Part 2> Reparations and the Churches: Share in Production Better Plan
by Louis O. Kelso and Patricia Hetter
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In the real economic world, there are only two possible distributive principles. Any idea for distributing income, regardless of how original and unique it may seem to its inventor, is a variant of one or the other. Distributive outtake from the economic system is either proportional to the recipient's contribution to production or it is not. One receives either according to one's production, objectively measured by the only conceivable impartial arbiter of value (free and competitive markets), or according to one's human need, as determined either by oneself, which leads to anarchy, or by an outside authority, which leads to the totalitarian state.
The first principle awards to the producer the value of his or her productive input; thus it encourages individuals to be productive, and, in so doing, provides maximum assurance that there will be a product to be distributed and that claims will be proportioned to the amount of goods and services available. Double-entry bookkeeping is the logic of any market economy, and the market value of the goods and services produced is automatically equal to the purchasing power generated by the process of production itself. It follows that the private property principle (under which the output belongs proportionately to its producers) establishes an orderly, dependable relationship between individuals and their economic environment - where free and competitive markets exist.
The need principle of distribution has exactly the opposite effects. As the recipient's outtake has no relation to his or her productive input, he or she is under no compulsion to produce. Therefore, economic motivation is at best discouraged, and more often destroyed. Nor is there any relationship between what is demanded and what is available. "There is no more chicken, tovarishchi," the public address system regularly informs the wary queues in Moscow's showplace supermarket on Kalinin Prospect. "We have run out of chicken." And of meat, and of eggs, and of housing space, and of clothing and of every other necessity or comfort that is produced in the economic order.
While the fruits of technology may seem like manna from heaven to those who are not scientists, engineers, entrepreneurs, skilled craftsmen, and others actively contributing to the production process, the fact is that every item of food and service is the result of the most rational, deliberate, and careful effort. The keys to production are motivation, rationalization, and action. All must be continuous, as one's need for food, clothing, shelter, and other creature necessities and comforts is continuous. Wealth does not consist of sterile money, but of things and actions which minister to physical needs of living human beings. Their production is not accomplished at once by magic or fiat, but takes place in slow and deliberate stages; it is a process maintained by foresight, planning, painstaking care, and patience, in cooperation with nature's laws. Anything which discourages people from making the effort necessary to produce wealth threatens life and the quality of life. A useful simile for economic output is a flowing river; if the river dries up, or is reduced to a trickle, the vegetation it nourishes fades and dies.
The need principle is incapable of motivating men and women to produce in the economic order, although if there is no product to distribute, the question of distributive justice quickly becomes academic. If people in general could be depended on to act unselfishly even most of the time, if they were capable of putting the welfare of others on a level with their own, if they were capable of believing that others need as much of the world's good things as they do - in short, if all of us were ready now to live here on earth according to the great commandment "Thou shalt love thy neighbor as thyself" - an economy might operate successfully on the utopian principle "From each according to his ability, to each according to his need." But the evidence is overwhelmingly otherwise.
Most churchmen are emotionally committed to the need principle because they have not thought much about its implications and consequences, and because they not unnaturally wish to see the religious values of charity and brotherhood realized in political and economic life. They want to believe that people are capable of selflessness in the impersonal economic order, even though the evidence is that they are incapable of it in even such a small, intimate, and voluntary association as the parish church, where presumably they enjoy divine assistance.
One cartoonist satirized the black reparations demand by portraying a swashbuckling trio of heavily-muscled black militants, festooned with bandoleers and bristling with hardware, in the act of passing the collection basket down a pew of scandalized worshipers. In the background, the clergyman is saying to a vestryman: "If they can get money out of this group . . .!" Precisely. Clergymen constantly witness the unwillingness of the productive to support the unproductive, except when they are objects of warm personal affection, as are wives and children. Even among intimates, support is often begrudged. Parishioners usually will not support the church itself except upon a niggardly and reluctant basis. Black militants think that the churches are rich, but their receipts in 1968 were only one percent of total U.S. personal income, and much of this giving was inspired not by generosity but the Internal Revenue Code. The Yearbook of American Churches shows that church costs are rising much faster than contributions; declining receipts are forcing budget cuts in even the relatively well-heeled denominations.
