A New Paradigm for Economic Empowerment of the Family in the 21st Century

WORLD CULTURE AND SPORTS FESTIVAL ’99
Special Convocation on “Family Ethics and World Peace”
February 4-8, 1999 (Seoul, Korea)

Panel discussions hosted by the Federation for World Peace

Backgrounder by Antonio Betancourt
Deputy Secretary-General, Federation for World Peace

The current social institutions, particularly the financial and economic structures, have led to a state of society that promotes the economic disenfranchisement of the family. These flawed components of the common good have transferred family and individual sovereignty, both economic and, political as well, to an elite. In order to address the issue of family disintegration and the concentrated social attacks on the integrity and very existence of this institution as the founding rock of society, a radical overhaul, a complete restructuring of the social order, is required in this next century. To do this, a new paradigm for the family based on universally shared values and aspirations, both in spiritual and economic terms, needs to be introduced. In our two sessions, we will concentrate on the economic aspect of the problem of poverty, the family and social disintegration.

In the 20th century, there have been two general approaches to the problem of how society should be structured to optimize justice and ensure participation of citizens in the economy. These are Capitalism and Socialism. In spite of their continued support in political, academic and financial circles, however, these two systems are flawed in their basic assumptions. Capitalism concentrates property and thus power in the hands of an elite of private property owners. Socialism concentrates property and thus power in the hands of an elite of state bureaucrats. While advocates of both systems talk of empowering ordinary people, none appears to realize that, in the words of Daniel Webster, “power naturally and necessarily follows property.” By concentrating ownership of capital, credit, and production lines in the hands of elites, whether public or private, both systems are ultimately self-defeating. What is needed is a “Third Way,” not between Socialism and Capitalism as the Welfare State is characterized, but beyond these two systems. We need a new economic development model that would empower the family and individual citizens through broad-based capital ownership.

The answer is to introduce new techniques, especially a new social architecture which would help finance advanced physical technologies in ways that build ownership and spread profits among the poor. In the end, the family cannot be “empowered” and the social order can never be changed until the critical issue of access to the means to acquire and possess private productive property — money and credit — is addressed. These uniquely social goods must be open and available to families and individuals everywhere in the world in order for them to halt the current social disintegration and achieve genuine empowerment through broad-based and direct ownership of wealth. The theme for the next millennium must be “Power to the People Through Power to the Family” — and power will only come through ownership of the new wealth that needs to be created by families and individuals in the next century. Let the people be the owners of the new wealth that they themselves will create.

Rapporteur’s Report by Dawn Kurland Brohawn
Director, Communications, Center for Economic and Social Justice

SUMMARY OF PRESENTATIONS

Under the two dominant paradigms of socialism and capitalism, defects in the basic institutions of society (particularly financial and economic structures) have led to the economic disenfranchisement of the family. With power and property concentrated in the hands of a small affluent gentry, most people are blocked from full participation in the economic, political and social orders. The inability of both systems to make power and property broadly accessible has been exacerbated by the realities of advancing technology and globalization of the economy. Widespread powerlessness under both socialism and capitalism has been broadly recognized as the major external cause for widespread poverty, crime, abortion, and the breakdown of communities and of the family itself.

As we approach the beginning of a new millennium, the question for all citizens of the world is whether the time has come for a new global paradigm — a “Third Way” that would economically empower and enfranchise all people, and restore sovereignty to each person and family. One hundred and eighty world leaders — including former presidents and prime ministers, legislators, scholars, and scientists — convened at a special two-day panel to consider that question and to examine a bold counter-proposal to the existing systems.

This two-day panel illuminated the reality that the family cannot be truly “empowered” unless basic defects in the social order are corrected, defects which erect barriers to full participation in the increasingly globalized and technological economic order. The pendulum swing between the power- and ownership-concentrating systems of capitalism and socialism will continue until the critical issue of democratizing access to the means of acquiring and possessing productive property (chiefly through the reform of such basic institutions as the money and credit system) is addressed. Such uniquely social goods must be systematically opened up to people everywhere in order for families to achieve genuine economic empowerment and to provide the material foundation for full human development.

