President Obama Makes An Argument For Rebuilding America

Speaking to 3,000 attendees of the Building and Construction Trades Department conference in Washington, DC on April 30, 2012, President Obama made an argument for investing in rebuilding America.

Investing in rebuilding America’s infrastructure is a proper role of government when executed via contracts to the private sector. But this is a short-term benefit to job creation as once the infrastructure projects are complete, they no longer require the significant labor worker force it took to build the infrastructure projects. If we want lasting benefit for the initial workers contracted, then the government policy must require that the companies involved facilitate broaden ownership through Employee Stock Ownership Plans (ESOPs) to empower the labor workers to acquire ownership in the new productive growth of their companies and pay for their acquisition out of the earnings generated by the government contracts. The old way of issuing government contracts to closely-owned companies unfairly enriches those owners, with labor workers left with a temporary job during the time it takes to build the infrastructure projects.

One can criticize President Obama on the economy endlessly, but neither do the Republicans have a plan to “restore an era of robust economic growth in the years ahead.”

Why, because they and their advisors are stuck in the one-factor view of economics,  and continue to ignore in policy and program planning the second, exponentially gaining non-human factor of production. Their economic advisors, as with nearly all economist, continue to miss the obvious by restricting their thinking to one-factor economics––labor workers.

Promoting opportunity and upward mobility through government stimulus spending is temporary at best in terms of creating job growth. Once the infrastructure is built, (and built to last and serve the broader interests of the nation) the jobs that built it no longer exist. Nor will strengthening job training programs work in the face of exponential displacement of labor workers by advancing technology. The role of physical productive capital (the non-human factor of production) is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production.

Never do the Republicans or Democrats, or for that matter any third party, address the term “OWNERSHIP.”  In fact, the entire subject of WHO OWNS the productive capital that comprises the third industrial revolution is NEVER addressed!!

The old way of making things involved taking lots of parts and screwing or welding them together. Now a product can be designed on a computer and “printed” on a 3D printer, which creates a solid object by building up successive layers of material. Such additive manufacturing will use new materials, which are lighter, stronger and more durable than the old ones. Carbon fibre is replacing steel and aluminium in products ranging from aeroplanes to mountain bikes. New techniques let engineers shape objects at a tiny scale. Nanotechnology is giving products enhanced features. But additive manufacturing is only one of a number of breakthroughs leading to the factory of the future, and conventional production equipment is becoming smarter and more flexible, too. Factories are becoming vastly more efficient, thanks to automated milling machines that can swap their own tools, cut in multiple directions and “feel” if something is going wrong, together with robots equipped with vision and other sensing systems. Everything in the factories of the future will be run by smarter software. Digitisation in manufacturing will have a disruptive effect every bit as big as in other industries that have gone digital, such as office equipment, telecoms, photography, music, publishing and films. And the effects will not be confined to large manufacturers; indeed, they will need to watch out because much of what is coming will empower small and medium-sized firms and individual entrepreneurs. As manufacturing goes digital, it will allow things to be made economically in much smaller numbers, more flexibly and with a much lower input of labor, thanks to new materials, completely new processes such as 3D printing, easy-to-use robots and new collaborative manufacturing services available online. Thanks to smarter and more dexterous robots, some lights-out manufacturing is now possible. Manufacturing revolutions never happen overnight, but this one is already well under way. There is enough transformative research going on in the biological sciences and in nanotechnology to spawn entirely new industries, like making batteries from viruses. And if the use of carbon-fibre composites were to spread from sports cars to more workaday models, the huge steel-stamping presses and robot welding lines would vanish from car factories.

I have devoted an entire Web site (www.foreconomicjustice.org) and Facebook page (http://www.facebook.com/pages/For-Economic-Justice/347893098576250) to advocating for a paradigm shift in economic thinking, which to date is based on one-factor labor worker input and excludes a “reality” discussion of the second factor in production––the non-human factor embodied in productive land, structures, machinery, superautomation, robotics, digitally automated factories, sophisticated computerized operations, etc. As the production/manufacturing/delivery of products and services continues to transform exponentially and employ advancing non-human productive capital digitally realized, the necessity will be to recognize that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to the capital owners of the non-human factor and progressively less to workers who make their contribution through labor. This means that the GOAL of Full Employment will not and cannot solve our income distribution problems. We can no longer ignore the advances constantly being made in the scientific world or the business world or the industrial world, which embrace the ever-expanding role of the non-human factor of productive capital input. What needs to be adjusted is the opportunity to produce, not the redistribution of income after it is produced.

The government should acknowledge its obligation to make productive capital ownership economically purchasable by capitalless and under-capitalized Americans using insured capital credit, and, as binary economist Louis Kelso states, “substantially assume financial responsibility for the economy through establishing and supervising the implementation of an economic, labor and business policy of democratized economic power.” Historically, capital has been the primary engine of industrialization. But as used, as Kelso has argued, has, as well, “been the chief cause of the institutional deformities that have created and maintained two incompatible classes: the overcapitalized and the undercapitalized.”

We need to arrive at a new market economy structure in which people are in a position to earn the wages of their capital as well as the wages of their labor. In companies that employ people the company would be in a position to be more competitive through lower labor costs and increased technological innovation, while achieving higher employee incomes through the employee’ capital.

If we change direction and systematically build earning power into consumers, we have the opportunity to reverse the depression perpetrated by systematically limiting the 99 percent to labor wages alone and through technology eliminating their jobs. We need solutions to grow the economy in ways that create productive jobs and widespread equity sharing. We need to systematically make capital credit to purchase capital accessible to economically underpowered people (the 99 percenters) in which the income from the capital investment is isolated until it pays for itself, and then begins to produce a stream of dividend income to the new capitalists. This can only be accomplished by enabling every person to have access to productive capital ownership and purchase the capital, and pay for it out of what the capital produces. It’s time good and well-intentioned people woke up and adopted a just third way beyond the greed model of monopoly capitalism and the envy model of the traditional welfare state. This will promote peace, prosperity, and freedom through harmonious justice.

Once this goal becomes the national political focus we will see an unbelievable discussion of workable plans to realize the goal. Remember that planning begins with a vision and a goal. This is not rocket science but it does require national leadership. Implementation requires amending a few laws that basically authorize the transactions that will broaden capital ownership paid for with the future earnings of capital investment. Allowing such transactions will provide incentives for profitable opportunities to employ unused capacity and promote stable economic growth.

Still, after a half-century, we have no leaders with a growth strategy that could restore the economic productiveness of the American economy. The growth strategy I have presented is not new, but it has not yet registered in the minds of leaderless politicians and their advisors from the left to the right of the political spectrum and a population of people who have been mis-educated and mis-led by conventional economists from all the conventional schools of economics.

We need leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every man, woman, and child as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every man, woman, and child to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.

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"Expanding Ownership"

Expanding Ownership

by Ronald Reagan
October 1980
Op-Ed

It is no secret that the American economy is in trouble. Federal deficits spending has fueled the fires of inflation. More and more Americans are suffering the anguish of unemployment – Americans who, in a strong and vibrant economy would be producing wealth for the benefit of the people of this nation. Government is claiming an ever-increasing portion of citizen income to pay for programs too often riddled with waste, fraud, and irresponsibility.

These baneful trends can be reversed. The method is clear. Americans deserve a major across the board tax cut. Runaway spending must be restrained; fraud and waste identified and eliminated. Excessive regulation of business must be cut back. Honest value must be restored to the dollar. Americans must be given new incentives to save, invest and produce.

But yet more must be done to restore and maintain this nation’s economic well-being. For we must make sure that the ownership of America’s great productive wealth remains broadly distributed among the American people.

Our Founding Fathers well understood that concentrated power is the enemy of Liberty and the rights of man. They knew that the American experiment in individual liberty, free enterprise, and republican self-government could succeed only if power were widely distributed. And since in any society social and political power flow from economic power, they saw that wealth and property would have to be widely distributed among the people of this country.

The truth of this insight is immediately apparent.

Could there be anything resembling a free enterprise economy, if wealth and property were concentrated in the hands of a few, while the great majority owned little more than the shirts on their backs?

Could there be anything but widespread misery, where a privileged few controlled a nation’s wealth, while millions labored for a pittance, and millions more were desperate for want of employment?

Could there be anything resembling a free government, where citizens without property dared not to resist the commands of the few who controlled their livelihoods?

Could any country be a land of free men and women, where the pride and independence of property ownership was reserved to the few, while the majority existed in dependency and servility?

It should be clear to everyone that the nation’s steadfast policy should afford every American of working age a realistic opportunity to acquire the ownership and control of some meaningful form of property in a growing national economy?

This is not to say that the government should confiscate from the “haves” and bestow upon the “have-nots”, beyond the requirements of a compassionate welfare programs to provide for those who cannot provide for themselves. Far from it. But it is to say that our duty is to foster a strong, vibrant, wealth-producing economy which operates in such a way presently have little or no ownership stake in their countries future.

This is not a new policy. Jefferson and Adams, Webster and Lincoln, Cleveland and Wilson – all understood its importance. But it is a policy that needs strong new emphasis in an age where its basic truth has sometimes been forgotten and removed from public discourse.

No one in public life today has done more to foster a reawakened understanding of this policy then Louisiana’s Senator Russell Long, the chairman of the Senate Finance Committee. He has been responsible for several of the recent tax law provisions to encourage our nation’s industries to create various kinds of Employee Stock Ownership Plans (ESOPs), through which workers can acquire an ownership stake in their companies. He has been a strong and effective voice in the nation’s council for a policy of expanded ownership for all.

The nation’s next president should call upon Congressional leaders like Senator Long to work with him to ensure that all Americans have a fair chance to become owners of property in their country. For if such a policy is not adopted, the bright ideals of this nation may fall prey to the fate which the Founding Fathers feared – the domination of concentrated power which stifles liberty, free enterprise, self-government, and the sacred rights of man.

"Broaden Ownership Of New Capital"

Joint Economic Committee

Congress of the United States

on the

January 1976 Economic Report of The President

BROADEN THE OWNERSHIP OF NEW CAPITAL

Wealth in the United States is concentrated in the hands of a relatively small fraction of the population. Unfortunately, the date on wealth are sparse. The last comprehensive attempt by the Federal Government to measure its characteristics and distribution was made by the Federal Reserve Board in 1962. It was estimated that more than three-quarters of the country’s total wealth was owned by less than one-fifth of the people, while more than one-quarter was owned by just the top 0.5 percent. The Federal Government should remedy the lack of up-to-date information on personal wealth through periodic surveys and comprehensive reports on this subject.

The distribution of wealth reflects in large part the pattern of ownership of non-residential capital with corporate shares being one of its principle forms. This category of wealth is much more concentrated than total wealth, with the top percentile of the personal income distribution owning 51 percent of the market value of individually owned corporate stock and receiving 47 percent of the dividends. Meanwhile, the new capital assets generated by businesses, which in recent years have averaged well over $100 billion annually, rebounded largely to the benefit of these persons who already have great wealth.

The number of shareholders, moreover, declined by some 18 percent from 1970 to 1975, and data suggest that young people today are not purchasing stocks in significant volume. Balancing this declining role of the individual investor has been the rise of financial institutions, which since 1950 have more than tripled their share of the market value of stock holdings.

To begin to diffuse the ownership of capital and to provide an opportunity for citizens of moderate income to become owners of capital rather than relying solely on their labor as a source of income and security, the Committee recommends the adoption of a national policy to foster the goal of broadened ownership. The spirit of this goal and what it purports to accomplish was endorsed by many of the witnesses at our regional hearings.

Without getting into specifics, the types of programs which could be established to help meet this goal will be outlined. Such alternative methods of broadening capital ownership are under study by the Committee.

