How To Stop Inflation Cold

Over the years, I have written in many venues about the extreme importance of four economic rights and responsibilities and their transformation into four Concordian economic policies. My writings on this topic have consistently received the most readers, all over the world.

To my unending surprise, spurred by our immediate needs I have recently discovered
another major—major—ability of Concordian economics. Here it is: With the tools offered by
Concordian economics, we can stop inflation cold.

Let us see how.

1. Concordian Labor Policy

For its expected immediate results, the key, most immediate policy to institute—ideally,
all over the world—is the Concordian Labor Policy.

Labor unions and politicians, all over the world, must stop pushing for “higher” wages.

I know, at first look this policy appears to be cruel and capitalistic.

Labor unions and politicians must instead push for equity distribution of the value of the
wealth created by workers and employees. Before looking at the advantages of this proposed
policy, let us acquire a deeper knowledge of the negative consequences of the push for higher
wages.

Some negative consequences of the push for higher wages

There are some immediate consequences of the push for higher wages: Corporations do
sooner or later raise their prices. Most of them will have to raise their prices if they want to
survive in business.

Higher prices follow, then inflation raises its ugly head; the flames of inflation devour the
temporary benefits of high wages.

Much damage is inflicted upon humankind from the push for high wages. People who are
not in the labor force, people on fixed income are forced to pay higher prices, all the while they
receive no personal benefit from higher wages, which at least temporarily are enjoyed by people
in the labor force.

The push for higher wages carries indeed cruel consequences for the poor; they become
automatically poorer by the moment.

Not the least negative consequence from the push for higher wages is the negative effects
in relation to competition from abroad. This is the reason why we in America have ceded our
manufacturing power to foreign nations. Again, low-income people and the poor who badly need
a job to survive are punished the most.

Some benefits of fair equity distribution

Workers today are “consultants” to the corporation for which they work. This is the
practical import of the labor contract. Whatever wages they receive, that is all they can expect.
The owners of the corporations, instead, benefit from the capital appreciation of their stocks.
It is this value that needs to be more equitably distributed. Capitalists do not deserve it.
They get a bad name just for this misappropriation of wealth that is not created by them, but by
workers and employees of the corporation.

Today, especially in the United States, thanks to the genius of Louis O. Kelso, there is a legal mechanism through which workers can share in the fair division of capital appreciation:
this is the fabled Employee Stock Ownership Plan (ESOP).

There are many advantages to the use of this tool. There are fiscal benefits for the
corporation and workers acquire stocks without having to spend a cent of their scarce supply of
money.

Distributed Ownership

In compensation for everyone, workers who are now part owners of the corporation in
which they work tend to work harder and more imaginatively to create more value for everyone.
Not the least benefit of this policy is its ability to take fire out from the conversation between
capitalists and socialists. From a poisonous ground, this policy moves people to positions of
reciprocal respect.

Labor unions must link their membership dues to the apportionment of equity in the
distribution of stock ownership.

American capitalists and American workers know a good thing when they see it. During
the last few years, the number of workers belonging to ESOPs has surpassed the (declining)
number of workers belonging to labor unions.

Academic economists seem to be unaware of the existence of ESOPs and those
economists who are aware of them often disparage them.

Can we imagine the day in which ESOPs gain widespread recognition and acceptance?

2. Concordian Monetary Policy

This is a second tool to stop inflation cold.  Concordian Monetary Policy calls for the Fed, and every Central Bank in the world, to follow these three basic rules on loan issuance:

1. issue loans only to create real wealth;
2. offer loans only to individual entrepreneurs, to
   corporations with ESOPs, and to local public agencies with taxing power;
3. issue loans at cost.

The first rule will stop inflation of the value of financial assets cold. We have to stop feeding the monster of financialization. If the price of financial assets grows to the sky, the entire
chain of economics is unavoidably affected. See the parallel increases in the cost of houses. (Pace
the current definition of inflation as affecting only some consumer goods.)

Withdrawing public funds from financial institutions, no damage will be done. The value
of financial assets might still continue to grow if the source of credit is restricted to the private
market.

Make Loans at Cost

The distinction between public and private financial markets automatically makes it clear
that any public agency like the Fed ought not to make a profit out of its operations. Thus, such
loans must be issued at cost.

And when such loans are issued at cost, a whole slew of positive consequences will
follow: credit becomes affordable to Main Street; by obtaining loans at cost, local economies
will flourish, these activities will acquire an immediate competitive advantage. In some cases,
the competitive advantage will be such that local enterprises will be competitive again in relation
to foreign enterprises, which generally benefit from their lower local labor costs.

And speaking of labor costs, if unions favor the policy of equity distribution mentioned
above, with the Fed’s restraint of issuing loans only to enterprises that produce real wealth of
tables and chairs, the manufacturing power of the United States will be restored to its former
glory.

Environmentalists fear not. One of the many implications of the policies advocated here
is that financially secure people will reduce waste and degradation of our natural resources.
Production for no other purpose than to repay debts will come to a screeching halt.