Session A:

A Critique of Socialism and Capitalism

(February 5, 1999)

Panel Chairman:

Hon. Edward Schreyer, former Governor General and Commander-in-Chief of Canada

Speakers:

Dr. Yuri Ossipyan, Director, Disarmament Agency, Russian Federation
Hon. Kenneth David Kaunda, former President of Zambia
Hon. Rodrigo Escobar Navia, member of the National Planning Committee and former Prime Minister of the Republic of Colombia

Session A of the panel “A New Paradigm for Economic Empowerment of the Family in the 21st Century,” moderated by the former Governor-General of Canada, the Rt. Hon. Edward Schreyer provided an unflinching critique of the two present systems of socialism and capitalism. Panelists included the head of Russia’s nuclear disarmament program, the former president of Zambia and leader of the African liberation movement, and the former Prime Minister of Colombia. The speakers presented a first-hand account of the disintegration of the traditional family structure in their transforming and developing economies, under the two systems that have dominated the world during the latter part of the second millennium. Offering a sociological dissection of socialism and capitalism, this session concluded with a philosophical perspective on the role of the family in the 21st century. A frank examination by the Session A panelists laid the groundwork for the next day’s session which outlined a counter-proposal calling for a Third Way for the new millennium.

“Families in Socialism”

Dr. Yuri Ossipyan

As the basic unit of society, the family will play a key role in the success of future human civilizations. In addition to its reproductive function in society, the family directly takes part in establishing generational ties, formulating the spiritual and moral needs of the young, and preserving and enriching societal traditions.

It is important for governments and communities to recognize that the family structure must hold a high status in society, as witnessed in constitutional and legislative acts. However, the practical status of the family is dependent on its daily living conditions. These conditions determine the family’s material and economic position in society, allowing it to provide for children, maintain cooperation and communication among its members, and establish itself in the social infrastructure.

In searching for the conditions most conducive to the healthy functioning of the family in the third millennium, it is instructive to examine past experiences of the family institution, particularly as it functioned under the socialist environment of the USSR.

First, we can examine the inconsistent and contradictory theoretical foundations of the family as a functioning unit in a socialist society.

Second, we can see the striking contradictions between the theoretical and practical function of the family as part of socialist society.

Third, we can examine the dilapidated condition of the family in contemporary post-Soviet Russia, largely resulting from the Socialist economic system and communist ideology oriented to the principles of equal distribution. This system fostered a dependent psychology within individuals, overpowering the initiative to provide stability for one’s own family.

Under Marxist-Leninist ideology, the family is viewed as the most conservative institution in socialist society and as the greatest obstacle to revolutionary socialism. Women, according to this doctrine, must free themselves from the bonds of family slavery and take part in societal production. The result of Communist ideology, counter to its professed objective, has been to deprive the family of harmonious relations, double the enslavement of women (both in the home and in the industrial sector), and interfere with the natural process of child rearing

As a result of the inefficiencies of socialism as an economic system (characterized by destruction of personal initiative, absence of the notion of “supply and demand,” and governmental control over production decisions), expenditures on societal goods have been inadequate, thereby decreasing the overall society’s standard of living. Marxist theories of “women’s equality” have resulted in a doubling of women’s workload, both in the workplace (where they receive one-half the pay of men) and at home.

With mothers forced to work outside the home to gain the basic material necessities, children are often left unsupervised. This result was foreseen by socialist theorists. In the 1920s, Bukharin observed that, “the family is the most conservative stronghold of the old regime.” The outcome of communist ideology is that “parents do not have the right to raise their own children.” Thus, state education replaced the family as the primary source for socializing children. Over the course of decades, totalitarian idealism and politicization of the educational system debased the natural societal mentality of the individual into a featureless cog, blindly accepting arbitrary totalitarian rule. The consequences of such “socialistic development” are now the main psychological impediment to liberal-democratic reforms in Russia today.

The condition of the average family in Russia is grave. The global financial crisis compounded with the fall of the Soviet Union destroyed former economic and socio-cultural connections between the republics. These factors have contributed to a high inflation rate, falling levels of production, failing educational establishments, and an ineffective social security system which is unable to provide for the bulk of needy children, retirees, the unemployed, and those unable to work.

The population of Russia is aging and degenerating, with infant mortality 2-2.5% higher than in England, Germany or France. Child mortality is 3 times that of developed countries. Of 4.5 million children up to the age of 2, half are receiving inadequate nutrition; in fact they are starving. Because of lack of financing, schools reserved for children of poor families have decreased. Almost 10,000 pre-schools have been closed. With many orphanages and special boarding schools no longer accepting children after the 9th grade, many children end up in the streets. Of these children, 1/3 become homeless, 1/5 become criminals, and 1/10 commit suicide. The unavailability of higher education has left over 500,000 teenagers over the age of 14 without a means to continue their education. Consequently, the rate of crimes committed by children and teenagers has grown steadily.

The reaction to low income and unstable family budgets is a lowered birth rate. 1/5 of families has no children. It is expected that by 2018, the Russian population will be half of what it is today. This family crisis will translate into a societal crisis. The situation may lead to a collapse, further threatening the family.

