Why Everyone in the World is Crazy

Recently we've been having an interesting discussion in the Kelso Binary Economics Discussion Group on the meaning of money. This was sparked by the first installment of the two-part posting on the "Jubilee proposal" that all debts be forgiven periodically. We offered what we thought was a reasonable compromise between the demand that all debts be written off, and the insistence that the trillions of pounds of flesh demanded be delivered in full.

Much to our astonishment, we received an angry response from a reader. The surprising part was not the anger or even the fact of the response. We've been taking the paucity of polemics inserted into the com box relative to the number of our readers as a sign that everyone agrees with us . . . right?

No, the astonishing part of the missive was the fact that, although we had explained our definitions of the terms we used to the respondent previously at great length, the excited letter-writer accused us of 1) not answering previous manifestos, and 2) not understanding the claims about money, credit, interest, or debt presented therein. By not accepting the writer's definitions (admittedly extremely garbled to the point of incomprehensibility), we demonstrated just how far out of it we are, that we must be operating in bad faith, why we will never convince anybody of what we're talking about, and so on, and so forth.

The respondent, however, was wrong - and not because of the disagreement with us. The fact is, the debate can never end because our two sides cannot agree on the meaning of the most important terms in the debate. We will therefore continue to talk past one another, the adherents on each side assuming that those taking the more or less opposite stance are actuated by malice, or simply too stupid to understand the issue. The debate can never be resolved because, in reality, without a common understanding of principles and terms, there is no debate. As G. K. Chesterton once pointed out,

It is no good to tell an atheist that he is an atheist; or to charge a denier of immortality with the infamy of denying it; or to imagine that one can force an opponent to admit he is wrong, by proving that he is wrong on somebody else's principles, but not on his own. After the great example of St. Thomas, the principle stands, or ought always to have stood established; that we must either not argue with a man at all, or we must argue on his grounds and not ours. (G. K. Chesterton, St. Thomas Aquinas, "The Dumb Ox." New York: Image Books, 1956, 95.)

Thus, because the letter-writer ignored basic definitions, we could argue for all eternity without either side convincing the other of anything except, perhaps, that the entire world is crazy except for the speaker. It is the easiest thing in the world to prove that everyone else in the world is a knave or a fool (probably - and paradoxically - both) on your principles. The path of true reason, even faith, is to prove somebody wrong on his or her own principles.

Bring the Jubilee: A Possible Solution

Obviously, unilateral debt forgiveness could very well cause more harm than good. This would be both to the property rights of persons, and to the common good as a whole by convincing people that debts don't have to be paid. A morally sound (and thus practical) program of debt forgiveness would therefore have to prioritize debts on some consistent and reasonable basis.

Step I: Determine whether the debt was incurred for a productive or non-productive purpose.

There are two kinds of credit. There is "good credit" — credit extended for investment in capital projects that generate their own repayment — and there is "bad credit": credit extended for consumption, speculation, or government spending.

Step II: Determine whether the credit was extended out of existing accumulations of savings, or was created by means of the loan.

You can loan out money that you've saved, or you can loan money by creating it in exchange for a lien on someone's existing assets or the present value of future assets. If you make a loan out of savings and the loan is for a productive project, you are due interest as a right of property. If the loan out of existing accumulations of savings is for a non-productive project, you are not due interest, because "interest" is a share of profits, and a non-productive project does not generate profits.

If you make a loan by creating money, whether for a productive or non-productive project, you are not due interest as you had no property right before the loan created the money. In all cases, however, you are due the principal of the loan, that is, the amount you lent.

Step III: Categorize the Debts

Category 1: Into this category go all debts on which the borrower has the ability to make the payments, including interest, if due in justice. These debts should not be forgiven, and all principal and interest payments should be made as agreed.

Category 2: Into this category go debts on which the borrower cannot pay everything, but can pay something. These debts must be judged on a case-by-case basis.

• If the loan was made out of past savings for a productive purpose and the project is profitable, but not profitable enough to pay the principal and all the interest, the interest rate should be adjusted to reflect the lender's and borrower's just degree of risk sharing. All principal payments should be made.

• If the loan was made out of past savings for a productive purpose that did not make a profit, no interest should be paid, but the principal is still due.

• If the loan was made out of past savings for a productive purpose that made a loss, no interest should be paid, and only a pro rata portion of the principal should be repaid.

• If the loan was made out of newly-created money for a productive purpose, all previous interest payments above a service fee and a fair risk premium should be applied to the principal. If the lender has received anything above the total amount of the principal, a just service fee, and a fair risk premium, it should be refunded to the borrower as an overpayment. All future payments, if any, are applied only to the principal.

• If the loan was made out of newly-created money for a non-productive purpose, all interest payments above a just service fee should be applied to the principal. If the lender has received anything above the total amount of the principal, it should be refunded to the borrower as an overpayment. All future payments, if any, are applied only to the principal.

Category 3: Into this category go debts on which the borrower cannot make payments of any kind. These are written off in their entirety.

Step IV: Restructure the Financial System to Institute a More Just Distribution of Ownership Opportunities

This is the most difficult, but the most important step of all: making as certain as humanly possible that such a situation does not recur. This can best be done by implementing Capital Homesteading on a global basis at the earliest possible date. This does not have to wait until the debt crisis is solved. In fact, it is far better if Capital Homesteading is put in place immediately, and then the debt crisis can be dealt with without getting into a panic mode. In and of itself Capital Homesteading may empower people with the ability to service currently unpayable debt.

Thus, the program should be:

• Implement Capital Homesteading and place a moratorium on all currently unserviceable debt.

• Once Capital Homesteading is in place, categorize all unserviceable debt in accordance with the guidelines in Step III above, taking projected income from Capital Homesteading into account.

• Restructure and reschedule debt when possible, forgive debt when necessary.

• Increase credit voucher amounts to anyone whose property rights were harmed by debt forgiveness, permitting them to be made whole. This amount should not be so great that it materially diminishes the credit voucher amounts going to everyone else. When it is a corporate person who has suffered harm, the tax deduction for bad debt write-off should be changed to a tax credit, as long as the full amount of the tax credit claimed each year is paid out to the shareholders in the form of tax-deductible dividends. In both cases (additional credit and tax credit), the amount should be subject to an annual maximum until the harm has been repaired.

These suggestions will doubtless need refinement, but they appear to be a reasonable way of handling the debt crisis from the perspective of the Just Third Way.

News from the Network, Vol. 2, No. 33

According to a CNNmoney dot com report ("Recovery maybe here, but hold the celebration say economists"), "the worst economic downturn since the Great Depression is over." The problem is that nobody knows it yet: "most average Americans won't feel like things are significantly better in the near term."

Inasmuch as virtually all of the so-called "economic growth" has been the result of artificial stimulation by the federal government and the wild swings in the speculative market for secondary equity and debt, it is difficult to see how the alleged recovery is supposed to be sustained. Nevertheless,

The Wall Street Journal's survey of top economists, published Wednesday, found that 57% believe the recession is already over, while another 23% believe that the economy will turn in the next month or two. Most economists now expect growth in the gross domestic product, the broad measure of the nation's economic activity, of about 3% or more in the period of July through September.

Unless these so-called gains are the result of actual production of marketable goods and services in which ordinary people participate fully by contributing both labor and ownership, instead of State subsidies and buying and selling intrinsically worthless stocks and bonds back and forth on Wall Street, the so-called recovery will prove to be as ephemeral as the Keynesian New Deal. The New Deal resulted in a brief burst of artificially-stimulated prosperity until 1936, when things began to fall apart again. The "top economists" seem to forget that Keynesian programs did not end the Great Depression. It was the Second World War — and the world no longer has the capacity to carry on a struggle on that scale without facing total annihilation both financially and physically. . . aside from the fact that engaging in a war to reestablish prosperity scarcely meets the requirements for a just war.

Be that as it may, the main events of the week are:

• A series of important telephone conferences on the East St. Louis project have taken place this week. A great many details were discussed and relationships realigned. Several action items were reviewed and future assignments suggested. Some project specifics were reviewed and the process of evaluation begun.

• Work on the new book on money and credit is advancing rapidly. The middle section, consisting of an historical survey of ideas about money, credit, banking, and finance through the ages is nearing completion of the first draft stage. Among other things, our research has traced the roots of Keynes' misconceptions about money and credit. These embody, in part, the fallacies embedded in the British Bank Charter Act of 1844 and the United States National Bank Act of 1864, both considered applications of the theories underlying the proposals of the "British Currency School."

