Ronald Reagan on Economic Democracy: "A Path Befitting a Free People" Part I

In 1987 President Ronald Reagan sought to create universal capital ownership in the United States of America through the Capital Homestead Act. The Capital Homestead Act would reorganize the Federal Reserve so that each citizen of the United States would become a shareholder of the Federal Reserve. If implemented it would be the most sweeping democratization of access to the real credit and productive capacity of the United States of America. It would also be the the most audacious attempt yet made in North America to place the common credit of the people into direct popular control since the early days of the Social Credit government in Alberta. Were it to be implemented it may also inspire a new generation of enterprise models that will end the existence of Wall Street's privileged access to credit and the 'end of corporate welfare as we know it.'

Please forgive the typos and my non-conformance to the Chicago Manual! This sneak preview is a very rough draft, and part of my ongoing quest to rewrite the Regina Manifesto.

On June 12, 1987, President Ronald Reagan spoke to the people of  Berlin at the base of the Berlin Wall's Brandenberg Gate, a visible manifestation of a vast enclosure of people behind the walls of  a prison house of nations. Addressing himself to Mikhail Gorbachev:
"General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe...Come here to this gate! Mr. Gorbachev, open this gate! "
Then President Reagan intoned the words, "Mr. Gorbachev, tear down this wall!"
According to reports at the time the amplification system being used allowed the American President's words to be heard on the eastern side of the wall.  The message heard in the east was clearly understood by its hearers from as far away as Moscow and Beijing as well.
Weeks later, on August 3, 1987, President Reagan spoke before the White House Task Force for Project Economic Justice.  President Reagan, recalling the works of another great liberator, Abraham Lincoln, would voice his conviction that Americans must take  down  another enclosure  that has proven  itself just as threatening to the life, liberty and happiness of humanity:
"I've long believed one of the mainsprings of our own liberty has been the widespread ownership of property among our people and the expectation that anyone... [could]..own a business..Thomas Jefferson dreamed of a land of small farmers, of shop owners and merchants. Abraham Lincoln signed into law the "Homestead Act" that ensured that the great western prairies of America would be the realm of independent, property-owning citizens. A mightier guarantee of freedom is difficult to imagine…in the future we will see in the United States and throughout the western world an increasing trend toward the next logical step, employee ownership.  It is a path that befits a free people."
While at that time many could not see the visible manifestation of the corporate enclosure of capital and the dangers it posed to human liberty as clearly as President Reagan did, perhaps the present global financial crisis has placed it before our eyes and we can now see it as the clear and present danger to the American Republic and to all humanity that it is. 
President Reagan's advocacy of the "path befitting a free people" takes the concrete form of the proposed Capital Homestead Act. It was designed to channel the money creation powers outlined in Section 13 of the Federal Reserve Act to create universal access of each American to capital credit invested in growing ownership stakes in new enterprises throughout Main Street America.

Through the Capital Homestead Act President Reagan sought to have the Federal Reserve reorganized so that each citizen would become a shareholder of the Federal Reserve.  No longer would the Federal Reserve run the danger of being reduced to a source of empty  and 'dark' liquidity for investment banks or hedge funds strung out on derivatives and doped up on 'structured finance.'   If implemented it would be the most sweeping democratization of access to the real credit and productive capacity of America and the most audacious attempt yet to place the common credit of the people within direct popular control since the early days of the Social Credit movement in the Canadian province of Alberta. 

If implemented it may also inspire a new generation of enterprise models that will end the existence of closed corporate tax-eaters with their privileged access to credit and their entitlements to corporate welfare, paid for courtesy of hardworking taxpayers. 
In the second part of this presentation we expand upon a number of existing prototypes of economic democracy that correspond in meaningful ways to this new generation of open corporate enterprise models.   While the measures President Reagan proposed to take would be of great benefit to the world of creating a truly open economy there are other measures that could be taken to affect much the same result.  What interests us here is the moral and philosophical grounding of President Reagan's approach.  From whence did it come?  What questions did President Reagan ask himself that led him in due course of time to model his solution on Lincoln's Homestead Act? It surely did not sprout from the rocky partisan ground that passes for political discourse in the field of political engagement today. 

