Money is only a tool. It is an offence against human dignity that anyone either be enslaved to a tool or become a tool himself or herself.
It is traditional in economics and finance to accept the principle that new capital formation is utterly impossible without saving. Nobody ever got something for nothing, and nobody ever will. What about gifts and charity, you ask? What about them? If someone gives you a gift or alms, you owe gratitude. You don’t get something for nothing.
The traditional principle of finance is correct. Part of the problem is that understanding of this whole savings thing is often incomplete. As a result, instead of money and credit being at the service of people, people are at the service of money and credit. By far the great mass of people are enslaved to savings.
This is ironic, for money is only a tool. We are not separating money and credit because as Henry Dunning Macleod said in his book The Theory of Credit, “Money and Credit are essentially of the same nature; Money being only the highest and most general form of Credit.” It is an offence against human dignity that anyone either be enslaved to a tool or become a tool himself or herself. As Louis O. Kelso observed,
Money is not a part of the visible sector of the economy. People do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.
Mere slavery to savings, while bad enough, is not the whole problem. As technology advances it eventually reaches the stage where most productive capital cannot be financed by a single individual with reasonable effort and ability. At that point ownership of productive technology tends to become concentrated in the hands of those who control existing accumulations of savings. This is “capitalism,” a term first used in this sense by the French socialist Louis Blanc in 1850.
It is only just that those who provide the financing for new capital formation should own that capital. Control and enjoyment of what one produces with what he or she owns are essential rights of property. As Kelso pointed out, “Property in everyday life, is the right of control.”
More specifically, “property” is two things. One, it is the absolute right inherent in every single human being simply because he or she is a human being. This is the “right to property.”
Two, property is the bundle of socially defined and necessarily limited rights that delineate how an owner may exercise his or her ownership, that is, control and enjoyment of the fruits of ownership. In general, no one may use what is owned to harm one’s self, other people or groups, or the common good as a whole. These are the “rights of property.”
The injustice inherent in the capitalist system is not that owners control and enjoy the fruits of what they own. Being an owner is as natural to human beings as life and liberty.
Rather, the injustice of the capitalist system results from the fact that the methods of capitalist finance as traditionally misunderstood necessarily exclude most people from capital ownership. Private property, technology, the corporation, even the financial system and the banks are not the problem.
Misuse of these institutions is a symptom of the underlying problem, not the problem itself. It is lack of participation in capital formation and ownership, and thus the inability for most people to be productive except by labor alone, that is the essential flaw in all forms of capitalism.
Not realising that the real flaw in capitalism is lack of participation in capital ownership, all forms of socialism abolish private property as a natural right. This is wrong because, as Kelso and Adler argued in The Capitalist Manifesto, their first collaboration, private property is an inalienable right and an essential prop of human dignity.
In both capitalism and socialism, then, most people are cut off from ownership of capital. This, as Kelso and Adler noted, is a most unnatural state of affairs because it imposes a condition of dependency — slavery — on anyone who does not have access to the means of acquiring and possessing private property in capital: a slavery to savings.
The unavoidable conclusion is that lack of access to money and credit cuts people off from capital ownership and leads inevitably at first to capitalism or socialism, and then to a form of what Hilaire Belloc called “the Servile State.” The Servile State is one in which most people are in a condition of dependency to private employers, the State, or the combined power of both.
Michael Greaney - economist. Research Director at the Center for Economic and Social Justice