To the labor of man alone he (Smith) ascribes the power of producing values. This is an error. A more exact analysis demonstrates…that all the values are derived from the operation of labor, or rather from the industry of man, combined with the operation of those agents which nature and capital furnish him. Dr. Smith did not, therefore, obtain a thorough knowledge of the most important phenomenon in production; this has led him into erroneous conclusions, such, for instance, as attributing a gigantic influence to the division of labor, or rather to the separation of employments. This influence, however, is by no means inappreciable or even inconsiderable; but the greatest wonders of this description are not so much owing to any peculiar property in human labor, as to the use we make of the powers of nature. His ignorance of this principle precluded him from establishing the true theory of machinery in relation to the production of wealth (italics supplied). [Say’s critique of Smith and labor theory of value in J.B. Say, A Treatise on Political Economy (1830) 6 th American edition, pp. xl-xli. Cited in Robert Ashford and Rodney Shakespeare, Binary Economics: The New Paradigm (University Press of America, 1999), pp.100-101.]
When capital owners are few, the private-property conduits of necessity create vast savings reservoirs for those few. If there were many owners, the same conduits would broadly irrigate the economy with purchasing power.
In a little over 100 years we have moved from an economy where most people were motivated and rewarded by profits to one where millions of our fellow citizens are wage-earning employees who are not so motivated or rewarded…. [The corporate form of business organization lacks for employees the element of personal involvement in the fortunes of the enterprise that is inherent in partnerships and family farms that once accounted for the employment of almost everyone…. Millions…work for wages alone. They do not share in profits or losses except indirectly in ways not apparent to them…. The sharing of success as measured by profits…makes each individual feel he is a responsible member of the group. Profit sharing is the recognition of the importance of the individual, whatever his job, to the success of an enterprise.
The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were. Kelso, Louis O. [From “Karl Marx: The Almost Capitalist,” American Bar Association Journal , March 1957.]: 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 property 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.
It is possible to imagine a voluntary economy, an economy that would let people choose their level of work and spending without exploitation or domination…. I would be content with the Kelso-Adler proposal as a way to make the economy voluntary. [“Is There Life After Birth,” The Center Magazine , Center for the Study of Democratic Institutions, July 1968.]
<...> slaves became the major form of Southern wealth (aside from land), and slaveholding became the means to prosperity. <...> The later impoverishment of the South nourished the myth that the slave economy had always been historically “backward,” stagnating, and unproductive. We now know that investment in slaves brought a considerable profit and that the Southern economy grew rapidly throughout the pre–Civil War decades. It is true, however, that the system depended largely on the international demand for cotton as the world entered the age of industrialization, led by the British textile industry. There was an increasing demand for clothing that was cheaper than linen and not as hot and heavy as wool.
Unless we increase our economy’s productivity—its vitality and competitiveness—we will face pressure for increasing controls….
[C]apital, 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 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. [Letter to The Washington Post , July 20, 1976.]
Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality.
The arc of the moral universe is long, but it bends toward justice. [Speech, “Where Do We Go From Here?” by Martin Luther King, Jr. made to the Tenth Anniversary Convention of the Southern Christian Leadership Conference (S.C.L.C) in Atlanta on August 16, 1967. Dr. King projected in it the issues which led to Poor People’s March on Washington. From Foner, Philip S., The Voice of Black America: New York, 1972.] A nation that will keep people in slavery for 244 years will “thingify” them and make them things. And therefore, they will exploit them and poor people generally economically. And a nation that will exploit economically will have to have foreign investments and everything else, and it will have to use its military might to protect them. All of these problems are tied together. What I’m saying today is that we must go from this convention and say, “America, you must be born again! . . .[ Ibid .] What is needed is a realization that power without love is reckless and abusive, and love without power is sentimental and anemic. Power at its best is love implementing the demands of justice, and justice at its best is power correcting everything that stands against love. . . . [ Ibid .] Another basic challenge is to discover how to organize our strength in terms of economic and political power. [Ibid.] Power properly understood is nothing but the ability to achieve purpose. It is the strength required to bring about social, political and economic change. Walter Reuther defined power one day. He said, “Power is the ability of a labor union like the U.A.W. to make the most powerful corporation in the world, General Motors, say ‘Yes’ when it wants to say ‘No.’ That’s power.” [Ibid.] Now a lot of us are preachers, and all of us have our moral convictions and concerns, and so often have problems with power. There is nothing wrong with power if power is used correctly. [Ibid.] [A] host of positive psychological changes inevitably will result from widespread economic security. The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the means to seek self-improvement. Personal conflicts among husbands, wives and children will diminish when the unjust measurement of human worth on the scale of dollars is eliminated. [Ibid.] [T]he Movement must address itself to the question of restructuring the whole of American society. There are forty million poor people here. And one day we must ask the question, “Why are there forty million poor people in America?” And when you begin to ask that question, you are raising questions about the economic system, about a broader distribution of wealth. When you ask that question, you begin to question the capitalistic economy. And I’m simply saying that more and more, we’ve got to begin to ask questions about the whole society. We are called upon to help the discouraged beggars in life’s market place. But one day we must come to see that an edifice which produces beggars needs restructuring. It means that questions must be raised. You see, my friends, when you deal with this, you begin to ask the question, “Who owns the oil?” You begin to ask the question, “Who owns the iron ore?” [Ibid.] One night, a juror came to Jesus and he wanted to know what he could do to be saved. Jesus didn’t get bogged down in the kind of isolated approach of what he shouldn’t do. Jesus didn’t say, “Now Nicodemus, you must stop lying.” He didn’t say, “Nicodemus, you must stop cheating if you are doing that.” He didn’t say, “Nicodemus, you must not commit adultery.” He didn’t say, “Nicodemus, now you must stop drinking liquor if you are doing that excessively.” He said something altogether different, because Jesus realized something basic – that if a man will lie, he will steal. And if a man will steal, he will kill. So instead of just getting bogged down in one thing, Jesus looked at him and said, “Nicodemus, you must be born again.” He said, in other words, “Your whole structure must be changed.” A nation that will keep people in slavery for 244 years will “thingify” them — make them things. Therefore they will exploit them, and poor people generally, economically. And a nation that will exploit economically will have to have foreign investments and everything else, and will have to use its military might to protect them. All of these problems are tied together. What I am saying today is that we must go from this convention and say, “America, you must be born again!” [Ibid.] [L]et us go out with a “divine dissatisfaction.” Let us be dissatisfied until America will no longer have a high blood pressure of creeds and an anemia of deeds. Let us be dissatisfied until the tragic walls that separate the outer city of wealth and comfort and the inner city of poverty and despair shall be crushed by the battering rams of the forces of justice. Let us be dissatisfied until those that live on the outskirts of hope are brought into the metropolis of daily security. Let us be dissatisfied until slums are cast into the junk heaps of history, and every family is living in a decent sanitary home. Let us be dissatisfied until the dark yesterdays of segregated schools will be transformed into bright tomorrows of quality, integrated education. Let us be dissatisfied until integration is not seen as a problem but as an opportunity to participate in the beauty of diversity. Let us be dissatisfied until men and women, however black they may be, will be judged on the basis of the content of their character and not on the basis of the color of their skin. Let us be dissatisfied. Let us be dissatisfied until every state capitol houses a governor who will do justly, who will love mercy and who will walk humbly with his God. Let us be dissatisfied until from every city hall, justice will roll down like waters and righteousness like a mighty stream. Let us be dissatisfied until that day when the lion and the lamb shall lie down together. and every man will sit under his own vine and fig tree and none shall be afraid. Let us be dissatisfied. And men will recognize that out of one blood God made all men to dwell upon the face of the earth. Let us be dissatisfied until that day when nobody will shout “White Power!” — when nobody will shout “Black Power!” — but everybody will talk about God’s power and human power. [Ibid.]
~Reputation.~--Reputation is one of the prizes for which men contend: it is, as Mr. Burke calls it, "the cheap defence and ornament of nations, and the nurse of manly exertions;" it produces more labor and more talent then twice the wealth of a country could ever rear up. It is the coin of genius; and it is the imperious duty of every man to bestow it with the most scrupulous justice and the wisest economy.--_Sydney Smith._
All the controversialists who have become conscious of the real issue are already saying of our ideal exactly what used to be said of the Socialists’ ideal. They are saying that private property is too ideal not to be impossible. They are saying that private enterprise is too good to be true. They are saying that the idea of ordinary men owning ordinary possessions is against the laws of political economy and requires an alteration in human nature. They are saying that all practical business men know that the thing would never work, exactly as the same obliging people always prepared to know that State management would never work. For they hold the simple and touching faith that no management except their own could ever work. They call this the law of nature; and they call anybody who ventures to doubt it a weakling. “On a Sense of Proportion,” [ The Outline of Sanity , G. K. Chesterton: Collected Works, Volume V. San Francisco, California: Ignatius Press, 1987, p. 76.]
Philosophy can bake no bread; but she can procure for us God, freedom, immortality. Which, then, is more practical--philosophy or economy?
[T]he organized labor movement as it is constituted today is as much a concomitant of a capitalist economy as is capital. Organized labor is predicated upon the basic premise of collective bargaining between employers and employees. This premise can obtain only for an employer-employee type of society. If the labor movement is to maintain its own identity and security, it must of necessity protect that kind of society. Radicals, on the other hand, want to advance from the jungle of laissez-faire capitalism to a world worthy of the name of human civilization. They hope for a future where the means of economic production will be owned by all of the people instead of just a comparative handful. They feel that this minority control of production facilities is injurious to the large masses of people not only because of economic monopolies but because the political power inherent in this form of centralized economy does not augur for an ever expanding democratic way of life. [ Reveille for Radicals , 1945.]
It is the first principle of economy to make use of available vital power first, then the inexpensive natural forces, and only at last to have recourse to artificial power.
