Dr. Norman Kurland

President

Center for Economic and Social Justice

Post Office Box 40711

Washington, D.C. 20016-0711

www.cesj.org

www.eei-consultants.com

Center for Economic and Social Justice (CESJ): www.cesj.org/

The Center for Economic and Social Justice, established in 1984, promotes a free enterprise approach to global economic justice through expanded capital ownership. CESJ is a non-profit, non-partisan, ecumenical, all-volunteer organization with an educational and research mission.

CESJ's global membership shares a common set of moral values and works together toward a common purpose, transforming good ideas into effective action.

Norman G. Kurland, CESJ President

Mr. Kurland is a lawyer-economist, pioneer of employee stock ownership plans (ESOPs) and a leading global advocate for “the Just Third Way,” a post-scarcity development model that transcends both capitalism and socialism by combining free markets with the democratization of economic power and capital ownership. He serves as President of the all-volunteer Center for Economic and Social Justice (CESJ), a non-profit think tank headquartered in Arlington, Virginia that he co-founded with Fr. William Ferree and other economic and social justice advocates in 1984. Mr. Kurland also founded and heads Equity Expansion International, Inc., an “investment banking firm for the have-nots,” which implements “Just Third Way” strategies around the world to turn non-owners into owners. He is a co-founder of Global Justice Movement.org (based in Canada) and the American Revolutionary Party(.US) launched in April 2005. He has taught binary economics and binary policy reforms in privatization seminars at the International Law Institute in Washington, D.C. In 1985, President Reagan appointed Mr. Kurland as deputy chairman of the bipartisan Presidential Task Force o­n Project Economic Justice, to promote economic democratization through ESOP reforms in Central America and the Caribbean.

He was a close colleague for eleven years of Louis O. Kelso, author of binary economics and inventor of the ESOP. With Kelso, Kurland co-founded the Institute for the Study of Economic Systems. He later became Washington Counsel for Kelso’s investment banking firm. Collaborating with Kelso, Kurland authored and lobbied the first and subsequent ESOP legislative initiatives in the U.S. Congress. He is the principal architect of several model ESOPs and legal systems for expanding ownership, as well as: the first ESOP and worker shareholders association in the developing world at the Alexandria Tire Company in Egypt; the “Capital Homestead Act” (a comprehensive package of national monetary and tax reforms); the “Community Investment Corporation” (a vehicle enabling community residents to share land ownership and profits); and “Justice-Based Management” (a system for applying principles of economic justice and building participatory ownership cultures within business corporations).

Business Week described Kurland as “the resident philosopher of ESOP in the capital.” He was the recipient of CESJ’s first Kelso-Ferree Lifetime Achievement Award, an honor he shares with Senator Russell Long, the legendary champion of ESOP o­n Capitol Hill. Mr. Kurland has authored numerous articles o­n the Just Third Way, binary economics, capital homesteading and related concepts for universalizing access to capital ownership. He was a contributing author to the 1994 compendium Curing World Poverty: The New Role of Property (John H. Miller, ed., Social Justice Review), and was the principal author of CESJ’s comprehensive economic reform agenda, Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security (Economic Justice Media, 2004).

Before joining Kelso, Mr. Kurland was director of planning of the Citizens Crusade Against Poverty, a national coalition headed by the labor statesman Walter Reuther. Before that Mr. Kurland, as a Federal government lawyer, became deeply involved as a civil rights investigator in the Mississippi “one-person, o­ne-vote” movement and later with the core group shaping economic empowerment initiatives in President Johnson’s “War o­n Poverty.” He came to Washington in December 1959 after receiving a Doctor of Laws degree from the University of Chicago, where he studied law and economics, following five years as an officer o­n flying status in the U.S. Air Force.

----------------------------------------------------

Chapter 7: Global Peace Science: https://peacefromharmony.org/docs/global-peace-science-2016.pdf , p 260-263

7.22. Pope Francis and the Just Third Way: Global Peace from Harmony.

Michael D. Greaney, Norman Kurland

(The full text of the article is published here: [58]. All references are in the original.)

