Radical Positivism

 

Open to all,

its definitive credo is:

Universal human progress by private and voluntary means.

Louis Kelso, Pioneer of Providence


Last week a fellow from Punta Gorda came to my door and asked for some coconuts from my trees. He had a wheelbarrow without rear braces -- just the tub, the wheels, and the handles -- tipped over in the yard. I have surplus coconuts, and he seemed to be enterprise-minded and, most important, had asked first, so I agreed to let him have some. No kid, but fit and wiry, he shinnied up the coconut tree, perched and hung from branches, and kicked coconuts off with his feet, at last twisting a few off by hand before climbing down.
 
While he was grading and assembling his coconuts, we talked. He said he was suffering "culture shock" in San Pedro, what with all the modern facilities that have descended upon us. He said he preferred to live free, and was planning on getting back to Toledo District soon. He liked to pick this and plant that, live simply from the land. My comment was that I never could understand why Belize seems so eager to give up one happy, legitimate, viable way of living to adopt the modern, materialistic ways. Up until a couple of years ago, on my weedpatch here in San Pedro, I'd done a great deal of my living his way and enjoyed it, giving it up as civilization, so-called, began to press in from all sides and in different ways.
 
The people having made the choice, however, it has been my policy to try to help. Philosophically, pursuing material wealth is nerve-wracking, but, in this world, viable. Everywhere in times gone by and even now in many parts of the world, a population that wanted to survive and be secure had to have wealth, because, with it, the implements of power -- classically, weaponry, but also the facilities of trade and influence can be bought. Building material wealth used to be, and, to a considerable extent, still is a means of survival and self-defense.
 
In the process, particularly in the past 200 years or so, humans have wrought stupendous transformations. The equipment, techniques, and customs for producing wealth astonish us. Since our brains and bodies don't mutate nearly as quickly as our technology has done, we often find ourselves confused by the whole thing, more than we actually realize. People living on the material fast track are often nervous, anxious, and irritated by its quick and powerful changes, even while they try to bring about more changes more quickly.
 
One of the befuddling activities that pops up in this environment is the study of economics. Trying to boost material development and progress, scholars try to figure out how and why we have come this far, and how we might proceed to best advantage. The theories and debates are abstruse and endless. They are also, to most of us, incomprehensible.
 
Occasionally, however, someone achieves a firm grasp on what, once explained, is obvious to all of us. It is not unusual that such a person be something of an outsider, an amateur as regarded by the academic establishment, usually one with an unusual degree of practical experience related to the theories in question. When such a person proclaims a new way of looking at the subject, the establishment usually finds it crude and theoretically inelegant, full of gaps and unanswered questions, and resists. Now and then, however, such a theory proves itself in practice and continues its campaign for wider application. It simply won't go away.
 
Such a thing happened in economics, and the theoretician was a man named Louis Kelso. His concept has been called "binary economics" and was set forth in a book co-authored with philosopher Mortimer Adler in 1958, titled "The Capitalist Manifesto". It was, however, no mere apology for capitalism as traditionally conducted. We often mistake the way a system is being operated for the entire nature of the system itself. There are people, for example, who equate Christianity with the Spanish Inquisition and perhaps the Crusades, holy slaughtering, and reject it.
 
Kelso's book was situated within a trend of economic thought that was prevalent when it was written, and has not been fully explored even now. An oversimplified summary might be this: Until the Industrial Revolution, human and sometimes animal labor, addressed to the natural environment, was what produced such wealth as was achieved. Oppressive techniques such as slavery, serfdom, and simply wily outmaneuvering caused some to benefit disproportionately from the labor of others. If a few owned, or participated in the exercise of sovereignty over, all the exploitable land, for example, then the many had no choice but to work for them for barely enough to keep body and soul together. That narrow and oppressive application of the system of "private property" gave it a horrible reputation it has still not shed, even with the freeing of property into the stream of commerce and its ownership much more widely distributed.
 
The distortion was, predictably, extended during the Industrial Revolution. The industrial facilities and mercantile establishments became the greater sources of wealth, owned by some and worked in by others, usually at fairly low, sometimes cruelly low, wages. True, with the deterioration and sometimes abolition of the class system, everyone had equal access to ownership, or opportunity to own, such facilities. But the brighter, the abler, the more self-disciplined, the more energetic, and, in some cases, those born with a jolly head start ended up among the minority of proprietors, and others served at the best wages they could negotiate.
 