Lester and others suggests the opposite: suicide is more common among people with a higher quality of life. “If you’re unhappy and you have something to blame your unhappiness on—if it’s the government, or the economy, or something—then that kind of immunizes you against committing suicide,” he says. “It’s when you have no external cause to blame for your unhappiness that suicide becomes more likely. I’ve used this idea to explain why African-Americans have lower suicide rates, why blind people whose sight is restored often become suicidal, and why adolescent suicide rates often rise as their quality of life gets better.
The world of the seventies is an entirely new world from that of the thirties. Many revolutions have changed the political, social and economic conditions of peoples, changing many concepts out of recognition and making our world a fast-changing world. The more pertinent revolutions to our studies on Constitutional reforms are: 1) the scientific revolution…, 2) the revolution of equality of men and nations…, 3) the revolution of rising expectations, and 4) the fiscal, monetary and organizational revolution of Marx and Keynes which should evolve in the triumph of a more relevant revolution, that advocated by Kelso which envisions a political economy based on popular suffrage, popular education, and popular capitalism. [ Bayanikasan: The Effective Democracy for All, 1976.]
~Economy.~--Economy is half the battle of life; it is not so hard to earn money as to spend it well.--_Spurgeon._
There are but three political-economic roads from which we can choose…. We could take the first course and further exacerbate the already concentrated ownership of productive capital in the American economy. Or we could join the rest of the world by taking the second path, that of nationalization. Or we can take the third road, establishing policies to diffuse capital ownership broadly, so that many individuals, particularly workers, can participate as owners of industrial capital.… The choice is ours. There is no way to avoid this decision. Non-action is a political decision in favor of continued, and indeed increased, concentrated ownership of productive capital. [Debates on converting the eastern rail system into an employee-owned company, December 11, 1972.]
On what shall man found the economy of the world which he would fain govern? If on the caprice of each man, all is confusion. If on justice, man is ignorant of it.
The industrial economy which divides society absolutely into two portions, the payers of wages and the receivers of them, the first counted by thousands and the last by millions, is neither fit for, nor capable of, indefinite duration: and the possibility of changing this system for one of combination without dependence, and unity of interest instead of organized hostility, depends altogether upon the future developments of the Partnership principle. [ Principles of Political Economy , Book V, Chapter IX, §5.]
If this is a service economy, why is the service so bad?
The real science of political economy is that which teaches nations to desire and labour for the things that lead to life; and which teaches them to scorn and destroy the things that lead to destruction.
Economists can certainly disappoint you. One said that the economy would
Ownership of productive property — long a basic principle of Catholic social doctrine — is more important today than ever before. Productive property (capital) and productive human effort (labor) are the sources of all goods and services. New technology is greatly increasing the contribution of capital to production and causing a decrease in the relative contribution of labor. Many, many tasks which were once done by human hands and minds are now done rapidly and unerringly by machines. Many economists predict that the day will soon come when labor will account for a tiny fraction of production and capital will account for almost all of it. The implications of these trends are inescapable. Unless ownership of productive property becomes more widespread, a growing number of our people will be unable to support themselves or to buy the products of our industry and agriculture. This will result in much hardship among individuals and a check upon the growth of our economy. [Editorial, Catholic Rural Life , vol. XVI, October, 1967.]
A creative economy is the fuel of magnificence.
It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society \x97 the farmers, mechanics, and laborers \x97 who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their government.
Humility is that line of conduct which is a mean between overbearing pride on the one hand and abject servility on the other, as economy is the middle term between extravagance and avarice.
~Cultivation.~--Cultivation is the economy of force.--_Liebig._
To an American, that which deprives him of his freedom he regards as injustice, and that which allows him to enjoy that freedom he regards as justice. The concept of justice is as central to the totality of his being as freedom is, and this is not surprising, since the motivating idea behind the American Declaration of Independence was the fervent desire for justice. [Excerpt from The Secret of American Success: Africa’s Great Hope, Ch. 28, “Freedom at the Helm,” pp. 215-217.] If one examines [the American] idea of freedom, the individual, free enterprise, their Constitution, their political and economic structures as well as their mode of exploiting their natural resources, all these are shrouded in the idea of justice.” Ibid. A shocked sense of justice has to be removed and justice restored…. Ibid. In the USA, where so many people compete for one and the same thing, where job opportunities, residential facilities, and food resources have to be spread over so many people, the question of justice becomes more imperative than ever before if communal and individual life is to be made possible and enjoyable. Ibid. [F]or the majority of Americans, collectivist or nationalized economy is morally wrong and therefore unjust. For them, free enterprise meets their keen sense of justice…. Ibid. The U.S.A. economic policy and practice have been largely influenced by this thought that people shall own property in their own right and in order to be strong enough to control their own government. Ibid. It appears it would be quite un-American not to be suspicious of the government or to distrust it. History has taught them a little too much about the tragic frailties of human governments, but it has also driven home to them that they must control firmly political and economic power, which, handed over to any government in their land, could be easily used to oppress them. Ibid. The real struggle between an American government and the people was one of power, which was settled when they designed their Constitution, which conceded the sovereignty of the people when it came to politics, and the sovereignty of the consumer when it came to economics. Ibid.