In a manifestation of moral fortitude, the Fed has given a nod of approval to this policy.
In a personal communication to this writer, the Fed has suggested that I should present this
proposal to my “state and federal representatives.”

Creation of Money

Last but not the least point to be made about a Concordian monetary policy is that this is
the fulfillment of the hopes and efforts of our beloved Benjamin Franklin. It is he who gave the
Government, rather than the bakers, the power to create and distribute public money.

Unfortunately, Alexander Hamilton led the country to a surreptitious counter-revolution
when he created the first Bank of the United States on the model of the Bank of England.

It is high time, as William Jennings Bryan advocated long ago, that we restore the “money of the Constitution.” The full sentence is pregnant of more meaning:

“…when we have restored the money of the Constitution, all other necessary reforms will be possible, and… until that is done there is no reform that can be accomplished.”

How true is this realization still today is an issue that is conveniently placed under wrap.

The Concordian Monetary Policy ought to be instaurated any time soon.  It must be instaurated the day after a major crash in the Stock Market if we want to minimize the devastation that
generally follows such crashes.

3. Concordian Fiscal Policy

As Henry George and the Georgists recommend, as soon as possible we ought to raise
taxes, no longer on income and capital appreciation, but on the basis of the market value of land
and natural resources. We would then stop penalizing enterprise and initiative.

This policy will have two major deflationary effects: the cost of government will be
reduced, and the price of land will be abated.

The first condition becomes apparent as soon as it is considered that, with the application
of Concordian Economic Policies, the functions of government will naturally and organically be
shrinking. Who will beg for a hand-out when the cupboard is full?

Taxes on land will convince owners of latifundia, the large estates strangling our cities
and towns, to sell some of their lands. An increase in the supply of land will induce a reduction
in the price of the land.

All enterprises will be affected by deflationary trends in the costs of land and natural
resources; everyone will benefit. (Landowners will benefit from lower costs of doing business if
they are in business as well as lower cost of consumer goods.)

The discourse about the history of natural resources is even more eventful. How did oil
and mineral extractors ever succeed in getting subsidies for resource exhaustion (depletion
allowances) rather than compensating the “public” for the extraction of the public’s common
resources, our commonwealth?

4. Concordian Industrial Policy

The application of the Brandeis Rule will do its part in reducing the flames of inflation.
The immediate effect will be a freeze in the value of assets of the largest corporations: Since they
cannot be bought or sold, their value will stabilize around their true worth. This effect will have
deflationary tendencies.

Most of all, those financial—and human—resources that today are
devoted to buying and selling other corporations will be directed toward the internal needs of
corporations. If these resources are devoted to stabilizing the cost of labor and materials, the
deflationary effect will not take long to be felt.

Do consider the ensemble: market wages, not high wages; loans at cost, rather than loans
at interest; lower income taxes and corporate income taxes; concentration of human and financial
resources on the internal needs of corporations.

Is this a dream? An impossible dream? Or is it a near-eternal quest to create the
polis, a social organization in which, as Martin Luther King, Jr. so magistrally put it, men and
women “will not be judged by the color of their skin but by the content of their character.”

5. Concordian Debt Policy as Mosaic Debt Jubilee

Should we cancel student debt?

No!

We should cancel all debt.

Most kings and emperors worthy of their robes declared a debt jubilee upon elevation to
the throne. It seems that the Israelites practiced a debt jubilee every seven years. This policy
hides all sorts of wisdom and suffers only from an apparent loss in the value of money.

Money has value when it can be exchanged for real goods and services. When such
correspondence does not exist, what one holds is a hot succession of zeros. These zeros kill the
enterprise and initiative of way too many people.

If debts are not repaid within seven years (this is true especially for business loans), it
means that the incurring—and the granting—of a loan was a mistake. Perpetuating a mistake
does not do any good to anyone. Implied here is a nuance: loan makers must share a
responsibility in the execution of loans. (Too many loans are granted for the satisfaction of
immediate greed.)

There is another not too subtle distinction in a debt jubilee. Capital loans ought to be
encouraged; consumer loans ought to be discouraged at all costs. Capital loans have the potential
of creating economic freedom for debtors and creditors; consumer loans definitely enslave the
borrower. They also foster an inappropriate manifestation of a desire for immediate gratification.

A Couple of Final Points

To this short list, we must now add the damage that inflation is causing to the reputation
of President Biden and the Democratic Party.

To paraphrase Brandeis, it is economists and politicians who need Concordian economics
most.

Rather than going blind into the future, why don’t we reconnect with a tried-and-true
tradition, the tradition of the American Progressive Movement?

Instead of following any longer two flawed European economists, Keynes and Hayek,
why don’t we listen to four powerful American voices? Benjamin Franklin, Henry George, Louis
D. Brandeis and Louis O. Kelso are their names. They never met, but together they offer a
powerful system of economic thought.

With them, morality does not take second place to efficiency. And notice that efficiency
refers solely to financial efficiency. Quite the contrary.