• A number of e-mails have been sent, following up on various personal contacts that were made over the past two weeks. No responses have been received, possibly because of the usual slowdown that occurs in August.

• We have located and purchased a rare copy of Keynes' Treatise on Money (1930), the book which Friedrich von Hayek reviewed and declared was filled with errors. Keynes made a few references to his Treatise on Money in subsequent works, but otherwise seemed content to let it lapse into obscurity without either correcting or repudiating it. Consequently, the two-volume Treatise on Money is one of Keynes' rarest titles. If you have books in the areas of economic and social justice, you might want to consider donating them to CESJ, after first checking to see if we don't already have them in our research library. We will do an internet search to determine the fair market value of the donation, and credit you with a tax-deductible contribution. (We usually use abebooks dot com to find out the price of collectible and used books.) You do not have to check first to see if we want any copies of The Capitalist Manifesto (1958) or The New Capitalists (1961), or even any of Kelso's later books. We have a constant demand for both titles, which are becoming increasingly difficult to obtain at reasonable prices.

• As of this morning, we have had visitors from 31 different countries and 42 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, Brunei, and Argentina. People in Israel, Venezuela, Argentina, Brazil, and Singapore spent the most average time on the blog. The most popular posting by far is "What Caused the Economic Crisis" from last week, followed by the letter to the Wall Street Journal on Caritas in Veritate, the Keynesian paradox of thrift (which seems to be especially popular in Brunei for some reason), the news reports, the response to Dr. Michael Novak (which has received no reply), the recent postings on the economic situation in Ireland, and the brief series on William Cobbett. With respect to the amount of time spent reading, the postings on "Can We Spend Out Way Out of the Recession," the usury series, and the Cobbett series appear to be the most popular.

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.

Bring the Jubilee: The Issue

Over the last couple of weeks one of the participants in the Kelso Binary Economics discussion group has been looking into the problem of overwhelming debt. This is a difficult issue, and not one easily solved, especially by the unilateral solutions that are, more and more frequently, being proposed.

It's not, for example, merely a question of forgiving debt. Debts are owed to somebody. Every debt that is forgiven means, effectively, a loss to whoever lent the money, thereby harming or even destroying that person's property rights.

Nevertheless, the concept of Jubilee could be extremely useful in view of the current world situation — as long as we realize and understand that the push of debt forgiveness for some inevitably means a shove against the human rights of property for others. The question then becomes how we manage the former without undue harm to the latter.

The concept of the "principle of double effect" is useful in this context. Most simply put, the principle of double effect allows us to do something that is not bad in and of itself, but which has bad consequences. In the case of debt forgiveness, writing off debt is hardly bad — but it does have the bad result of harming others' property rights.

The "requirements" of the principle of double effect are pretty straightforward:

• The act is itself good, or at least morally neutral;

• You intend the good effect, and not the bad either as a means to the good, or as an end itself;

• The good effect outweighs the bad effect in circumstances sufficiently serious to justify causing the bad effect, and you do all you can reasonably do to minimize the harm.

There is one more requirement in social justice. That is to organize with others to restructure the relevant institution(s) so that the situation is less likely to reoccur. How to do this is described in the pamphlet by William J. Ferree, S.M., Ph.D., Introduction to Social Justice.

That being said, how do we apply these principles to the issue of debt forgiveness? First, of course, we have to see if what we propose meets the requirements of the principle of double effect:

Is forgiving debt good or morally neutral? Absolutely.

Do we intend to harm others' property rights, or is direct harm to property rights (as opposed to debt forgiveness) our goal? Absolutely not.

Does the good of forgiving debt outweigh the bad of harm to property rights? That's harder to answer. Not all debt is unserviceable, and even debt that is unserviceable may not be entirely unserviceable. That leaves us with the problem of exactly how we might engage in debt forgiveness that is both fair and has a chance of accomplishing the desired goals.

William Cobbett, "The Poor Man's (and Woman's) Friend," Part IV (Final)

Cobbett's emphasis on widespread ownership of the means of production readily explains his evident hostility to industrialization. The process of industrialization, while not inevitably linked to the capitalist economic model (ownership of the means of production concentrated in the hands of a private elite), was bound to it by the usual form of financing capital formation and the reliance on existing accumulations of wealth. Under these prevailing (and incorrect) assumptions, workers in industrial concerns were considered necessarily stripped of ownership and forced to rely exclusively on wages for their subsistence, and forced to work in inhuman conditions.

That being the case, Cobbett naturally tarred industrialization with the same brush he used to blacken the system developed under the Tudors that concentrated ownership of land in the hands of an elite few. Cobbett attributed the start of this process to Henry VIII Tudor and his confiscation of Church lands and the property of the multitudes who disagreed with his religious and political changes. (See Cobbett's A History of the Protestant Reformation in England and Ireland, 1829.)

The concentration of ownership of the means of production, however, actually began earlier, under Henry VII Tudor. Henry VII asserted a right to rule based on something other than the consent of the people assembled in parliament, and abolished the near-autonomy of the duchies of York and Lancaster that had always provided a counter to the concentration of power in the crown, and always cherished a deep hostility toward Ireland, which had provided a base of support for the House of York as well as putting forth a seemingly endless stream of pretenders to the crown, such as Lambert Simnel and Perkin Warbeck.

Thus, industry was not evil, per se, but the structures of ownership and the method of financing capital formation presumably required that the working classes be reduced to a condition that Cobbett characterized on more than a few occasions as slavery. This set up a paradox, for Cobbett was fully aware that the agricultural life he advocated was impossible without an adequate industrial base to support it.

Thus, it was the presumed necessity of concentrated ownership that accompanied industrialization, not industrialization itself, that Cobbett condemned. (This is a distinction that many authorities today, indoctrinated in the Keynesian dogma that wealth must be concentrated if society is to advance, seem unable to make. This may be the source of the blanket assertion that Cobbett was "always wrong" in his economic analysis.) The United States was thus, for Cobbett, the Land of Opportunity because there was widespread ownership of the means of production (chiefly land), and industrialization, with its presumed inevitable concentration of ownership and the stripping of the working classes of private property, had not yet gained a foothold. In sum,

What he [Cobbett] saw was the perishing of the whole English power of self-support, the growth of cities that drain and dry up the countryside, the growth of dense dependent populations incapable of finding their own food, the toppling triumph of machines over men, the sprawling omnipotence of financiers over patriots, the herding of humanity in nomadic masses whose very homes are homeless, the terrible necessity of peace and the terrible probability of war, all the loading up of our little island like a sinking ship; the wealth that may mean famine and the culture that may mean despair; the bread of Midas and the sword of Damocles. In a word, he saw what we see, but he saw it when it was not there. And some cannot see it — even when it is there. (G. K. Chesterton, William Cobbett)

While Cobbett did not state it explicitly, the importance of America was that it was a truly new thing, a genuinely novus ordo that broke with the past at the same time that it delivered on all the promises previously made but which could never be kept under the old social arrangements and structures. In America,

• The reliance on the rich to form capital out of their existing accumulations of savings and thus provide jobs for workers who thereby became their effective slaves was eliminated due to the free or extremely inexpensive land.

• There were no real social classes because everyone had equal opportunity to be economically self-sufficient; classes could be discarded without any danger of harm to the social order.

• With artificial distinctions of social and economic class removed, every person was politically equal, with equal rights and duties.

• Under equal opportunity to advance socially, economically, and politically, people were closer to what God made them, and thus individuals and society were more peaceful and less prone to unrest in civil, domestic, or religious society.

In other words, in America people could become more fully human than they were able within the institutional structure of Europe.

It is possible (very easy, in fact) to poke some very big holes in Cobbett's view of America . . . if we concentrate on finding specific instances where the principles of America were contradicted, the most obvious being the institution of chattel slavery. That does not change the fact that in America Cobbett saw an important advance in the form of a break from old, flawed institutions, and a move toward something more consistent with what it means to be fully human.

Like the individual human being charged with the duty to acquire and develop virtue — the habit of doing good — America now had the duty to acquire and develop institutional patterns of doing good. Both individuals and societies have this potential. It therefore becomes the obligation of the human person with respect to him- or herself, and the citizen organized with like-minded others with respect to the whole of society, to acquire and develop individual and social virtue, respectively.