In the individual firm, employee ownership can be encouraged directly through tax incentives to the employees to purchase stock or to firms to place newly issued stock into the hands of their employees. The latter approach, known as Employee Stock Ownership Plans (ESOPs), was examined in recent hearings by the Committee.

An alternative plan involves multiform funds which would receive tax-favored contributions from affiliated firms and issue nonnegotiable fund certificates to the employees. This type of fund, which has been in operation in France and West Germany, may diversify its portfolio, although it may be limited to particular industries and regions.

Providing ownership opportunities not just to employees but to citizens at large could be accomplished through various devices. One example would be the establishment of funds which would accumulate personal savings on a tax-preferred basis and use them to acquire a diversified portfolio of equity shares in corporations. For instance, individuals with earned income not exceeding $20,000 could be allowed to save up to $3,000 a year in one or more funds and to deduct this amount from their taxable incomes.

Whatever the means used, a basic objective should be to distribute newly created capital broadly among the population. Such a policy would redress a major imbalance in our society and has the potential for strengthening future business growth.

To provide a realistic opportunity for more U.S. citizens to become owners of capital, and to provide an expanded source of equity financing for corporations, it should be made national policy to pursue the goal of broadened capital ownership. Congress also should request from the Administration a quadrennial report on the ownership of wealth in this country which would assist in evaluating how successfully the base of wealth was being broadened over time.

* * *

[The following appeared as a “Letter to the Editor” on July 20, 1976, from Chairman of The Joint Economic Committee, 1976; Hubert H. Humphrey]

“Broaden Capital Ownership”

In his column on July 4, Hobart Rowen maintained that “Debate Still Needed on Employee Stock Ownership Plans.” I agree wholeheartedly with this. However, I wish to point out that the debate should not be limited to ESOPs alone, for there are many alternatives methods for achieving the ultimate goal, which is to broaden the ownership of capital.

I view this as such an important goal that in addition to introducing with Senator Javits the Employee Stock Ownership Fund Act of 1976, which was discussed in Mr. Rowne’s column, I directed the Joint Economic Committee to seriously examine this goal (“Broaden Capital Ownership”) and the best means to achieve it. The committee began its investigation by holding two very informative days of hearings on ESOPs last December at which Louis O. Kelso and other ESOP experts testified. I am pleased to say that the committee fully endorsed this goal by making it a recommendation in its 1976 Annual Report to the President: “to provide a realistic opportunity for more U.S. Citizens to become owners of capital, and to provide and expanded source of equity financing for corporations, it should be made national policy to pursue the goal of broadened capital ownership.”

The most recent contribution by the committee to the debate on whether such a goal is needed and is justified and, if so, how it should be met, was a staff study released last month entitled “Broadening the Ownership of New Capital: ESOPs and Other Alternatives.” This study is a valuable input into the debate Mr. Rowen says is needed as it presents the overall context for the debate and analyzes many methods other than ESOPs that would broaden capital ownership in the U.S. The latter point is a critical one, for I feel that the more comprehensive types of plans should be subjected to debate, which they haven’t been up to this point, by Congress and the appropriate Executive Departments.

The main advantages of such plans according to the study were: (1) they stimulated both the issuance of stock and its distribution to new stockholders and (2) the new stockholders would, if so desired, consist entirely of lower and middle income Americans who currently own a very small share of this country’s outstanding stock. It is my intention that the Joint Economic Committee continue its efforts in this area by examining these types of plans over the next year.

The broad framework of my thoughts in this area may be stated quite briefly. Throughout my career as a public servant, I have viewed full employment as a top priority goal for this country. And I continue to do so. But I also recognize that capital, and the question of who owns it and therefore reaps the benefit of its productiveness, is an extremely important issue that is complementary to the issue of full employment. I see these as the twin pillars of our economy: Full employment of our labor resources and widespread ownership of our capital resources. Such twin pillars would go a long way in providing a firm underlying support for future economic growth that would be equitably shared.

HUBERT H. HUMPHREY,
U.S. Senator (D-Minn.)
Washington D.C.

The Abiding Truth That Private Property Is The Economic Guarantee Of Freedom

The following are articles written in the 1950s by Bishop Fulton J. Sheen D.D., Ph.D. and originally posted by Guy C. Stevenson on Facebook.

Revolutionary Change
April, 1959

Two revolutionary changes have taken place recently in England and the other in Russia. Both had to do with private property.

It has always been the position of sane men that when property under a socialist regime belongs to the state or the dictator, there is never the same care for it that there is under a regime of personal responsibility. A man is willing to sit down on someone else’s tools, but he is not willing to sit down on his own. The one way to get men interested in property is to give them some incentive and one of the best incentives is some share in production or the fruits of their labor.

In Britain, a parliamentary committee investigating 13 years of socialism in Great Britain recently brought the following facts to light.

♦   ♦   ♦

Costs in all state-owned enterprises are higher than under private ownership because the state managers are not under the same pressure as private owners to show profits and to cut down unnecessary expenses.

A Story is told of one man who had gone into private business from government and found a deficit in his business. He said: “I was not worried about it, until I realized that I was no longer working for the government.”

Nor were labor relations any better when state managed, as was proved by tensions in the coal mines and the transport industries. One billion six million tons of coal were lost in the mining industry because of strikes. Not only did the mines show a deficit of $80 million in 11 years of state management, but the transportation systems in the same period lost $424 million. One British airline lost $75 million.

The investigation also revealed that there were 3,000 more employees in the airline than were actually needed, the jobs having been given out as political plums. On the contrary, the private industries that were left free from government socialism showed lower costs and higher returns without any financial aid.

♦   ♦   ♦

Russia has had the same experience of the failure of socialism. First of all, Nikita Khrushchev has admitted that the commune system with which communism started has failed. This was a very pointed reference to China which has two million mess halls where workers eat together, four million nurseries where all children are kept together, and all this after the tearing down of millions of homes to provide common dormitories for workers. Russia challenges China when it claims that it has already achieved communism. Russia denies this, stating that there must be socialism first and that is as far as Russia had advanced, whereas China is behind Russia.

But more important still, Mr. Khrushchev now says that people will not work in Russia without some incentive; this he adds is particularly true when workers do not have sufficient goods to meet their needs. He justifies the use of incentives to work by saying that they are necessary under socialism; but when communism arrives — and no one knows when it will, the incentives to production will be done away with. But for the moment there must be some rewards given to those who produce more– the mere love of state property is not enough. No Communist would ever have asserted this 20 years ago.

♦   ♦   ♦

Both the above admissions of failure point up the abiding truth that private property is the economic guarantee of freedom. A man is free on the inside because he has a soul which he can call his own; he is free on the outside because he can call something his own. Economic justice means that neither class, labor nor capital, should be deprived of some share in the ownership, profits or management of industry. It used to be that capital claimed all; now labor claims more and more but without assuming responsibility for increased production which helps create their wages and their livelihood.

Socialism is a system in which capital and labor share in responsibility to the anonymous state. Nineteenth Century capitalism was a system in which capital denied any responsibility for the worker; the 20th Century must be one in which labor sees itself, not working for such and such an industry, but with them.


We’ve been here before.

ONE hears so much today about the conflict of Capitalism and Socialism or Capitalism and Communism, that many people believe they are two contradictory systems. The truth is Capitalism and Socialism, from an economic point of view alone, are related as retail and wholesale. Socialism and Communism have carried to the extreme many of the basic principles already latent in Capitalism, which is here not understood as private property, but as a concentration of wealth in the hands of the few without any social control.

Those who think that capitalism and socialism are enemies should long ponder, how the capitalistic system of England (European Union) has without any revolution, become socialistic. Capitalism in the United States has ‘not yet’ become socialism, but the growing power of the State indicates that the transition is taking place slowly. It may be inquired when the transition of one to another takes place without revolution.

OWN vs. OCCUPY

The answer is when capitalism has reached its maximum point of efficiency, when it generates so many conflicts between capital and labor, when it begets social injustices: and when labor demands more and more a share of its gains without assuming increasing responsibilities toward the source of its gains. The State then steps in to correct the abuses. Thus does ownership rest in the hands of a few capitalists evolve into ownership of the means of production in the hands of a few (State) bureaucrats.

There is nothing mysterious about the process any more than there is a mystery as to how a democracy which identifies freedom with license eventually becomes a totalitarian state. The chaos resulting from unbridled liberty can be controlled only by force, and thus the pendulum swings from unbounded license to unbounded tyranny.

Capitalism and Socialism are related in another way, namely, their attitude toward religion. Capitalism is indifferent to religion: it wants no church, no Bible, no moral law telling a man what he ought to do with his wealth. Socialism wholesales this idea by saying religion may have nothing to say, and if it has nothing to say, then it should not be permitted to exist (HHS). Thus the amoral attitude of capitalism becomes the anti-moral attitude of socialism.

Ownership Of  The Means Of Production

There is very little hope for the average man or family in either system, and it offers them little consolation to know that capitalism becomes socialism. Both capitalism and socialism are opposite sins against property. Capitalism emphasizes private rights to property without any social responsibility to the common good: socialism emphasizes the social use of property, to forgetfulness of personal rights. The true solution is one in which the rights to property are personal (connected to the PERSON), but the responsibilities are social. The one real defense for Liberty in the economic order is property. *

The more anonymous property becomes the more the individual suffers and the less freedom he enjoys. Property reaches its complete state of impersonality and anonymity in socialism. Some day labor may become smart and instead of organizing to get more and more money out of industry, it may organize to get itself more and more ownership so that it may have some capital to defend.

by Fulton J. Sheen D.D., Ph.D.

December, 1951

Posted by: “OWN or be OWNED”

Economic MatrixChristian Social OrderCapital Homesteading Now

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“NEW SLAVERY” _________________________________________________________

Freedom Without Property Is Incomplete

By Bishop Fulton J. Sheen

There are three ways in which a man becomes a slave. He may be born into slavery, or forced into it, or he can deliberately accept his servitude. All three forms flourish in the modern world. Men are born and forced into slavery in Russia and her satellites states. Men in the free world invite slavery when they ask the government to provide complete security, when they surrender their freedom to the “Welfare State.”

The slave states of Western world are an outgrowth of monopolistic capitalism—an economic system which is opposed to the wide distribution of private property in many hands. Instead, monopolistic capitalism concentrates productive wealth among a few men, allowing the rest to become a vast proletariat.

Some representatives of monopolistic capitalism, sensing this evil in their system, have tried to silence criticism by pointing to the diffused ownership in the great corporations. They advertise, “No one owns more than 4 percent of the stock of this great company.” Or they print lists of stockholders, showing that these include farmers, schoolteachers, baseball players, taxi drivers, and even babies. But there is a catch to this argument, and it is this: although it is true that individuals of small means own shares in the company, it is not true that they run the company. Their responsibility for its policies is nil.

Possession properly has two faces, two aspects: we all have a right to private property, but this is accompanied by our responsibility for its righteous use. These two things (which should be inseparable) are frequently divided today. Everyone admits that the farmer who owns a horse is obligated to feed and care for it, but in the case of stocks and bonds, we often forget that the same principle should prevail.

Monopolistic capitalism is to blame for this; it sunders the right to own property from responsibility that owning property involves. Those who own only a few stocks have no practical control of any industry. They vote by postcard proxy, but they have rarely even seen “their” company. The two elements which ought to be inextricably joined in any true conception of private property — ownership and responsibility — are separated. Those who own do not manage; those who manage; those who manage and work do not control or own.

The workmen in a factory may have a shadowy, unknown absentee “employer” – the thousands of individual owners of stock – whom “management” represents and tries to please by extra dividends. The workman’s livelihood is at the disposition of strangers who make a single demand of their representatives: higher profits.

Faced with such insecurity, labor unions seek a solution in demands for higher wages, shorter hours, pensions, and such things. But this approach takes monopolistic capitalism for granted, and accepts the unnatural division between property and responsibility as permanent. A much more radical solution is apt to come, and this may take either of two forms.