Eric Hoffer, in "The True Believer", emphasized that formerly oppressed people, liberated, perversely tend to imitate their former oppressors. One reason may be that they feel very lucky to have escaped oppression and privation, and are willing to impose them on others to maintain their positions. Another is that they have had no other practices exemplified to them, and so simply change roles, from oppressed to oppressor, in processes they know best. Along with oppression of people not bright, energetic, opportunistic, or fortunately-born enough to compete, the new merchant princes and industrial titans exhibited another characteristic of their aristocratic exemplars: they savaged one another. Business was often conducted by way of negative as well as positive competition, as among feudal warlords in eternal battle. While oppressing the masses, for which they have been excoriated, the proprietors just as eagerly endeavored to hamper and ruin one another. The latter phenomenon is not broadly acknowledged, because oppressed people and their advocates have little sympathy for oppressors ruined by their own kind.
 
Karl Marx, by no means alone but most dramatically, advocated the case of the many against the few, describing history as an eternal conflict among classes that could only be resolved by confessing that labor was the only legitimate source of wealth, maintaining that all material resources, natural and, as with factories, artificial, should be held in common, and the wealth produced by labor on the land or in the mills divided according to need. All would be laborers, and the world would be a Workers' Paradise, he explained.
 
Aside from a gross misunderstanding of human nature, particularly its variability, Marx did not sufficiently anticipate the effects of what came to be called automation. It was described by John Kenneth Galbraith in his classical popular economics text, "The Affluent Society". Human labor, he noted, was becoming less and less important in the production of wealth, as powered and automated machinery was coming to produce more and more of it. Thinking along the same lines were engineering visionary Buckminster Fuller, a number of others, and Kelso. How would it be possible, Galbraith asked, to distribute wealth in a way that would be equitable, or fair, or at least socially tolerable enough to ward off uprisings and riots, when the old rationale for distributing wealth was primarily by way of payment for labor performed -- in an environment in which labor was less and less required?
 
Social planners came up with two solutions, probably with Galbraith's endorsement, he being, sentimentally and not dogmatically, a socialist. The solutions were, generally, welfare and makework, both based on confiscation, by taxation, from those to whom wealth flowed most copiously, and redistribution to those without paychecks, plus funding of generally unessential, sometimes vaguely useful, modes of employment. Both techniques had been employed during the Great Depression, and, indeed, throughout history.
 
The solution tended to generate resentment all around, and another, also quite ancient, was discovered. The progress in technology, automation, produced such material progress despite the social burdens placed on it, that most people's standards of living increased dramatically. With them, the disposable income available for discretionary, even frivolous spending, did the same. A great number of people simply started businesses offering that market unique, or amusing, or friviolous, or distinctive products, and prospered. In his book of essays, "Mauve Gloves and Madmen, Clutter and Vine", astute thinker-writer Tom Wolfe observed that "the masses" had no taste for mass-produced, uniform adequacy as social planners had designed for them, but rather, with a few extra dollars in their pockets, preferred to express their own individuality, sometimes gaudily, like petty princelings. Consumerism erupted, with people of relatively modest means prowling the emporia, grandly eyeing the offerings in imitation of the haughty lords and ladies of yore, favoring some offerings with their patronage and wrinkling their noses disdainfully at others. In this sort of market, many small entrepreneurs thrived. Variety and selection on the store shelves exploded, and the stores, of course, got bigger and bigger.
 
Nevertheless, redistribution and makework continued to irritate people, and prove awkward and, in the soaring and dipping of the tumultous economies, precarious. Galbraith's solution was unsatisfying, and a great many people simply did not have the entrepreneurial spirit necessary to exploit and capture a significant share of the new and abundant wealth floating around. At this point, Kelso's principles join the considerations.
 