The world community should continue seeking to create the optimum conditions for the family to function effectively in world societies, and to create a stable progressive development for mankind. This requires that we build a system of priorities addressing urgent questions regarding the family. Practical, immediate actions could include:

Create a system of economic aid to countries needing family assistance, to lower child mortality rates, provide for children’s total nutritional needs, lower youth crime rates, and continue educational opportunities.

Create organizations to undertake the systematic interdisciplinary study of the family’s role and function in future human society, and to conduct research for resolving the most urgent family problems.

Create a legal and civic base for the family’s role in society, as it relates to economic, moral, psychological, educational, and religious questions.

Support systematic international conferences, practical seminars, exchanges of delegations, and the production of literary works, which would raise the role and prestige of families in contemporary and future societies.

“How Capitalism has Undermined the Family”

Hon. Kenneth D. Kaunda

Amidst the complexity of human civilization and sophistication of technology that the human race has achieved as it enters the new millennium, the family has remained the bedrock of society and community and the key institution for imparting basic values and culture. Indeed, the complex superstructure of our civilization rests on our continued protection and nurturing of the family as a basic unit of human society.

Throughout history the family has endured serious challenges brought about by changes in the socio-economic organization of human society. The advent of capitalism in the 19th century and the birth of the industrial society took children out of the care of their families, uprooted communities, and destroyed the extended family.

The African experience of industrial capitalism was that capitalism took advantage of and was compounded by racism. Under the “contract labour” system in the mines of South Africa and Rhodesia, for example, workers were not permitted to live with their families. As large numbers of contract employees were forced to live for extended periods in men’s hostels, leaving their families behind in villages far away, African culture and norms became uprooted. Entire communities became composed of single parent families, as men were sometimes forcibly required to work in the mines. These situations were not unique to the mines of Southern African; similar experiences occurred on the plantations and agricultural estates in French West Africa.

No one can deny that capitalism has satisfied human needs more than any other economic system to date. And there are companies in the world today that have employment policies which strive to fulfill career satisfaction, promote the health of the work force, and provide financial security for their employees.

However, in recent years, global capitalism has manifested itself in Africa and other parts of the developing world in the form of Structural Adjustment Programs dictated by Western economic powers controlling the financial and commodity markets of the world. This neo-capitalism has had a severe impact on the family in the developing world.

Structural adjustment measures, imposed on all developing countries regardless of their level of development, have basically demanded:

1. Devaluation of currencies

2. Increases in interest rates

3. Imposition of credit ceilings

4. Cutting of services

5. Removal of subsidies

6. Privatization of state companies

7. Elimination of protectionist tariff and non-tariff barriers, and

8. Promotion of foreign private investment

For Africa and much of the developing world, the results of these measures have been severe job losses, increases in prices and the cost of living, unaffordable fees for basic social services for most people, and the deterioration of infrastructure, public works and the environment.

This has had a serious impact on the family. Mothers have had to go into the informal sector to supplement their husbands’ incomes, removing them from the care of the children. Babies are forced into unhygienic conditions. The breakup of families has spawned street children. The high cost of living has often forced young women out of their families into prostitution.

Deteriorating infrastructure, public works and environment have created disease-prone conditions. Compounded by unaffordable medical fees and low levels of education, the result is a genuine human tragedy. In Zambia, life expectancy has dropped from 52 in 1985 to 48 in 1995; during the same period, infant mortality rose from 84 per 1000 to 114 per 1000. Similarly, the mortality rate for children under five has risen drastically while pre-school enrollment has dropped.

This ethical criticism of neo-capitalism in developing countries is well known, but has been largely ignored. Furthermore, neo-capitalism has failed to address the long-term issues of human development such as employment generation, the development of marketable skills, food security, infrastructure, and the environment.

Worst of all, this new capitalism puts a premium on debt service to multi-lateral institutions, even where economies have no capacity to repay. This has stifled successful reform and the addressing of poverty that seriously undermines the family. Meanwhile national resources continue to be concentrated in fewer hands and the gap in income continues to grow between the privileged few and vast majority of low-income earners. Public confidence in the political system, and in democracy itself, is undermined, while social instability and strife grows.

As we enter the Third Millennium, we must address these issues and reform the detrimental features of neo-capitalism. We must ensure that the benefits of this system of ownership, production and distribution can accrue equitably to the whole world. If trade in the world continues to be inequitable, the chances of capitalism working for the poor are extremely remote. And with the merging of giant multi-national companies to control world markets, the future for the poor and their families looks bleaker still.

