The fatal defect of capitalism is its undemocratic and unjust concentration of economic power (capital ownership). This is structurally perpetuated, causing a gap between rich and poor that continually widens, leaving a great mass of poor people. At least three built-in mechanisms cause this: interest, inflation and what Louis Kelso called 'morbid capital'. Interest and inflation will be dealt with later. In this article something about 'morbid capital' in relation to Rule 5 for safe money creation, reading: 'Only ESOP-companies should be financed with newly created money by the (Cuban) Central Bank'.

Morbid capital stifles consumption and thereby slows down economic growth. Here's what happens. People who earn more money than they can reasonably consume, either save at interest, or invest. Approx. 2 to 5% of the population in capitalist countries fall within this category. Socialist countries, such as Cuba, do not suffer from this defect. Their under-consumption and lack of economic growth is caused by other defects.

Suppose somebody earns $100 million a year. This is high, but not exaggeratedly exceptional among the rich elite in capitalist countries. Suppose further, that he/she does not consume more than $10 million (this figure is an estimate, but research has shown that this gives a fair impression; probably consumption would in reality be less). Now, what happens with the remaining $90 million? Usually this is invested in even more income-generating capital (e.g. stocks, bonds, real estate etc.). This results the following year in even more income and thus even more 'morbid capital', i.e. money that is never consumed. This is how capital is concentrated and the economy stifled. Thus the concentration of capital becomes abusive, for it runs counter to the common good, i.e. the economy, which is detrimental even to the rich (apart from the fact that the rich always have to pay loads of money for police, security and armies to ward off the mass of poor people who are always out to steal for sheer survival; even Cuba faces this problem with its starvation level wages; this problem can only be solved by raising people's income). Marx saw the problem and tried to remedy it, but missed the ball. Louis Kelso, however, hit a homerun (see below).

Win-win for rich and poor

The concentration of morbid capital is both undemocratic and detrimental to all, even to the rich themselves. After all, poverty and a sluggish economy is not in their interest either. Henry Ford understood quite well he had to pay his workers a higher wage, otherwise they couldn't buy his cars. So, if more of the morbid capital was consumed instead of re-invested, demand for goods and services would rise, stimulating economic growth. It is known that if consumption goes up, the economy accelerates.

Now, if there was a way to diffuse capital ownership, the capital income would also be diffused, i.e. spread among a large percentage of the population, preferably 100%. And this is in fact possible by applying solidarist financial instruments. Diffused capital ownership would evaporate morbid capital, because small capital owners would consume all or most of their income from capital. Such increased consumption would cause a kind of multiplier effect resulting in robust economic growth, benefiting all, including the rich.

Now, those sharp readers who raise the question how new investments would be financed, if there is no morbid capital available for this purpose, should read our earlier articles on money creation. Money for productive investments can always be created by the Central Bank. This source is virtually limitless. There is no need to save to invest. This is where Kelso hit his homerun! In fact, a triple homerun. Diffusion of capital ownership will stimulate consumption (1), investment can be financed by money creation (2) and the Central Bank can loan at 0% (3). As said, Solidarism is about abundance, not scarcity. For our readers of faith, this is the secret of the miraculous multiplication of the loaves and fishes.

 

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