Pope Francis faces many challenges in his efforts to modernize the application of Catholic social doctrine to today’s problems, particularly the growing global wealth, income, and power gap. His greatest challenge, however, may be overcoming a prevailing ignorance or misunderstanding of the basic moral principles that make lasting, systemic solutions possible.

As taught in academia, then embodied in law and promulgated by the media, there is an unquestioned assumption that capitalism and socialism (or some amalgam of the two) are the o­nly possible arrangements of the social and economic order. Neither system, however, empowers and liberates every person within it. Both systems are structured to concentrate opportunity, ownership, and power in a few hands—whether in private hands (as in capitalism), or in the State (as in socialism). Such concentration inevitably breeds poverty, corruption, and conflict.

What few academics, politicians, or media gurus have considered seriously is whether there can be a moral and truly democratic alternative—a “Just Third Way”—that transcends both capitalism and socialism. If such an alternative is conceivable, what are its principles for restructuring the economic system? How could the system itself help close the wealth and income gap—without depriving anyone of their wealth and property rights? What are its means for empowering economically each person through equal opportunity, and access to the means of acquiring and possessing income-producing wealth?

A Question of Power and Justice. Power is essential because people need power to be able to exercise their natural rights, especially life, liberty, and property. By exercising their natural rights within a justly structured social order, people build habits of doing good. They “acquire and develop virtue.” Pope Francis recognizes, however, that the system itself keeps most people, and families, powerless and dependent. It prevents them from exercising their natural rights, and acquiring and developing virtue. How, then, can we reform the system to support justice and freedom for all?

The Two-Part Papal Teaching. While capitalism and socialism are both morally inconsistent with Catholic teaching, socialism is the greater danger. Capitalism nominally accepts natural rights such as life, liberty, and property—cornerstones of Catholic social teaching. These, however, are distorted in application, especially by preventing or inhibiting participation by everyone. Socialism abolishes the concept of natural rights by making their exercise—particularly the exercise of property rights (control over what is owned, and the right to its income)—contingent upon something other than human nature. Socialism places the right to control the means of production in the State, and in its bureaucracy. What makes socialism especially dangerous is that it seems so close to what the Church teaches that many people do not see the difference. Socialism’s promise to take care of everyone seems to reflect the first part of the papal teaching. By imposing a false equality of results, however, socialism concentrates power in those who control the State—which guarantees many being without property, being without power, and being dependent o­n the State.

Capitalism’s self-delusion—that it provides everyone with the same chance to become rich—seems to fulfill the second part of the papal teaching. However, as promoted by adherents, like Ayn Rand and Milton Friedman, capitalism glorifies greed. It turns a blind eye to this reality, and fails to lift unjust institutional barriers that prevent most people from even making a decent living. Capitalism imposes “a yoke little better than that of slavery itself”5 through ever-increasing dependency o­n the State for jobs or welfare. As Hilaire Belloc predicted in The Servile State, this differs from socialism o­nly in the details. Clearly, a new economic framework offering structural solutions is needed in order to transcend the errors of both capitalism and socialism.

The “Just Third Way” of the interfaith Center for Economic and Social Justice (CESJ) addresses the second part of the papal teaching: removing systemic barriers that inhibit or prevent each person’s full participation in the common good. This social justice-based, free-market economic system would empower people to meet their own needs through their own labor and capital. The Just Third Way synthesizes three essential elements. The first is the social doctrine of Pius XI as analyzed by CESJ co-founder and social philosopher, Father William J. Ferree, S.M., Ph.D. The second is the binary economics of lawyer, and expanded ownership economist, Louis O. Kelso. The third is the three principles of economic justice first systematized by Kelso with his co-author, the Aristotelian-Thomist philosopher, Mortimer J. Adler.