Kelso proposed it be made easier for employees and, eventualy, other people, to acquire shares of ownership in the wealth-producing apparati, now the largely-automated productive facilities. The first specific application of his initiative was Employee Stock Option Plans, ESOPs. Employees were extended easier opportunities to buy shares in the companies in which they worked. In part, offering of shares at discounted prices substituted for a few dollars of outright cash payments for labor, and so companies, saving on the one hand, could easily support accommodation on the other. The technique had long been an element of top-level employee, or executive, compensation. It was rightly judged that if people had ownership interests in the companies they worked for, they would develop a proprietary spirit and work harder and more efficiently. Previously, their wages or salaries tended to be fixed regardless of how well or barely adequately they performed, and there was no direct incentive to benefit the company. With ESOPs, that isolation was moderated, a degree of shared fortune instituted and the broad meaning of the word "company" more nearly realized.
 
Now let's hark back to a man named John Maynard Keynes. During the Great Depression, Keynes put forth a proposal that government involve itself in economics and assume the position of contrarian. In prosperous times, government would tax relatively heavily and build up surpluses while moderating inflationary and "boom" trends that tend to generate overoptimism, folly, ludicrous folly, and eventually panic and depression. When economies dragged, governments, Keynes said, should spend the accumulated surpluses, undertaking public works to provide employment and disbursing welfare payments to relieve emergency situations. The releasing of the surpluses into the economies would stimulate industry and commerce, counteract the despair and distress of "busts", and restore economies.
 
Basically, what Keynes proposed was no different from the principles of saving for hard times. As government policy, it had been used by Joseph in Egypt, as recounted in the biblical Book of Genesis. Keynes's problem was that his system, unlike Joseph's, had to be instituted with the famine, not the years of plenty, at hand. To counteract a Great Depression, government had to distribute money it had never collected, dole grain out of empty granaries. But, due to the mysterious ways of money, it was possible for government to borrow and to some degree simply declare money in existence and issue it. As Joseph and any thrifty homemaker would have predicted, the system was workable, so long as debts incurred in hard times were repaid and surpluses for the next ones accumulated. Unfortunately, politicians were loth to impose taxes and appear party-poopers when economies were rebounding, and so they tended to be Keynesians in hard times, but, in prosperous times, nothing in particular -- indeed, deficit spenders thrilled by the influx of revenues and singing, in effect, "It ain't-a-gonna-rain-no-more." Acting that way, governments tended to make economic peaks higher and more precarious, hastening "busts". It became apparent that if government was to try to manipulate economies, politicians' hands would have to be slapped away from the controls and cold-blooded economists allowed to operate the Keynesian machinery. In the USA, this is essentially what is done right now, wherefore we know the name of Alan Greenspan, Chairman of the Federal Reserve Board, as well as we do the name of the President of the United States.
 
The point important to us is, Keynes used previously unexploited qualities of that mysterious thing called money, and the available but previously unused facilities of government, to bring about improvements.
 
Kelso's proposal was to do something similar. His object was to make it as easy as possible for as many people as possible to share in the wealth generated by capital assets, which are generally organized under the management and title ownership of corporations. But corporations are fictions, behavioral habits described and regulated by law. They are not people, though they may be treated as legal "persons" for particular purposes. People own corporations, by way of owning ownership shares in them -- stock. Kelso figured that if labor was being supplanted by capital assets as the major generator of wealth, and thus opportunity to improve one's life through earning and saving being constricted, one solution would be for people to become owners of stock -- investors. ESOPs were a successful application of his idea.
 
Another possible application has been called "capital homesteading". Being rather stupid creatures, we seem to be able to make progress best when we do familiar things in new ways. During the settlement of the USA's territories by people from other continents, (to the cruel discomfiture of the indigenous natives), people were several times offered tracts of land to "homestead". If they moved onto tracts of public land and registered intent to improve them, they eventually acquired title as private proprietors. The land was the capital asset. In effect, they were allowed to borrow it and use it to improve it in order to own it free and clear. This same technique is being used as a development vehicle in Belize and some other countries at this time.
 
Kelso's proposals generally aim toward applying that technique to private ownership of shares in corporations, that is, in largely automated productive facilities. A good piece of land can be made to grow crops, and a good piece of factory can be made to emit sports utility vehicles, both types of products marketable for profit. Why not enable people, rather easily, to acquire private ownership interests in one as with the other?
 