One way of remedying the situation would be through a profound alternative of our political and economic life, with the aim of distributing the means of production more widely by giving every workman a share in profits, management, and ownership, all three. The other alternative which is not a constructive solution is confiscation: this may take the violent form of communism, or the less noticeable form of bureaucratic encroachment through taxation, as favored by the welfare state. [And/or outright confiscation likened to General Motors, AIG, and Banks, etc. etc. etc.] Confiscation in any form is an unhealthy solution for a real disease. It amounts to telling men that because they are economically crippled, they must abandon all efforts to get well and allow the state to provide them with free wheelchairs.

The denial of the right of ownership to a man is a denial of his basic freedom: freedom without property is always incomplete. To be “secured” – but with no accompanying responsibility – is to be the slave of whatever group provides the security.

A democracy flirts with the danger of becoming a slave in direct ratio to the numbers of its citizens who work, but do not own / or who own, but do not work; or who distribute, as politicians do, but do not produce. The danger of the “slave state” disappears in ratio to the numbers of people who own property and admit its attendant responsibilities under God. They can call their souls their own because they own and administer something other than their souls. Thus they are free.

________________________________________

Originally published in On Being Human: Reflections, On Life and Living, Fulton J. Sheen, New York: Doubleday & Co., 1982

________________________________________

The Significance Of Property

“The Great Jailer who became rich through “confiscation” does not envy your national wealth; he envies your personal wealth. Personal wealth is the economic guarantee of your freedom. He knows that your right to call property your own is yours because you already have a soul which you can call your own.” Fulton J. Sheen, 1959

* * * * * * *

Share In Ownership Is Asked For Every Citizen.

Monsignor Fulton J. Sheen Holds Property a Guarantee of Freedom

Property is “the economic guarantee of freedom, as the soul is its spiritual guarantee,” Monsignor Fulton J. Sheen of the Catholic University said last night in an address over WEAF network of the National Broadcast Company.

The way out of our current difficulties is for labor to share in the ownership of the industry in which it is employed, Monsignor Sheen declared. He said that this meant “the restoration of property, not as the right to do with it whatever you please, but as ownership bound up with control as the last and solid bulwark of free men in a free country.”

“When labor is willing to assume this responsibility and when capital is willing to share it.” he asserted, “then shall we have a rebirth; the freedom with which America began; then the symbol of freedom in the United States will not be a free lunch-counter, but a Statue of Liberty; then the inspiration of freedom will be He who, hanging on a cross, kept His body so much His own that He could give it to us as our life, and who kept His soul so much His own that He could commend it to His Heavenly Father.”

January 1939 ; The New York Times..

We as a people, ought to investigate the merits of “Expanded Capital Ownership, through the Capital Homestead Act”. Or perhaps wait another three quarters of a century.

Posted by “Own or be Owned”

 

The President’s Incoherent Economic ‘Philosophy’

In a National Review Online editorial by James C. Capretta, he states as the basis of his argument:

“Once upon a time, President Obama was a traditional Keynesian. When he came into office, he favored a massive injection of new government spending into the economy in the name of ‘stimulus’ — counter-cyclical federal activity aimed at offsetting depressed consumer demand emanating from a recession-battered private sector.”

One can criticize President Obama on the economy endlessly, but neither do the Republicans have a plan to “restore an era of robust economic growth in the years ahead.”

Why, because they and their advisors are stuck in the one-factor view of economics,  and continue to ignore in policy and program planning the second, exponentially gaining non-human factor of production. Their economic advisors, as with nearly all economist, continue to miss the obvious by restricting their thinking to one-factor economics––labor workers.

Promoting opportunity and upward mobility through government stimulus spending is temporary at best in terms of creating job growth. Once the infrastructure is built, (and built to last and serve the broader interests of the nation) the jobs that built it no longer exist. Nor will strengthening job training programs work in the face of exponential displacement of labor workers by advancing technology. The role of physical productive capital (the non-human factor of production) is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production.

Never do the Republicans or Democrats, or for that matter any third party, address the term “OWNERSHIP.”  In fact, the entire subject of WHO OWNS the productive capital that comprises the third industrial revolution is NEVER addressed!!

The old way of making things involved taking lots of parts and screwing or welding them together. Now a product can be designed on a computer and “printed” on a 3D printer, which creates a solid object by building up successive layers of material. Such additive manufacturing will use new materials, which are lighter, stronger and more durable than the old ones. Carbon fibre is replacing steel and aluminium in products ranging from aeroplanes to mountain bikes. New techniques let engineers shape objects at a tiny scale. Nanotechnology is giving products enhanced features. But additive manufacturing is only one of a number of breakthroughs leading to the factory of the future, and conventional production equipment is becoming smarter and more flexible, too. Factories are becoming vastly more efficient, thanks to automated milling machines that can swap their own tools, cut in multiple directions and “feel” if something is going wrong, together with robots equipped with vision and other sensing systems. Everything in the factories of the future will be run by smarter software. Digitisation in manufacturing will have a disruptive effect every bit as big as in other industries that have gone digital, such as office equipment, telecoms, photography, music, publishing and films. And the effects will not be confined to large manufacturers; indeed, they will need to watch out because much of what is coming will empower small and medium-sized firms and individual entrepreneurs. As manufacturing goes digital, it will allow things to be made economically in much smaller numbers, more flexibly and with a much lower input of labor, thanks to new materials, completely new processes such as 3D printing, easy-to-use robots and new collaborative manufacturing services available online. Thanks to smarter and more dexterous robots, some lights-out manufacturing is now possible. Manufacturing revolutions never happen overnight, but this one is already well under way. There is enough transformative research going on in the biological sciences and in nanotechnology to spawn entirely new industries, like making batteries from viruses. And if the use of carbon-fibre composites were to spread from sports cars to more workaday models, the huge steel-stamping presses and robot welding lines would vanish from car factories.

I have devoted an entire Web site (www.foreconomicjustice.org) and Facebook page (http://www.facebook.com/pages/For-Economic-Justice/347893098576250) to advocating for a paradigm shift in economic thinking, which to date is based on one-factor labor worker input and excludes a “reality” discussion of the second factor in production––the non-human factor embodied in productive land, structures, machinery, superautomation, robotics, digitally automated factories, sophisticated computerized operations, etc. As the production/manufacturing/delivery of products and services continues to transform exponentially and employ advancing non-human productive capital digitally realized, the necessity will be to recognize that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to the capital owners of the non-human factor and progressively less to workers who make their contribution through labor. This means that the GOAL of Full Employment will not and cannot solve our income distribution problems. We can no longer ignore the advances constantly being made in the scientific world or the business world or the industrial world, which embrace the ever-expanding role of the non-human factor of productive capital input. What needs to be adjusted is the opportunity to produce, not the redistribution of income after it is produced.

The government should acknowledge its obligation to make productive capital ownership economically purchasable by capitalless and under-capitalized Americans using insured capital credit, and, as binary economist Louis Kelso states, “substantially assume financial responsibility for the economy through establishing and supervising the implementation of an economic, labor and business policy of democratized economic power.” Historically, capital has been the primary engine of industrialization. But as used, as Kelso has argued, has, as well, “been the chief cause of the institutional deformities that have created and maintained two incompatible classes: the overcapitalized and the undercapitalized.”

We need to arrive at a new market economy structure in which people are in a position to earn the wages of their capital as well as the wages of their labor. In companies that employ people the company would be in a position to be more competitive through lower labor costs and increased technological innovation, while achieving higher employee incomes through the employee’ capital.

If we change direction and systematically build earning power into consumers, we have the opportunity to reverse the depression perpetrated by systematically limiting the 99 percent to labor wages alone and through technology eliminating their jobs. We need solutions to grow the economy in ways that create productive jobs and widespread equity sharing. We need to systematically make capital credit to purchase capital accessible to economically underpowered people (the 99 percenters) in which the income from the capital investment is isolated until it pays for itself, and then begins to produce a stream of dividend income to the new capitalists. This can only be accomplished by enabling every person to have access to productive capital ownership and purchase the capital, and pay for it out of what the capital produces. It’s time good and well-intentioned people woke up and adopted a just third way beyond the greed model of monopoly capitalism and the envy model of the traditional welfare state. This will promote peace, prosperity, and freedom through harmonious justice.

Once this goal becomes the national political focus we will see an unbelievable discussion of workable plans to realize the goal. Remember that planning begins with a vision and a goal. This is not rocket science but it does require national leadership. Implementation requires amending a few laws that basically authorize the transactions that will broaden capital ownership paid for with the future earnings of capital investment. Allowing such transactions will provide incentives for profitable opportunities to employ unused capacity and promote stable economic growth.

Still, after a half-century, we have no leaders with a growth strategy that could restore the economic productiveness of the American economy. The growth strategy I have presented is not new, but it has not yet registered in the minds of leaderless politicians and their advisors from the left to the right of the political spectrum and a population of people who have been mis-educated and mis-led by conventional economists from all the conventional schools of economics.

We need leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every man, woman, and child as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every man, woman, and child to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.

http://www.nationalreview.com/articles/296709/president-s-incoherent-economic-philosophy-james-c-capretta

Delaying Retirement: 80 Is The New 65

The CNN Money article states:

“A quarter of middle-class Americans are now so pessimistic about their savings that they are planning to delay retirement until they are at least 80 years old — two years longer than the average person is even expected to live.

“It sounds depressing, but for many it’s a necessity. On average, Americans have only saved a mere 7% of the retirement nest egg they were hoping to build, according to Wells Fargo’s latest retirement survey that polled 1,500 middle-class Americans.”

President Obama stated: “What’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” As long as working people are limited by earning income solely through their labor worker wages, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in revolution.

The majority of Americans, dependent on labor worker wages, no longer think that jobs and labor wages will return suddenly—if at all—and at a livable earnings level, that the value of their homes will re­bound, or that their limited retirement funds will soon be fully restored. Americans are scared but attribute their worsening finances to job losses, reduced hours, wage givebacks, and overall reduced earnings. They do not understand the role of productive capital driven by technological innovation and science and the requirement for them to become capital workers, as well as labor workers, to earn a viable economic future. And until we, as a society, understand how wealth is produced, how consumers earn the money to buy products and services and the nature of capital ownership, we will not be able to set a course to obtain an affluent quality of life for middle and working class citizens, where everyone “can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” In binary economist Louis Kelso’s words, “build an economy of universally productive individuals and households.”

Kelsonian binary economics and the various credit mechanisms derived from its understanding are based on the principles and dynamics of a free market economy. When understood, the current system is exposed as a system rigged to continually concentrate the ownership of capital in the 1 to 5 percent of the population. Also exposed are the moral implications of the current system, which is presently propelled by greed in our society. Democratic capitalism does not require people to be any better than they presently are, but it does enable our society to leverage both greed and generosity in a way that honestly recognizes and harnesses productive capital as the factor that exponentially produces the wealth in a technologically advanced society.

http://money.cnn.com/2011/11/16/retirement/age/index.htm

 

Capitalism And Socialism Or Capitalism And Communism Are Related?

Fulton J. Sheen D.D., Ph.D. penned a four-part article in 1951 entitled “Capitalism And Socialism Or Capitalism And Communism Are Related?, which I recommend reading. The series challenges the thinking of both socialists and communists, and is related to an article I published on www.foreconomicjustice.org authored by binary economist Louis O. Kelso, which originally appeared in the American Law Journal in 1957.

This series of articles was written (in order) from 1951, 1956, and 1958 under the title “Bishop Sheen Writes” and is in the public domain, research from newspapers in Canada, USA, and England, the Archbishop Fulton J. Sheen Foundation of Peoria, Ill and Catholic University of America.

