Thursday, January 10, 2008

Four Economic Rights: Social Renewal Through Economic Justice for All

by Carmine Gorga, Ph.D.


To realize the importance of the four economic rights examined below, one has to place them in the context of the forces they have to oppose in order to assert themselves. The opponents of rights are not some vague and unidentifiable forces. The opponents of rights are the active forces of privilege. The essential differentiation between rights and privileges is this. Rights unite; privileges divide.

A NATION DIVIDED BY PRIVILEGES

The dynamics of privilege become apparent in nearly every morning newspaper. We know the headlines by rote: this group wants a tax reduction; that group wants an increase in services. The dynamics are all there. Privileges, since they are not due to us, are always acquired to the detriment of other people. Hence the recurring struggle of wills. No issue is ever settled. No one is ever secure about anything.

Based upon such quicksand, there are never enough resources to satisfy the grab for privileges.

Hence, it takes force to extract privileges. But once the privilege is obtained, its use fosters passivity: there is nothing to do but to enjoy the privilege until the next challenger comes around. By then the will and the strength of the user of privilege has generally been so enfeebled that surrender is near. Yet the newly dispossessed will rise again.

A NATION UNITED BY RIGHTS

Rights unite us all. They make us all equal. The magic of rights is this. Once a right is asserted in one particular case, it is asserted for all. (It is the extension of the application of rights that often is a horrendously slow process.)

The opposing political will must be broken. The opposing will is more easily broken if the request is advanced in a reasonable fashion, hence the success of nonviolent political movements and if the request makes it absolutely clear that the privileged group is not going to be denied the exercise of the right that is proposed. The right must be universal.

Once the opposing will is broken the right is exercised by all and it is exercised actively. As opposed to privileges it takes a continuous act of the will to exercise that right. The right then implies a duty.

FOUR ECONOMIC RIGHTS

As there are four factors of production, namely, land, financial capital, labor and physical capital, so there must be four specific rights of access to those factors otherwise, instead of being productive, as Pope John Paul II points out, we will be marginalized. Rooted in the natural law, these rights can be formulated as follows:

- the right to share in the bounties of nature,
- the right to share in the bounties of national credit,
- the right to own the fruits of one's creation,
- the right to protect the fruits of one's creation.

These four rights, once exercised in full, will renew the very roots of our culture and our civilization. They will work from within existing structures and might allow us to transform the provision of goods and services from the brutal exercise it has lately become into a very spiritual enterprise, as it inherently is.

THE RESOURCES OF THE NATION ARE POTENTIALLY INFINITE

The resources of the nation are potentially infinite. The evidence that this statement is true is overwhelming. The issue therefore is not scarcity, but greed justified by social disorganization. No one knows today what is enough. Consequently one is compelled to accumulate more than one needs. When one does that, one deprives other people of their due because e at any one moment resources are finite.

If the social organization is right, everyone knows what is enough. What is enough is what one needs today. If the social organization is right, one can assuredly implement the Gospel's injunction: "Look at the birds of the air... Consider the lilies of the field... O men of little faith..."

The issue then is one of social organization. If the resources of the nation are potentially infinite, everyone has the right of access to them. They are a common good.

But how can society enforce such a right? The issue is not only one of will but also one of reality. Some solutions work, some do not. Some solutions work in one society, at one time; some do not. The solution that seems to be best applicable to the needs of the modern world lies in the use of taxes on land and natural resources. They have to be generally higher than they are today and taxes on buildings and other human activities have to be correspondingly lower.

Owners who do not want to, or think they cannot afford to, pay justly and fairly apportioned taxes on land and natural resources will not be dispossessed; they will simply sell their property and enjoy the fruits of interest on the money obtained in exchange for the transfer of their right of ownership to more capable hands who will make, for instance, the weeds and rubbish filled lots, in too many downtown areas today, bloom. These taxes are effective because they tend to eliminate hoarding, thus opening access to unused resources that ought to be used.