The ideas expressed in the Declaration of Independence, the Virginia Declaration of Rights, the U. S. Constitution, etc., — all were directed at creating and sustaining a new order within which the human person could become more fully him- or herself. The principles were there. It was now up to apply them in a manner consistent with the natural law that defines the human person as human.

What You Can Do to Address the Economic Crisis

On Sunday, August 9, 2009, I took a neighbor lady to Mass at a local parish. The celebrant chose the proposed health care plan currently being pushed through Congress (as soon as they come back from vacation, of course) as the subject of his "Homily." (I had to look that up. A "Sermon" is based on the scripture reading for that day, while a "Homily" is on any subject consistent with Christianity that has some relevance to the congregation. Now you know.)

Some people walked out on the sermon, and a couple of people went up to the priest afterwards and told him how outraged they were that he would dare talk about "politics" and "attack" the infinite wisdom of the State. They didn't put it that way, of course, but the implication was that the priest had no right to do anything other than get up and talk in vague platitudes and make people feel good about themselves.

For the record, the priest only commented about the moral implications of the health care proposal as it has been explained in the newspapers. He told no one what to do, restricting himself to pointing out that, as described, the proposal is not completely consistent with the moral teaching that is common to all religions and philosophies with a basis in the natural law.

Seeing the people who walked out and hearing the comments, I got the impression that the bishop would soon be receiving secret reports on the priest's no doubt scandalous behavior and making people feel bad about themselves. (Knowing how the bishop feels about the subject, however, I have a sneaking hunch any such reports will quickly be deposited in File 13.) Nevertheless (although it is not my habit), I wrote a "fan letter" to the priest, if only to give him some documentary evidence to support the contention that not everyone was offended or outraged by the sermon. I mean homily.

With respect to the Just Third Way, however, the point was to seize the opportunity, and try to see if CESJ or any of the other organizations in the Just Third Way could find some way to introduce more people to the possibilities offered by the Doctors' Plan for Universal Health Care in particular, and Capital Homesteading in general. In this way, we will be able to respond more effectively to our critic (and others) who told us we would "rue the day [we] ever heard of health care financing reform." (cf. our July 30 posting on "Who is Responsible for Our Health Care?") Here's the letter, with incriminating names removed to protect the guilty:

Dear Father:

First, let me say once again how much I appreciated your homily at Mass yesterday on the dangers represented by the health care plan currently being pushed through the Congress. It was a necessary wake-up call and reminder of the need for moral guidance in these matters, particularly in light of your obligation to present the teachings of the Church in a practical and comprehensible manner. I hope I adequately conveyed my approval of your action in our brief discussion after Mass.

Second, I confess to being ill-prepared to talk with you, as our volunteer who was with me pointed out, and not having any business cards with me. Let me redress that omission by giving you Dr. Norman Kurland's contact information and our website address again in a possibly more legible fashion:

Dr. Norman Kurland, President
Center for Economic and Social Justice
www.cesj.org

Third and finally, I'd like to suggest some possible initiatives to take advantage of your bringing these issues out into the open.

One, you might want to visit the CESJ website, www.cesj.org, particularly the "executive summary" of the "Doctors' Plan for Universal Health Care," which was prepared, in part, with input from Dr. Steve White, past president of the Catholic Medical Association. You might also find Dr. Kurland's brief bio useful, as well as the short description of some of CESJ's accomplishments. Of special importance is the pamphlet, Introduction to Social Justice, written by one of CESJ's co-founders, the late Rev. William J. Ferree, S.M., Ph.D., "America's greatest social philosopher" (as he was termed by Rev. Andrew F. Morlion, O.P., Ph.D., confidential papal secretary and founder of the International University of Social Studies in Rome).

Two, your mention of Dr. Mercedes Wilson gave me an idea. We have on occasion characterized CESJ's "Just Third Way," particularly the "Capital Homesteading" application, as an economic agenda for the Pro Life movement, especially since the principles of economic justice on which the Just Third Way is based appear to provide a good follow-up to Caritas in Veritate. It would, I think, be very useful for Dr. Kurland and Dr. Wilson to talk. If you could help arrange a meeting, it would be mutually beneficial to both CESJ and Dr. Wilson, especially in her position as a member of the Pontifical Academy for Life. You might try mentioning my name in connection with the U.N. conference in Copenhagen that I attended with Father Matthew Habiger, O.S.B., Ph.D. (former head of Human Life International), but I doubt that she remembers me. (Father Habiger is currently on the CESJ board of counselors.)

Three, I spoke with Dr. Kurland earlier today about the possibility of giving a talk at the parish on the Just Third Way as a Pro Life economic agenda, and its congruence with the natural law (and thus Catholic social teaching). Dr. Kurland is generally willing to give talks if an organization can guarantee a large enough crowd, and a small honorarium and travel costs are covered. It might be possible to draw attendees from other parishes if a notice could be inserted in the local Catholic newspaper or other parish bulletins, possibly even nearby Catholic colleges and universities. Including people from institutions of hire (and higher) learning to a talk by Dr. Kurland might suggest some possible courses for them that convert them from the education-as-job-training paradigm to the realization that education is for life training.

If you like, I could drop off copies of a couple of our recent publications at the Rectory, Capital Homesteading for Every Citizen (2004) and In Defense of Human Dignity (2008), or (if you prefer), Capital Homesteading is also available on the website as a free download.

Again, thank you for your homily on Sunday. I think far more people appreciated it than were able to tell you. I saw one woman make applauding motions with her hands, which was most encouraging, even though I generally consider applause at Mass inappropriate.

Spending Cap and the Wealth Gap

Last Friday's issue of the Wall Street Journal carried an interesting piece by Stephen Moore on how the current government spending spree might be halted. The idea was that Congress should mandate a legally-binding limit on how much the federal government could spend, then raise taxes on wage incomes.

The problem is that the article left out the possibility of taxing dividends and capital gains as regular income, presumably in the belief that financing new capital formation requires the accumulations of the rich in order to be viable. That is not, in fact, the case, as anyone familiar with the basic theory behind banks of issue and central banking can tell you. Here is the text of the letter we sent to the Journal on the subject, with a sentence or two added for clarification:

Dear Sir(s):

Mr. Stephen Moore's editorial in last Friday's Journal ("It's Time to Legislate a Spending Cap," WSJ, 08/07/09, A11) is a step in the right direction, but it goes at the problem from the wrong direction. Politicians can always justify spending what they've been given. A legal limit on spending, binding or not, can be circumvented by passing another law.

It may be time to consider an alternate approach: don't try to figure out how much we can afford to surrender to the State, but how much the State needs to function effectively. The federal government should be required to prepare a budget and, when the budget is approved, set a single tax rate at a level sufficient to cover all current expenditures and begin retiring the debt. Government figures prior to the current spending spree suggest that a tax rate of approximately 46% on all income from whatever source derived (including dividends tax deductible at the corporate level and capital gains) above $30,000 per adult and $20,000 per dependent would balance the budget and retire the debt as of 2006 in 17 years.

This still leaves us, however, with the presumed necessity of using existing accumulations of savings to finance capital formation, and the reason behind giving preferential tax treatment to dividends and capital gains. The question becomes, are existing accumulations of savings necessary to finance new capital, and thereby provide jobs for non-owning workers?

Capital formation (and thus job creation) need not be financed out of existing accumulations of savings, as Dr. Harold Moulton of the Brookings Institution pointed out in his 1935 monograph, The Formation of Capital. Instead, the commercial banking system can provide investment capital for all financially feasible projects by discounting qualified industrial, commercial, and agricultural paper at the Federal Reserve. This would back the currency with liens on hard assets instead of government debt. By extending the credit in ways that create new owners who will use the income from their investments first to pay for the assets and then for consumption instead of reinvestment, effective demand and the tax base will increase, enabling the federal government to cut entitlements and lower taxes.

The Federal Reserve has proved it can create money for massive non-productive government spending. It's time to return the institution to its original purpose and provide adequate liquidity for private sector growth and development.

News from the Network, Vol. 2, No. 32

This week has been deceptively slow with respect to the Just Third Way. Most of the time has been taken up by "meetings, bloody meetings." These seem at first to accomplish very little, but they lay the groundwork for future action. This makes for rather boring reading until the planned actions are actually carried out, but the meetings themselves are important.

On the national front, people seem obsessed with the fact that the stock market seems to be recovering, evidently little realizing that the stock market has not acted as a genuine barometer of economic health since before World War I. It has little, if any direct link to the productive sector. The proceeds of shares sold on Wall Street or any of the other exchanges throughout the world do not benefit the issuing companies, but the brokers and investment bankers that purchased the shares from the companies, as well as subsequent owners of the shares.