Capitalism And Socialism Or Capitalism And Communism Are Related?

We’ve been here before.

ONE hears so much today about the conflict of Capitalism and Socialism or Capitalism and Communism, that many people believe they are two contradictory systems. The truth is Capitalism and Socialism, from an economic point of view alone, are related as retail and wholesale. Socialism and Communism have carried to the extreme many of the basic principles already latent in Capitalism, which is here not understood as private property, but as a concentration of wealth in the hands of the few without any social control.

Those who think that capitalism and socialism are enemies should long ponder, how the capitalistic system of England (European Union) has without any revolution, become socialistic. Capitalism in the United States has ‘not yet’ become socialism, but the growing power of the State indicates that the transition is taking place slowly. It may be inquired when the transition of one to another takes place without revolution.

OWN vs. OCCUPY

The answer is when capitalism has reached its maximum point of efficiency, when it generates so many conflicts between capital and labor, when it begets social injustices: and when labor demands more and more a share of its gains without assuming increasing responsibilities toward the source of its gains. The State then steps in to correct the abuses. Thus does ownership rest in the hands of a few capitalists evolve into ownership of the means of production in the hands of a few (State) bureaucrats.

There is nothing mysterious about the process any more than there is a mystery as to how a democracy which identifies freedom with license eventually becomes a totalitarian state. The chaos resulting from unbridled liberty can be controlled only by force, and thus the pendulum swings from unbounded license to unbounded tyranny.

Capitalism and Socialism are related in another way, namely, their attitude toward religion. Capitalism is indifferent to religion: it wants no church, no Bible, no moral law telling a man what he ought to do with his wealth. Socialism wholesales this idea by saying religion may have nothing to say, and if it has nothing to say, then it should not be permitted to exist (HHS). Thus the amoral attitude of capitalism becomes the anti-moral attitude of socialism.

OWNERSHIP OF THE MEANS OF PRODUCTION

There is very little hope for the average man or family in either system, and it offers them little consolation to know that capitalism becomes socialism. Both capitalism and socialism are opposite sins against property. Capitalism emphasizes private rights to property without any social responsibility to the common good: socialism emphasizes the social use of property, to forgetfulness of personal rights. The true solution is one in which the rights to property are personal (connected to the PERSON), but the responsibilities are social. The one real defense for Liberty in the economic order is property*

The more anonymous property becomes the more the individual suffers and the less freedom he enjoys. Property reaches its complete state of impersonality and anonymity in socialism. Some day labor may become smart and instead of organizing to get more and more money out of industry, it may organize to get itself more and more ownership so that it may have some capital to defend.

by Fulton J. Sheen D.D., Ph.D.

December, 1951

*

OWN or be OWNED”

“The society had fallen, much as our society has today, into a tangle wherein the bulk of men were disappointed and angry and seeking for a solution to the whole group of social strains. There was indebtedness everywhere; the power of money and consequent usury. There was slavery everywhere. Society reposed upon it, as ours reposes upon wage slavery today. There was weariness and discontent with theological debate, which, for all its intensity, had grown out of touch with the masses. There lay upon the freemen, already tortured with debt, a heavy burden of imperial taxation; and there was the irritant of existing central government interfering with men’s lives; there was the tyranny of the lawyers and theircharges.” — Hilaire Belloc, The Great Heresies, 1938

Capitalism And Socialism Or Capitalism And Communism Are Related? –– Part II

Much like today.

[This is the first in a series of two articles analyzing the nature of the struggle in the world today – the year, 1956.]

1– The two conflicting ideologies in the world are popularly called Capitalism and Communism. Capitalism, in the broadest sense, gives primacy to the Profit-Principle and thus makes gain the goal of life: another name for it is the Market-Principle, which seeks unlimited production through free trade. Communism, on the contrary, gives primacy to the State-Principle and insists on the subjugation of economic forces to the control of the state: another name for it is Socialism. [much like today.]

2– Communism, or Socialism is a reaction against Capitalism. The older forms of Capitalism in the nineteenth century made economic processes independent of church, Bible, morality and the state. Its most common expression was: “I can do with my wealth and my property whatever I want.” That kind of Capitalism produced a concentration of wealth in the hands of a few, and the impoverishment of the masses. [again much like today.]

A reaction against this took place in some democratic societies by the state stepping in to protect individuals against exploitation. Stock markets transactions were controlled, labor unions encouraged to organize to protect the masses, labor relations boards set up, credit supervised by the state, and social benefits such as old-age pensions extended to all citizens. More and more the state or politics began to supervise economic processes. Free exchange, or the Market-Principle, thus became subject in some degree to political regulation and social planning. [again much like today.]

Communism represented the extreme of this solution by jumping to the other extreme. From the primacy of economics, Communism jumped to the primacy ofpolitics. The Market-Principle gave way to the State-Principle, or control by the Party Bureaucracy. [again much like today.] Because property rights were abused to some extent by older Capitalism, Communism denied the right to all property. Personal rights were denied for the sake of social use, and this was accomplished by violent confiscation.

End Of Press Freedom

Because free press was sometimes, but rarely, abused to defend the older Capitalistic exploitation, Communism destroyed freedom of the press, allowing its existence only when, as the Soviet Constitution puts it, it is used to support the Socialist state. Religion under older Capitalism was considered an individual affair: because it was not permitted to moralize on economic processes which were considered amoral, the Communist went to the other extreme of saying that religion was a defender of the property rights and, therefore, should be abolished. [again much like today.]

Because the suffrage and the free ballot were occasionally abused by the older form of Capitalism, to elect those who would defend the certain economic “barons” the Communists went to the extreme of abolishing the free ballot: only one Party was allowed, and, as Molotov once said, “all the other parties are in jail.” The older Capitalism did not like men to organize in communities, such as unions, but insisted that men should be treated like individual atoms: Communism went to the extreme of packing the atoms together in a mass without restoring personality of the abused workers. [again much like today.]

Move To Economic Controls

Socialism thus became the forcible organization of society to cure the chaos created by older Capitalism and its first form of Liberalism. Though the communists and soviets were tremendously interested in economics –as they must be because of their materialism– the important point is that economics was submitted to political control. The Market-Principle of economics gave way to the Bureaucracy-Principle of politics, and this because Communism believed that the only way to save the community was by the destruction of human freedom. [again much like today.]

It is an over-simplification to say that the Western world stresses Gain and Security, while Communism stresses the Collectivity and the masses. But the basic struggle going on in the world today is between Economics and Politics, or the supremacy of the Market-Principle, with social controls and socialism and Communism or the supremacy of the State-Principle, which subjugates production, distribution, thinking, traveling and the human soul to the omnipotent power of the State. [again much like today.]

In the next article, we will trace the more recent development of this struggle as it affects world-politics.

by Fulton J. Sheen D.D., Ph.D.

June 1956

 

Capitalism And Socialism Or Capitalism And Communism Are Related? –– Part IIIAgain Much Like Today!

[We were warned.]

THE STRUGGLE in the world today is between a philosophy of life which makes economics, security, gain and profit the dominant motive of life, and Communism, or Soviet Socialism, which stresses the primacy of politics or State domination of economics, press, distribution, art and science because there is only one will — the State-will; only one conscience — the State-conscience: only one religion or God —the State-god and its messianic promise of world revolution with the illusion of hope and change.

These two colossal giants have been soliciting the rest of the world to fall within their respective orbits. Each has its bait which is dangled before the Eastern peoples to tempt them into the arms of either. The Market-Principle of the Western world tries to win other people by offering them products of the Market [marketing] such as food, economic material for reconstruction, and arms as a first line of defense. Granted that there are humanitarian motives in this giving, the important point is that our economic system, which is capable of producing greater surplus, has surpluses to give and does not need distant military bases to protect its existence.

The Soviets use the economic appeal also, and they are beginning to use it more than ever before. But the economic is not primary. The accent is more on the political, but the political is presented as an appeal to “culture,” to “community,” to the “solidarity for all people” under the leadership of the Soviets. Hence the constant appeal to the “People’s Government” in China and Tibet: hence the penetration by Soviet “culture” into Western world, and the plea to Westerners to visit the Soviet Union to study their culture and their progress. The Soviets give aid but not so much to win military bases as to win over “the people,” the “masses,” the “community.” This accounts for the Soviet attack in China against “capitalists” and “imperialists” in order to win the people to a new “culture” and “way of life.” [One World Order.]

One wonders if the present tendency to “debunk” Stalin does not fit in with this cultural emphasis. The term most often used in abusing Stalin is that the “cult of personality” was wrong. The shift is from a dictator who incarnated within himself the political primacy of the State-Principle to the collective leadership representative of a “people” or a “culture.” The world cannot be gained as quickly to Communism by a dictator as it can by “apostles of culture” visiting England, thus proving their solidarity and oneness with all “peoples.”

Suddenly the United States, which stresses the economic against the Soviet stress onpolitics, finds itself caught unprepared by the quick shift of the Soviets to the cultural barrage laid down against the Eastern world, which barrage is only a disguise for theState-Principle. What is important in Russia today is not the attach on Stalin: it is rather the shift to the cultural as the mask of “culture” works on the masses of the people, not just to feed them, but to revamp their thinking, their education, their family life, their morals, their loyalties and their religion. Security and prosperity are the catchwords of the Western with its primacy on economics, but “culture” is the slogan of the Soviet drive.

What makes it difficult for us to appreciate this struggle in simple terms is because we take our beliefs from the very civilization in which we live: we are in a crisis and we take our philosophy from the crisis, like a drowning man might develop his philosophy from the water which suffocates him. There is not a sufficient number of standards outside of both economics and politics. The doctor who is not sick is a better judge of the patient’s illness than the patient himself. The only way we know whether a line is crooked is by relation to something true and straight. Not even we who write this article would be able to say that neither the Economic-Principle nor the Political-Principle will save the world if we did not have some Moral-principleoutside the world itself. That is why a philosophy and a faith are so important.

by Fulton J. Sheen D.D., Ph.D.

June 1956

“If, to please the people, we offer what we ourselves disprove,
how can we afterwards defend our work?
Let us raise a standard to which the wise and the honest can repair.
The event is in the hand of God.”

— George Washington

*   *   *

“The truth on this subject is that communism and atheism are intrinsically related and that one cannot be a good Communist without being an atheist and every atheist is a potential Communist … The intrinsic relation between the two he noted as follows: ‘Communism begins where atheism begins*.'”

— Fulton J. Sheen, COMMUNISM and the CONSCIENCE of the WEST, 1948, page 69: * Footnote quote from: Karl Marx, Okonomisch–Philosophische Manuskript, Gesamtausgabe I,3, p. 164


“America, it is said, is suffering from intolerance. It is not. It is suffering from tolerance: tolerance of right and wrong, truth and error, virtue and evil. Christ andchaos. Our country is not nearly so overrun with the bigoted as it is overrun with the broad-minded.”

–Fulton J. Sheen, 1931.

Capitalism And Socialism Or Capitalism And Communism Are Related? –– Part IV

What is happening today to socialism throughout the world may give a few hints as to the trends in the future.

Socialism began as a protest and a reform, as does every party. Its protest was directed against those political parties which ignored the economically submerged part of the population, and in particular the workers. It was also directed against capitalism which by its avarice for profits refused to give the worker, in many cases, a living wage. Their protests were right: their reforms were wrong.

The reforms which socialism proposed were twofold:

  • An international agreement of all people who shared their protests, thus making a nation less important than the international solidarity of the workers and underprivileged.
  • The putting of all productive property, such as factories, railroads and mines, into the hands of the state, which in turn would make the distribution of revenue to people. (what is commonly called today: redistribution.)

Now what is happening today? NATIONALIZATION

Socialism has for the most part given up its international character. Where it remains national, it has also abandoned to a great extent its principal tenet of state ownership. Recently the Socialists of Germany, remembering the evils inflicted by the total control of Hitler in the name of the state, disclaimed any attempt to nationalize industry.