“Reflections and Notes on the Contemporary Family in the 20th Century
And What Should Be in the 21st Century”

Hon. Rodrigo Escobar Navia

Approaching the end of one millennium and the beginning of another, it is time to take an inventory, an evaluation of the systems in which we presently live. In one century the world has experienced the greatest development known to mankind. The volume of development increased 6 times from 1975 to 1999. As of 1998 there was $24 trillion in world consumption.

However, there is no equilibrium in that consumption. 20% of the world’s population now consumes 86% of the total volume produced.

The family has been the victim of these grave imbalances. It has been exposed to the most serious attacks by both capitalism and socialism.

The family is the most universal institution. It exists in every culture and society. At first the family was a closed unit of labor, consumption and social structure. As the family grew into a society, certain divisions emerged. Institutions such as the state and religion were created. The family had to establish relationships with those institutions.

The family fulfills two contradictory functions. The first is inclusive. The family creates the concept of “us” and “we”. It provides for the socialization of its members. The second function is exclusive. Within the family we learn the concept of “them”, those who are outside the family. This second aspect can also lead to the selfishness of the family, where it considers itself to be better than others. Thus, we need to develop a sense of responsibility toward other families.

There is a fundamental fact of this century: Globalization. Today we live in a global village. However, the notion of the closed unit persists in how we understand society. We continue to see things in terms of “us versus them.”

Today we must shift to a new global concept: the family of families. We need to recognize our interconnectedness.

Both socialist and capitalist systems have reduced the value of the family. Both systems perceive the family in reductivist and positivist terms. While socialism’s goal was equality, it sacrificed freedom. Capitalism, in seeking freedom, sacrificed justice.

As we approach the 21st century, we cannot be satisfied that the world’s affluence is enjoyed only by 20% of its people. We have the means and resources to bring about a more equitable distribution. But we have to remember that while the family is the first institution, it is not the only one. It is a departure point, but not the whole picture. We will need to think beyond one’s own family to other families and eventually to see each other as a member of a global family composed of different races, nationalities and beliefs and yet connected with each other as members of an organic whole.

Audience Discussion: Session A

Members of the audience engaged the speakers in a serious exchange on the devastating impact of poverty on human communities and the family. One key observation in this session was that there are high concentrations of wealth and power throughout all societies today. The capitalist model, it was acknowledged, has produced the highest standard of living for the greatest number of people that the world has ever seen. However, panelists and audience members also agreed that capitalism has failed to alleviate inequitable ownership patterns and widespread poverty in both developed and developing economies, as well as those that are moving from socialism to a market system. In terms of consumption and use of the earth’s resources, the vast disproportion between developed and developing countries (which hold 80% of the world’s population) starkly evidences this systemic flaw.

As one panelist observed, in order to alleviate global poverty which leads to the extinction of communities, families need to transcend the belief that only their family counts. In the 21st century, we need to become a “family of families.” Second, we need a new economic order that can match and keep pace with the forces of globalization. One audience member emphasized that the new paradigm needs to add a dimension of spiritual development and cooperation to the idea of economic empowerment. The destruction of developing economies wrought by defective World Bank and IMF lending policies was also discussed. In addition, one audience member observed that certain cultures have a different view of economics and ownership than what emerged from Europe, and asked how the spirituality of these indigenous cultures could add to the new paradigm.

The panelists noted that the 21st century has to bring about an integration of values, and that the world is marching toward an inclusive civilization. Indigenous people will have a lot to contribute to world civilization in terms of spirituality and ecology.

Session A closed with remarks by Antonio Betancourt, the President of the World Institute for Development and Peace. If we are to help uplift and empower the family, he observed, we must consider the impact of the money and credit policies of the Federal Reserve, IMF, World Bank, and the central banks of Europe and Japan. The Third Way, Mr. Betancourt commented, is based on justice, which goes beyond economics alone. We need moral principles and sound logic for showing how basic institutions can be modified to empower every individual and family. He concluded, “We must become soldiers for change.”

Session B:

“The Third Way: A New Economic Paradigm

For Empowering the Family”

(February 6, 1999)

Session B gave a detailed presentation on an expanded ownership model of development known as the “Third Way. This alternative paradigm is largely based on the “binary economics” and theory of economic justice proposed by the late lawyer-economist Louis Kelso (popularly known as the father of the employee stock ownership plan or “ESOP”). Kelso’s ideas have positively transformed or touched the lives of more than 10 million workers in the U.S.A. in the last 25 years by giving them the legal and financial tools to become owners of the corporations and therefore of the wealth that they are creating.