It ought to be noted that energetic, industrious, and self-disciplined people have always, so to speak, self-Kelso'd. They find ways to earn money, they spend less than they earn even after taxes, they accumulate savings as insulation against misfortune, and eventually the savings are substantial enough that some can be put into longer-term, riskier, but potentially profitable investments. Those who do it with dedication retire on income produced by their investments, adequate to supply their needs, cursing the hampering effects of taxation and inflation all the way. People who earn their income and then, through self-restraint, conserve some of it, cordially deplore having it pilfered from them, by those techniques, and transferred to the portfolios of others, many of whom they suspect may be shiftless or improvidently self-indulgent.
 
But the real reasons for the necessity of some plan like Kelso's are even more compelling than the "I earned it, I saved it, it's mine!" sentiment. As explained, as technology automates more and more primary production, the opportunity -- at least for those not entrepreneurially inclined -- to earn substantial money with really productive, satisfying work is diminished. The opportunity to "self-Kelso" becomes more difficult and less generally available. And even the opportunity to do so by accepting makework occupations is emotionally unsatisfying. "I moved 100 bales of paper nobody is ever going to read" is not a likely description of job satisfaction. If nothing else is available, to "self-Kelso" by abiding demeaning work is better than not to do it at all, but consigning people to decades of meaningless makework is hardly the way to any Workers', or People's, Paradise. Fulfillment enroute, if possible, is much better, as those pursuing vocation rather than occupation demonstrate. Vocation is simply the sort of work one feels suited, even called, to do. Occupation is devotion to whatever drudgery puts food on the table. People pursuing vocation feel eager, healthy, enthusiastic, and generally happy, whereas people consigned by necessity to occupation usually feel like convicted felons serving sentences. If more people can be enabled to pursue vocation, happiness and enthusiasm alone will improve performance and thus productivity, all to the general benefit.
 
Another classic and conventional method for "self-Kelso" progress is debt financing. One borrows the money to buy the home, thereby avoiding rent and getting the advantage of certain tax breaks, and emerges as a homeowner, the proprietor of a considerable chunk of dollar value who started out with nothing. The Kelso proposals advise that, as with programs to assist financing for homeowners, there be programs to assist people in buying shares of productive capital assets. As with home purchasing, the buyers would have to pay back the money, with some interest, but would progress, responsibly, from nothing to something substantial.
 
Some explicators of Kelso's thought distinguish between credit purchases of income-producing assets, such as shares of stock, and assets that do not produce income, such as homes and cars. Indeed, a person who buys a residential house on credit, then rents it to tenants, may have the joyful experience of watching the house pay for itself. The distinction should really fall between essential and nonessential purchases. We are born taxed with fixed expenses for food, clothing, shelter, and medical care. Without them, we tend to sicken and die prematurely. A person who buys an adequate home, on credit, is simply renting to self, cleverly redirecting the expense of a fixed cost, that for shelter, back into the payer's pocket. To buy something that does not recover such fixed costs nor generate income to retire any loan obligation assumed to buy it, however, is truly the improvident road to ruin. Many a yacht owner has discovered that only the very wealthy and those with arrangements to charter or otherwise work the yacht as an income-producing asset, can truly afford one.
 
The channeling of unavoidable costs back to the payer's own pocket, or having others pay off asset purchase debts by rendering returns on investments made in the assets, are ancient and indisputably valid techniques for improving material conditions. The use or expanded or modified use of resources and processes to make those techniques easier to operate, promotes the general welfare no less than building better roads to stimulate commerce.
 
There are several organizations promoting these ideas. Notable is www.cesj.org , the Center for Economic and Social Justice. That one's major project at the moment is to apply the Kelso principles to transform the Social Security System so that the pay-in, draw-out technique has the direct backing of the productive facilities now taxed, indirectly through assessments on employers and employees, to produce the money to fund the disbursements. Another is the Institute for the Public Good, www.publicgood.org , more dedicated to introducing, explaining, and expanding Kelso's theories.
 
Academic purists often decry the Kelso approach as crude, inelegant, and incomplete. Compared with today's airliners, the same could be said of the old Ford Trimotor, even the famous DC-3. But their time had come, and they transformed the world even as the principles on which they operated were being refined and improved, their more elegant successors designed and built. When something makes eminent sense and the need for it is increasingly compelling, it is better to put it in operation and refine it than to reject it and wait for the perfect solution. Sooner or later, necessity compels use of something imperfect anyway: the wait for perfection, and especially perfection agreed by all to be such, is eternal -- and painful.
 
John Lankford
 




Radical Positivists of the world unite, and make it a better place for all!


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