In France, the party has become less that of the economically disinherited and more a kind of muddle class of bourgeoisie party, which it certainly was not in the beginning. English socialism has practically abandoned state ownership, and Austrian socialism at the last meeting completely gave it up.

But what function then does socialism serve? Since 1917, socialism in Europe has been a kind of wet nurse to communism. It marched in the parades of communism, but figuratively speaking carried no bombs. Lenin always said of socialism that it wanted the same things as communism, but it would not use the same means, such as violence. Perhaps the extreme of violence of one of the European socialists in the last few years was to throw a chair at one who opposed him.

Socialism also wanted to do away with private property in production by legislation: communism by confiscation and exile and concentration camps.

Along with this abandonment of the party or state owning the means of production, socialism has, in one or the other countries of Europe, given up its anti-religious basis. [Unlike America today.]

Communists in Russia, of course, do not call Russia a Communist state. According to Lenin, the Communist state was to come a few years after the revolution when property would be put into the hands of the state and religion would be annihilated. But now after 41 years, it is still called the Union of Socialist Republics and the prospects of it becoming a Communist state, in which Marx said no one would steal because everyone would have such an abundance, is less and less a possibility.

Even for the Communists, socialism was the halfway house to communism. Now the proprietors of the halfway house have given up one or the other of its principal tenets, and communism outside Russia is finding less and less hospitality among the Socialists. The weakening of socialism will eventually mean the weakening ofcommunism outside Russia.

The world is ready for a golden mean between the false individualism of the 19th Century and the collectivism of the 20th Century.

On the one extreme the person was isolated from a social responsibility and membership in social units except those clubs and churches: the other extreme was acollectivism in which the person was absorbed into the party through violence, as under communism, or in the tremendous industrial machine of either management or labor in which he is controlled but with little control.

The one remedy which is open to the future is the formation within a nation of professional groups which correspond to organs in the body. As organs mediate between the individual cells and the head, so units which are engaged in a common enterprise– for example, the management of and labor of the steel industry–would restore to the individual a sense of responsibility toward his social group without absorbing him. What is needed is a re-forming rather than a reform of social institutions.

Regretfully, social life which once flourished in a variety of associations, organically linked with one another, has practically been destroyed [as has the traditional familywhich added intrinsic value to social life – civilization itself, and without which would not exist.]

Just as it is natural for those who dwell together to form a village or township, why should not those who work in the same trade or profession form corporate groups with powers and self-government and thus escape titanic, impersonal control? [In May of 2012 it will be the 150th Anniversary of the ‘Homestead Act’, which help build those villages and townships, across much of western United States, today we need an ‘Industrial Homestead Act/Capital Homestead Act’ connecting every child, woman, and man –Person– with power, property, and the promise to participate: self-governance.]

Fulton J. Sheen D.D., Ph.D.

August 1958

Let us raise a standard of thinking. . .

“There is only one reason for being critical, and that is to be constructive, just as the only reason for razing a house is to make one rise in its place. There is perhaps too much of the skeptic in the critic today, in the sense that his protests are rarely followed by reforms and his denunciations but seldom succeeded by enunciations. A need exists for a renewal of something implied in the word ‘appreciation,’ in the etymological sense, namely, an evaluation or a judging of things by their real worth. But the real worth implies a standard, and a standard of thinking cannot be the fashion, but “what is true.” — Fulton J. Sheen, 1935

* * *

Series originally posted by Guy C. Stevenson on Facebook

http://www.americaspartynews.com/talk/forums/thread-view.asp?tid=23722&posts=4#M61259

http://foreconomicjustice.com/1055/karl-marx-the-almost-capitalist/

Karl Marx: The Almost Capitalist

This article, authored by binary economist Louis O. Kelso, appeared in the American Bar Association Journal, March 1957, and was provided by Norman Kurland of the  Center for Social and Economic Justice (CSEJ.org). The article is a Critique of Karl Marx’s Das Kapital.

Norman Kurland Editor’s Note:

By labeling his moral-economic concepts as a “universal” or “social” version of “capitalism,” Kelso, in the opinion of some supporters, has failed to appreciate the enormous difficulty in communicating with many people around the world who have become disenchanted with the ideological and moral shortcomings of the social system known as “capitalism.”

In the classic work Kelso co-authored with the philosopher Mortimer Adler, The Capitalist Manifesto (Random House, 1958), Kelso and Adler constructed their theory of economic justice as the logical “third alternative” to primitive capitalism and primitive socialism. As they pointed out, neither system provides a sufficiently solid moral foundation for guiding social change.

Kelso and Adler justify their use of the term “capitalism” by describing an economy as “capitalistic” when its mode of production shifts from labor-intensive (“laboristic”) to capital-intensive processes. However, the term “capitalism” obscures the value system which Kelso and Adler espouse.

Furthermore, the term “capitalist” was coined by socialists as a term of derision, to suggest an ownership class devoid of human values, persons who glorify the vice of greed and live by exploiting others. Adding such qualifiers as “universal,” “social,” “democratic” and even “worker” to a word that historically has signified monopoly power and special privilege, fails to remove the odious connotations of “capitalism.”

And since Kelso defines “capital” as “things” used in production (in contrast to people or “labor”), the term “capital-ism” also suggests an ideology or value system which elevates material values above the higher spiritual and moral values of mankind. “Economic justice,” “free markets,” and “private property” rest on a much more attractive semantic base. Semantics aside, anyone who reads their book will find that Kelso and Adler explicitly describe a just form of “free market” society that aims at fulfilling the highest human values.


England of the mid-nineteenth century, in the throes of the industrial revolution, was not a pleasant place to work. Anyone who entertains the contrary idea need merely consult the writings of the economists of that period, or its historians, or even its novelists, such as Dickens.

It was against a background of the disintegration of the agricultural economy of England, and the human chaos incident to the industrialization of production that Karl Marx set himself the task of improving the lot of the factory worker.

Beginning slowly during the first seventy-five years of the eighteenth century and reaching a crescendo during the last quarter of that century and the first half of the nineteenth century, incalculable changes took place in the lives of laboring people. The transformation was initiated first by the intensification of the division of labor and later by the crowding of workers into hand or hand-and-machine factories. This phase was, in factory after factory, followed by the mechanization of progressively more of the manual tasks, shifting to animal power, then water power and wind power, and then to steam for basic motive power.

The resulting disorganization in the lives of the people affected was stupendous and frightful. Only the few who were quick to adapt themselves to the era of the machine were able to avoid the destruction–frequently successive destructions–of their means of livelihood through the radical changes resulting from rapid technical obsolescence of the methods of production. The impact of these swift transformations was more than could be safely digested and absorbed by the farm populations which began to turn to the industrial cities for their means of living.

The division and subdivision of tasks once calling for the most highly developed skills until the tasks could be performed in many instances by women and children provided the opportunity, and the indigence entailed in the shifting from an agricultural life to dependence upon the fluctuating employment in factories provided the inducement: thousands of parents exploited their children by forcing them into the factories. Wives neglected their families to become factory employees. The full fury of competition between man and machine, between merchants, between manufacturers and between nations was unleashed among people who had not the faintest idea of its implications. Methods by which producers could become reasonably informed about markets were almost wholly lacking. Laws against adulteration of products had not yet been enacted. Industrial safety codes and means of compensating the dependents of injured workmen were unknown. The sanitary conditions of factories in general were incredibly bad. An employer who worked the men, women and children in his factories only twelve hours a day was something of a public-spirited paternalist. Foreign trade brought the local supplier into competition with foreign producers he had never seen or heard of.

Newly born industrial enterprises and the people whose fortunes were tied to them, learned the nature of industrial production primarily by successive bitter experiences. Businesses ran through constantly recurring cycles of expansion, boom, over-production, liquidation and depression. Superimposed upon this disorganizing parade of booms and slumps were the disrupting effects of primitive money and credit systems providing mediums of exchange containing built-in erratic gyrations of their own. The money system of Great Britain, like that of other countries experiencing the industrial revolution, suffered not merely from irresponsible banking, inadequate knowledge, poorly designed regulatory laws and rampant exploitation of the opportunities for financial fraud, but also from the results of heavy importations of gold and silver–the monetary metals–from the New World.

Without analyzing here the causes, we need merely note that the problems of the workers fell upon deaf political ears in Britain and elsewhere as the industrial revolution progressed, until agonized suffering reached the notoriety of an unsuppressible public scandal. Even then, the factory owners, who could point proudly to the fact that for the first time in history, per capita increase in the output of goods and services was beginning to race ahead, had no basis in experience for knowing whether they could at once be humane in their labor relations and still maintain their positions in the unprecedented hurly burly of competition.

Marx’s Work…

The Cause of Injustice

Against this background, in which the mere outlines of industrial production under free enterprise were vaguely taking shape, Marx set himself the task of finding the cause of economic injustice. His masterpiece, Capital, draws and documents the picture of the industrial revolution from the standpoint of the industrial worker. He was the one primarily responsible for having attached the name “capitalism” to the theretofore unclassified economic system of Great Britain. Marx’s source materials, in addition to his own indefatigable personal studies of factory life, were the Reports of the Royal Commissioners on the Employment of Children and Young Persons in Trades and Manufacturers, the Reports of the Inspectors of Factories (who were appointed under the Factories Regulation Acts of 1859), the Reports form the Poor Law Inspectors on the Wages of Agricultural Labourers, the Reports of the Select Committee (of the House of Commons) on the Adulteration of Food, and other official documents, as well as the writings of the economists of his day.

Because of the dire suffering of the industrial workers, Marx, who knew the facts and knew how to describe them, made a powerful emotional case for economic reforms to improve the lot of the worker. Since the actual operation of the system, which he called “capitalistic” was as enormously beneficial to the segment–less than 10 per cent–of the population who owned the factories as it was destructively detrimental to most of the 90 per cent who worked in them, Marx could have led a revolt against the established order by pointing to this disparity alone. But he did not choose to do so. He made the most painstaking and ponderous effort to seek out the cause of the injustice.

At length, Marx rendered his verdict. The malefactor, the cause of all this limitless human misery, was the capitalist. His crime, felonious by all canons of human decency and fairness, was the unrecompensed piracy from the defenseless industrial workers of most of the wealth which they alone created. No plunder in history, said Marx, could compare with the enormity of the offense of the capitalist who, without working himself, appropriated the products of the worker, leaving the worker with only the minimum amount paid as “slave-wages” to keep him alive and to enable him to produce.

Marx and Capitalism…

They Almost Meet in the Dark

The root of all of the evil Marx surveyed was, he concluded, the private ownership of the means of production. The emotional case which he built in favor of a revolution to improve the position of the industrial worker was mountainous. The method of carrying out the revolution, he advocated, was for the workers to seize the government by force and then to use the state to expropriate the ownership of capital. Unfortunately, the moral truth of the massive case which Marx marshaled for improvement of the lot of the industrial worker was dwarfed by the magnitude of his error in assigning as the cause of the maldistribution of wealth, the private ownership of capital.

In the course of his investigation, Marx actually saw, but was prevented by this error from comprehending, the underlying principles of capitalism. Since there can be no doubt about Marx’s honest effort and fierce desire to find the key to a workable industrial economy, we are justified in venturing the speculation that had Marx understood the implications of the principles of capitalistic distribution which presented themselves to him as “appearances” only, he might have become a revolutionary capitalist instead of a revolutionary socialist.

Karl Marx, as he reflected upon the causes of economic injustice in the first century of capitalism, came to a conclusion as momentous as it was mistaken. The world was to suffer as much from the critical error of the decision as it had suffered to provoke Marx to make it. Had he not been blinded by a borrowed myth, Marx might well have proclaimed “People of the world, unite! Extend the benefits of capitalism to all mankind.” Instead, he exhorted the workers of the world to unite and “throw off the chains” of capitalism.