The Social Doctrine of Pius XI. At the heart of the Just Third Way is Pius XI’s revolutionary understanding of social justice, and its particular act. According to Ferree, Pius XI’s breakthrough in moral philosophy was to identify social justice as a particular virtue distinct from the general virtue of legal justice. This is a critical distinction. Where a general virtue is necessarily indefinite, and has no specific act, a particular virtue is, in a sense, defined by its act. A general virtue cannot, therefore, be defined with any precision, while a particular virtue must be defined with scientific accuracy. As Ferree explained: “Social Justice is not at all the vague and fuzzy “blanket word” that gets into so many popular speeches. It is an absolutely clear and precise scientific concept, a special virtue with definite and rigid obligations of its own”.

Thus, where legal justice as a general virtue involves acts of individual virtue that have an indirect effect o­n the common good, social justice is a particular virtue to reform “social tools” (institutions) to enable people to have a direct effect o­n the common good. Institutional injustices that seemed hopeless can be resolved when people organize in groups to reform and restructure their institutions. As Ferree concluded: “The completed doctrine of Social Justice places in our hands instruments of such power as to be inconceivable to former generations.”

Binary Economics. Kelso’s binary economics, the systems theory underlying the Just Third Way, is found primarily in the two books he co-authored with Adler: The Capitalist Manifesto, and The New Capitalists. The titles are misleading, as the system Kelso described can o­nly be called “capitalism” if by “capitalism” is meant “the use of capital.” “Binary” means “consisting of two parts.” Kelso divided the factors of production into two, all-inclusive, categories—the human (“labor”), and the non-human (“capital”). The central tenet of binary economics is that there are two components to both productive output and to income: (1) that generated by human labor, and (2) that generated by capital…..

The Act of Social Justice. Socialists attempt to resolve this conflict (between society and the individual) by asserting the primacy of social virtue over individual virtue, and capitalists by claiming that of individual virtue over social virtue. According to Ferree, however, o­nly the act of social justice can resolve the conflict, making it possible to be both a good person, and a good citizen, by bringing the structuring of institutions and laws in line with moral principles.

“Charity is the soul of justice,” as John Paul I reminded us. When, however, the essential differences between justice and charity are lost—along with the distinctions between general and particular, individual and social, even natural and supernatural virtues—we can fall unconsciously into the moral trap where the end justifies the means. Eventually the whole of moral philosophy degenerates into moral relativism. CESJ has always defended the just wage contract (along with the just price and just profit determined in a free and non-monopolistic market) as an essential element of an economically just system. Along with Kelso and Adler, however, CESJ points out the inadequacies and consequent injustices of the wage system.

Under both capitalism and socialism, the wage system creates a widening gap between workers and owners. Few own the productive wealth that displaces millions of jobs worldwide. Most people are dependent o­n these owners, or the government, for their job or welfare incomes. Widespread capital ownership, o­n the other hand, is the keystone of the social doctrine … The necessity of universal citizen access to equal opportunity, and the means to acquire and own capital, becomes increasingly evident in today’s global, high-tech world. Human labor is rapidly being displaced by automation, robotics, and artificial intelligence. The act of raising wages does not address this reality, as it o­nly increases costs and prices, and adds to the cost of living for everyone, especially the poor. This theme was developed, with ever increasing clarity and force, by successive Pontiffs up to the most recent statements of John Paul II; but it was Pius XI who did most to give it a permanent place in Western thought as an integral part of a whole new “Social Morality” which he proposed to the world, to parallel the individual morality which Western civilization had already developed.

The Slavery of Past Savings. All this philosophizing, however, would remain an academic exercise if it were not bound to another flawed assumption embedded in the monetary, tax, and economic policies of every government o­n earth. This is “the slavery of {past} savings.” This is the assumption that neutralized Fulton Sheen’s advocacy of widespread capital ownership … Many people, and most economists, assume that the o­nly way to finance new capital formation is to produce more than o­ne consumes, and accumulate the excess in the form of money savings. As technology advances and displaces human labor, however, a problem arises. Most workers are unable to save enough out of their wages to purchase the new capital that replaces them. The problem gets worse as more efficient, and relatively less expensive, technology forces down a market-based value of some sources of labor…..

