by Norman G. Kurland
(Excerpted from Toward Economic and Social Justice, Center for Economic and Social Justice, 1986)
Everyone has an inborn aversion to injustice. We can sense injustice in our daily lives, on the job, when we shop, and as we observe life in society. Justice, on the other hand, involves discovered principles which can be applied in practical ways to help us resolve and avoid human conflicts.
Throughout history many people have given their lives for “justice.” But all too frequently the ideas of justice around which people have rallied were confused, superficial, divisive or just plain wrong. This led to tragic consequences for the heroes – and even worse for the victims – of what seemed to be a noble cause. Often the terms “economic and social justice” were misused describing, not justice, but what were really injustices or unresolved social problems.
In pursuing and implementing justice in today’s world, the first challenge is to clarify these terms so that everyone can understand them. The next problem is to develop a conceptual framework and practical methodologies for applying in a practical way in their daily lives universal moral values. This new framework for action must take into account the reality that the Age of the Robot has the potential for expanding the world’s productive potential so that poverty can be eliminated.
One definition of justice is “giving to each what he or she is due.” The problem is knowing what is “due”.
Functionally, “justice” is a set of universal principles which guide people in judging what is right and what is wrong, no matter what culture and society they live in. Justice is one of the four cardinal virtues of classical moral philosophy, along with courage, temperance (self-control) and prudence (efficiency). (Added to these are the three religious virtues of faith, hope and charity.) Virtues or “good habits” help individuals to develop fully their human potentials, thus enabling them to serve their own self-interests as well as work in harmony with others for their common good.
The ultimate purpose of all the virtues is to elevate the dignity and sovereignty of the human person.
DISTINGUISHING JUSTICE FROM CHARITY
While often confused, justice is distinct from the virtue of charity. Charity, derived from the Latin word caritas, or “divine love,” is the soul of justice. Justice supplies the material foundation for charity.
While justice deals with the substance and rules for guiding ordinary, everyday human interactions, charity deals with the spirit of human interactions and with those exceptional cases where strict application of the rules is not appropriate or sufficient. Charity offers expedients during times of hardship. Charity compels us to give to relieve the suffering of a person in need. The highest aim of charity is the same as the highest aim of justice: to elevate each person to where he does not need charity but can become charitable himself.
True charity involves giving without any expectation of return. But it is not a substitute for justice.
PHILOSOPHICAL DEVELOPMENTS OF THE CONCEPT OF JUSTICE
The mandate “Justice, Justice, thou shalt pursue,” we are reminded by the Old Testament, involves the highest duty each person owes to God. (Deut. 16:20). Pursuing justice is a moral imperative. It is not a zero-sum game where one gains only at the expense of another. By pursuing true economic justice, everyone can come out a winner, everyone gains dignity.
Aristotle in his Ethics divided justice into two parts: Commutative justice and distributive justice. (See The Oxford English Dictionary.) The first deals with exchanges of equal or equivalent value between individuals or groups of individuals. The second deals with a distribution or division of something among various people interacting together in shares proportionate to what each one deserves. These virtues impact directly on the behavior of individuals, not institutions.
The late Father William Ferree discovered in the writings of Pope Pius XI a major breakthrough in moral philosophy. (See works by Rev. William Ferree, S.M., Ph.D., including The Act of Social Justice, [Washington, D.C.: Catholic University, 1942] and Introduction to Social Justice, [New York: The Paulist Press 1948]) Pius XI pointed out that “social virtues” are separate but complementary to the “individual virtues.” While individual virtues describe the moral quality of our individual actions, social virtues describe the moral quality of our institutions. For example, individuals may act justly within unjust institutions, and vice versa.
Thus, “social justice” focuses on human institutions and the principles of justice which guide their formation, development, and restructuring. Social institutions affect the behavior of individuals but they are not flesh-and-blood human beings themselves.