Had Marx chosen the capitalistic alternative rather than the socialistic one, the world would be a vastly different place in which to live today. Without the false and seductive promises of socialism, Russia, the nation built on Marxism, would be without the principal rhetorical weapon which it uses to seduce the minds of men.

Yet it is a fact that Marx actually considered the problems which should have led him to discover capitalism. But for three basic errors in reasoning, Marx might have been looked upon today as the apostle of capitalism rather than its detractor and tormentor.

The three mistakes that turned Marx away from capitalism rather than towards it, have made Marx the false prophet of the industrial worker. Together with the socialist writers who have followed in his footsteps, Marx deprived generations of workers from realizing that in capitalism–not in socialism–lies their hope for economic well-being, the good life, and political freedom.

Three Mistakes…

The Course of History Changes

The three errors which Marx made were these:

(1) His adoption of the labor theory of value which had previously been advanced by David Ricardo.

(2) His failure to understand that the private ownership of property, including capital instruments, is indispensable to political freedom; in short, his failure to understand the menace to human freedom of the ownership of the means of production by the state.

(3) His mistaking the wealth produced by capital for “surplus value”, i.e., value which he thought was created by labor and stolen from the laborer by the capitalist.

Let us examine each of these mistakes. In the course of doing this, we shall see in each case how closely Marx came to acknowledging the actual principles of capitalism. Yet in every case, having grasped the principles, he also rejected them because of his fundemental errors.

Error No. 1:

The Labor Theory of Value.

Except for the few wants which men can satisfy directly by things adequately supplied by nature, human labor, for untold ages, had been the primary source of the creation of wealth. Man, with his hands and his brain, has given value to raw materials found in nature by imparting to them qualities which render them able to satisfy his wants. Similarly, man has performed personal services for himself or for others which have also satisfied needs. Nothing is more obvious than that man must wrest his living from nature through the cleverness of his mind, the strength of his muscles and the skill of his body. Since, at the outset, then, man was the only acting force, the idea that all changes in nature’s raw materials were wrought by man alone was both obvious and indisputable. The labor theory of value–the idea that labor is the only agency capable of creating wealth, i.e., adding “value” to raw materials and performing services–must have been approximately correct in primitive times and, to a lesser degree, in pre-industrial economies.

But once men applied their intelligence to constructing tools and machines which were able to produce wealth, or at least to co-operate with human labor in the production of wealth, a basic change occurred, the significance of which was not at once fully appreciated. The fact that all economic value was not created by labor, but rather by labor and capital together, was obscured by the fact that, in the early stages of machine production, machines were usually “operated” by their owners. As a result, the services of the machine were indistinguishably commingled with those of the machine-owner and so there was yet no occasion for recognizing the separate economic functions of each.

The significance of the labor theory of value is more than academic. If labor is the source of all value created in the productive process, then labor has a valid moral claim to all wealth created through production. Then the only moral claim of the owner of capital is to have his capital restored to him, i.e., to get back the value of his capital with compensation for the effects of wear, tear and obsolescence. Honestly to reach his conclusion that the capitalist was thieving from the laborer, Marx had only to believe that labor did in fact create all economic value (i.e., the values added to raw materials found in nature).

But confronted with the fact that capital instruments were actually performing more and more of the functions which added value to raw materials and were even beginning to compete with labor in the performance of purely service activities, Marx could not prove the proposition that labor was the sole creator of value and he did not try. He merely asserted, again and again, that the proposition was historically true and that its truth was of very recent discovery. All commodities, including capital instruments, said Marx, “are only definite masses of congealed labour time” (Capital, Modern Library Edition, page 46, New York.)

“The recent scientific discovery that the products of labour, so far as they are values, are but material expressions of the human labour spent in their production, marks, indeed, an epoch in the history of the development of the human race, but by no means dissipates the mist through which the social character of labour appears to us to be an objective character of the products themselves.” (Ibid. page 85; italics added). Marx is here saying flatly what he elsewhere elaborates–that although capital instruments appear to create wealth, this is merely an illusion, and that there is some sort of mysterious “congealed labor” hidden in the capital instrument which enables it to give value to its products.

At this point Marx actually saw one of the basic principles of capitalism: that capital instruments do create wealth, just as labor does. But he rejected the idea as an “appearance” only and held doggedly to his belief that only labor could create wealth. By denying the obvious, that in an ever-increasing number of instances, the performance of particular production tasks may be carried out alternatively either by labor or capital instruments; and by asserting that regardless which method was used, the capital instruments owned by a “capitalist”, were in fact, “labour instruments”; and by concluding that whichever method was used, labor in fact created all the value, Marx put the capitalist in the unethical role of getting something for nothing.

Today we are not merely familiar with the phenomenon of machines to make machines, we are also acquainted with the trend to make automated machines with automated machines. Nevertheless, tracing the process backwards through several technological generations sooner or later brings one to the point where the predecessor of a particular machine was made by hand labor. Since Marx regarded human labor not only as an ingredient in an economic product, but as the only ingredient other than raw materials provided by nature, the problem of machines made largely by machines was a disconcerting one for him.

The value of a product, he said, is determined by the amount of labor time it contains. After a few technological generations of producing machines primarily by machines, what could be said of the machine which, although it contained almost no “value” in terms of man-hours and required very little assistance from labor in the form of an operator’s man-hours, turned out a vast quantity of products, all of which sold for very good prices?

Marx actually considered this problem. How could he square the labor theory of value with a machine containing very little “value” (in terms of man-hours of labor) which at the same time is operated with very few man-hours of labor, yet which produces a great amount of wealth? Confronted with this problem, Marx might have announced another of the basic principles of capitalism: that the productiveness, the “productivity”, of capital instruments, in comparison with that of labor (other than the top echelon of labor consisting of management and technical workers) is steadily rising. But here again Marx rejected the clearly discernible truth and supplemented it with a corollary to the labor theory of value.

In this case, he said, the machine, after yielding up what little “value” it contains, works gratuitously, just as the sun works ripening the corn in the field. Marx here came within a hair’s breadth of recognizing the increasing productivity of capital instruments in comparison with that of labor. Had he allowed himself to see the point, it is safe to assume that a man of Marx’s sincerity would have cried, “If capital instruments are the source of the increasing production of wealth in an industrial economy, the owners of capital instruments are rightly the persons who should receive the proceeds of the wealth so produced. Let us then set as our goal the greatest possible accumulation and perfection of capital instruments for the greater production of wealth. And let us so regulate our economy as to extend the opportunity of engaging in production through the ownership of capital instruments to an ever increasing proportion of the population.”

Marx missed this critical point. Faced with the spectacle of the production of vast wealth through a large contributory effort by capital instruments and a negligible contribution by labor, Marx could merely say: “In modern industry man succeeded for the first time in making the product of his past labour work on a large scale gratuitously, like the forces of nature.” (Ibid, page 424). Thus did Marx substitute for objective analysis the dogma he had borrowed from Ricardo.

Error No. 2:

Marx’s Failure To Understand the Political Significance of Property.

Before examining Marx’s second critical error, it may be helpful to take note of what the concept “property” means in law and economics. It is an aggregate of the rights, powers and privileges, recognized by the laws of the nation, which an individual may possess with respect to various objects. Property is not the object owned, but the sum total of the “rights” which an individual may “own” in such an object. These in general include the rights of (1) possessing, (2) excluding others, (3) disposing or transferring, (4) using, (5) enjoying the fruits, profits, product or increase, and (6) of destroying or injuring, if the owner so desires. In a civilized society, these rights are only as effective as the laws which provide for their enforcement. The English common law, adopted into the fabric of American law, recognizes that the rights of property are subject to the limitations that

(1) things owned may not be so used as to injure others or the property of others, and

(2) that they may not be used in ways contrary to the general welfare of the people as a whole. From this definition of private property, a purely functional and practical understanding of the nature of property becomes clear.

Property in everyday life, is the right of control.

Property in Land. With respect to property in land, we need merely note that the acquisition of an original title to land from a sovereign is a political act, and not the result of operations of the economy. If the original distribution of land unduly favors any group or type or persons, it is a political defect and not a defect in the operation of the economy as such. A capitalistic economy assumes and recognizes the private ownership of land. It may, as under the federal and state mining laws and federal homestead acts, encourage private ownership of land by facilitating private purchasing of mining, timber, agricultural, residential or recreational lands.

Property in Capital. In a capitalistic economy, private ownership in all other articles of wealth is equal in importance to property in land. From the standpoint of the distributive aspects of a capitalistic economy, property in capital–the tools, machinery, equipment, plants, power systems, railroads, trucks, tractors, factories, financial working capital and the like–is of special significance. This is true because of the growing dependence of production upon capital instruments.

Of the three components of production land is the passive1 source of almost all material things except those which come from the air and the sea, while labor and capital are the active factors of production. Labor and capital produce the goods and services of the economy, using raw materials obtained, for the most part, from land. Just as private property in land includes the right to all rents, the proceeds of sale of minerals and other elements or substances contained in land, private property in capital includes the right to the wealth produced by capital. The value added to iron ore by the capital instruments of a steel mill becomes the proeprty of the owners of the steel mill. So in the case of all other capital instruments.

Property in Labor. What is the relationship of the worker to the value which he creates through his work? It has been said that no one has ever questioned the right of a worker to the fruits of his labor. Actually, as was long ago recognized by John Locke and Jean Jacques Rousseau, the right of the worker to the value he creates is nothing more than the particular type of private property applicable to labor. Each worker, they said, has a right of private property in his capacity to produce wealth through his labor and in the value which he creates.

Marx and Property. Marx did not err in his understanding of the dependence of capitalism upon private property. In fact, the Communists, following Marx, appreciate this absolute dependence more than do non-Communists, many of whom, influenced by the conviction that Marx is full of errors, have falsely entertained the idea that this is one of them.

Marx, however mistaken he was in his program for achieving the economic changes he thought were needed, cannot be charged with having intended to worsen the economic and political condition of modern man. The facts of his life and character permit us little doubt that his intention was to eliminate suffering by substituting a fairer distribution of economic goods and services, and through this, a more equitable distribution of leisure and the opportunity to lead a good life. Marx was rightly, if also vehemently, critical of the exploitation of the many by the few.

Had Marx seen that the socialization of capital (i.e., its ownership by the state) would of necessity place the control of capital in the hands of those currently wielding political power, thereby unifying economic and political power, the two basic sources of social power, we can assume that Marx would not have advocated the destruction of private property in capital instruments. If the factory owners of the nineteenth century, having political influence but not unlimited political power, were in a position to exploit the workers, the bureaucrats of the twentieth century in a socialized state, possessing not only unlimited political power, but also unlimited economic power through ownership (i.e., control) of the instruments of production, are infinitely better equipped to exploit workers and other non-bureaucrats. What better proof of this than Russia and the Russian satellites?

The Communist Politician…

A True Tyranical Capitalist

It is the Communist politician who sees in Marxism the opportunity for personal power and wealth which Marx, if we may take him at his word, failed to perceive. The Communist politician perceives in Communism the personal advantage to himself which comes with the transfer of property (working control) in the means of production to the state, and the elevation of himself to a place in the management of the state. The Communist politician is thus able to epitomize in himself the kind of tyrannical capitalist Marx declaimed against, with the further opportunity for unlimited despotism that is inherent in the fusion of political power and economic power in the same hands.

Marx’s failure to perceive the political significance of private property has allowed his doctrine to furnish the most perfectly designed ruse for potential tyrants that has ever been devised. In the name of benefitting society as a whole, the actual control of the capital instruments and land is placed in the hands of those wielding political power!