The two panelists were presented as leading scholars in Kelsonian economics who have implemented and helped introduce Kelsonian credit and tax reforms into the U.S. and other legal systems. Contrasting the Kelsonian “Third Way” with the confused and superficial approaches proposed by Bill Clinton and Tony Blair, the panelists presented the ownership model as a more just, efficient, and workable alternative to the present wage-welfare models of socialism and capitalism. They outlined the economic and moral principles of an economic system based on 1) expanded capital ownership, 2) free and open markets, 3) the restoration of the full rights of private property, and 4) limited economic power of the State.

The speakers described practical and proven expanded ownership mechanisms for financing new wealth creation, linking people as owners as well as workers to the global market place and advancing technology. A key to empowering the family in the 21st century, they emphasized, is the use of productive, self-liquidating credit to transform non-owners into owners without taking away the property of present owners. Finally, they presented a comprehensive economic transformation program — the Capital Homestead Act — that could be implemented by any country to economically empower every person and family through individual ownership of the means of production.

SUMMARY OF PRESENTATIONS

Panel Chairman:

Antonio Betancourt, President of the World Institute for Development and Peace, and Executive Director of the Summit Council for World Peace

Speakers:

Dr. Robert Ashford, Professor of Law, Syracuse University, College of Law.

Dr. Norman Kurland, Co-founder and President of the Center for Economic and Social Justice, and Managing Director of Equity Expansion International, Inc.

“Louis Kelso’s Binary Economics: A New Market Paradigm for Empowering Families and Individuals”

(c) 1999

Dr. Robert Ashford

The promise of the Industrial Revolution was abundance and leisure. However, few today have abundance and leisure. In the midst of God’s promise of abundance, we see great disparities: widespread poverty in the midst of plenty, excess capacity and oversupply met with inadequate mass purchasing power. The question is, do we accept the way things are or is there something we can do about it?

We need to take a new look at “the way things are.” This is what binary economics does. Conventional economics is built on the principle of scarcity. Binary economics, on the other hand, is built on the principle of abundance. It explains how economies can grow from relative scarcity to much greater abundance by including everyone in the wealth creation process, and how that greater abundance can be enjoyed by everyone without redistribution or coercion.

Binary economics is an idea that is neither “right-wing” nor “left-wing” nor a mix of the two. Rather, binary economics is a new system of private property and economics. Based on the work of Louis Kelso, binary economics can be described as a paradigm because (1) it rests on reasonable assumptions, (2) it is internally consistent, and (3) it offers a good descriptive and prescriptive model. It is a paradigm that has to be understood first in its own terms.

Three basic assumptions of binary economics (which differ from the assumptions of the conventional schools of economics) are:

1. Capital (including land, animals, machines, tools, and intangibles, such as patents) is independently productive.

2. Technology makes capital much more productive than labor.

3. Capital has an independent distributive relationship to growth (i.e., the more broadly capital is acquired in voluntary transactions, the faster the economy will grow, independent of productivity).

Based on these assumptions, binary economics asserts that an open, inclusive private property system will be more robust both materially and spiritually than a system in which private property (in the means of production) is concentrated in the hands of a few or in the state. The greater abundance and distributive justice promised in a binary economy is an important part of the binary understanding of democracy. Full democracy, from a binary perspective, requires universal, individual participation in both political power and economic power. Full economic power requires the right to participate in production not only as workers but also as owners. And participation as an owner requires the right to acquire capital on market principles, including competitive access to credit to acquire capital.

Binary economics contains three paradigm-altering concepts:

1. Productiveness. The binary concept of productiveness is distinct from the conventional concept of productivity. Prospectively, productiveness can be thought of as “independent productive capacity.” Retrospectively, productiveness can be thought of as “actual work done.” Considering the great per-capital growth in the U.S. economy for example, binary economists conclude that economic growth is primarily the result of increasing capital productiveness rather than increasing labor productivity. Thus, the most important effect of technology is not on labor productivity but on capital productiveness: as technology advances, capital productiveness replaces and vastly supplements labor productiveness. As production increases with technology, capital is doing an increasing percentage of the work. Accordingly, in efficient markets, labor’s market share of aggregate output decreases as capital replaces and vastly supplements labor in production.

From a binary perspective, the present distribution of the earnings to labor and capital supposedly based on their competitive contribution to production is very problematic. One essential condition of competitive markets is that there be no barriers to entry. Accordingly, binary economics asserts that markets cannot be efficient in pricing capital and labor as long as most people are excluded from effective participation in the capital markets.