DEFINING SOCIAL AND ECONOMIC JUSTICE
Social justice is the broader concept and encompasses economic justice. Social justice is the virtue which guides us in creating those organized human interactions we call institutions. In turn, social institutions, when justly organized, provide us with access to what is good for the person, both individually and in our associations with others. Social justice also imposes on each of us a personal responsibility to work with others to design and continually perfect our institutions as tools for personal and social development.
Economic justice, which touches the individual person as well as the social order, encompasses the moral principles which guide us in designing our economic institutions. These institutions determine how each person earns a living, enters into contracts, exchanges goods and services with others and otherwise produces an independent material foundation for his or her economic sustenance. The ultimate purpose of economic justice is to free each person to engage creatively in the unlimited work beyond economics, that of the mind and the spirit.
WHAT IS PROPERTY?
Many people erroneously equate property with material objects, such as land, structures, machines, tools, things. In law, however, property is not the thing owned but rather the relationships an “owner” justly acquires (as a result of access to credit or previous creative activity) with respect to things. Private property is a set of rights, powers and privileges that an individual enjoys in his relationship to things. Under the law, these include the rights of (1) possessing, (2) excluding others, (3) disposing or transferring, (4) using, (5) enjoying the fruits, profits, product or increase, and (6) of destroying or injuring, if the owner so desires. These rights are only as effective as the laws which provide for their enforcement. The English common law, adopted into the fabric of American law, recognized that the rights of property are subject to limitations that (1) things owned may not be so used as to injure others or the property of others, and (2) that they may not be used in ways contrary to the general welfare of the people as a whole. As a functional matter and in the final analysis, property in everyday life is the right of control.
WHAT IS PRIVATE PROPERTY IN CORPORATE EQUITY?
Next to the State itself, the corporation is one of civilization’s greatest social inventions. In the modern world, the most important instrument for organizing private property rights in the means of production takes the form of corporate equity, represented by shares of common stock. These shares allow many owners to share individually and “jointly,” not collectively, in the ownership, risks and profits of a modern corporation. The corporation in turn is a convenient legal vehicle which owns “collectively” the land, machines and other assets it needs to produce and market in the global marketplace. While individuals may own shares in a corporation, no shareholder has any legal title to the machinery or other assets owned by the corporation itself.
WHY IS PRIVATE PROPERTY ESSENTIAL TO ECONOMIC JUSTICE?
Joint or share ownership provides each shareholder his or her own definable private property stake in the corporation and thus decentralizes economic power. In contrast, collective ownership of an enterprise offers no definable stake for any individual owner and thus concentrates power in whoever controls the collective.
Property in the means of production is the primary social “link” between a particular human being and the process of producing and distributing wealth. Property determines who has the right to share in profits, the “wages of ownership.” Assuming that economic values are set democratically and freely in a competitive marketplace and that unjust barriers to participation in work and ownership are lifted, property incomes become the key to distributive justice.
Power exists in society whether or not particular individuals own property. If we accept Lord Acton’s insight that “power tends to corrupt and absolute power corrupts absolutely,” our best safeguard against the corruptibility of concentrated power is decentralized power. And if Daniel Webster is also correct that “power naturally and inevitably follows the ownership of property,” then democratizing ownership is essential for democratizing power.
KELSO AND ADLER: AN EXPANDED OWNERSHIP THEORY OF ECONOMIC JUSTICE
Both the Marxist and the Kelso-Adler theories of economic justice recognize property as an institution essential to controlling income distribution patterns. (See Chapter 5 of The Capitalist Manifesto, Louis O. Kelso and Mortimer J. Adler [New York: Random House, 1958; reprinted by Greenwood Press, Westport, Connecticut].) Both agree that where a few individuals own and control industrial capital and the majority of workers own little or no capital, income patterns will become grossly distorted and lead necessarily to the abandonment of the orderly process of supply and demand, and eventually to a breakdown of the property system itself. And without the stability of property, force eventually is required to hold together the social order.