The Right Question

We find President Reagan's questions to be interesting, since we advocate a civil market economy in which labor is not subordinated to capital via the the employment contract. We argue for economic democracy largely on Lockean grounds. The employment contract should be progressively eroded by the business community and finally abolished in favour of the implementation of democratic-republican principles advocated by America's revolutionaries and the framers of the US Constitution, extending the principles of democratic-republican governance to a free enterprise economy.

The application of democratic-republican ideals to the organization of our enterprises may be unfamiliar territory to most Americas, as well as to academics and business practitioner alike. Americans, whether identifying themselves as 'liberal' or 'conservative' draw varying lines of separation between our freedom to choose our public officials at the ballot box and the degree of liberty we exercise in our daily lives at work.

The apologist for real existing capitalism as we know it today is particularly eager to defend a wall of separation between economy and state even while suggesting that our governments ought to 'operate like a business' and otherwise suggesting that any alternative to capitalism is akin to capitalism's once erstwhile enemy, Marxism. However many of the principles applied to governance of republics has been fruitfully applied within individual companies as well as within the context of interfirm collaboration, resulting in resilient business communities of empowered stakeholders. The fruitful cross-fertilization of the principles of governance of political and economic affairs of a society suggests the desirability of a shared social operating system.

Obviously a shared operating system for a republic and the economy that sustains it would be based on shared ethical principles, shared social principles and a shared worldview, yielding to us the essential democratic-republican public philosophy. This development of the republican public philosophy with reference to economic democracy interests us here at ECODEMA, and we believe its development will require a reframing of what a free enterprise economy is.

We define a free enterprise economy to be that economy where inalienable rights of human beings may be not be surrendered by any kind of pact that alienates those rights. For example a human being has the inalienable right to liberty and may not sell themselves into slavery and no would-be master may offer any lifetime, annual or hourly consideration whatsoever to a prospective slave who might endanger the health of the republic by consenting to slavery.

We find that this reframing of free enterprise is remarkably consistent with revolutionary and nineteenth century republican perspectives of free enterprise, which they, Abraham Lincoln among them, defined through the lens of 'free labor.' Free labor refers to labor that has access to the means of production, marketplaces and credit within an empowering framework where wage labor is not required not a central structural feature of firms in a free enterprise economy.

Michael Sandel, probably America's foremost authority on the development of public philosophy in the USA and advocate of the civic republicanism that defined USAmerican political discourse throughout the totality of the nineteenth century and the earlier part of the twentieth, tells us that despite the space that liberal democracy creates for openness and the communication of ideas our discourse is thin and makes for a starving democratic-republic.  It is hardly possible nowadays to have a discussion on politics that isn't focused on personalities or pure self-interest.  This state of affairs will continue to be a stumbling block to us until such time as we adopt a politics that is focused on principle and that ceases to reduce the United States constitution to a set of procedures and the Declaration of Independence reduced to incantations muttered upon ritual occasions: 
"At a time when democratic ideals seem ascendant abroad, there is reason to wonder whether we have lost possession of them at home.  Our public life is rife with discontent.  Americans do not believe they have much say in how they are governed and do not trust governments to do the right thing…our politics is beset with anxiety and frustration." ( Michael Sandel, Democracy's Discontent p. 3)
Lip-service notwithstanding, without a grounding in the founders' public philosophy we are ill-equipped to make sense of our condition with reference to it:  
"...two  concerns…. lie at the heart of democracy's discontent. One is the fear that, individually and collectively, we are loosing control of the forces that govern our lives. The other is the  sense that, from family to neighborhood to nation, the moral fabric of community is unraveling around us. These two fears-for the loss of self-government and the erosion of community-together define the anxiety of the age. It is an anxiety that the prevailing political agenda has failed to answer or even address. " (ibid p. 3)
The shared liberal consensus of both the US 'right' and 'left' assumes that individuals are free agents – atomized unencumbered persons naturally unbound by moral or social ties not of their choosing.  There is no obligation to act according to shared vision of the common good.  Pure self-interest is freely asserted on the basis of what amounts to mutual license at best and no fundamentally shared standard for defining mutual obligation or community exists.   Sandel asks:
 "How is it possible to affirm certain liberties and rights as fundamental without embracing some vision of the good life, without endorsing some ends over others?"   (Ibid p. 10)
Sandel goes on to link democracy's discontent with liberalism's separation of the public sphere from that of organization of enterprise in the marketplace: 
"Central to republican theory is the idea that liberty depends on sharing in self-government. …republican political theory means deliberating with fellow citizens about the common good and helping to shape the destiny of the political community.  But to deliberate well about the common good requires more than the capacity to choose one's ends and to respect others' rights to do the same. It requires a knowledge of public affairs and also a sense of belonging, a concern for the whole, a moral bond with the community whose fate is at stake. To share in self-rule therefore requires that citizens possess, or come to acquire,  certain qualities of character, or civic virtues. The republican conception of freedom….requires a formative politics, a politics that cultivates in citizens the qualities of character self-government requires. "  (Ibid pp. 5-6)
Sandel jumps into the meat of the matter straightway: Republican principles, emphasizing community and self-government, and speaking of liberty as the capacity for self-rule and positing virtuous traits of public character required to develop capacity for such self-rule , ought to prompt us to join Thomas Jefferson, Abraham Lincoln and apparently President Reagan, in asking questions we have forgotten, or been afraid to ask, specifically:what kind of enterprise models and economic arrangements are consistent with the principles of self-government? To ask such a question may result in the conclusion that there must exist a common operating system for republics and economic democracies that is rooted in an unenclosed commons and therefore must take the form of an open economy.   
The commons Americans have inherited is a shared beneficial interest that likewise carries with it the mutual obligation to actively defend this interest if we are to extend the blessings and basis of liberty to future generations.  The Republic is THE fortress for the well-being of the commonwealth.  The steward of that commonwealth is an economic democracy. 