Let us briefly put the issue another way. We all have the duty to pay taxes on our property of land and natural resources. We all have this duty because most of the value of our land and natural resources comes first from God or Nature, if you will and from the community thereafter. A rock in Arizona is worth a pittance; a rock in Manhattan is worth lot. The difference lies in what the community brings to the rock: sewer lines and telephones lines, and on and on.

Correspondingly, we all have a right in this matter. We all have the right to enforce the payment by all of a fair assessment of taxes on land and natural resources because, if one does not pay his fair share of such taxes, all others will have to make up the balance.

THE RIGHT OF ACCESS TO NATIONAL CREDIT

Either in a positive or negative way, we all contribute to the value of national credit. Therefore, national credit is a common good par excellence. It belongs to all of us.

National credit is a precious resource. From certain points of view it is more precious than natural resources: misuse of natural resources reduces their availability and increases their price. Misuse of national credit reduces the availability and increases the price of all goods and services. National credit is mostly an untapped resource: what central banks tap is mostly bank credit. Bank credit is created by the savings of a limited number of people; national credit is created by us all.

The use of national credit constitutes one last frontier. We must not mishandle it as we have mishandled so many other frontiers in the past. Properly handled, the use of national credit will function like manna from heaven. It will fuel our creative engines to make us satisfy our immediate as well as our future needs. Properly used it will be just sufficient to our needs. We will always have enough of it.

In-depth consideration of the potential use of national credit leads to the formulation of three essential criteria for its proper use: 1) national credit must be used only to issue loans that are necessary for the creation of new wealth; 2) it must be issued at cost; 3 ) it must be issued to the benefit of all.

The rationale for the first criterion is best seen in the negative. National credit cannot be used to finance the purchase of consumer goods because these goods do not generate the income necessary to repay the loan.

National credit cannot be used to finance the purchase of goods that are to be hoarded. National credit cannot be used to finance the purchase of government debt unless the debt is issued to create new wealth.

The rationale for the second criterion is easily specified. Interest rates for credit to create new wealth must cover only the cost of administration of the loan instruments and insurance of default risks.

The rationale for the third criterion is more complex. Some people are inept at creating wealth; some do not care about it. We must all pursue our destinies. And we must not become slaves of the creators of wealth in the process. The application of this criterion, rather than a limitation, presents us with a tremendous opportunity. It means that entrepreneurs have to share the ownership of the wealth they create with all those who help them create it: Employee Stock Ownership Plans (ESOPs) and cooperatives are some of the ideal legal instruments that serve to achieve this aim.

THE RIGHT TO OWN THE WEALTH ONE CREATES

If men and women have an indisputable right to own common goods as land and national credit, how much stronger is the right to own the wealth one creates? That is the fundamental premise on which ESOPs and cooperatives rest. They are legal instruments that allow a fair apportionment of the right of ownership over the wealth that employees create in cooperation, of course, with the owners of capital.

Employees are outside contractors. They offer their labor and receive wages. They have no right to the wealth created by the corporation wealth which includes consumer goods, goods to be hoarded and capital goods.

ESOPs and cooperatives change all that. Following an established set of rules and regulations, they transform employees from contractors into stockholders. From outsiders employees become insiders. Employees then become much more efficient workers. Provided ESOPs and cooperatives are not simply window dressing, legal arrangements to cajole the taxman, but in fact do respect the whole person of the employee, they are mostly successful. ESOPs multiplied during the Eighties.

The question is how can ESOPs and cooperatives be made tools of national policy? The answer lies in seeing them not as concessions from existing owners and managers to employees, but as means to give life to universal rights. Three procedures might speed up the tempo of the assertion of this right.

First, when the use of national credit is called upon to assist in the creation of new wealth, the use of ESOPs and cooperatives must be made mandatory. There will still be no compulsion in this practice because those who did not want to extend the right of ownership to their employees would be free to recur to existing, although more expensive, credit channels.