The Marxist and Kelso-Adler theories of economic justice differ mainly on where to place ownership powers and rights over productive capital, and on the best means for preventing ownership from becoming monopolized by a few. Also, Marx recognizes only property in labor (from Ricardo’s labor theory of value), denying any personal right to acquire property in capital.
Where Marx, by abolishing private property in corporate equity, would make the State (or collective) the only owner of capital, the Kelso-Adler theory would diffuse access to private property broadly among all members of society. Thus, private property would serve both as the foundation for other fundamental human rights and as the ultimate check on the potential abuses by government or by any political majority against individual liberties and the rights of political minorities.
In the economic world, property performs the same power-diffusion function that the ballot does in politics. It does more. It makes the ballot-holder economically independent of those who wield political power.
The connection between widespread distribution of property and political democracy was evident to America’s founders, as was reflected in the 1776 Virginia Declaration of Rights, the forerunner of America’s Declaration of Independence and the Bill of Rights. Following John Locke’s trinity of fundamental and inalienable rights, the Virginia Declaration of Rights declared that “Life, Liberty, with the means of acquiring and possessing Property” are the highest purposes for forming any just government. While access to property may be sacred and inalienable, as previously mentioned, the rights of property are not unlimited.
With the abolition of slavery and feudalism, the United States ensured that no person would ever again become the property of another. Through this and other limitations on the rights of private property, a just government transcends the weaknesses of a pure “laissez-faire” approach to ownership rights. But by fulfilling its duty to all its citizens to lift barriers to private property in the means of production, government builds a permanent political constituency for a free market economy.
DEVELOPING THE ROLE OF PRIVATE PROPERTY IN BUILDING A JUST GLOBAL MARKETPLACE
A major focus of moral philosophers in the Third Millennium should therefore be on the development of a system of economics and long-range strategy for restructuring the economies of the globe into a single common market based on private property, free markets, limited government and the modern business corporation. This strategy would not only restore the original rights of private property in corporate equity for present as well as new owners. It would also provide everyone, as one of the most fundamental of human rights, with the means-including more universal access to productive credit-to become an owner of privately-owned capital instruments.
INSERT 3 PRINCIPLES DIAGRAM
THE THREE PRINCIPLES OF ECONOMIC JUSTICE
The pursuit of justice is one of the ultimate ends of human life. Borrowing from the Kelso-Adler theory of economic justice (with a slight refinement of their third principle, that of “limitation”), we can see that there are three essential and interdependent pillars of the expanded ownership theory of economic justice: The Principle of Participation, The Principle of Distribution, and The Principle of Harmony. Like the legs of a three-legged stool, if any of these principles is weakened or missing, the system of economic justice will collapse. Like every system, economic justice involves input, output, and feedback for restoring harmony or balance between input and output.
The Participative Principle
The principle of participation describes how one makes “input” to the economic process, including the human right to private property as well as the right to work. The principle of participation requires that every person be provided by society’s institutions with equal access to make a productive contribution to the economy, both as an owner as well as a worker.
Participative justice is a humanizing alternative to institutionalized charity and governmental redistribution, which tend to become condescending and indifferent to human suffering and negate personal expressions of justice and personal charity. Participative justice is violated by institutions and laws that cause monopolistic or privileged access for a few to participation in ownership of modern instruments of production.
The following guidelines shape the participatory opportunities available to each person in contributing to the common good through the corporation, the labor union, the marketplace and in modern economic life in general:
The right to life includes the right to earn a living. To enjoy a rich intellectual and spiritual life, each person must have a solid foundation in the material world.
Both human dignity and equality of economic opportunity require that every person be given access to the means to participate in future private property ownership opportunities, as well as in creative work and self-management.
The institution of private property – which guarantees a person access to the means to own and control capital tools as well as the personal right to share in profits – is fundamental for building each person’s material base in the modern world.