The closed markets for capital acquisition cause great harm both in terms of efficiency and justice. People are poor in an industrial economy because they have not acquired sufficient capital on market principles. The conventional prescription to enable poor and working people to acquire capital (work hard, save, and invest wisely) is largely ineffective, because most people do not earn enough to make ends meet. Only a few succeed in acquiring viable capital estates in this way. Binary economists know that there is a better, more efficient, democratic and generous way to enable people to acquire capital that requires no redistribution or coercion. Binary economics reveals that most capital is acquired with the earnings of capital, not labor. By restructuring our money, credit, and insurance system, much of the capital that pays for its own acquisition (out of the profits it earns) can buy itself for poor people just as it does for rich people. (Note also that capital is not the same as money, which represents a bid on something. Capital is what is actually doing the work, producing the wealth.)

2. The binary private property system. Private property can be understood as God’s way of enabling people to alleviate toil. It rests on three moral principles: (1) universal participation (the right to participate in production through one’s labor and capital), (2) distribution (the right to receive the full fruits of what one produces, based on one’s relative contribution to production), and (3) limitation (that no one should be able to produce so far in excess of his capacity to consume that he excludes others from participating in production).

The binary property right can be expressed as the right to acquire capital and to pay for it out of its pre-tax income on market principles, and then to receive its full net income indefinitely. To open up the capital acquisition market requires:

A full payout of capital income to repay loans used to purchase the capital.

A capital credit insurance mechanism to provide the security demanded by lenders and to spread the risk of default. (One barrier preventing the poor from gaining access to capital credit is that they lack the assets to put at risk behind the capital loan. Insurance would provide a substitute for traditional forms of collateral, overcoming the barrier to capital credit that most people face because they have no collateral to secure credit.

A coordinated monetary policy geared towards growth linked to broadened private property ownership.

3. The principle of binary growth. This principle states that capital has both a productive relationship to growth (that binary economies explains by way of productiveness and conventional economics explains by way of productivity) and also an independent and very potent distributive relationship to growth. Thus, economies grow not only as a function of increases in the added productive capacity (resulting from more productive labor input, increased capital investment, technological advance, and decreases in transactions costs) but also as an independent function of the broader distribution of capital acquisition on market principles. Accordingly, the broader the distribution of capital ownership, the faster the economy will grow, as increases in supply are matched by increases in purchasing power generated by widespread capital incomes.

The traditional ways for a company to grow are (1) to sell shares, (2) to retain earnings, and (3) to borrow money. Unfortunately, the traditional ways generally restrict capital acquisition to existing owners. Only rarely do they create new owners who live to enjoy viable capital estates. Mechanisms such as Employee Stock Ownership Plans (ESOPs) are capital credit devices which overcome this failure of traditional corporate finance to operate in a way that is open to all. They operate by borrowing on behalf of a constituency group (such as employees of a corporation) in order to acquire capital which will generate profits to pay for itself over time.

To universalize access to capital ownership, the binary infrastructure of an economy would include (1) constituency trusts or other capital credit mechanisms to cover corporate employees, utilities customers, residents of developing communities, homemakers, civil servants, the disabled, and eventually all people without viable capital estates, (2) qualified lenders to determine the feasibility of specific capital loans, (3) capital credit insurance, private and public, and (4) a central bank to ensure that there is an adequate money supply to meet the needs of growth and capital expansion.

The binary infrastructure would make binary ownership-broadening transactions competitively feasible, but it but would not require them. The decision as to whether to utilize conventional or binary financing in particular situations would remain voluntary and subject to competitive market discipline. Binary economists predict, however, that new binary investment opportunities will produce substantial, sustainable, green growth and broader ownership without redistribution or coercion.

New paradigms offer new choices. Binary economics offers a more inclusive private property system based on universal individual participation in the ownership of capital. It provides a system where all people can flourish by playing by the rules, where no one has to gain at the expense of another.

Teachers, government officials, business people, political and religious leaders, philanthropists, foundations, lawyers and other fiduciaries, and concerned citizens should study binary economics as an alternative approach to understanding economic policy, and consider how it might affect their judgment as to what is practical and desirable. No discussion of peace, justice, democracy, or efficiency is complete without it.

Author’s Note: For a fuller statement of binary economics by the Author see Binary Economics: The New Paradigm, co-authored with Rodney Shakespeare, (University Press of America 1999; Tel. 800-462-6420).

“The Third Way: A New Paradigm for Economic Empowerment of the Family in the 21st Century”

Norman G. Kurland

I approach the subject of economic empowerment of the person and the family from the standpoint of justice. In terms of the dignity and empowerment of most individuals, many of our laws and social institutions today need to be restructured, as they violate principles of justice, disempower the human person, and threaten the healthy functioning of the family.