The second procedure for a speedy assertion of this right is to link any grant of public money to the expansion of ownership of the resulting wealth to all employees of corporations creating that wealth.

The third procedure is to link the vicissitudes of inflation and deflation to the exercise of this right. We all more or less agree that during inflationary periods asking for higher wages adds to the flames of inflation just as during periods of deflation ion imposing lower wages adds to the ravages of deflation. These negative spirals must be broken. They are generally broken through the exercise of force or the (generally vain) promise of future advantages. How much more reasonable is it to prevent the problems by the use of fundamental rights?

THE RIGHT TO PROTECT WHAT ONE OWNS

Included in the right of ownership of wealth is the right to protect it from outside incursions into its uses and enjoyment. As Pope Leo XIII maintained, the right of property is "sacred and inviolable." The consequences of this right have been mostly feared and resented by governments and reformers alike. But it is proper and unavoidable. All justification for that fear and resentment will be annihilated once the ownership of wealth becomes not a privilege reserved for the few but a common right for all.

To this right corresponds a duty, the duty to respect other people's property. This set of rights and duties can assume a hundred different manifestations, from trivial to momentous. Perhaps the application that is of utmost importance today regards the buying corporations as if they were "things" and not entities deeply affecting the lives of the people within and without their direct area of influence. This practice produces uncountable horrors.

The practice of corporate aggrandizement has deep roots in human nature. An old example is how hermits became monks and monks created institutions too large for their own good. So new religious orders were created. And the process started anew again and again. We have had more than a century of intense experience to prove that this practice creates havoc in the economic realm. It must be stopped.

Only if we put a stop to this practice, will we protect our civilization from the quick and the cunning. Thousands of years ago, we made a huge stride forward when we decided that the murder of another person was not a private affair. We will make a huge stride forward when we will realize that the buying and selling of corporations is akin to industrial murder. This practice cannot be tolerated. Captains of industry should not operate in a business environment in which the fruits of the labor of many can be gobbled up at the whim of any operator who, with the promise of quick results, gains command of untold financial resources. Our time horizon has to widen beyond the next accounting period; our horizon of concerns has to expand beyond the production of goods and services. What we affect, in the final analysis, is always the life of particular men and women.

Since the practice of buying and selling corporations is so ingrained, we cannot hope to put an abrupt stop to it just as we cannot abruptly increase taxes on land and natural resources to the desired level.9 We must start by imposing this prohibition on a limited number of the largest corporations and gradually extend it to the smaller ones until it reaches a level of reasonableness that is satisfactory to everyone, including lawyers and investment bankers. But industrial murder must be stopped.

AN ORGANIC POLICY

These four rights form the backbone of an organic economic policy that will gradually produce self-reinforcing benefits. The dissolution of the power of privilege that ensues will, of course, require constant vigilance, but it will proceed by its own internal dynamics and thus will direct the whole gamut of problems affecting our world today on the way to a proper solution. There are many ways of demonstrating the validity of this position. The simplest is to expand upon the set of distinctions between rights and privileges outlined at the outset of this discussion.

THE LARGER CONTEXT

In the beginning an attempt was made to place this discussion within the historico-political context. These issues can also be studied from the sociological, teleological and theological viewpoint. It is on this vast ground that we will find the ultimate justification for the suggested policy.

Privileges are based on envy, use greed as the engine to set the social dynamics in motion, are extracted through violence or the threat of violence and foster sloth.

Rights are based on self-sufficiency, use self-reliance as the engine to set the social dynamics in motion, are exercised through mutual respect and foster the dignity of the person.

What did God -- or Nature, or at the limit, our own will -- put us on this earth for?


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Carmine Gorga, lecturer and author of numerous publications, is president of Polis-tics, Inc., a consulting firm in Gloucester, MA, and is currently working on a book entitled A New Monetary Order: Based on Rights, not Privilege.

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