New technology in the form of labor-saving and energy-saving capital tools is a prerequisite for human progress and the source of material abundance. As human labor is liberated at the economic workplace by new technology, the contributions of workers to the man-machine mix must shift from their labor inputs to their ownership of new capital tools.
In the modern corporation, each worker’s property stake should determine his personal right to share in the productivity gains and profits in the business that uses these tools. His private property stake in corporate equity also should determine his power to share in corporate decision-making and in responsibility for those decisions.
Participation is more than just gain sharing or profit sharing. It also involves self-governance, which depends on the sharing of power, responsibility, access to information, accountability and risks.
Power, responsibility and accountability over policy and operational decisions should always be decentralized and kept as close as possible to those whose property is at risk. This is the essence of democratic participation and the concept of “subsidiarity”. Subsidiarity requires that corporate decisions should never be made at higher levels when they can be made prudently at the workplace. This follows naturally when full ownership rights are widely dispersed among workers.
Applied to corporate ownership, widespread citizen participation in ownership also broadens the social accountability of the modern corporation to an expanding base of shareholders, laying the foundations for a genuine economic democracy, without which political democracy cannot long endure.
No person should be required to do work that can be done more efficiently by a machine that he can own.
As each person becomes economically liberated through ownership of advancing technology, education should be provided to help him redirect his “free time” to acquire knowledge and pursue creative work which enhances the sovereignty and dignity of each person.
Allocating among workers access to the capital credit needed by business is the key to their participation in future ownership opportunities. Capital pays for itself out of future profits. Thus, neither past savings nor wage reductions are necessary for workers to acquire future ownership.
The democratization of credit for expanding capital ownership is therefore a fundamental human right, without which economic sovereignty for all is virtually impossible.
The Distributive Principle
The principle of distribution defines the “output” rights of an economic system matched to each person’s labor and capital inputs. Through the distributional features of private property within a free and open marketplace, distributive justice becomes automatically linked to participative justice, and incomes to productive contributions.
Many confuse the distributive principles of justice with those of charity. Charity involves the concept “to each according to his needs,” whereas “distributive justice” is based on the idea “to each according to his contribution.” Furthermore, justice involves the sanctity of property, contracts and the free and open marketplace.
Distributive justice presupposes participative justice, especially the requirement that all persons be given equal opportunity to acquire and enjoy the fruits of income-producing property.
Originally understood as “to each according to his work,” the postindustrial version of economic justice requires distribution “to each according to what he contributes to production.” This modern guiding principle of distributive justice is also consistent with the traditional distributive attribute of private property, which is violated whenever an owner or worker is deprived of the fruits of his productive inputs.
The “private property” distributive principle is essential for motivating people to build and create abundance for all and for converting waste into useful production. Widespread access to capital ownership thus combines justice with efficiency, both at the workplace and in the world marketplace.
Where workers are deprived of equal ownership opportunities, have only their human inputs to contribute to production, and their incomes are threatened by industrial robots, artificial intelligence and other labor-saving technologies, the laws of supply and demand make their family incomes less secure.
But as all members of society, including the most handicapped persons, begin to derive ever-increasing incomes from their shares of ownership of industrial capital, the competitive market mechanism-instead of harming working people-can be allowed to operate as the most democratic and objective means for measuring just prices, just wages and just profits. Individual choice will govern in the marketplace.
Once consumer sovereignty can be expanded through rising ownership incomes and statesmen begin to favor greater reliance on a more just free market system, basic economic decisions of production, investment and resource allocation (subject to reasonable social regulation) can begin to be made on a more decentralized and personalized basis. Such democratic modes of economic decision-making would stand in sharp contrast to today’s highly centralized, subjective, arbitrary, coercive, and bureaucratic mechanisms for guiding economic development.
The basic guidelines of distributive justice are as follows:
An individual’s earnings should be proportional to his or her contributions to overall production. Demanding to be rewarded for the labor or capital contributions of others is the equivalent of stealing. State-forced redistribution of income from one to another rests, therefore, on shaky moral grounds.