Most religious communities reject the need principle in their own internal organizations. Wealthy congregations do not ordinarily split their income with poor congregations. Generally, each congregation is required to be self-supporting and to cut its vestments to fit its cloth. Pastors of wealthy congregations in non-Roman churches do not ordinarily receive the same salaries as pastors of poor parishes. Church schools do not ordinarily educate all children on the basis of their intellectual endowment and their need for education; they generally provide better education for those children whose parents can afford to pay the costs. That these same parents tax themselves to provide scholarships to a few needy pupils does not alter the basic principle. It is true that poor congregations can expect some financial aid from their richer brethren, but that aid, like all distributions to strangers on the basis of charity, will be minimal. Nor will it be freely given. It will be doled out on the basis of the same kind of means test that churchmen urge be abolished in determining public welfare eligibility.
Doubtless, the church would like to organize its financial affairs on the principle of charity, if only charity were not so inimical to solvency. The church has learned that if each of its parts is not compelled to produce the income required to maintain themselves, there will not be enough income to go around. It might be deduced from this experience that the macrocosmic economy must also be organized in such a way that the individual consumer units can produce the income their members wish to consume; otherwise, there will be a permanent disproportion between what is needed and what is available and an all-pervasive animosity between the productive and the unproductive or the underproductive.
For the need principle does not only demoralize production, it creates such strife, enmity, and bitterness in society that ultimately a totalitarian authority is required to keep the peace. Indeed, the need principle cannot be administered except by a central authority; nowhere is discipline more absolute than in the monastery. It is not possible to distribute wealth on the basis of the claimant's assessment of his or her need. The Black Manifesto demand for reparations offers a classic illustration of the truth that each claimant judges his or her own need to be the most extreme and urgent of all. Black militants do not stop to reflect that other groups in society also have suffered from social wrongs. The principle of self-preference leads them to believe that they have suffered more than others and that they deserve more than others. If the churches should actually give them the money they demand - ostensibly to finance projects for the general black welfare - the principle of self-interest might convince the militant leaders that, of all needy blacks, they themselves were neediest and worthiest. The lion's share of the funds could be allotted to living expenses, offices, travel, and salaries for relatives, friends, and political allies.
While fashions in naming doles change from time to time in the eternal search for a name which will conceal the dole-nature of such programs, one phenomenon remains absolutely constant. The administrators of doles uniformly tend to put their own welfare first. This is true whether they are black militants, government poverty program administrators, industrialists seeking government subsidies, tax or duty relief, communist bureaucrats such as those examined by Djilas in The New Class, or the lay administrators of church business enterprises and pension funds.
In demanding reparations from the churches, the banks, the foundations, and other treasuries public and private, the black militants are not introducing a new and radical principle into American society. They are falling back on the oldest, most familiar, and most desperate principle in the human community, the principle of need. They are not asking for money because they earned it, or because they deserve it, or because it is owed them under any conceivable principle. They are asking because they need it, because they are poor. The heart of the racial problem in America and of the overwhelming number of all other social problems everywhere is poverty: white poverty as well as nonwhite. This poverty, and the fierce competition it breeds among men and women for the scarce material goods of life, is the chief cause of racism, for the principle of self-preference also operates to push on to others, if possible, the burdens and pains of life. To be relevant, to contribute effectively to the building of a more just and humane society, the churches must put the weight of their influence behind an economic strategy capable of physically eliminating the poverty that afflicts nine-tenths of the U.S. population, and 95 percent of the rest of the world's people.
The Jewish philosopher Maimonides long ago identified the enlightened man's duty to the poor. Giving, he said, has eight degrees. Of these, seven have to do with the way the act is done and the spirit of the giver. A rich man may give to the poor man reluctantly, cheerfully, generously, stingily, voluntarily, ostentatiously, tactfully, secretly, or anonymously. But the last and highest degree of helpfulness is to eliminate the need for kindness by preventing poverty from arising. The truly charitable man, said Maimonides, helps the poor man to become economically productive so that he will not need to beg. Maimonides understood that man's dignity requires him to produce the wealth he and his family wish to consume. In the words of a black ghetto dweller eight centuries later, "I can't be a man by you givin' things to me. I can't be a father by you givin' to my kids. My kids have got to get from me, if I'm to be their father."