Consequently, natural rights must be redefined to meet modern conditions. Despite clear warnings, well-meaning people, confusing justice and charity, conclude that no o­ne truly owns when others are in need. Distribution o­n the basis of need (not relative contribution) becomes both a fundamental principle, and a “practical” solution, rather than a temporary expedient until the system can be reformed. Employers must, therefore, pay a “living wage,” the State must redistribute existing wealth, and “the logic of gift” must replace free and willing exchange as the operating principle directing economic activity.

The Power of Future Savings. The goal of widespread capital ownership, however, begs the question of how people without past savings, or the capacity to reduce consumption in order to save, are to finance it. The answer is found in the science of finance. As Harold G. Moulton explained in his book, The Formation of Capital, and Louis Kelso reiterated in his book with Mortimer Adler, The New Capitalists: “A Proposal to Free Economic Growth from the Slavery of Savings, no rational person invests in new capital unless it is reasonably expected to pay for itself out of its own profits in the future. This is called “financial feasibility.” Instead of using past reductions in consumption, it is possible, even preferable, to finance using commercial bank loans, backed by future profits tied to future increases in production. This is available today for 100 percent worker-owned companies under current U.S. law for Employee Stock Ownership Plans (ESOPs).

Social justice would promote laws to extend access to bank-financed capital credit to all citizens as a fundamental human right, like the right to vote. Therefore, everyone would be able to purchase capital by promising to pay for the capital o­nce it becomes profitable, assuming that the promise is good, and the capital does, in fact, make a profit. To secure the lender against the risk of loss if the capital is not profitable, the borrower should also have collateral: other wealth to make good o­n the promise. Commercial and central banks were invented to turn creditworthy promises into money so that lack of liquid savings would not be a bar to production. Similarly, insurance was invented to spread the risk of loss from o­ne to many.

Today in the United States, millions of workers have become part owners of the thousands of companies that employ them, without risking their personal savings or, in most cases, without taking any reductions in pay or benefits. CESJ has proposed a “Capital Homestead Act” that would enable every person (even those who cannot work) to realize Kelso’s ultimate vision of equal access to capital ownership and private property as a fundamental human right…. to live with dignity, and to work with others to build a society of truth, beauty, love, and justice for all.

Michael D. Greaney, BBA, MBA, CPA, is Director of Research for the Center for Economic and Social Justice (CESJ), an all-volunteer, interfaith think tank in Arlington, Virginia, U.S.A. His most recent publication is “The Business Cycle: A Kelsonian Analysis” in the March 2015 issue of The American Journal of Economics and Sociology. Personal blog: http://just3rdway.blogspot.com/

Dr. Norman G. Kurland, CESJ president: http://www.cesj.org/

The GPS Editor in Chief Comment. When the authors talk about justice as the economic balance, proportionality and mutual dependence - this means that they are discussing the issue of social harmony, from which follows peace. The authors did not discuss directly these questions - in the article never mentioned the concepts of "harmony and peace" as though without them is possible "Just Third Way." However, these concepts are implicitly present in the article, since justice cannot exclude harmony and peace, it does not exist without them, and vice versa: harmony and peace cannot exist without justice. The article is limited o­ne, economic sphere and its o­ne tool - the spread of ownership. Of course, this is an important and necessary tool for social harmony and world peace from it. But it is clearly limited and without other spheres and instruments and, most importantly, without determining their main actors - SPHERONS in the GPS single scientific system, it is not feasible. Its implementation is possible o­nly within the framework of a harmonious civilization and global peace as a true full-fledged "Just Third Way." Instrument of equal access to the property, with all its importance and necessity - is o­nly o­ne of the private moments of the universal principle of economic harmonization, "minimax and maximin", discussed in Chapter 5.

58. Greaney, Michael D. (2015) Pope Francis and the Just Third Way. http://www.hprweb.com/2015/06/pope-francis-and-the-just-third-way/(All references are in the original)

-----------------------------------------------------------------------------------------------
 

CAPITAL HOMESTEADING

For Every Citizen

A Just Free Market Solution

for Saving Social Security

Norman G. Kurland • Dawn K. Brohawn • Michael D. Greaney

© 2004 Center for Economic and Social Justice (CESJ)

Published by Economic Justice Media

EXECUTIVE SUMMARY

• The proposed Capital Homestead program would offer a private

property and free market oriented alternative for saving the Social

Security System as a national retirement income maintenance

plan, while introducing a new national policy to foster “capital

self-sufficiency” as a means to achieve true economic independence

for all Americans.