One right of private property requires that an owner receive the free market-determined fruits of his human inputs as well as the free market-determined share of profits, reflecting his capital inputs.
Distribution based on productive input (the distributive principle derived from private property) stands in sharp contrast to the principle, “to each according to his needs.” The first distributive principle is indispensable for justice and for motivating people to produce wealth. The second is a guiding principle of charity, the necessity for which is reduced to the extent justice is realized for all.
Where the ownership of a nation’s wealth-producing enterprises is widely distributed throughout society, just prices, just wages and just profits are best determined by the free and competitive marketplace, not coercively or by mercantilist or protectionist government policies.
Forced equality of results and artificial leveling holds back human development and causes human conflict. Equality of opportunity, on the other hand, is vital to the liberation and continuing perfection of each person.
Under widespread capital ownership and a free market economy, capital incomes should automatically increase relative to labor incomes when capital productiveness increases faster than labor productiveness.
All should pay fair value in exchange for what they receive in the economic marketplace. A global free marketplace should be actively encouraged so that consumers can receive the highest values at the lowest possible costs.
The Harmony or Balancing Principle
The principle of harmony encompasses the “feedback” or balancing principles required to detect distortions of either the input or output principles and to make whatever corrections are needed to restore a just and balanced economic order for all.
“Economic harmonies” is defined in The Oxford English Dictionary as “Laws of social adjustment under which the self-interest of one man or group of men, if given free play, will produce results offering the maximum advantage to other men and the community as a whole.” This principle offers guidelines for controlling monopolies, building checks-and-balances within social institutions, and re-synchronizing distribution (outtake) with participation (input). The first two principles of economic justice flow from the eternal human search for justice in general, which automatically requires a balance between input and outtake, i.e., “to each according to what he is due.” The principle of harmony, on the other hand, reflects the human quest for other absolute values, including Truth, Love and Beauty.
In the field of economics this balancing between input and outtake is reflected in Aristotle’s commutative or “exchange” justice. Balancing principles are also incorporated in double-entry bookkeeping, the logic of an individual enterprise. It is also the logic of a market economy, as first suggested by the French 18th century economist Jean Baptiste Say. Say’s Law postulated that in a free market economy, supply would create its own demand, and demand its own supply.
Notwithstanding the logic of Say’s Law, the history of politics is largely a history of ill-fated attempts to repeal the laws of supply and demand, alongside efforts of a few to monopolize economic power and privilege. Historically political interferences with the market system seem to follow when the majority of citizens begin to perceive seemingly insurmountable institutional barriers to equal access to productive credit and expanded ownership opportunities. As a result, free market policies have seldom if ever been supported by a broad political constituency, with the rare historical exception in settling America’s vast land frontier.
There is one thing Karl Marx and John Maynard Keynes agreed upon: they both condemned Say’s Law, but for different reasons. Following either Marx or Keynes, most modern political economists (except for the modern followers of Adam Smith) also reject Say’s Law.
Marx pointed out that Say’s Law would not work in a market economy (1) where workers could only participate as workers, not owners (2) where there was a growing global supply of workers because of rising populations and lowered world migration barriers; (3) where emerging technologies continue to take over tasks formerly performed by workers; (4) where new technology and expanding profits automatically flowed into the hands of a small ownership class; and (5) where owners would be forced to invest any excesses in their incomes into ever-larger accumulations of productive assets. “Capital breeds capital,” as Marx described the traditional system of capitalist finance. “Supply could not create its own demand,” as Say had asserted. The purchasing power (demand) generated by the non-owning majority in any economy expanding under pure “laissez-faire capitalism” would never be enough to purchase all marketable goods and services which an expanding industrial economy was capable of producing. Marx’s logic was clearly right, “the rich would get richer and the poor poorer” under monopoly capitalism.