Be that as it may, the main events of the week are:

• As noted above, there were several telephone conferences on the East St. Louis project, with the major conference taking place on Wednesday, August 5, 2009. Several action items were reviewed and future assignments suggested.

• A letter was sent on Thursday to the Irish Independent, Ireland's largest daily newspaper, in response to an op-ed piece on the need for people to get organized in order to find a solution to the economic crisis. The letter suggested that people investigate the Just Third Way, especially Capital Homesteading, as a viable alternative to failed government programs based on discredited Keynesian economics. We hope to post the letter next week. The op-ed piece in the Independent was sent to us by Mr. Christopher O'Connor, Treasurer and Financial Secretary of the Colonel John Fitzgerald Division, Arlington, Virginia, Ancient Order of Hibernians in America as one of the Division's social action initiatives. Division contact information is on the website.

• A letter was also sent to the Wall Street Journal in response to a proposal detailed in an editorial that a binding legal limit be placed on government spending and taxes be raised on labor incomes in order to balance the budget. We proposed a somewhat easier, more just, and certainly more financially feasible alternative in the form of the tax proposals contained in the Doctor's Plan for Universal Health Care. This letter, too, should be posted some time next week.

• We have not received any feedback from Michael Novak for our response to his comments.

• As of this morning, we have had visitors from 26 different countries and 42 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, Brazil, the UK, and Argentina. People in Venezuela, Argentina, the United States, Canada, and India spent the most average time on the blog. The most popular postings continue to be those in the series on usury, but the news reports are catching up. Yesterday's posting on "What Caused the Economic Crisis" received more hits in one day than any posting since the piece on President Obama's inauguration speech. With respect to the amount of time spent reading, the postings on "Can We Spend Out Way Out of the Recession" and the Cobbett series appear to be the most popular.

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.

What Caused the Economic Crisis?

Taking another break from William Cobbett (he won't mind . . . I hope), one of our loyal readers asked an obvious question the other day: "What caused the economic crisis?" Frankly, I think I'd rather try to understand string theory or turn Finnegan's Wake into a musical comedy than attempt to dig up all the causes of the current economic troubles. The roots of the problem go back several thousand years, and would take too long to explain in a blog posting in a way that wouldn't try someone's patience. We can, however, say what we believe to be the immediate cause of the mess — and a very quick possibility for a solution. So, in "elevator speech" form:

Q: What was the immediate cause of the economic crisis?

A: The immediate cause of the economic crisis was the creation of money for consumption, speculation, and government spending instead of for investment in capital projects that will pay for themselves out of future earnings.

Q: What is the solution to the economic crisis?

A: The solution to the economic crisis is to create money for financially feasible capital investment, and by that means empower every person with the means of acquiring and possessing a capital ownership stake sufficient to generate an adequate and secure income if thrift and frugality are exercised.

Like all "elevator speeches," the quick answer raises more questions than it answers — such as the issue that people are in trouble now, how will making them capital owners in the future do anything to help that? Here's the short answer to that:

Q: What are people supposed to do now, and until they own enough capital to generate an adequate and secure income?

A: Caritas in Veritate states the principles and suggests specific measures that can be undertaken at the present time to keep people alive and healthy in a manner befitting the demands of human dignity, but without prejudice to the need ultimately to empower people with the means to acquire and possess capital of their own.

That is, we need to take care of people now by making whatever redistribution of wealth is necessary to keep people alive and healthy in a manner that respects their human dignity. Do not, however, labor under the delusion that a redistribution of wealth is anything other than a barely tolerable expedient as an emergency measure. Such measures cannot last, and must be replaced at the earliest opportunity with a system that enables people to gain a living income through their own efforts, whether through their labor, their ownership of capital, or both. Society must apply the principles of economic justice. This, as we might expect, raises more questions:

Q: What are the principles of economic justice?

A: There are three principles of economic justice, 1) The principle of Participation (or Participative Justice), 2) The principle of Distribution (or Distributive Justice), and 3) The principle of Harmony (sometimes referred to as Social Justice).

Q: What are the basic things that a society must have to be economically just?

A: To be economically just, a society must embody the "four pillars of an economically just society" in some form: 1) A limited economic role for the State, 2) Free and open markets as the best means of determining just wages, just profits, and just prices, 3) Restoration of the rights of private property, especially in corporate equity, and 4) Widespread direct ownership of the means of production, individually or in free association with others.

That's about all anyone would have time (and the listener the patience) for in an "elevator speech" situation. For anything more, it's probably better to let the great thinkers speak for themselves. Thus, if people want details and specifics, refer them first to Father Ferree's Introduction to Social Justice, an analysis of the social doctrine of Pope Pius XI. It's relatively short, but challenging, as it forces people to question many of their basic assumptions about social justice.

Referring people to Introduction to Social Justice on the CESJ website also takes them (obviously) to the website. There they can find some very in-depth treatments of the principles of economic and social justice as well as specific proposals applying the principles, most especially Capital Homesteading.

You may have to warn people that the material presented on the CESJ website is not a panacea, nor is it easy for someone who might be stuck within certain modern thought frameworks and assumptions to grasp, but the advantage is that a serious investigator can always make contact with us directly via the contact information on the website.

William Cobbett, "The Poor Man's (and Woman's) Friend," Part II

It's common these days to pay lip service to people like William Cobbett, G. K. Chesterton, and Hilaire Belloc, and "support" the policy of widespread ownership of the means of production embodied in "distributism." Unfortunately, a number of the people who claim to support something they call "ownership of private property" don't really understand ownership or private property. As one self-appointed "authority" has declared on more than one occasion, "property is a right, but it is not an absolute right."

Now, the claim that "property is a right, but it is not an absolute right" can be understood in one of two ways, one right, and one wrong. The right way to understand it is that the right to be an owner is absolute, a natural right, inherent and inalienable in every single human being that is, was, or ever will be born. What is not absolute is what an owner can do with what he or she possesses, even, in some circumstances, what a person may own. That is, the exercise of private property must be limited by the wants and needs of the owner, other persons, and the common good as a whole.

The wrong way to understand the statement, "property is a right, but it is not an absolute right" is to assert (usually without any proof other than personal faith) that private property is "prudential matter" so that some or all people can have their allegedly natural right to be an owner taken away if some other people (those with the clubs, guns, or guillotine) decide that is the "right" thing to do.

Cobbett disagreed most emphatically with the idea that private property is somehow "prudential matter," and said so in no uncertain terms:

You may twist the word freedom as long as you please, but at last it comes to quiet enjoyment of your own property, or it comes to nothing. Why do men want any of those things that are called political rights and privileges? Why do they, for instance, want to vote at elections for members of parliament? Oh! because they shall then have an influence over the conduct of those members. And of what use is that? Oh! then they will prevent the members from doing wrong. What wrong? Why, imposing taxes that ought not to be paid. That is all; that is the use, and the only use, of any right or privilege that men in general can have. Freedom is not an empty sound; it is not an abstract idea; it is not a thing that nobody can feel. It means, — and it means nothing else, — the full and quiet enjoyment of your own property. If you have not this, if this be not well secured to you, you may call yourself what you will, but you are a slave. (William Cobbett, A History of the Protestant Reformation in England and Ireland, 1829, §456)

As surely as America's Founding Fathers (especially George Mason of Gunston Hall, who embodied the natural right to be an owner in the first section of his draft of the Virginia Declaration of Rights, June 12, 1776), Cobbett saw that political life — civil life itself — was rooted in private property: "All men are equal by nature; nobody denies that they all ought to be equal in the eye of the law; but, how are they to be thus equal, if the law begin by suffering some to enjoy this right and refusing the enjoyment to others?" (William Cobbett, Cobbett's Advice to Young Men, and (Incidentally) to Young Women, 1830, § 338) All of the italics in the quote are Cobbett's, by the way.

Is the point still unclear? Just in case anyone had any doubts on the matter, Cobbett kept repeating it — in italics:

What is a slave? For, let us not be amused by a name; but look well into the matter. A slave is, in the first place, a man who has no property; and property means something that he has, and that nobody can take from him without his leave, or consent. (Ibid., § 344)

Private property not a natural right? Private property "prudential matter"? Not likely — unless you are an advocate of mass enslavement, or a toady of the slavers.