As Pope Paul VI said, “If you want peace, work for justice.” In our work to bring about a more peaceful world, we can be guided by a clear understanding of the principles of economic and social justice. Social justice, as defined by Pope Pius XI in his encyclical Quadragesimo Anno, represents an advance in social morality. Going beyond individual ethics, social justice deals with the structuring of social institutions — such as our laws, banking systems, and government — so as to support the dignity, sovereignty and full development of each individual affected by that institution. The act of social justice is when we recognize a problem in our institutions, develop a plan for change, and come together to change the social order.

Why do we need a “Third Way” for the third millennium, a new system for economically empowering every person and family? Kelso’s theory of binary economics is based on a theory of economic justice. His use of the term “universal capitalism” was a mistake because the word “capitalism” does not accurately describe his new paradigm. An “ism” is a value system. Since capital can be defined as “things” (such as machines, land, structures, patents, etc.), capital-ism represents a value system that glorifies things. Capitalism, by its earliest definition, is a system of exploitation. It is based on the vice of greed. This is not the basis upon which we should build a more just world.

On the other hand, socialism, as Kelso pointed out, is based on the vice of envy. It seeks to pull the other person down; it imposes a forced equality of results.

We have to create our system so that people are valued above things, so they control things, so they can regain the sovereignty given to them by God. Marx wanted to create a system where God is canceled out, and the state is placed above people. That explains the alienation of most people today. In a just social order, under the highest sovereignty of God, sovereignty begins with the human person, then the family, then the community, and then finally, the state. Thus, the sovereignty of state should be subordinate to the sovereignty of the people, not vice versa.

If we are to create a world in the third millennium that secures the sovereignty of the human person and economic empowerment of the family, we can see the need for a third alternative to the two present paradigms. On the one hand, there is capitalism, an economic system governed by market forces but where economic power is concentrated in the hands of a few who own and control productive capital. On the other hand, socialism, in all its forms, is an economic system governed centrally by a political elite, who enjoys even more highly concentrated ownership and economic power. Logically, a “third way” would be a free market system that economically empowers all individuals and families through direct and effective ownership of the means of production — the best check against the potential for corruption and abuse.

Stable families require stable incomes. The concentration of wealth and power today threatens the stability, well-being and income security of the family. How do we create the conditions to connect all people and families to the tremendous growth potential of advanced technologies and energy systems? The answer lies in the redesign of our credit and banking systems, which today channel money and credit to the small percentage of humanity who own most of today’s productive capital.

The true Third Way offers some guiding principles for redesigning our social institutions and economic system:

1. Sovereignty of the Person under God. This principle holds that under the highest sovereignty and moral authority of the Creator (from whom all absolute values and universal rights ultimately derive), all sovereignty begins with each human being, not social institutions such as the State, the corporation, or the labor union. Social institutions derive their legitimacy and authority through the consent of the governed, who may organize to restructure those institutions if they deny basic human rights or threaten the dignity of any person.

2. Binary (Two-Factor) Economics. Binary economics recognizes that the economic process involves two sweeping categories of input: labor and capital (or to put it another way, people and things). Since it is the capital (things) that is making the vast difference in terms of growth, we have to make sure that ownership of capital is accessible to all of humanity. Not so that people pursue lives that are strictly materialistic, but so that people have a sufficient material foundation for living rich spiritual lives. We should be using money and credit to develop people, not to exclude people.

3. The Three Principles of Economic Justice.

Participation: Even more critical than participation with the vote is participation in the economic process. This principle states that every person has the right to participate fully in the economic process with both their labor and their capital. It is a principle of equal opportunity, which includes access to the means of acquiring and possessing productive property.

The primary social means to bring about participation in ownership of productive assets involves the democratization of productive, self-liquidating credit (largely available only to the wealthy). A central issue in discussing any third way is whether those who create money and control credit today will use money and credit in the future in ways that include or exclude most people from participation in ownership and profits.

Distribution: This principle, which follows from the principle of participation, states that each person is entitled to receive the full fruits of what his or her labor and capital contributes to production. It is distribution based on contribution, as opposed to need (which is valid for charity, but not justice).

Harmony: This is the feedback or corrective principle, which comes into play when either the principle of participation or that of distribution is violated. Through acts of social justice we can correct our institutions to better reflect the principles of participative and distributive justice.

4. The Four Pillars of a Just Market Economy:

Universal access to capital ownership. This is the moral omission in market economics today. Concentrations of ownership and power create political opposition to free market policies. This pillar would create a natural constituency for private property and the free market.

