Wednesday, 27 May 2015

Peoples’ Capitalism

How Does Peoples’ Capitalism Work?
The following comes from a site dealing with an economic theory known as Peoples' Capitalism originated by James Albus

James S. Albus, ca. 2000.

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Two words: INVEST and SAVE
Peoples’ Capitalism would make credit available to every citizen for investment in productive enterprises. The ultimate goal would be to make everyone into a capitalist in the sense that everyone would accumulate a growing portfolio of investments in the means of production. Over time, everyone would receive a substantial income based on ownership of capital assets. Eventually, ownership of capital would become the primary source of income for all.
The amount of credit made available would be sufficient to effectively double the current national investment rate. In the United States, this would amount to about $6000 per capita per year. The mechanism for accomplishing this would be for the Federal Reserve to open its discount window and issue credit to member banks for self-liquidating loans to individuals for investment in approved enterprises. Approval would be based on criteria similar to those routinely employed by the investment banking community. Examples include established mutual funds, IRAs, and investment plans such as the Thrift Savings plans available to government workers. Other investments might qualify, depending on approval criteria of the member banks. Collateral would be in the form of ownership shares of the enterprises in which the investments were made. Details of one possible mechanism for achieving this are described by Kurland et al. (2004) in the book Capital Homesteading. These loans would have a payback period of 30 years. Insurance against default would be financed by a service fee estimated at 3% of the outstanding balance per year.
Peoples’ Capitalism would provide a new tool for fighting inflation. Economists agree that price is determined by supply and demand, and demand is largely determined by disposable income. If disposable income is diverted into savings, demand falls and prices fall. Therefore, Peoples’ Capitalism would substitute mandatory savings for monetary restraint for fighting inflation. The rate of withholdings would be graduated with income and indexed to the rate of inflation. Consumer income would thus be diverted into personal savings in the amount required to achieve a desired effect on inflation. These savings could be held in personal accounts such as Certificates of Deposit or Individual Retirement Accounts. These would earn interest at market rates, but could not be redeemed for a period of at least five years. The rate of savings withholding would be adjusted by formula every two weeks based on the latest measure of inflation.
Withholding savings from consumer disposable income would provide a much more powerful and fast-acting mechanism for controlling inflation than adjusting interest rates. This would enable the Federal Reserve to focus monetary policy entirely on investment policies designed to maximize productivity and economic growth. Interest rates could be used for other purposes such as controlling the international flow of investments.
Doubling the nation’s investment rate without inflation would dramatically increase the rate of economic growth. Estimates are that economic growth would increase to between 6% and 8% per year. This would assure a strong job market and opportunity for upward mobility to all those with talent and ambition. It would also assure rapid development and implementation of more efficient and more environmentally friendly technologies. Productivity would grow, profits would increase, quality of goods and services would rise, and costs of production would fall.
Within a decade or two, everyone would begin to receive income from their investments. Within a generation this would eliminate poverty in the United States. By 2050 every adult citizen would receive investment income of over $50,000 per year.
Everyone would be a capitalist!

The Frontpiece
is a painting done in acrylics by the author. It is a composite of symbols representing the philosophical origins of the ideas embodied in Peoples' Capitalism.
The first symbol underlying all the others is the Star of David that represents the basic concepts of economic justice and individual human worth set down in the Law of Moses and elaborated throughout the prophetic tradition. Among the Mosaic statutes is an ordinance establishing a Year of Jubilee, a period to be celebrated once every half century by the cancellation of debts, the liberation of slaves, and the return of land rights to the original owners (Lev 25:10-55). The deep concern for human welfare that is expressed in this and other Hebrew laws reaches its climax in the prophecies of Isaiah concerning a time when the Lord's Messiah shall bring justice to the poor and equity to the meek (Is 11:1-9).
Also on the frontpiece is a cross, symbolizing the teachings of Jesus of Nazareth. This son of a simple carpenter saw in himself the fulfillment of the Messianic prophecy: "The Spirit of the Lord has anointed me to bring good news to the poor, to proclaim release to the captives, recovery of sight to the blind, liberty to the oppressed, and to announce the year of recompense of our Lord [A reference to the Year of Jubilee] (Lu 4:18-21). Jesus promised the meek that they should inherit the earth, and admonished his followers to love their enemies and pray for their tormentors (Mt. 5:5, 45), yet he castigated the political, academic, and religious establishment, calling the priests and professors hypocrites and vipers for using the power inherent in their positions of honor and trust to cheat the simple and steal from the helpless (Mt 23:14-23).
The frontpiece also contains the five-pointed Star of Revolution. This star represents the body of ideas that has arisen from the three great Western revolutions: the American, the French, and the Industrial. This is the ideology that inspired men to overthrow the Divine Right of Kings, to declare the political equality of all human beings, and to perceive the inseparable relationship between personal liberty and the secure ownership of income-producing property.
Lastly, there is the four-pointed star, a symbol chosen to represent an ideology for the coming Second Industrial Revolution — the Robot Revolution — the revolution in industrial production that will eventually result from the invention of the computer. The four points of this star correspond to the four fundamental axioms of Peoples' Capitalism, and to its four practical operational elements: technological innovation, rational investment, adequate savings, and equitable distribution of wealth and income. [**At the time of the first edition, the author was unaware that the four-pointed star was also the symbol of the North Atlantic Treaty Organization (NATO).**]
The entire painting conveys a sense of hope and reverence appropriate to the profound nature of the events that are now taking place. We are living in a historical moment of creation. Within the past three decades there have emerged the fundamental building blocks of what can only be termed a new life form, based not on the carbon atom and the double helix of DNA, but on the semiconductor crystal and the mathematics of symbolic logic and numerical computation. There is now evolving a new kind of self-regulating, even self-reproducing, organism that will have the power to end physical poverty and make every human being economically secure and self-sufficient.
Peoples' Capitalism is a political program that attempts to anticipate the scope of the coming robot revolution and to subject its enormous productive power to the influence of the ancient Judeo-Christian precepts. Peoples' Capitalism is a message of hope, a plan of escape from the present worldwide economic dilemma, and a program for a new world order in which material prosperity will be commonplace and the full potential of human knowledge will be directed toward the fulfillment of mankind's most majestic imaginations.
Notable quotes from the book:
"The central concept of Jeffersonian Democracy was that ownership of the means of production should be widely distributed among the electorate. Peoples' Capitalism is a means by which the Jeffersonian ideal could be achieved in a post-industrial society."
"Peoples' Capitalism would place a comfortable income floor under everyone, but more important, it would impose no ceiling on anyone. It would distribute dividends from high technology robot factories on an equal per capita basis, and the rest of the economy would be fair game for competition."
Basic axioms of Peoples' Capitalism
  1. All else being equal, it is better to be wealthy than poor.
  2. The individual is the best judge of what constitutes his (or her) own betterment.
  3. Human benefit is the ultimate measure of goodness for any social or economic system.
Theorems to be proved
The existing economic system is far from optimum in its production and distribution of what people need and want.
America is not a capitalist society – it is an employee society. We are a nation of wage earners, and in a very real sense, "wage-slaves".
The labor theory of value and the work ethic may now constitute the most important impediment to technological advances that could eliminate both poverty and pollution, not only in the United States, but throughout the entire world.
Questions to be addressed
  • If robots eventually do most of the economically productive work, how will people receive an income?
  • Who will own these machines?
  • Who will control the powerful economic and political forces they will represent?

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