In light of this, there is only one possible distributist — or Just Third Way — response to someone who claims that private property in the means of production is not a natural right, or that the wage-welfare system that forces people into dependency on the State is the only way to temporal salvation (instead of being, as Chesterton and Belloc emphasized over and over [and over and over] another form of slavery). That is to point out the rather obvious fact that Abraham Lincoln freed the slaves in 1863 . . . why are you trying to undo all his work?

William Cobbett laid it out quite plainly. Own or be owned. It's that simple.

Response to Dr. Michael Novak

We interrupt William Cobbett to bring you an important news bulletin. Due to our not having received the forwarded e-mail until last week and as a result of our e-mail being down, we were not able to respond to Dr. Novak's concerns in a timely manner — but better late than never. Dr. Novak's note to Dr. Robert Moynihan, editor and publisher of Inside the Vatican magazine, was called forth in response to a "newsflash" sent out by Dr. Moynihan on the new encyclical, Caritas in Veritate. What follows are Dr. Novak's thoughts, and our response. Except for the e-mail addresses that have been removed, the text of Dr. Novak's e-mail is as he sent it.

From: Michael Novak
To: Robert Moynihan
Subject: Re: Encyclical, Background, Corrected/Amended

Thanks for this?

What is the meaning of "wealth" in talking of concentrations of wealth? How many families in the US amassing one million or more dollars in their estate keep that wealth for as long as ten years after the death of the principal? Rockefellers happen, but are rare. Things seem different in Europe, with great families going on and on.

Did Anglo-American economists get a voice?

You mention poor Americans in trailer camps. How much do trailers cost? How much do they receive monthly in welfare, including medical care?

Wealth has a cause. Poverty is what you have naturally.

Just a few thoughts.

Also, "justice," -- according to some historical precedent? Or some utopian ideal? Or ---

"Common good," of course (or "public interest" as the American founders preferred); but who defines what the common good is, and how is it imposed upon recalcitrant materials? Does common good entail government action? Which branch of government discerns the common good? Or is that decided by public debate?

August 4, 2009

Dear Dr. Novak:

Please excuse the delay in responding to the questions you raised in your e-mail to Dr. Robert Moynihan. Our e-mail has been down for a week, and a copy of your e-mail was not forwarded earlier.

Most of your concerns are addressed in the orientation book (Every Worker an Owner) and report (High Road to Economic Justice) prepared by the Presidential Task Force on Project Economic Justice in which you participated in 1986 under the Deputy Chairmanship of Norman G. Kurland, president of the Center for Economic and Social Justice ("CESJ"), www.cesj.org.

I believe you became acquainted with Dr. Kurland while you were a professor at Syracuse, and it may have been Dr. Kurland who introduced you to the work of Louis Kelso and Mortimer Adler. Dr. Kurland may also have suggested the term "democratic capitalism" to you, although he has subsequently abandoned it as inaccurate and misleading. Copies of Every Worker an Owner and High Road to Economic Justice were presented to President Reagan and received his endorsement. Later, the books were presented to His Holiness Pope John Paul II in a private audience in 1987, and the principles and programs detailed in them received his gracious encouragement.

A more up-to-date treatment of the principles and proposals from the Task Force can be found in Capital Homesteading for Every Citizen (2004), while we published a treatment of the philosophy and principles as In Defense of Human Dignity (2008).

Your question regarding the common good is answered in Introduction to Social Justice (1948), a pamphlet by Father William J. Ferree, S.M., Ph.D., a co-founder of CESJ who, at his death in 1985, was described as "America's greatest social philosopher" by Father Andrew F. Morlion, O.P., Ph.D., founder of the International University of Social Studies in Rome, and papal confidential secretary. I believe that Dr. Kurland may have been present when you first met Father Ferree in your home.

Father Ferree's pamphlet presents the "common good" in a manner consistent with Aristotle and St. Thomas Aquinas as the network of institutions within which we as human persons acquire and develop virtue, thereby becoming more fully human. Each person, consistent with the "analogy of being," thus has an "analogously complete" capacity to acquire and develop virtue, and therefore fully possesses the common good within him- or herself.

"Common good" (the complex network of institutions, including the rights defining exercise of life, liberty, and property — cf. the Summa IIa IIae, q. 90, a. 2 on whether the law is always directed to the common good) is carefully distinguished from common goods — that in which the State exercises property as an expedient on the assumption that private individuals cannot or should not own such goods, e.g., infrastructure, military arms, and so on. As St. Thomas explains,

Community of goods is ascribed to the natural law, not that the natural law dictates that all things should be possessed in common and that nothing should be possessed as one's own: but because the division of possessions is not according to the natural law, but rather arose from human agreement which belongs to positive law, as stated above (IIa IIae, q. 57, a. 2). Hence the ownership of possessions is not contrary to the natural law, but an addition thereto devised by human reason. (Summa, IIa IIae, q. 66, a. 2)

That is, the natural law merely states that the goods of the earth are not common property ("Thou shalt not steal"), not how goods are to be divided, which is left to human reason. Thus, if human reason deems it expedient that certain goods (weapons of mass destruction, roads, bridges, utilities, and so on) should be owned in trust by the State, and thus in common by all the people instead of individually or in free association with others, this is allowable — as long as individual private ownership of other goods is not thereby obviated.

Every individual has, inherent within him- or herself the power to act directly on the common good by organizing with others in order to correct flaws in our institutional environment and lower barriers to full participation in the institutions of the common good. This is "the act of social justice," described in detail by Father Ferree in his 1941 doctoral thesis, The Act of Social Justice. The State, as Albert Venn Dicey explained in Lectures on the Relation between Law and Public Opinion in England during the Nineteenth Century (1905), passes and enforces laws that the citizens, through acts of social justice, have, in effect, already accepted or are prepared to accept. The State, in a manner that respects personal sovereignty and individual human dignity, thereby acts in accordance with the popular will.

CESJ has developed some proposals that would change common goods currently held in trust by the State for the people, to being private property directly-owned by people, individually or in free association with others. This would be accomplished by devolving ownership through "Natural Resource Banks" and Community Investment Corporations, or CICs, also called "Community Land Cooperatives," in which each citizen would have a defined and direct private property stake in the land, natural resources and infrastructure that many people erroneously believe can only be owned by the State on their behalf. (The "Natural Resource Bank" is not to be confused with the completely unrelated "Land Bank" proposal of John Law in 1705 or the Rentenmark program implemented by Dr. Hjalmar Schacht that operated in Germany, 1924-1948.)

Once you have reviewed these items on the CESJ website, I invite you to give Dr. Kurland a call if you have any further questions or concerns. Contact information is on the website.

Thank you. We look forward to hearing from you.

William Cobbett, "The Poor Man's (and Woman's) Friend," Part I

As faithful readers of this blog have seen, the working assumption of most economic theories is that the chief means to acquire and possess capital — credit — is available only to those who have already accumulated sufficient savings to invest, or who can persuade those who have saved to lend them the money. This, the basic assumption of Keynesian economics, seems to invalidate Say's Law of Markets. How can people purchase "capital and land" when they lack the means to do so, and jobs do not exist that enable them to sell their labor? Worse, what if the available jobs pay below the amount necessary either for the worker and his or her dependents to live in a manner befitting the demands of human dignity, or fail to clear all the goods and services that have been produced at market prices?

In the early 19th century, however, there was one answer: the United States of America. Until relatively late in the century, it was possible for almost anyone to come to the United States and, if willing to take the risks, gain a property stake ranging from the moderate to the gargantuan. In America of the early 1800s, the theories of Malthus were a dead letter. In 1829, one commentator referred to the United States as, "that anti-malthusian country where Malthus would certainly be burned alive." (William Cobbet, The Emigrant's Guide. Arlington, Virginia: Economic Justice Media, 2008, 189-190.)

William Cobbett was a champion of the poor and downtrodden in the late 18th and early 19th century in Great Britain. Unlike most such self-appointed authorities, however, he certainly chronicled the crimes of the wealthy and the government, but most of his efforts were directed to what was necessary to lift people out of poverty and empower them to resist the political and religious oppression of the English establishment.

In contrast to today's "conspiracy theorists" — whatever they might call themselves — Cobbett's goal was not to seek out and punish the presumably guilty. This program seems to be advocated in the hope that an ideal world will somehow spring up spontaneously like a phoenix out of the ashes of the old order once the criminals have been executed as painfully as possible. No, Cobbett's goal was to identify and promote what would make life better for the poor, not what would make life miserable for the rich.

