize that repeating the "same old thing" over and over can become extremely irritating to people, especially those who disagree with us. This gives them the escape route of being able to claim that we are being "rigid" in our unnatural insistence on basic principles of natural law. This permits them to feel released from any obligation actually to discuss these matters . . . if they ever had any such inclination in the first place. Every once in a while, however, a light goes on somewhere, proving that, no matter how highly educated someone is, there is always hope for him or her. Here's a paraphrase of the note we received, edited somewhat for clarity and to protect the writer from being attacked with pitchforks, torches, and guns by outraged villagers, capitalists, and socialists. We passed our version by the original writer for comment, so it is substantially the same note.

I have read, reread, and reread the case you make for basing the natural law on Intellect instead of Will which you have made over and over — and now I see! If we make the natural law "changeable" by making it subject to the will, or even His Will, then there are no immutable natural rights. Our inalienable rights to life, liberty and property become disposable at the will of the strongest. If, however, we arrive at an understanding of the natural law through the use of reason, trying to understand the Intellect of God or His Essence or Self Consciousness, this is not changeable. If our natural rights are not immutable and inalienable, then (as you point out) they will be determined by whoever is the most powerful.

Then there is the whole issue of the natural right to property and the rights of property — access (opportunity) and use (exercise). It seems almost everyone who is insisting upon "helping the less fortunate" is really misunderstanding this point. Except in extraordinary circumstances, justice only demands equal access, that is, the opportunity to acquire property. Charity then operates for those who "through no fault of their own" can't provide for themselves, as Pope John XXIII's stated in Pacem in Terris. It's a matter of choice whether any individual or society wants to take care of those who won't provide for themselves. As St. Paul said, "those who do not work shall not eat."

Is there anyone else out there who is trying to educate our leaders, Catholic and others, about this critical distinction? Far too much of what passes as "social justice" these days, frankly, is socialistic. This is disastrous. If, as Pope Pius XI stated, socialism is not incompatible with Christianity because it abolishes private property, but because it requires the destruction of the natural law, then socialism by any name (as we saw in the Soviet Union and are seeing in China) destroys the social order. While we assume that many people espousing socialism are sincere in their convictions, are they aware that (however inadvertently) they are prescribing the destruction of the social order that natural law adherents from Aristotle down to Pope Benedict XVI have been trying to rescue for thousands of years?

Now all we have to do is convince the other 5,999,999,988 people in the world, and we might get somewhere. Teaching, learning, organizing and restructuring the social order so that individual justice and charity can operate most effectively and efficiently, however, is what social charity and social justice are all about, not redistribution and worship of the State. If you're anxious to read the two short works by Father William J. Ferree, S.M., Ph.D. on social justice and social charity before they are officially released in a newly edited combined version, you can download the texts of Introduction to Social Justice and the discourse on social charity from the CESJ website.