Maimonides belonged to the twelfth century, when human labor was the principal factor of production; toil was a moral and economic duty and economic opportunity meant opportunity to work. Thus, he thought in terms of helping a sick man to become well enough to work again or of finding an unemployed man a job. This approach is both unrealistic and grossly inadequate in an economy where the bulk of goods and services is produced not by the human factor of production but by the nonhuman factor - things external to man which harness the forces of nature to produce material wealth. It is this aspect of technological change - the shift from human labor to capital instruments -- that is behind the alienation phenomenon observable in all industrial economies. Youth and the minorities are most vociferously sensitive because they are, for now, the chief victims of society's defective response to technological change. But we may be certain that unless this defect is corrected the millions of additional victims to come will swell the ranks of the alienated and further erode the relevance of all of society's institutions, including the churches.
A strategy capable of eliminating domestic and world poverty cannot be based upon redistribution of the limited output of existing economies. This approach only spreads poverty and foments hatred between have-nots and haves. It violates the double-entry or input-as-basis-for-outtake logic that is the heart of a free market economy, of a free people's morality, and of freedom itself.
We have asserted earlier that the affluence of the U.S. economy is a myth. True, the productive side of the economy regularly produces more goods and services than Americans can afford to consume, and it rarely operates at more than 85 percent of capacity. This year, for example, California plans to destroy some 45,000 tons of cling peaches already ripening on the trees. Why? Because there are no "consumers" in a country where for millions of families a can of peaches represents an impossible luxury. But if these families had the purchasing power to buy all the peaches they wanted to eat, existing orchards could not begin to supply the demand. Additional acreage would have to be put under cultivation; otherwise the price of peaches would rise out of reach or rationing would have to be imposed.
California is the nation's first state in egg production. If its entire output, now hailed as excessive in relation to market demand, were equally divided among the entire state population, it would be sufficient to provide every Californian with only three dozen eggs per year - about one egg every ten days, the British wartime ration! What is true of peaches and eggs is true of virtually every other consumer product. Thus, unless the U.S. economy is to degenerate into the type of sad, bleak, scarcity economy characteristic of eastern Europe, and even of economies in western Europe which are generally impoverished despite their pretensions to affluence, we must vastly increase productive power; at the same time, we must raise the power of the poor - all of the poor - to consume. This can only be done by making it possible for the poor to engage in production much more intensively.
When we get beyond short-sighted and futile attempts at redistribution according to need, such as those which would coerce reparations from the haves to eliminate the poverty of the have-nots, it is clear that because human nature is as it is, and because the condition of poverty is to be without the goods and services that constitute real wealth, there is only one logical way effectively to close the purchasing power gap of the masses. It is to enable them, family-by-family, individual-by-individual, to become economically more productive, in order both to raise the aggregate output to levels high enough to provide affluence for all, and to legitimately entitle each family and each individual to buy and pay for an affluent living. Most of the goods and services of an industrial economy (and none except industrial economies can be affluent) are produced by the nonhuman factor of production - land, structures, and machines. Thus, solving the problem of poverty requires us to solve the problem of enabling every family and individual consumer unit to participate in production both through employment (where a technical demand for such employment exists) and through the ownership of productive capital.
This is not the place to demonstrate that this can be done and how it can be done, for we have done so in other writings. (See The New Capitalists, by Kelso and Adler, Two-Factor Theory: The Economics of Reality, by Kelso and Hetter, and "Uprooting World Poverty: A Job for Business," by Kelso and Hetter.) If men and women of good will understand they are searching in the wrong quarter for a solution, they can correct the direction of their search. We submit that the need principle cannot solve the problem of poverty in an industrial society.
It is time to examine the facts of the real world of production. Each year we bring into existence tens of billions of dollars of newly formed capital - newly improved land, new structures, new machines - while financing (that is, organizing its creation) in ways that vastly multiply the economic productive power of the top wealth-holding five percent who own all existing productive capital. We make the overly productive more productive, despite the fact that they have no unsatisfied consumer needs and wants. We fail to make more productive those whose unsatisfied needs and wants are a social scandal.
Thus, year-in and year-out, century after century, we progressively increase the power to consume of those who already produce more - sometimes tens of thousands of times more - than they and their dependents can or wish to consume. The power of those who cannot produce anything, or in any event not enough to add up to a decent standard of living, is not augmented at all. It may even be diminished. For their labor power, the only thing they have to sell, may be rendered obsolete by the process of new capital formation itself.