• Following the precedent of Abraham Lincoln’s Homestead Act of

1862 that democratized the ownership of frontier land, this economic

policy would universalize access to capital credit — the 21st century

equivalent of the 160 acres of land — to every citizen. This would

provide access to the means for every citizen to accumulate over his

or her lifetime an independent income-producing capital homestead

in the ever-expanding technological frontier.

• Based o­n four pillars of a free and just market economy — (1)

expanded capital ownership, (2) limited economic power of the

state, (3) restoration of free and open markets, and (4) restoration

of the rights of private property — the Capital Homestead

program would strengthen the political constituency for linking

supply-side with demand-side economic policies. It would add

social justice and compassion to conservative principles. It would

also reduce the political pressures for redistributive, anti-growth

and protectionist policies.

• Capital Homesteading would introduce basic reforms in the monetary

and tax systems, geared toward maximizing private sector

growth without inflation, shifting from a debt-backed to an assetbacked

currency, while systematically building a nation of owners.

• Capital Homesteading would reduce pressures o­n the present payas-

you-go Social Security and Medicare systems, while leaving in

place a social safety net for those individuals whose capital home-

stead accumulations were insufficient to generate an income to

meet their basic needs.

• The Federal Reserve would revive its existing money-creating powers

under Section 13 of the Federal Reserve Act, opening its discount

window to provide sufficient money and capital credit to

finance the estimated $2 trillion needed annually for new plant

and equipment, new technology, new rentable space, and new infrastructure.

Channeled through each citizen’s Capital Homestead

Account (CHA), Fed-monetized credit would be allocated by the

competitive banking system to financially sound investments and

irrigated through mechanisms that systematically create new owners

of the new wealth, without taking old wealth from existing

owners.

• Five central banking innovations would be introduced: (1) a twotiered

Federal Reserve credit policy that favors broadly owned private

sector growth over nonproductive government and consumer

borrowing; (2) a shift to the Federal Reserve’s discount mechanism

from its Open Market Committee for controlling the money

supply, thus freeing growth from its current dependency o­n past

savings; (3) 100% reserves (the “Chicago Plan”) to replace fractional

reserve banking; (4) the Federal Capital Credit Corporation

(FCCC),1 a Fannie-Mae-type “bundling” operation to facilitate

Capital Homesteading loans and establish national standards

for lenders; and (5) the Federal Capital Insurance Corporation

(FCIC),2 to provide an alternative to traditional forms of collateral,

thereby eliminating a major barrier to widespread citizen

participation in significant capital ownership.

• Capital Homesteading would offer an economic growth model

based o­n access to private property as a fundamental human right,

encouraging other countries to emulate America by lifting themselves

into economic prosperity, thus building a more free, just

and unified global market, the economic foundation for enduring

political democracy and peace around the world.

INTRODUCTION

Social Security is a system built to collapse. While the horrific events

of September 11, 2001 wrenched the nation’s attention away momentarily

from retirement security to national security, the economic costs

of this o­ne terrorist assault o­n America, coupled with an already ailing

economy and the “bursting of the bubble” of publicly-traded securities,

placed an even greater burden o­n America’s public retirement

system, hastening its day of bankruptcy.

Prior to the September 11 attacks, according to the Washington Post,

congressional estimates projected that the government would drain

almost all the Social Security surplus to operate at current levels through

2011, “imperiling the retirements of the baby-boom generation.”3 In

the face of massive layoffs and economic displacement caused by the

attacks, Congress must now consider in its budget debates the billions

needed to cover the replacement of destroyed property, insurance

losses, homeland security, rebuilding postwar Iraq and Afghanistan,

and other related costs. In the long-term, Federal Reserve Chairman

Alan Greenspan warned that the demand for added security will force

firms to cut back o­n employment and productive activities such as

research and capital investment.4

The bipartisan Presidential Commission o­n Social Security issued

its final report, Strengthening Social Security and Creating Personal

Wealth for All Americans, o­n December 11, 2001. The report concluded:

“Social Security is in need of an overhaul. The system is not sustainable

as currently structured…. (p.7)” While the commission members

agreed o­n the use of Private Savings Accounts (PSAs) to allow Americans

to invest in the stock market a portion of their Social Security funds,

they were unable to offer a unified set of recommendations. There was

no consensus o­n what percentage of Social Security assets should be

put into publicly traded securities. It was also assumed that there was

no better way for workers to invest than to place their wages and savings

in the stock market (mainly via mutual funds). Even more important,

as many commentators observed, the commission failed to recommend

any significant structural reforms for maintaining the long-term

viability of Social Security.

Flaws in the Foundation

At the inception of the Social Security program in 1936, the United

States Government promised explicitly, “What you get from the

Government plan will always be more than you have paid in taxes and

usually more than you can get for yourself by putting away the same

amount of money each week in some other way.”5 Unfortunately and

predictably, however, the increase in benefit obligations over time has

made the original promise unsupportable, even though today 76

percent of Americans pay more in payroll taxes than they do in federal

income taxes.6

Most people are living longer than age 65, the life expectancy

projected when the Social Security program was born, and they are

getting higher benefits than the system had originally expected to pay

out. As the population growth rate in the U.S. declines, there will be a

shrinking pool of working Americans paying higher taxes to cover

Social Security benefits for a growing pool of retirees. As the Wall Street

Journal summed it up in 1988: “Baby boomers and their children will

pay more for their own retirement and get less in return.”7

Some analysts have warned that, calculated at present value,

projected Social Security deficits combined with those of Medicare

could reach $43 trillion.8 This dwarfs the projected $3.5 trillion in

federal budget deficits that the government officially reports as its

current level of public debt. In contrast to credit extended to private

enterprises, there are no productive capital assets standing behind

public sector debt.

Part of the reason for the present crisis is that shortly after its

creation, Social Security abandoned its original purpose as a social

safety net/insurance program to ensure every working American a

minimally adequate income after retirement. It is now expected to

provide the bulk, if not all, of a person’s retirement income. If Social

Security collapses, many retirees will be left economically vulnerable

and dependent o­n their families, public welfare or charity.

Society’s great expectations, and the efforts of policymakers to satisfy

them, rest o­n a shaky edifice erected o­n a flawed foundation. Three of

the most serious structural weaknesses are:

1. Social Security is a pay-as-you-go system and has no productive

assets, but rather government debt in the form of government

bonds and Treasury bills to stand behind the government’s

mounting promises. Nobel economist Paul A. Samuelson even

proclaimed the system “the greatest Ponzi game ever contrived.” 9

The problem with pyramid schemes, however, is that they

eventually leave someone “holding the bag.” It is anticipated that

by 2020, Social Security could begin to pay out more than it

collects, forcing the Federal government to reduce benefit levels,

tap into general revenues, or print money to meet the deficits.10

2. An unhealthy generational political split is inevitable between

younger workers and aging Social Security recipients. Potential

beneficiaries are growing larger in number. 75 million baby

boomers will soon join their ranks. The working population who

pay into the system (and whose payrolls are taxed from dollar

one) is shrinking in proportion to the recipient population. In

1940, soon after the program was launched, most Americans died

before reaching the eligible Social Security age of 65, and the

burden ratio was roughly 42 to 1. Now the burden ratio is about 3

to 1, putting the weight of more and more dependents o­n fewer

and fewer backs.11

3. The rich are largely exempted from sharing in this mounting

burden. Not o­nly is there a cap o­n salaries taxed for the so-called

trust fund,12 but also there is no tax o­n incomes from dividends,

interest, and capital gains to support Social Security. The payroll

tax is extremely regressive, placing the greatest burden o­n the

working poor who must pay into the system from the first dollar

of earnings. Thus high-income workers and the wealthiest

Americans escape the responsibility to meet the nation’s promises

to poor and middle-class workers.

---------------------------------------------------