That being the case, Cobbett's writings may seem at first simply a long catalogue of crimes and criminals. Nowhere, however (at least that I recall), is there any of the prevalent demands for punishment and vengeance that masquerade as a well-formed "social conscience" today. As G. K. Chesterton characterized Cobbett,

The chief mark of the modern man has been that he has gone through a landscape with his eyes glued to a guidebook, and could actually deny in the one, anything that he could not find in the other. One man, however, happened to look up from the book and see things for himself; he was a man of too impatient a temper, and later he showed too hasty a disposition to tear the book up or toss the book away. But there had been granted to him a strange and high and heroic sort of faith. He could believe his eyes. (William Cobbett, 1926)

Thus, seeing reality, Cobbett tried to focus on what would make things better, not what would make them worse. What we therefore see in any of his writings following the (extremely) long list of what is wrong in society, is something that many people today regard as a virtual obsession on Cobbett's part: widespread individual and joint ownership of the means of production. There were other things as well, but nothing seemed more calculated to inspire Cobbett's ire than denial of the natural right to be an owner of the means of production, for nothing else has the same capacity as property to empower people with control over their own lives.

News from the Network, Vol. 2, No. 31

Once again, the stock market is up, and the economists and politicians are (once again) announcing the end of the recession . . . and (once again) unemployment figures are on the increase and a number of companies have announced further losses. The "key indicators" at which the experts seem to be looking are housing (which is a large part of the reason the recession started) and the stock market (ditto, ditto, ditto, ditto). It is unclear how or why speculation that is not backed up by any productive activity is supposed to signal the end of the recession.

On closer examination, the economic news released today does not really indicate that the recession is over, nearly over, or even that there is light at the end of the tunnel. The only thing that has caused the pundits to start punding is that the economy shrank less than expected. Given the sort of economic and political doublespeak to which we've become accustomed since the hegemony of Lord Keynes, this is interpreted (once again) as "Happy Days Are Here Again."

• On Wednesday, Norman Kurland flew to the city of East St. Louis, Illinois. While there, he had top-level meetings with various figures in industry, finance, and state and local officials. The purpose was to discuss the MECLC initiative for an "E-Macro System" for eleven communities in Southwestern Illinois. The "E" in "E-Macro System" signifies not only "energy," but the extremely innovative citizen ownership proposal: "Equity."

• On Thursday, after returning to Virginia, Norman Kurland and a number of participants from the previous day had a follow-up telephone conference to discuss some of the specifics about the MECLC project that had been raised in the previous day's meeting. The meeting was very fruitful, and a number of specific actions were agreed upon.

• On Thursday and Friday the CESJ e-mail system went down. Consequently, if any news items were submitted to the address below, they have not yet been received. The system is expected to be back up Monday, August 3, 2009.

• On Friday, Norman Kurland had an interesting conversation with a businessman from Provo, Utah, who came across the CESJ and EEI websites and was intrigued by what he saw. Norman Kurland had an extended conversation with him, and expects to hear back from him once he has reviewed the additional information he received during the phone call.

• As of this morning, we have had visitors from 27 different countries and 42 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, Brazil, the Philippines, and the UK. People in Venezuela, Argentina, the United States, Canada, and Brazil spent the most average time on the blog. The most popular postings continue to be those in the series on usury, the letter to the Wall Street Journal on Caritas in Veritate, and the news reports.

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.

Who is Responsible for Our Health Care?

Earlier this week we received an e-mail containing negative comments about CESJ's proposed "Doctors' Plan for Universal Health Care" and suggesting not only that profit is unjust, but that CESJ had no business getting involved in the discussion on how to finance universal health care. There was also a hint that allowing the State to take over direct administration of providing an individual good such as health care is somehow automatically better than anything the private sector could come up with. You can judge the comments for yourself, by reading the edited version of the e-mail. The text was edited to correct spelling and grammar, and to remove anything that might allow identification of the writer.

Sometimes I wonder if you actually understand how health care financing works. Every dollar that goes out of the system for non-medical purposes means one less dollar there is for medical services, that is Health Economics 101. So if the health insurers and in particular United Healthcare takes out a $859 Million Quarterly (Record) Profit that means that $859 Million dollars does not go for health care services. Therefore, sick people who would be receiving the necessary medical services aren't getting the care because the excess profit is going to shareholders.

So I repeat my question and I would appreciate an answer: How much is a life worth to you? I know that you cannot or won't be able to answer the question? Why? Because there is no good or safe answer to the question. The fact of the matter is that the health insurers/HMOs know that what they are doing is morally unacceptable but they just do not care because they are making billions over the dead bodies of the poor, sick and the uninformed. This profiteering in health care financing and delivery has to stop, its not good for our country, its not good for our citizens and its not good for souls.

This morning when I was reading your email I was interrupted by an email from a young relative. Here's my relative's take on the health care reform debate: "Bill Maher says 'If conservatives get to call universal healthcare "socialized medicine," I get to call private, for-profit healthcare "soulless, vampire bastards making money off human pain".' "

Now, I do not go to that extreme, but the point that I am making is that if a young person with a Master's Degree in Library Science sees the inequity in our present health care financing system, significant change is in the future.

Good luck with the Third Way Concept but I would suggest that you stay far away from the Health Care Reform debate because it is not your fight. If you make it your fight I guarantee you that you will rue the day that you ever heard of health care financing reform.

Our response is as follows:

Contrary to your assertion, we understand how health care financing works. The presumed abuses you point out on the part of private insurers can be taken care of through our recommendation to make all insurance companies "mutual" insurance companies, with the full rights of private property passed through to the owners: the share/policyholders. Under our proposal, every citizen would be covered under an insurance plan of his or her choice, and would be a share/policyholder in that same company. Any profits would then go to the share/policyholders in the form of dividends or rebates on premiums, thereby directly reducing aggregate health care costs by the amount of the distributed profits.

Assuming that we agree that the present increasingly oligopolistic health care and insurance system is not optimal, the likely alternative to the simple and more democratic reform proposed under the "Doctors' Plan" for universal health care is to put matters in the hands of the State. Any profits realized from health care delivery would not be distributed to the citizens, but (as is usual with such profit centers as the Federal Reserve and the Export-Import Bank of the United States) be turned over to the U. S. Treasury as revenue. This would, if the past is any guide, encourage overcharging on premiums to support a bloated State bureaucracy, automatic denial of claims, and anything else to enhance revenue for a government that is becoming increasingly desperate for additional sources of income and new ways to tax.

The State's proper role, however, is not to take care of all our individual goods such as food, clothing, shelter, or health care. As defined in the U.S. Constitution and in traditional philosophy of government, the State's role is to care for the common good — the "general welfare," not each person's "individual welfare." The common good, of course, is that network of institutions within which the human person, as an aspect of his or her personal sovereignty and individual human dignity, acquires and develops virtue — "pursues happiness" — as a "political animal." Our natural rights to life, liberty, and access to the means of acquiring and possessing private property in the means of production support our acquisition and development of virtue.

Putting power over individual welfare in the hands of the State leads directly to a totalitarian order. This is either through the establishment of socialism outright, or through its bastard cousin, fascism. Totalitarian States do not, as a rule, respect life in any form, to say nothing of liberty, property, or pursuit of happiness. They were, in the twentieth century, responsible for an estimated 90 million deaths:

Stalin: 1.5 to 2 million (purges), plus 5 to 10 million (famine)
Hitler: 13 to 14 million (death camps, execution of POWs, ethnic cleansing)
Pol Pot: 7.1 million
China: 58 million (ROC, Nationalist, Japanese, and Communist, cf. R. J. Rummel, China's Bloody Century. New Brunswick, New Jersey: Transaction Publishers, 1991).

Perhaps you could be more specific in addressing which of the principles or applications of principles embodied in the "Doctors' Plan" with which you disagree, either from a moral or an economic standpoint. We did not see anything in your remarks offering a way to keep the choice over health care in the hands of citizens, preserve the doctor-patient relationship, or grow the economy — including the health care delivery system — in an ethical and sustainable way that would allow people to afford the means to sustain their lives in a manner befitting the demands of human dignity and respect for personal sovereignty.

Your suggestion that we, or anyone else concerned with basic human dignity and personal sovereignty "stay far away from the Health Care Reform debate because it is not your fight," displays a certain lack of political acumen. On the contrary, it is everyone's fight. As Edmund Burke has been paraphrased as saying, "All that is necessary for the triumph of evil is for good men to do nothing."

