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From the Editor
Regarding Capitalism, Communism and Occupy Wall Street
By: David Deschesne
Editor/Publisher, Fort Fairfield Journal
October 19, 2011
There’s a lot of discussion going on about the cause of our economic problems, with the current media spectacle of “Occupy Wall Street.” While the protestors there are on the right track, the mainstream media is focusing on only those who have a message of destroying Capitalism and replacing it with Communism as the answer to our economic woes.
Most people who graduate from a public school in the U.S. today have no idea what either of those two systems are, so I’ll attempt to explain them in a two-part editorial, starting with Capitalism.
Part 1: Capitalism
What is Wealth?
Before one can understand capitalism, it is first necessary to understand what wealth is. We have been conditioned by our modern banking system to believe wealth is so many of these paper Federal Reserve Notes, bank assets and bonds that float around Wall Street and in the portfolios of millions of investors. Those items are not true wealth
Wealth is essentially the land and what you get out of it with the application of human labor. In other words, natural resources such as gold, oil, lumber, fish, potatoes, etc. that have been worked and developed by human labor into a form that is usable by other humans.
Trees standing in a forest have value in that they can be turned into lumber for building, or firewood for heat. However, until human labor is applied to those trees to cut them down, transport them to a mill, mill them into lumber, or cut them into firewood, they are not wealth. Wealth begins to accrue to the tree once it is touched by human hands and begins to increase as value is added at each of the stages of its development. A stack of cord wood is wealth because it has had human labor impressed upon it to convert it into something usable—namely, wood ready to be used to heat a home. Milled lumber is wealth because it has human labor impressed upon it to ready it for building. The wealth stored in the wood in this example is the labor that was impressed upon it to develop it into something usable; for if that labor were not impressed upon it, another person would have to expend their own labor to bring it to the point of usefulness.
By this definition and understanding, potatoes are only wealth once they are harvested and stored in a potato house. The wealth stored in the potato becomes more valuable as more steps in its refining and processing brings it closer to the dinner table. Fish, oil, gasoline and all other natural resources follow the same rules. They become “wealth” only as human labor is applied to them to make them more useable and valuable to other humans.
19th century economist Henry George explains in his monumental work, Progress and Poverty the difference between labor expended for one’s own desires versus for the purpose of adding value to a product; “Wealth is not the sole object of labor, for labor is also expended in ministering directly to desire; but it is the object and result of what we call productive labor—that is, labor which gives value to material things. Nothing which nature supplies to man without his labor is wealth, nor yet does the expenditure of labor result in wealth unless there is a tangible product which has and retains the power of ministering to desire.” (Progress and Poverty, ©1882 Henry George, p. 36)
With that said, money is not wealth, despite what the banks, school systems and media gurus have been telling you.
All money in existence in the U.S. today is nothing more than bits and pieces of other people’s borrowed debt. The money in all cash drawers, savings and checking accounts, people’s private “piggy banks”, etc. has been borrowed into existence either has a house, car, snowmobile, ATV or other type of loan. It is also brought into being by government bonds and corporate debt. Banks create new “money” at the time of a loan and loan it into existence as a “Federal Reserve Note”.
Paper debt-note money is not “wealth” because it has to be paid back by the future expenditure of labor. The items acquired by bank notes, credit cards and borrowed money may have added to the overall stock of wealth of a society, but those effects are negated by the debt that society must pay via a future expenditure of their labor.
“The increase in the amount of bonds, mortgages, notes or bank bills cannot increase the wealth of the community that includes as well those who promise to pay as those who are entitled to receive. The enslavement of a part of their number could not increase the wealth of a people, for what the enslavers [bankers] gained the enslaved [borrowers] lose.” (-op cit. p. 35).
What is capital?
Some have argued that the blood of Capitalism is greed. I disagree. Capitalism as a function of business is simply a process where one accumulates more surplus wealth than they need to live and uses that surplus wealth in trade for other products and services. For example, if I harvest more firewood than I use, the excess is capital; if I grow more potatoes than I can eat, the excess is capital; if I purify more water than I can drink, the excess is capital, etc. If I do the aforementioned for the purpose of trading those products either to store their value in (wealth-backed) money, or to acquire other products/services I do not have, that is capitalism.
To say that greed is the blood of capitalism is in err. Rather, “need” is the blood of capitalism. If there were no demand for products, there would be no need to acquire an excess. Just because some have greed for a motive does not mean the system is bad, just the greedy people.
Government bonds and bank notes held by Wall Street bankers and investors are neither wealth, nor capital. “A government bond is not capital, nor yet is it the representative of capital. The capital that was once received for it by the government has been consumed unproductively—blown away from the mouths of cannon, used up in warships, expended in keeping men marching and drilling, killing and destroying. The bond cannot represent capital that has been destroyed. It does not represent capital at all. It is simply a solemn declaration that the government will, some time or other, take by taxation from the then existing stock of the people, so much wealth, which it will turn over to the holder of the bond; and that, in the meanwhile, it will from time to time, take, in the same way enough to make up to the holder the increase which so much capital as it some day promises to give him would yield him were it actually in his possession.” (op cit. p. 171).
The root of our economic problem has been the acceptance of bank notes, bonds and financial derivatives such as Credit Default Swaps, Collateralized Debt Obligations and Mortgage-Backed Securities as if they were wealth. They are not wealth, but merely a mechanism to take the wealth that a person has promised to expend labor on some time in the future.
We got into trouble when more of this fictitious debt “money” was created and loaned than there is physical labor and resources to pay it back. The mainstream media is promoting those who advance Communism as the answer to that problem. In next edition’s editorial I’ll explain why that simply cannot be the solution.