Marx’s second great error prevented him from seeing that the ideal “classless society”, of which he dreamed, is not one in which a political group in power has the function of distributing wealth. It is rather the political economy in which the individual ownership of property–particularly capital instruments–is spread over the entire population. Only such a broad distribution of private economic power can guarantee individual freedom and the power of the people as a whole to limit or turn out at will a political group in power.

Marx was actually on the verge of recognizing that so long as men are what they are, capitalism is the only possible classless society. His failure to do so derives from his failure to understand the political significance of private property. He consequently also failed to understand the political significance of state ownership in a socialist state. To concentrate control over the means of production in a political group is to establish that administration as a class–an all powerful class–and to remove all possibility, so long as such a group exercises its power fully and ruthlessly, to overthrow such despotism by means other than force.

Marx recognized that the men who were the owners of productive property also enjoyed “individuality”, leisure and opportunities for culture and education. (Ibid., page 581). This being so, it is nothing short of fantastic that he brought himself to these illogical conclusions: (1) Destroy private ownership of productive property. (2) Make all men workers. (3) Appropriate all wealth produced in excess of that required to sustain workers, and let it be distributed by the state as its political leaders see fit.

The political commissars, however, who employ Marx’s ideas for their own purposes–the exploitation of power and wealth which socialism offers to a ruling bureaucracy–are not so illogical. The destruction of private property in the means of production is their guarantee of self-perpetuation.

There is a Marxian tenet that the nature of a society is determined by the mode of production (whether agricultural or industrial), and the ownership of the means of production. It is sound. The conclusions here are within and consistent with this fundamental insight.

Thus the second great Marxian error caused Marx to seek in socialism what he could have found only in capitalism.

Error No. 3:

Mistaking the Wealth Created by Capital for Wealth Created by Labor and Stolen by the Capitalists.

Each of the three critical mistakes which Marx made in his study of capitalism arose from the fact that he began his analysis with a study of distribution rather than with a study of production. At the distributive end, something less than a tenth of the population, for the most part owners of land and capital, were faring infinitely better–receiving a proportionately greater share–than were the other nine tenths, whose only participation in economic activity was as workers or as recipients of public charity under the poor laws. The pattern of distribution was bad from whatever standpoint it might be judged. Those who were receiving the great share were the capitalists, the owners of the expanding industrial and commercial enterprises.

For Marx, capitalism was simply what he observed in the European world around him, and primarily in Great Britain. Since the distributive pattern was unsatisfactory, capitalists and capitalism, he concluded, must be at fault. Labor had “historically” been the source of all production of wealth, and the workers were now receiving a progressively smaller proportion of the proceeds of production. Down with capitalism!

Had Marx started with an objective analysis of production and a deeper insight into the property-freedom relation, he might well have concluded with a declaration of war against capitalists for hoarding capitalism.

Let us now examine once more the principles of capitalistic production that Marx might and should have used as a starting point. In an exchange economy, and particularly in an economy of freely competitive markets, each service and each commodity is valued for its peculiar ability to satisfy a certain desire of the consumer. Whether the service of commodity is produced by labor alone or by capital alone or by the co-operation of these two, is unimportant to the potential purchaser except as the method of production implants specific characteristics in the thing marketed. It is the finished product which is demanded by the purchaser, not the knowledge that it is produced in one way or another–a mere means by which the product was brought forth. Contrary to what some sentimentalists think, there is nothing sacred about the products of labor that is not equally sacred about the products of capital or those produced jointly by capital and labor.

To effect any change in the nature or position of material goods or to perform any kind of a service, material goods must be acted upon. Marx recognized this; but, because of his obsession with the labor theory of value, he contended that only labor could be credited with the value of material goods produced or services performed. “Useful labor” he said, “is an eternal necessity imposed by Nature without which there can be no material exchanged between man and Nature, and therefore no life.” (Ibid. page 50). To effect such changes in matter, or to perform such services, purely physical, i.e., mechanical means, must be used. With rare exceptions, pure thought is not economically compensable. Speech, writings, mechanical action–all these things performed by man, are capable of entering into economic transactions. The thought behind such speech, writings, mechanical action, is not by itself capable of entering into ordinary commerce.

Man as a non-scientific and non-managerial subsistence-laborer is, from the standpoint of economics (aside from his separate nature and position as the consumer), a primitive, low-horsepower engine, relatively clumsy and of brief durability, for the production of economic goods. Man the worker, except in the fields of science and management, has grown steadily less impressive since the onset of the industrial revolution. He can work eight, ten or twelve hours at a stretch and then must rest. His strength and speed of action are quite limited. He is subject to numerous ailments, often adversely affected by climate, temperamental and not infrequently lazy. He makes many mistakes. As a factor in the production of wealth, man is progressively less successful in competing with capital instruments, except, again, as a scientist or as manager.

It is not as a worker that man is master of the earth. It is as the intelligence behind all production and as the consumer–the reason for production and the destiny of the things produced–that he is supreme.

It may well be that confusion between man the worker and man the thinker–the source of all ideas and plans–contributed as much as any cause to Marx’s failure to recognize capital as a producer of wealth in the same sense that labor is. Mental activity enters into economic transactions primarily in two ways:

(1) the mental activity of the scientist and manager is responsible for the invention, development, improvement and production of capital instruments, and the supervision of productive activity of both laborers and capital instruments. Scientists and managers are in general the top echelon of labor –the professional level. Their services include entrepreneural activities, in which they provide the initiative in organizing the capital and labor to institute or expand particular business activities. A substantial portion of their services is rendered in improving the productivity of capital instruments, thus promoting the substitution of machines for men and otherwise reducing labor requirements, where to do so will reduce the costs of production and render the businesses in which they are engaged more effifient and competitively better. The steady improvements in capital instruments, systems of production, and organization of productive processes, are the results of the mental activity of the scientists and managers. Their ability to produce in these fields is the secret of their rising productiveness and the increased demand for their services.

(2) Mental activity enters into non-scientific work and non-managerial work in varying degrees. The intelligent direction by the worker of his own activities is incidental to the mechanical work performed by him. Labor is compensated for a particular type of service of a physical nature which could not be rendered in the absence of intelligent direction on the part of the worker himself.

Marx recognized that machines and men are competitors in the sense that scientists and and managers, in carrying out their function to produce goods and services in a competitive market, strive to eliminate labor costs and to improve upon hand methods of production. “The instrument of labour [meaning, of course, machines, the instruments of the capitalist ] when it takes the form of a machine, immediately becomes a competitor of the workman himself.” (Ibid. page 470) In speaking of this competition, Marx comes as near as possible to recognizing that capital instruments are active forces in the production of wealth, performing an economic function of the same sort as labor, and frequently performing functions which can interchangeably be performed by either.2

Marx observes that in the case of the handcraft industries, “the workmen are parts of a living mechanism. In the factory we have a lifeless mechanism independent of the workman, who becomes its mere living appendage….By means of its conversion into an automaton, the instrument of labour confronts the labourer, during the labour process, in the shape of capital, of dead labour, which dominates and pumps dry living labour power. The separation of the intellectual powers of production from the manual labour and the conversion of those powers into the might of capital over labour, is, as we have already shown, finally completed by modern industry erected on the foundation of machinery. The special skill of each individual insignificant factory operative vanishes as an infinitesimal quantity before the science, the gigantic physical forces, and the mass of labour that are embodied in the factory mechanism and, together with that mechanism, constitute the power of the ‘master’.” (Ibid. page 462). It may well have been Marx’s failure to recognize that capital instruments in practice supplant not only physical forces, but intelligence, that deterred him from recognizing that capital “works” just as labor works.

Whether Marx could have closed his eyes to the facts of production in the now-dawning age of automation is an interesting speculation. Yet even in Marx’s own day it should have been possible for him to recognize that the scientists (engineers) in designing capital instruments build into these instruments the capability of performing operations which, if performed by labor, would require the application of brainwork. His obsession with the labor theory of value rendered him incapable of this insight.

But today, with the development of feed-back, self-correcting and self-programming machines, capable of automatically performing a sequence of logical operations, correcting their own errors as they perform their productive tasks, choosing from built-in instructions or characteristics their proper functions, it is likely that even Marx would have broken through his barrier-obsession that labor does all the work.

Human minds ultimately direct the production of goods and services. This is true of the functions of capital instruments as it is of workers. As a production process uses more and more capital instruments, more of the human mental control of the process of production is shifted away from workers to scientists (and their mechanical progeny) and to management. Thus the private ownership of labor is not, in action, essentially different from the private ownership of capital. Each involves the right of control of an active means of production, the right to take the fruits of such production, to produce where and when the owner desires, and to accept or reject conditions of production. The most significant difference is that the owner of capital instruments is not required to be personally present in the productive process; he produces, or in any event he may produce, vicariously. Mental activity as such is not the basis of the property rights of either labor or capital owners in wealth produced.

What difference would it have made to Marx’s theory of capitalistic economics if he had recognized both the power of labor and the power of capital instruments to create wealth? It would have made all possible difference.

If all wealth is created by labor, and if the total wealth created is in excess of that distributed to labor on the basis of the market value of labor, then the excess is “surplus value”. This surplus value, according to Marx, is something really stolen from labor by the capitalist. It is elementary that wealth belongs to him who creates it, and if only labor can create wealth and capital instruments cannot create wealth, then the owners of capital have no possible claim to a share in the proceeds of production. The most they could legitimately claim would be to have the value of their original capital, which has been partly or wholly consumed in the productive process, restored to them. In the socialist state, this “surplus value” is something that would belong to society as a whole, to be distributed as the administrators of the state decide.

In short, if labor is the only possible creator of wealth, then capital cannot be a creator of wealth, and there can be no legitimate return to capital other than a return of the original investment. The recognition by Marx of capital as one of the two active actors creating wealth would have exposed the falsity of his own basic theories. More than that, he would have been led inevitably to exactly the opposite conclusions. If labor is entitled to a return in the form of wages for wealth created by labor, then the owners of capital should be entitled to a return for the wealth created by capital.

Strange as it may seem, Marx recognized the technological trend and even acknowledged that it appeared to be the case that the net wealth remaining after payment for raw materials and labor was wealth created by capital. Yet he refused to believe this appearance, and simply asserted again and again that this excess was “surplus value”. With regard to the increasing productivity of capital, he noted that “every introduction of improved methods…works almost simultaneously on the new capital and on that already in action. Every advance in chemistry not only multiplies the number of useful materials and useful applications of those already known, thus extending with the growth of capital its sphere of investment…. Like the increased exploitation of natural wealth by the mere increase in the tension of labour power, science and technology give capital a power of expansion independent of the given magnitude of the capital actually functioning.” (Ibid. pages 663-664) With respect to the apparent production of wealth by capital instruments, Marx acknowledged that there appeared to be, as Sismondi had said, a “revenue which springs from capital “. But he refused, to the very end, to believe that it was the wealth created by capital–a possibility he saw but never understood or appreciated. To Marx, the wealth created by capital remained “surplus value” to which the owners of capital had no claim–surplus value stolen by the owners of capital from the owners of labor.

Marx’s Three Errors…

A Fateful Near Miss

But for the basic and demonstrable errors in his theory of capitalism–the three errors discussed above–Marx would have reversed his views about capitalism and socialism. His writings leave no doubt that he was making an honest search for the truth about capitalism and the causes of maldistribution of wealth under capitalism. But it is also true that his writings leave no doubt that, had he caught and prevented himself from falling into his three foundational errors, he would have become as defiant in his espousal of capitalism as he erroneously was vehement in its denunciation.