Limited economic power of the state. The role of the state should basically be to stop creating special privileges. It should lift barriers to participation, and democratize access to capital credit through rational methods of finance.

Free and open market system. There are two ways of determining the just price or just wage. One is to have a person or small group set prices or wages. The most democratic means is to let everyone vote with his or her dollars in the market place. The developing world has a comparative economic advantage because of its lower wage costs. If you can offer workers in developing countries access to the most advanced technologies and management know-how, sufficient low-cost capital credit to acquire those technologies and hire the expertise, and a new social contract based on sharing in the ownership and profits of productive enterprises, such workers can out-compete those in the developed countries.

(Restoration of) Private property. Owners’ rights in private property are fundamental to any just economic order. Property secures personal choice, and is the key safeguard of all other human rights. If you destroy private property you destroy the means for people to gain sovereignty, and put them under the control of the state. Private property links income distribution to economic participation — not only by owners of existing assets, but also by new owners of future wealth.

Capital Homesteading, a legislative package of monetary, tax and expanded ownership reforms, is based on the precedent of America’s homestead policies in the 1860s. It would enable every citizen and family to acquire a viable, income-producing capital stake in the growth frontier. Some financing vehicles for democratizing ownership under such a national policy would include:

Employee Stock Ownership Plans (ESOPs) for attracting capital credit to enable workers with little or no assets to gain significant ownership opportunities, and to pay for their shares out of pre-tax corporate profits, rather than reduced take-home pay.

Community Investment Corporations (CICs) for enabling residents of a region or community to share in the ownership, profits and control of land planning and development.

Consumer Stock Ownership Plans (CSOPs) for enabling regular customers to share in the ownership, profits and control of utilities and other “natural monopolies.”

Individual Stock Ownership Plans (ISOPs). Using the same credit techniques as with the ESOP, you can enable homemakers, disabled people, civil servants, teachers, and people working in the non-profit sector, to begin to accumulate productive assets.

We can change the world. There is nothing stopping us. The challenge of the future is to find authentic leaders who aren’t looking for power and money merely for themselves, but who are seeking to empower others and restore to them the sovereignty that God intended. Money and central banks are simply instruments of civilization. If our institutions are unjust, we can change them. Today central banks operate to keep power concentrated. Tomorrow they can be restructured to bring about a more democratic, more just and more peaceful world.

Audience Discussion: Session B

Session B’s presentations on “a new economic paradigm for empowering the family,” provoked a lively exchange between the audience and panelists. As one audience member, the chairman of Egypt’s steel industry, pointed out, “This is a big idea. We are hearing many new things. Clearly more time needs to be devoted to this subject.” The panelists agreed heartily, observing that while there has been widespread support for Louis Kelso’s expanded ownership policies and practical applications, academia has avoided analysis and debate on the soundness of Louis Kelso’s binary economics and theory of economic justice. The lack of understanding of Kelso’s conceptual framework, the panelists contended, has led to piecemeal application of some of his technologies while leaving the present defective systems in place. In the end, good theory makes good policy, one panelist emphasized, and bad theory (based on faulty assumptions and logic) leads to bad policy.

Among the key concerns raised by the audience was whether Kelso’s Third Way could be applied in the developing world, given the often high levels of corruption and lack of sound institutional infrastructure and “rule of law.” One of the panel members (who had implemented the first ESOP in the developing world at the Alexandria Tire Company of Egypt) mentioned that in fact he is now advising leaders in Bangladesh, Uganda and Russia on strategies for transforming their economies to the Kelsonian Third Way model. The real enemy of progress and development, he said, is bad ideas. The concepts, technologies, and sources of financing exist for implementing the Third Way in developing countries, the panelist pointed out, adding that developing countries have certain competitive advantages over the developed economies. What is needed are authentic leaders within developing countries — people with power and a long-term vision for their society, leaders who are seeking to empower all their citizens, not just themselves. One such “authentic leader” was Senator Russell Long in the U.S. (who was the person most responsible for putting the ESOP into U.S. law).

It is also crucial, the panelists noted, that countries develop their own economic blueprint for moving toward the Third Way, one which is based on the right moral principles and a sound theoretical foundation. In terms of beginning a process of change, the immediate questions are: How can these new ideas be introduced to leaders? How can we educate the leaders?

The audience’s response to the provocative “Third Way” ideas was perhaps best summed up by former Canadian Governor-General Edward Schreyer in the final plenary session of the Seoul conference. Singling out the panel on “binary economics,” he noted that these new ideas may offer a way of addressing the world’s pressing issues of stewardship of natural resources and the management of capital and financial resources. These ideas, he concluded, call out for our serious attention.