Free Labor vs. Wage Labor
The particular framework advocated by President Reagan was based solidly on the historical republican principles of free labor which remained at center stage of the populist and progressive movements that arose shortly before the Civil War. The central concern of republican advocates of largely self-employed 'free labor' was the formation of character required to participate in the institutions of republican self-governance. Economic arrangements came under close republican scrutiny, particularly the growing trend toward the employment of wage labor (and in the decades after), and republican concern about the growth of 'wage slavery' was as much at the the heart of Lincoln's Homestead Act as opposition to chattel slavery was. For Civil War era USAmericans steeped in republican values an argument for the merits of the wage slavery system vs. chattel slavery would have much the same incoherence as an argument for the private vs. public ownership of slaves:
"The debate between Jacksonians and Whigs displays the persistence of republican themes in the first half of the nineteenth century.  Their emphasis on the civic consequences of economic arrangements separates their political discourse from our own...republican ideals led nineteenth-century Americans to address issues now lost from view. One such issue was whether America should be a manufacturing nation. By the mid-nineteenth century that question had been decided […]But the emergence of factory life raised a related question, no less fundamental, that would reverberate in American politics to the end of the century. This is the question whether working for a wage is consistent with freedom."   (Democracy's Discontent, p. 168) 

Few people now challenge the notion of wage labor as such, especially in the way that Michael Sandel and David P. Ellerman challenge it. But in the nineteenth century, many USAmericans did:
“…according to the republican conception of freedom, it is by no means clear that a person who works for wages is truly free." since "On the republican view, I am free only to the extent that I participate in self-government, which requires in turn that I possess certain habits and dispositions, certain qualities of character.  Free labor is thus labor carried out under conditions likely to cultivate the qualities of character that suit citizens to self-government. " (Democracy's Discontent, page 168)
The rising trend of wage labor was a radical departure from the philosophical moorings of free enterprise and free labor in early America:
"Jefferson once thought that only yeoman farmers possessed the virtue and independence that made sturdy republican citizens. By the first decades of the nineteenth century, however, most republicans believed that these qualities could be fostered in the workshop as well as on the farm. The artisans, craftsmen, and mechanics who carried out most manufacturing in the early nineteenth century were typically small producers who owned their means of production and were beholden to no boss, at least not as a permanent condition. Their labor was free not only in the sense that they agreed to perform it but also in the sense that it equipped them to think and act as independent citizens, capable of sharing in self-government.  The journeymen and apprentices who labored for wages in the workshops of artisan masters did so with the hope of acquiring the skills and savings that would one day enable them to launch out on their own. Wage-earning was for them not a permanent condition but a temporary stage on the way to independence, and so consistent, at least in principle with the system of free labor...before the Civil War...the conception of free labor predominated." (Democracy's Discontent, page 169,page 177) 
In this context, it is clear that the concept of free labor can be reframed as Labor at Liberty - the individual right (independence) for a laborer to advance in ownership without restriction or constriction of wage in the industry that employs them.  This is the real Spirit of America from which the founders worked; a spirit that has always been at work in the hands and hearts of hard working Americans.