Our business strategy and our economic concepts, products of the same preindustrial past that made wise, good Maimonides conclude that the highest form of giving was to enable a poor man to become productive through toil, are focused only on labor to solve the purchasing power problem. But the actual source of increased output is the other factor of production - capital. Its ownership by every consumer unit must now be accepted as a necessity. And by productive capital we do not mean small business enterprises of the kind contemplated by black capitalism or minority entrepreneurship. These are, and must be, rarely more than glorified good-will industries for the black able-bodied. While an excellent soul food restaurant promotes human happiness and civilization, only rarely will it provide more than subsistence and long hours of toil for its owner; even restaurants that make the owners rich leave waiters and kitchen help stuck in poverty.
By productive capital, we mean equity interests in the major corporations of the economy, say the 4,000 or so biggest, safest, richest corporations in the nation. These corporations produce about 80 percent of the economy's good and services. This means that they also produce 80 percent of the economy's production-generated purchasing power (as distinguished from the inflationary purchasing power induced into the economy by various governmental devices). Not only is small business in hopeless competition with the corporate giants (the small enterprise often can be kept going only through subsidy), it is physically incapable of solving the poverty problem of either the 150 million poor people or of the economy as a whole. The purchasing power generated by hundreds and thousands of mom-and-pop stores or of five- or ten-man machine shops is too small to buy more than a fraction of what the huge capital-intensive corporations can produce. The rule is that capital produces affluence, labor only subsistence.
Ownership of viable holdings of capital in the major corporations of the economy, together with the legitimate jobs available within the economy, can provide the aggregate purchasing power necessary for the masses to consume our entire industrial output, no matter how fast it grows. When many, and eventually all consumers, own viable holdings of shares in big business, there will be a dazzling future for small enterprise. Individual initiative and creativity, always ready to burst into flower when the risk of failure does not involve total disaster for innocent dependents as well as for the risk-taking entrepreneur, will achieve its golden age in the universal capitalist economy of tomorrow. But that will be quite a different economic climate from the present one, in which the current concept of minority entrepreneurship means a deliberate matching of maximum weakness with maximum risk.
Poverty, like charity, has great emotional appeal to the churches, even if churchmen, as individuals, are as keen to avoid its inconveniences as everyone else. Can the church overcome its historic obsession with poverty, its deep-rooted conviction that somehow privation is good for the soul, and put its moral weight behind a strategy to eliminate poverty and create a nation and a world of prosperous individuals and families?
This is the real test of its relevance. For if the churches back programs and principles that perpetuate poverty and its attendant hate and strife - in a world where poverty is physically and technically an anachronism -- the churches will become not only irrelevant, but extinct.
-- Originally published in Business Horizons, December, 1969. 
| "Black people have never had any economic base in America. We know all about economic alienation - we have been alienated from the beginning. Slavery alienated the Black man from the fruits of his own labor. Our ancestors were brought to this country to be used as living capital instruments. Abraham Lincoln freed the slaves only in the legal sense. Technology was the slave's real emancipator. Technology freed the human slave by transferring his toil onto the tireless backs of non-human slaves driven by water, steam, petroleum, and electricity. But the Black man has been alienated a second time, because he never has owned, and never had a chance to own, the machines that replaced, and indeed, surpassed his power to toil a thousand-fold. When he lost his servitude, he lost his livelihood. As Frederick Douglass said, 'emancipation made the slaves free to hunger; free to the winter and rains of heaven . . . free without roofs to cover them or bread to eat or land to cultivate.' For all his good intentions, Lincoln didn't free the slaves. He fired them.
"People who teach economics are mostly white, but the people who understand economics are mostly black. Our experience has taught us things that most white men still don't see or won't admit. We know that we are poor. White people are poor, too, only they try to disguise their poverty by calling it 'affluence.' We know we're poor, and more important, we know why we're poor. We're poor because we don't own any of that thing - capital - that produces most of the wealth. The labor power of our ancestors produced wealth -- that is why our ancestors were worth enslaving as capital instruments. But today our labor power - along with the labor power of many whites and most of the young - is becoming so superfluous that no one wants it. Slavery taught us who had leisure, who had freedom, who had wealth. Not the slave, but the slave-owner. Not the sharecropper, but the land-owner. Not the employee, but the capital owner."
(Floyd B. McKissick, President of C.O.R.E., July 12, 1969)
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