If labor alone is a creator of wealth, there must be, as Marx and Engels said in the Communist Manifesto, equal liability of all to labor. But if capital is a creator of wealth, one may participate in the production of wealth either as an owner of labor or as an owner of capital. Similarly, if land is a source of wealth, one may participate in the production of wealth as an owners of land. But this basic capitalistic principle goes further. If, as we know, the productivity of capital is increasing in relation to that of non-managerial and non-scientific labor, and if the right to participate in the distribution of the proceeds of production follows from the fact of participation in production, the social justice which Marx sought lies in regulating the capitalistic economy so that there emerges an ever-increasing proportion of capitalists.

The uneasy ghost of Marx must suffer the torments of the damned at the truth glaring from the pages of history that one does not abolish property by transferring it to the state. To put an end to private property in capital and land by establishing the socialist state is to concentrate the vast aggregate of property rights in the wielders of political power. There is no mystery in the fact that through a literal application of the theories of the great seeker after social justice, the Communist countries have achieved the exact opposite of what was promised. Marx wailed over the plight of the helpless worker under the merciless lash of the powerful factory owner. What would he say of the plight of the worker before the inescapably crushing power of the dictator, the political clique, or the party which in fact (though never in name, since everything is always done in the name of “the people “) owns all factories, all instruments of production, all land, and fuses this power with political power ?

There can be only one answer. The safety, the security, the dignity of the individual which Marx sought in socialism can be found only under capitalism. The answer to the charge that ownership of capital instruments is too concentrated lies in the proper use of governmental regulation to reduce the concentration and to continuously broaden the private ownership of the means of production.

What Marx almost discovered was that both the benefits and the success of capitalism grow with the number of men who are capitalists. His error in failing to discover this truth was the most fateful near-miss in history.

ENDNOTES

1 Agricultural and timber land may be said to be an exception to this, since in growing crops and timber, agricultural and timber lands may be said to function in an active manner.

2 Note that by using the term “instruments of labor” to designate capital instruments owned by capitalists, Marx is again indulging the labor theory of value. By referring to capital instruments as “instruments of labour”, Marx makes it appear logical to attribute the productive efforts of capital to labor.

How Conventional Economist Peter Diamond Thinks About Taxes And Jobs

“When economists think about the role taxes play in an individual’s decision to work, they think about two things. There’s the “substitution effect,” where higher tax rates make you work less, because you keep less of every extra dollar you earn. But there’s also the “income effect,” in which higher tax rates make you work more, because you need to earn more to be able to live how you want to live, or retire when you want to retire. The question is which dominates: The desire to keep more of the money you make or the desire to have more money in total?”

Conventional economist Peter Diamond, the MIT economist who won the 2010 Nobel prize, as with nearly all economist, continue to miss the obvious by restricting their thinking to one-factor economics––labor workers. Promoting opportunity and upward mobility through tax incentives to incentive the “work ethic” doesn’t work in light of the role of technology, which is to “save” labor. The role of physical productive capital (the non-human factor of production) is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production.

Never do conventional economists such as Peter Diamond, or for that matter any of the political leaders they advise, address the term “OWNERSHIP.” In fact, the entire subject of WHO OWNS the productive capital that comprises the third industrial revolution is NEVER addressed!!

The old way of making things involved taking lots of parts and screwing or welding them together. Now a product can be designed on a computer and “printed” on a 3D printer, which creates a solid object by building up successive layers of material. Such additive manufacturing will use new materials, which are lighter, stronger and more durable than the old ones. Carbon fibre is replacing steel and aluminium in products ranging from aeroplanes to mountain bikes. New techniques let engineers shape objects at a tiny scale. Nanotechnology is giving products enhanced features. But additive manufacturing is only one of a number of breakthroughs leading to the factory of the future, and conventional production equipment is becoming smarter and more flexible, too. Factories are becoming vastly more efficient, thanks to automated milling machines that can swap their own tools, cut in multiple directions and “feel” if something is going wrong, together with robots equipped with vision and other sensing systems. Everything in the factories of the future will be run by smarter software. Digitisation in manufacturing will have a disruptive effect every bit as big as in other industries that have gone digital, such as office equipment, telecoms, photography, music, publishing and films. And the effects will not be confined to large manufacturers; indeed, they will need to watch out because much of what is coming will empower small and medium-sized firms and individual entrepreneurs. As manufacturing goes digital, it will allow things to be made economically in much smaller numbers, more flexibly and with a much lower input of labor, thanks to new materials, completely new processes such as 3D printing, easy-to-use robots and new collaborative manufacturing services available online. Thanks to smarter and more dexterous robots, some lights-out manufacturing is now possible. Manufacturing revolutions never happen overnight, but this one is already well under way. There is enough transformative research going on in the biological sciences and in nanotechnology to spawn entirely new industries, like making batteries from viruses. And if the use of carbon-fibre composites were to spread from sports cars to more workaday models, the huge steel-stamping presses and robot welding lines would vanish from car factories.

I have devoted an entire Web site (www.foreconomicjustice.org) and Facebook page (http://www.facebook.com/pages/For-Economic-Justice/347893098576250) to advocating for a paradigm shift in economic thinking, which to date is based on one-factor labor worker input and excludes a “reality” discussion of the second factor in production––the non-human factor embodied in productive land, structures, machinery, superautomation, robotics, digitally automated factories, sophisticated computerized operations, etc. As the production/manufacturing/delivery of products and services continues to transform exponentially and employ advancing non-human productive capital digitally realized, the necessity will be to recognize that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to the capital owners of the non-human factor and progressively less to workers who make their contribution through labor. This means that the GOAL of Full Employment will not and cannot solve our income distribution problems. We can no longer ignore the advances constantly being made in the scientific world or the business world or the industrial world, which embrace the ever-expanding role of the non-human factor of productive capital input. What needs to be adjusted is the opportunity to produce, not the redistribution of income after it is produced.

The government should acknowledge its obligation to make productive capital ownership economically purchasable by capitalless Americans using capital credit, and, as binary economist Louis Kelso states, “substantially assume financial responsibility for the economy through establishing and supervising the implementation of an economic, labor and business policy of democratized economic power.” Historically, capital has been the primary engine of industrialization. But as used, as Kelso has argued, has, as well, “been the chief cause of the institutional deformities that have created and maintained two incompatible classes: the overcapitalized and the undercapitalized.”

We need to arrive at a new market economy structure in which people are in a position to earn the wages of their capital as well as the wages of their labor. In companies that employ people the company would be in a position to be more competitive through lower labor costs and increased technological innovation, while achieving higher employee incomes through the employee’ capital.

If we change direction and systematically build earning power into consumers, we have the opportunity to reverse the depression perpetrated by systematically limiting the 99 percent to labor wages alone and through technology eliminating their jobs. We need solutions to grow the economy in ways that create productive jobs and widespread equity sharing. We need to systematically make capital credit to purchase capital accessible to economically underpowered people (the 99 percenters) in which the income from the capital investment is isolated until it pays for itself, and then begins to produce a stream of dividend income to the new capitalists. This can only be accomplished by enabling every person to have access to productive capital ownership and purchase the capital, and pay for it out of what the capital produces. It’s time good and well-intentioned people woke up and adopted a just third way beyond the greed model of monopoly capitalism and the envy model of the traditional welfare state. This will promote peace, prosperity, and freedom through harmonious justice.

http://www.washingtonpost.com/blogs/ezra-klein/post/how-peter-diamond-thinks-about-taxes-and-jobs/2012/04/27/gIQAZDHxlT_blog.html#weighIn

Does Organized Labor Have A Future?

In David Lazarus’ column in the April 27, 2012 edition of the Los Angeles Times, he states:

American Airlines has spent the week trying to persuade a bankruptcy judge to allow it to chuck all its labor contracts and put the squeeze on thousands of union employees.

“If things go as expected — that is, a victory for management and not for rank-and-file workers — it will be the latest blow to organized labor and yet another indication that, in the workplace of the future, most of us will be fending for ourselves.”

The labor union movement should transform to a producers’ ownership union movement and embrace and fight for democratic capitalism. They should play the part that they have always aspired to––that is, a better and easier life through participation in the nation’s economic growth and progress. As a result, labor unions will be able to broaden their functions, revitalize their constituency, and reverse their decline in light of the role of physical productive capital (the non-human factor of production), which is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production.

Never does the union movement address the term “OWNERSHIP.”  In fact, the entire subject of WHO OWNS the productive capital that comprises the third industrial revolution is NEVER addressed!!

Unfortunately, at the present time the movement is built on one-factor economics––the labor worker. The insufficiency of labor worker earnings to purchase increasingly capital-produced products and services gave rise to labor laws and labor unions designed to coerce higher and higher prices for the same or reduced labor input. With government assistance, unions have gradually converted productive enterprises in the private and public sectors into welfare institutions. Binary economist Louis Kelso stated: “The myth of the ‘rising productivity’ of labor is used to conceal the increasing productiveness of capital and the decreasing productiveness of labor, and to disguise income redistribution by making it seem morally acceptable.”

Kelso argued that unions “must adopt a sound strategy that conforms to the economic facts of life. If under free-market conditions, 90 percent of the goods and services are produced by capital input, then 90 percent of the earnings of working people must flow to them as wages of their capital and the remainder as wages of their labor work…If there are in reality two ways for people to participate in production and earn income, then tomorrow’s producers’ union must take cognizance of both…The question is only whether the labor union will help lead this movement or, refusing to learn, to change, and to innovate, become irrelevant.”

Unions are the only group of people in the whole world who can demand a real Kelso-designed ESOP, who can demand the right to participate in the expansion of their employer by asserting their constitutional preferential rights to become capital owners, be productive, and succeed. The ESOP can give employees access to credit so that they can purchase the employer’s stock, pay for it in pre-tax dollars out of the assets that underlie that stock, and after the stock is paid for earn and collect the capital worker income from it, and accumulate it in a tax haven until they retire, whereby they continue to be capital workers receiving income from their capital ownership stakes. This is a viable route to individual self-sufficiency needing significantly less or no government redistributive assistance.

The unions should reassess their role of bargaining for more and more income for the same work or less and less work, and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital on the part of the workforce. They should continue to represent the workers as labor workers in all the aspects that are represented today––wages, hours, and working conditions––and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.

If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.

When labor unions transform to producers’ ownership unions, opportunity will be created for the unions to reach out to all shareholders (stock owners) who are not adequately represented on corporate boards, and eventually all labor workers will want to join an ownership union in order to be effectively represented as an aspiring capital owner. The overall strategy should assure that the labor compensation of the union’s members does not exceed the labor costs of the employer’s competitors, and that capital earnings of its members are built up to a level that optimizes their combined labor-capital worker earnings. A producers’ ownership union would work collaboratively with management to secure financing of advanced technologies and other new capital investments and broaden ownership. This will enable American companies to become more cost-competitive in global markets and to reduce the outsourcing of jobs to workers willing or forced to take lower wages.

Kelso stated, “Working conditions for the labor force have, of course, improved over the years. But the economic quality of life for the majority of Americans has trailed far behind the technical capabilities of the economy to produce creature comforts, and even further behind the desires of consumers to live economically better lives. The missing link is that most of those unproduced goods and services can be produced only through capital, and the people who need them have no opportunity to earn income from capital ownership.”

Walter Reuther, President of the United Auto Workers, was the ONLY labor leader to express his open-mindedness to the goal of democratic worker ownership in his 1967 testimony to the Joint Economic Committee of Congress as a strategy for saving manufacturing jobs in America from being outcompeted by Japan and eventual outsourcing to other Asian countries with far lower wage costs: “Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth, which is today appallingly undemocratic and unhealthy.

“If workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing [through wider share ownership] cannot be said to have any inflationary impact on costs and prices.”

Unfortunately for democratic unionism, the United Auto Workers, American manufacturing workers, and American citizens generally, Reuther was killed in an airplane crash in 1970 before his idea was implemented. Leonard Woodcock, his successor, never followed through.

http://www.latimes.com/business/la-fi-lazarus-20120427,0,2015318.column