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Manifesto" (1958) and "The New Capitalists" (1961). By providing a theoretical framework within which various financing vehicles could be developed, Kelso and Adler laid the groundwork for an entirely new economic system, a "Just Third Way" that transcends both capitalism and socialism.

Kelso and Adler lowered the barriers to widespread direct ownership by as many people as possible. They did this by advocating that all new investment be financed out of "pure credit," that is, new money created by extending loans through the commercial banking system. Ownership of the new capital should be spread out among the people who would use the profits first to repay the acquisition loan, and then for consumption, not reinvestment. Collateral would be provided in the form of capital credit insurance, using the standard "risk premium" on most loans to purchase an actual insurance policy to pay off in the event of loan default.

As an alternative to using tax rebates to stimulate the economy artificially for a short time, then, a more rational program would be to address the underlying problem to begin with: lack of widespread ownership of the means of production, and misuse of the commercial banking system to finance consumption, speculation, and government spending instead of capital that is broadly owned by as many people as possible.

One possible program is "Capital Homesteading," described in the book, "Capital Homesteading for Every Citizen," (2004). Capital Homesteading integrates Say's Law of Markets and Dr. Moulton's findings on financing capital formation with the breakthrough of Kelso and Adler. It gets the economy away from temporary fixes such as tax rebates, inflation, and artificial job creation, and bases economic policy on enabling as many people as possible to participate in the economic process, produce, and sell goods and services to gain income, not welfare or redistribution.

Learn more about this author, Michael Greaney.
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