Ultimately, there is only one thing that you can "guarantee" if we or anyone else let you persuade him or her that he or she "will rue the day that you ever heard of health care financing reform." That is that the State will step in unopposed while people stand idly by, hoping vainly that the bureaucrats in charge of determining who qualifies to receive State-controlled health care will not deem them, in the words of Karl Binding and Alfred Hoche, Lebensunwertes Leben — "Life unworthy of life." You will then have an answer to your demand regarding the value of human life. As far as the totalitarian State is concerned, the answer is, "nothing."

You might find the analysis of Dr. Leo Alexander, Chief Medical Examiner at the Nuremberg War Crimes Trials of interest in this context. His article, "Medical Science Under Dictatorship," from the July 14, 1949 New England Journal of Medicine, examines the politicization of the practice of medicine in the Third Reich.

The Poor Man's Friend

Nearly two centuries ago William Cobbett ran for parliament. He failed to get elected, but the series of pamphlets he wrote was collected and published as The Poor Man's Friend. In the pamphlets he carefully explained why he was running for office:

How there came to be so much poverty and misery in England? This is a very interesting question; for, though it is the doom of man, that he shall never be certain of any thing, and that he shall never be beyond the reach of calamity; though there always has been, and always will be, poor people in every nation; though this circumstance of poverty is inseparable from the means which uphold communities of men; though, without poverty, there could be no charity, and none of those feelings, those offices, those acts, and those relationships, which are connected with charity, and which form a considerable portion of the cement of civil society: yet, notwithstanding these things, there are bounds, beyond which, the poverty of a people cannot go, without becoming a thing to complain of, and to trace to the Government as a fault. Those bounds have been passed, in England, long and long ago. (The Poor Man's Friend, 1829, § 90)

His answer? Lack of widespread direct ownership of the means of production. As he made clear in another book he published the next year in a tome purporting to give advice to young people starting out in life,

What is a slave? For, let us not be amused by a name; but look well into the matter. A slave is, in the first place, a man who has no property; and property means something that he has, and that nobody can take from him without his leave, or consent. (Advice to Young Men, and (Incidentally) to Young Women, 1830, § 344)

This is not empty rhetoric, but a simple statement of fact:

Freedom is not an empty sound; it is not an abstract idea; it is not a thing that nobody can feel. It means, — and it means nothing else, — the full and quiet enjoyment of your own property. If you have not this, if this be not well secured to you, you may call yourself what you will, but you are a slave. (A History of the Protestant Reformation in England and Ireland, 1829, §456)

It might be something to think about.

Worker Ownership Model in Argentina

From a law professor at the Catholic University of Buenos Aires we recently received an inspiring story about workers who, without expropriation or otherwise harming the property rights of others, took over a bankrupt company and turned it into a success. As she reports,

You will like the story of the Zanello Pauny company. This is one of the factories known here in Argentina as fábricas recuperadas ("recovered factories") as the result of a group of workers continuing to work at the factory even though it was shut down after a bankruptcy — an instance of a business tragedy that has a happy ending.

Don Pedro Zanello founded this metal fabrication plant in 1950. It was located in a small town called "Las Varillas" in the Province of Córdoba. The factory was virtually the only source of employment for the people of the town.

As you know, during Menem´s administration a drastic change in economic policies took place. Markets were opened to importations. As a result, previously subsidized national industries collapsed. One of the victims of this sudden change from a controlled economy to free market principles was Zanello, S.A. In 2001, after more than 50 years of development in the national industry, the company went bankrupt, and the factory shut down after the equivalent of what is known in the United States as a "Chapter 7" bankruptcy. That is, instead of reorganizing the company to keep it alive (as under a U.S. "Chapter 11"), the company was closed and its assets put up for sale to satisfy the creditors.

Argentine law, however, allows workers at a bankrupt company to continue operations provisionally. This benefits the workers through continued employment, and also provides a small chance that the company can be brought back to life. As a result, workers organized and came together in free association as a "Work Cooperative." This gave them legal standing to rent the plant and equipment of the Zanello factory and continue operations.

The key to the success of this endeavor was gaining access to capital credit — the principal means in a modern economy to acquire and possess capital. The workers were able to obtain credit from the Provincial Bank of Córdoba that gave them the cash to purchase the factory. In an unusual move, the workers had no money or other wealth of their own to use as collateral for the loan. Instead of collateral, the Bank of Córdoba became the "principal and privileged creditor," using the factory itself to secure the loan to the Work Cooperative. This was a result of all the company workers, both members of the cooperative and administrative personnel, coming together to present their case to the loan officers at the bank.

In consequence, a new corporation, "Pauny S.A.," was created. The new company bought the Zanello assets thanks to the credit supplied by the Provincial Bank of Córdoba, which was able to transfer its privileged credit position in Zanello to the new Pauny S.A. As a result, Pauny S.A. secured a long term line of credit from the Córdoba Bank, and became the new owner of the factory.

The shares of the company were divided equitably among all the stakeholders. Workers owned a 33 % share through the cooperative, the administrative personnel had another 33 %, the dealers (retailers) had 33%, and the balance (1 %) was held by the City of Las Varillas as a fiscal creditor.

The operation grew, and it soon increased the number of workers from 20 to 400 people. In order to add more capital, the dealers sold 31% of their shares to private investors, while the workers took a cut in pay to contribute to the increase in capital.

Today, the sales are very high, and the corporate expansion has allowed the company to add cartage and road building machinery to its line of agricultural products. The latest news showed that the factory released a special line of tractors called "Rino 3000." This is only one model of a complete line of tractors that have been put into production since the year 2002. The tractor is equipped with a 180 horsepower engine and, according to the manufacturers, "its price is very competitive."

Today, the town of Las Varillas is surviving the economic crisis. The rate of unemployment has fallen from 25 % in 2002, to 4% today. This example shows that it is possible to have a successful enterprise thanks to the effort and the willpower of the people involved on the development of a community project — as long as they can secure capitalization on good terms, and the business is otherwise viable.

Individual Charity and Social Justice in Action

A few weeks ago, CESJ's president, Dr. Norman G. Kurland responded to a comment by a reader of one of his many e-mails (which we are lamentably far behind in getting posted on this blog). The issue dealt with the impression that the reader seemed to have gotten that individual, one-on-one action to bring people around is somehow in conflict with the act of social justice, or that one necessarily cancels out the other or renders it ineffectual. That is not the case at all. As Norm explained,

There are many roads to a just social order. You described one to rehabilitate the "the wandering blank-stared wage slaves and enroll them in the collective rehabilitation of the BINARY approach." While the individual approach can be useful and appropriate at times, within the current state of society it's a good bet that most of these people may have already responded to you with a blank stare. If, however, that is the way that you believe you can be most effective, please continue to go down that path.

Yes, we may face a catastrophe before the blind and the deaf are open to the Just Third Way. We in CESJ, however, are committed to try our best to avoid that situation and the bloodshed and tragedy associated with a total collapse of the system.

Our efforts are directed to gathering a critical mass of social architects, Just Third Way revolutionaries, and authentic servant leaders who get immediately fired up, just as you did, and get them to organize to do whatever it takes to rehabilitate the system. (That's how we have proceeded in the East St. Louis project.) I see the current system as producing those who respond to new ideas in fear or with a blank stare. We seek authentic servant leaders who, like us, focus on correcting the flaws in a system that has created a nation of wage, welfare, and charity debt slaves who no longer trust their own minds.

Not everyone is deaf or blind, as you seem to suggest. There are a growing number of people who see the big picture and who are working together to change the system in ways consistent with the Just Third Way and binary economics, that is, in accordance with the demands of personal sovereignty and individual human dignity.

I have been in a successful revolution (the civil rights movement), so when I later discovered the ideas and principles of the virtue of social justice as articulated by one of CESJ's co-founders, the late Father William Ferree, S.M., Ph.D., I knew he was right. These principles, although never articulated by civil rights leaders in as scholarly a fashion as Father Ferree) were the key to changing the political system in the Deep South for millions who were excluded previously from the political process.