On the other hand, Keynes, in trying to make capitalism work without reforming ownership patterns, dismissed Say’s Law by ignoring supply, at least for the short run. Keynes noted that a “free market” economy failed to provide sufficient “elasticity” in prices and wage rates to clear the market in times of massive unemployment and over-supply. Keynes thus focused exclusively on the demand side of the economic equation. The solution, according to Keynes, was to “fine-tune” the economy by artificially increasing mass purchasing power through governmental intervention in tax policy, wage rates, interest rates, money and credit policies, welfare schemes and other public sector reforms, all aimed at generating “full employment”, not universal participation in ownership and profit distributions.
Perhaps the most important contribution made by Louis Kelso was to revive the logic of Say’s Law as a means for restoring an equilibrium between aggregate supply and aggregate demand (mass purchasing power) within the context of a market economy. Under conditions of widespread citizen access to capital credit (in contrast to consumer or non-productive credit), leading to universal participation in ownership and profit distributions, Say’s Law could be made to work in an industrial world. Demand would create its own supply, and supply its own demand. Capital growth would be matched by consumer incomes ready to buy the marketable goods and services produced by those new capital assets.
Widespread citizen participation as owners of capital would also change politics by creating a political buffer against historic attacks on free market principles. It would produce an expanding political constituency necessary to shift control over the economy from government to a more dynamic, decentralized and just private sector.
Consistent with the principle of harmony are the following guidelines:
Justice in distribution follows justice in participation. Where the Principle of Participation is violated, social pressures increase for arbitrary and subjective substitutes for private property for determining just income distributions. Thus, to safeguard property rights, the first social duty of every person is to work together with others to help change economic institutions which violate the Principle of Participation.
As the most effective check on the State or on concentrated private economic power, private property should be made widely accessible, particularly to workers.
All private property rights should be fully restored with respect to ownership shares in the modern corporation, society’s most advanced social tool for organizing production and distributing incomes broadly. Since the right to property is an inalienable right, the derivative rights of property-e.g., rights to profits and shareholder voting-must not be violated either by government or by majority shareholders.
In addition to its production and marketing functions, the most important social role of the corporation is to decentralize future ownership, especially among its own workers, and thus recapture from government the primary role for distributing mass purchasing power.
The democratic labor union, whose primary social duty is to promote economic justice for workers, should undergo continual restructuring and self-renewal to gain for its members more just and widespread future access to private property rights in income-producing assets.
The primary economic duties of the State are to respect and enforce contracts, to protect individual property rights, and to pursue economic justice by lifting all barriers to expanded ownership and free trade within a more participatory global enterprise system.
Ultimately, the State, deriving its powers from the consent of the governed, represents two legitimate potential monopolies: one over society’s instruments of coercion and the other in controlling the creation of money and credit. No other monopolies should be tolerated.
The antidote for economic and other nongovernmental monopolies is competition. The key to competition is access to credit. To encourage new enterprises to compete with economic monopolies that may develop, the State must therefore ensure the availability of broad-based access to future capital credit for potential competitors.
The power of government at any level to own or redistribute productive capital should be drastically curtailed. State-owned enterprises should be reorganized into profitable stock corporations and sold on credit to their employees and other citizens.
Tax laws, inheritance laws, laws affecting corporations and unions, welfare and social security laws, public employee pension programs, anti-trust laws and other laws reflecting national income and monetary policies should be reexamined and reformed to encourage maximum rates of private sector expansion, but through means that ensure expanded share ownership opportunities for all members of society.
In conclusion, we are reminded of the words of Pope Paul VI, “If you want peace, work for justice.” While the elegance of the Kelso-Adler theory of economic justice offers much to guide us in restoring harmony to the social order, we should remind ourselves that the work of restructuring the social order is never finished. Social justice perfected is beyond human grasp. But since justice is a moral imperative, we are all called to pursue it endlessly.