“The Jeffersonian conviction that political liberty was safe only where no man was economically beholden to any other died hard in America….and in the nineteenth century it still had considerable force. In the minds of most Northerners of the Civil War generation, democracy demanded independence, not only political but economic; it demanded the maximum diffusion of self-reliant habits; and it demanded that the distance between the status of a rich man a poor man not be so immense as to corrupt the one or provoke the other to a desperate rebellion." (Daniel Rodgers, The Work Ethic in Industrial Amrica, p.33)  
It is our contention that the binding social cords between free enterprise (economic) and a free society (political) must be fused together dyadically in a system of Liberty that accounts for the merits of labor in producing its own wealth (i.e. well being).  This wealth created by labor cannot be harvested by another “master class”, in particular latter-day slave merchants who trade on that labor as if labor were reducible to a commodity.  Daniel Rodgers, notes how although northern capitalism strove to disconnect these principles, still workers knew this wasn’t right in America:
"…wage working violated the canons of a free society….in the North of 1850, work was still, on the whole, something one did for oneself, a test of one's initiative that gave its direct economic reward. What masters a man had – the weather, prices, the web commerce – were impersonal and distant. This was the moral norm, the bedrock meaning of free labor. Even as they built an economic structure that undercut it, Northerners found it hard to let go of that ideal upon which so much of their belief in work rested."   (Work Ethic in Industrial America, pages 34-35)
The duplicity of the Northern merchant capitalist seeking to exploit labor for profit, while hawking national union and yet undermining free labor by demoralizing it, put to a slow death the very principles that make a free society work and its people unite.  This is the very thing that divides capital from labor and makes them enemies:
"What would it profit us, as a nation", asked William H. Sylvis, the leading labor figure of the 1860s, "if we were to preserve our institutions and destroy the morals of the people; save our Constitution, and sink the masses into hopeless ignorance, poverty and crime; all the forms of our republican institutions to remain on the statute books, and the great body of the people sunk so low as to be incapable of comprehending their most simple and essential principles…?”  (The life, speeches, labors and essays of William H. Sylvis: late president of the National Labor Union.)

Indeed, what would such a disembodied canon of liberty, having the forms of liberty but not the empowering spirit thereof, profit the soul of America? Under such conditions the United States Constitution and the Declaration of Independence would become a mockery, an abominable creed uttered with impure lips by hearts far from the love of true liberty.  


Thank you, for mentioning Capital Homesteading,.. Although Ronald Reagan never mentioned ‘Capital Homesteading’ per say; It is as he articulated – Every Citizen an Owner- and as you have provided is exactly right. He said ‘Industrial’ we say ‘Capital’ and what’s the difference?

Because Capital Homesteading is trademarked, I trust you will provide your readers with a link as I just did to Pass Capital Homesteading Now by 2012. www.cesj.org –or- http://www.capitalhomestead.com/

Alan, loved your series part I, and looking forward to your collaboration with us as soon as possible.

Guy Stevenson
National Field Secretary for CESJ
Center for Economic and Social Justice.

PS. We (CESJ) just completed a week long trip to Washington D.C. where we presented 30 Senators and Congressman, the Federal Reserve Chairman and Mr. Obama (Sixth such presentation to Washington leaders) with our "Declaration of Monetary Justice" which will incorporate Capital Homesteading with in the Federal Reserve System. Capital Homesteading in my mind is the “Big Fix”, and is just.

PSS. More information upon contact... also check out the Just Third Way Blog - http://just3rdway.blogspot.com/2010/04/own-fed-program-part-vii-case-for.html

Ronald Reagan on youtube: http://www.youtube.com/watch?v=06vP84SqnS4

Par Guy Stevenson le 2010-04-23 11:39





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