Before you write off this approach you should take the time to read Father Ferree's pamphlet, Introduction to Social Justice. Your approach to building a grassroots movement is different, with its own merits, as well as strengths and weaknesses. Until, however, you can make a good case that Father Ferree's principles are unrealistic, impracticable or are in some manner inconsistent with the demands of human dignity, we will continue down our present path. We wish you well in continuing down your path focused on rehabilitating wage slaves at the grassroots level, rather than on rehabilitating the system that produces wage slaves. Yes, our approach takes time and committed allies, but we don't have the time and resources to split our efforts and proceed down two paths at once. If, however, you can mobilize funding and people skilled at community organizing who can communicate the Just Third Way message at the grassroots level, you will always have CESJ materials and people available for those initiatives.

News from the Network, Vol. 2, No. 30

In a manner similar to what happened in the months prior to the Crash of 1929, swings in the stock market are becoming greater and greater. Even as the various news media are loudly trumpeting that "Happy days are here again" (the Wall Street Journal), and that the recession is over, the market has already started falling on "disappointing" news about Microsoft's earnings.

A little common sense would have told people that when you have more than half a million more people added to the unemployment rolls, with the prospect of their being joined by many more when the hike in the minimum wage begins to take effect, there is something fundamentally wrong with they way the economy is structured — and no amount of temporary (or even permanent) speculative gains on Wall Street in which most people have no stake is going to do a bit of good.

Be that as it may, we continue to advance the Just Third Way, as can be seen from the news items of this past week:

• The CESJ quarterly board meeting was held this past Saturday. The main topics of discussion were the restructuring of the website and the project in East St. Louis.

• We continue to receive favorable comments on the letter we posted on the new encyclical, Caritas in Veritate. Evidently, for all the positive reception of the document, people seem to feel that something more is needed, and that "something more" is a clearer presentation of the three principles of economic justice and the overall framework of the Just Third Way.

• The restructuring of the CESJ website continues. The latest addition is a small collection of selected articles by Judge Peter Stenger Grosscup, one of Teddy Roosevelt's "Trust Busters," who wrote an insightful series of articles on the dangers associated with the growing concentration of ownership of capital in the United States, and the benefits that individuals and society as a whole receive from widespread ownership of the means of production.

• On Tuesday, Norman Kurland had a conversation with a businessman in Canada who is representing some "social entrepreneurs" who have expressed interest in the East St. Louis project. The discussion focused on various creative ways in which financing for the project might be obtained in ways that would retain and strengthen the citizen ownership and participation features.

• On receiving the news that Father Joseph Fessio, S.J., has once again been terminated by Ave Maria University, we sent out e-mails to selected friends and members of CESJ to see if there was anyone who could put Norman Kurland and Father Fessio together for a discussion on how best to approach the Vatican for a meeting on the new encyclical and a discussion on the principles of economic justice and their application to the present economic crisis.

• Norman Kurland has arranged to fly out to East St. Louis next week to discuss strategy for implementing the "E-Macrosystem" project in East St. Louis and ten other communities in the area. The project as planned will not only provide non-polluting electrical power for an industrial and commercial rebirth of the area, but empower every resident economically (and thus politically) by vesting each person with a direct private property stake in the enterprise, making the "E" in "E-Macrosystem" stand for "Empowerment," "Energy," and, especially, "Equity."

• As of this morning, we have had visitors from 25 different countries and 41 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, Brazil, the UK, and the Philippines. People in Chile, the United States, Venezuela, Brazil, and Canada spent the most average time on the blog. The most popular postings continue to be those in the series on usury, or which only a few remain to go up, and the news reports.

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.

On Usury and Other Dishonest Profit, Part XXXV

From the common list of "reasons" we hear why widespread direct ownership of the means of production "can't work" is because workers and other ordinary citizens can't handle the responsibility, can't handle the risk, can't handle the handle, and so on. The one thing that all of these objections have in common is that they typically come from people who are not workers or other real people, but are usually capitalists, academics, and politicians (or their hangers-on).

The answer to these and other objections can be found in an approach to corporate governance CESJ developed called "Justice-Based Management," or "JBM." This was previously called "Value-Based Management," but that term became associated with programs intended to maximize share values, a distantly-related but not entirely congruent approach that ignores the necessity of worker and citizen ownership. What follows is taken in large measure from "What is Justice-Based Management?" on the CESJ website.

Justice-Based Management (JBM) is a leadership philosophy and management system that applies universal principles of economic and social justice within business organizations. The ultimate purpose of JBM is to create and sustain ownership cultures that enhance the dignity and development of every member of the company, and to economically empower each person as an owner and worker.

JBM promotes a company's long-term profitability within the global marketplace by enabling all worker-owners to serve and provide higher value to the customer. JBM connects every worker's self-interest to the bottom-line and long-term success of the company.

The JBM process builds upon a written articulation of the philosophy and principles of the company's leader (typically the CEO or chairman of the board) and leadership core group, in terms of universal principles and core values of the company. JBM proceeds in stages to build a consensus upon these fundamental shared values and vision of the company within each work area of the company.

These articulated values provide the foundation for enhancing the productiveness of workers and company profitability, and include such structures as employee-monitored economic incentive programs, participation and governance structures, two-way communications and accountability systems, conflict management systems and future planning and renewal programs.

One of the main components of JBM is the "empowerment ESOP." While the Employee Stock Ownership Plan (ESOP) was originally invented as a means for providing working people with access to capital credit to become owners of corporate equity, most ESOPs are set up as just another employee benefit plan or tax gimmick, or as an employee share accumulation plan ("ESAP"). Most ESOPs today are not designed to treat worker-owners as first-class shareholders. The "empowerment ESOP," on the other hand, is designed to encourage workers to assume the responsibilities and risks, as well as the full rights, rewards and powers, of co-ownership.

Furthermore, all academic and government studies to date have concluded that ESOPs alone are not enough to affect individual and corporate performance. Within a JBM system, in combination with a regular gain-sharing program tied to bottom-line profits, and structured systems of participatory management, the empowerment ESOP stimulates everyone in the company to think and act like entrepreneurs and owners.

Justice-Based Management offers an ethical framework for succeeding in business. JBM balances moral values (treating people with fairness and dignity) with material value (increasing a company's productiveness and profits while enriching all members of a productive enterprise). JBM's three basic operating principles are:

1. Build the organization on shared ethical values — starting with respect for the dignity and worth of each person (employee, customer and supplier) — that promote the development and empowerment of every member of the group.

2. Succeed in the marketplace by delivering maximum value (higher quality at lower prices) to the customer.

3. Reward people commensurate with the value they contribute to the company — as individuals and as a team.

Justice-Based Management is guided by the concept of social justice, as articulated by the late social philosopher William Ferree, S.M., Ph.D., and summarized in Introduction to Social Justice. Social justice involves the structuring of social organizations or institutions (including business corporations) to promote and develop the full potential of every member.

JBM also embeds within an ownership culture the three principles of economic justice defined by the late lawyer-economist Louis Kelso and philosopher Mortimer Adler:

1) "participative justice," or the right to the means and opportunity to participate in the economic process as an owner as well as a worker;

2) "distributive justice," or the right to the full, market-determined stream of income from one's labor and capital contributions; and

3) "harmony" (or social justice), or the right and responsibility of each person to work in an organized way with others to correct the "social order" or institution when the principles of participative or distributive justice are being violated or blocked.

Within JBM the principles of social and economic justice provide a logical framework for defining "fairness" and structuring the diffusion of power within the corporation.
Structuring Ownership Participation

JBM is designed to systematize and institutionalize shared rights, responsibilities, risks and rewards within all company operational and governance structures involving:

• Corporate values and vision

• Leadership development and succession

• Corporate governance and future planning

• Operations (policies and procedures) and hardship sharing policies

• Communications and information sharing

• Training and education

• Pay and rewards

• Grievances and adjudication

A well-designed Justice-Based Management system sharpens and crystallizes the leader's philosophy around "universal" principles, providing a solid foundation for a corporate culture that enables people to internalize these guiding principles. JBM generates organizational synergy by connecting each worker-owner to the financial tools of ownership (i.e., ESOP and profit sharing), participative management systems, and a defined share of power in the governance of the organization. This in turn enables people to make better decisions, discipline their own behavior, and work together more effectively and cooperatively — because it is truly in their self-interest to do so.

Ultimately, no matter what your reasons (or lack thereof) for wanting a just economy, the only way to remove usury as a dominant force in a modern economy — or any economy, for that matter — is 1) to base economic activity solidly on the application of sound principles of the natural law, and 2) eliminate the myth that the only way to finance capital formation is through existing accumulations of savings from your thinking.