Louis Kelso goofed with his first book-title: ‘Capitalist Manifesto’. And he rubbed it in with his second book: ‘The New Capitalists’. We said it before, but it bears repeating. The system devised by Kelso and Adler is neither capitalism, nor socialism. It is something entirely new and unique, a third way or third system, giving its own answers to all societal questions, from the economy to politics to sociology to education, health care and everything else. It is complete, as is capitalism and socialism. But it adds one vital thing: a spiritual basis. We have chosen the word ‘Solidarism’ to denote it and maintain the phrase ‘Just Third Way’ to succinctly describe it.
Now, solidarists seem to be masters in the art of choosing wrong book-titles. Another important solidarist work is entitled: ‘Capital Homesteading for every citizen’, written by Norman Kurland. What is wrong about this title is that you have to read the book first before you understand the title. It should be the other way around. A title should invite to read. ‘Capital Homesteading’ doesn’t. Nevertheless, this little book has much to offer. It describes and elaborates upon one of Kelso’s key financial instruments designed to structurally build capital (capital ownership) into every citizen, i.e. every man, woman and child from birth to death.
Building capital into people
Solidarism does not attack nor exclude the rich. Strange as it may sound, they are people too. What we propose to do is not taking from the rich (theft is theft, no matter how you twist it), but raising the prosperity of the poor. By sharing the (accelerated) growth, the gap between rich and poor can be gradually and naturally narrowed, although it will never be closed. One of the financial instruments devised to do this, is ‘capital homesteading’, the building of a capital estate into people, i.e. an estate to be owned by every individual citizen.
Here’s how it works. Every Cuban citizen, rich or poor, from birth to death, will receive a loan yearly from the Cuban Central Bank on his private ‘capital homestead account’, held at a private bank. The amount is related to the estimated growth potential of the economy for the coming year, based on figures of previous years. For the U.S.A. the amount has been calculated at US$ 7,000.- per year, but for Cuba this would be (much) lower for its economy is in bad shape. But as Solidarism will quickly generate double digit growth (helped along by a mass of Foreign Direct Investment as soon as Cuba opens up), the amount will quickly rise to a sizable annual sum. And will continue to rise.
Now, citizens are not free to spend these annual loans as they please. Certainly not on consumption (remember Germany?).The loans have to be used to buy stocks and shares in solid companies (to be used for approved productive investments only). The eligible companies will be listed by the Cuban Central Bank. These companies may or may not be listed at the Stock Market. At present there is no Stock Market in Cuba, but there will be, once Solidarism has been embraced.
The stocks and shares bought by every citizen - financed by the Central Bank with newly created money -, will generate dividends. Again citizens are not free to spend these dividends as they please. They have to be used to pay back the annual loans first, which may take anywhere between 5 to 10 years (sometimes longer). But as soon as an annual loan has been paid off, the owner of the then fully paid shares is free to spend all future dividends as he pleases. He is also then free to cash out and sell his shares, if he believes that to be prudent.
In this way every citizen will gradually build his/her own capital estate, guaranteeing a second income from capital to supplement his/her income from labor. By the time a child turns 18, he will already own a fully paid income generating capital estate (‘capital homestead’) equal to approx. 8 times the annual loan amount. In the U.S.A. this would be approx. US$ 56,000.-. This would provide him with an annual extra income from capital of approx. US$ 5,600.-. And this will continue to rise every year for as long as he lives. And there is little doubt that he would spend it on consumer goods and services, thus fuelling the economy. For most people (95%) have many unmet needs and wants and would therefore save little.
Too good to be true?
What this instrument basically does is channel new money created by the Central Bank through its citizens, so that they gradually become capital owners. The same thing happens now in all capitalist countries, with this difference that only the rich can receive the newly created money from private banks, for only they can provide the required collateral (either privately or via the companies they own) for large productive investments. So, if anybody tells you this cannot be done, ask him how money is created now and for the benefit of whom? He’ll soon be silent.
And he should be triply silent when you explain that the private banks add interest on the created new money, thus making sure they are not left out, but at the same time stifling the economy and forcing everybody into a never ending rat race to stay abreast of inflation. And anyway - you guessed it -, the banks are owned by the same rich people (2 to 5% of the population;) who can provide collateral to obtain the loans they use for further productive investments, thereby for ever adding to their capital estates. You see now how the poor are effectively excluded from capital ownership in capitalism? You see now that you should ‘own or be owned’?
But socialism is not the answer. Because capitalism can and will use the same capital concentrating methods internationally (i.e. interest, inflation, morbid capital, collateral requirement and others) to slowly strangle Cuba in the same way Russia was strangled. But Russia then opted for KGB-democracy and ‘vulture’-capitalism, brutal and merciless. Cuba does not have to follow this example. There is a better way.