04/23/2013 05:25 pm ET | Updated Jun 23, 2013

The Path to Sustainable Economic Growth

At the core of understanding America's economic disintegration and seemingly intractable economic problems is the need to learn a new way of thinking that explains why the operation of our modern industrial economy is simply not working. Although tectonic shifts and advances in the technologies of production promise the increasing abundance of exponential growth in the economy's capacity to produce products and services with much less human effort, there is widespread poverty and a disintegration of middle-class status. Even when the economy has experienced some degree of growth, too many people remain poor or are excluded from the resulting limited economic abundance. The notion that the economic benefits flowing to a wealthy class will "trickle-down" is a non-sensible theory and only results in "trickle" menial, low-pay jobs, private charity, and public taxpayer-supported welfare, in plain view and disguised.

What has and continues to escape the focus of conventional economists, and the politics of progressives, centralists and conservatives, is that the wealthy are rich because they own productive capital -- non-human wealth-creating assets used to produce products and services. The reality is that in most economic tasks and in the overall economy, productive capital (not human labor) is independently doing evermore of the work that results in the products and services produced for consumption. It is productive capital's increasing productiveness and evolution, rather than human effort (productivity conventionally considered) that is the productive means most responsible for economic growth. Effectively, technological innovation and invention limits new higher productivity jobs to relatively fewer workers, leaving most other people willing and able to work with lower paying job opportunities or no jobs at all. This increasing majority is finding it more and more difficult to afford the products and services that are increasingly produced by productive capital.

It is essential that people focus their thinking on the understanding of who and what creates wealth, in order to fully understand how to solve growing income inequality and the disintegration of the nation wherein the majority of citizens are regulated to low-pay job serfdom and public welfare.

The required new thinking must respect property rights, and the right of all citizens to acquire private and individual ownership of wealth-creating productive capital assets. This is the path to prosperity, opportunity, and economic justice -- the only path that will assure democratic and free market conditions.

The reality is that while increasingly productive capital growth is the means to achieving general affluence for all citizens, the practical opportunity to acquire productive capital is not accessible to everyone. The vast majority of citizens are unnecessarily excluded from effective participation in the property rights and earnings of productive capital assets. This is not to say that the opportunity to acquire productive capital does not exist, but that the opportunity is unnecessarily denied to the middle class and poor (the savings-poor capital-less and under-capitalized) and effectively limited to the few who are already well-capitalized and thereby wealthy. Even though the wealthy ownership class represents less than 10 percent of the population with the very rich representing 1 percent or less of the population, they all use the potent financial mechanism of capital credit to acquire productive capital assets, with virtually all assets acquired using the earnings of the productive capital to pay for their acquisition. Through this financial mechanism the rich effectively acquire more riches through the process of acquiring capital productiveness with the earnings of production.

In the meantime, while the economy's technical prowess is capable of producing the products and services needed and wanted by all people, the poor and middle class are unable to realize their needs and wants no matter how hard they work, because they cannot earn enough through a job to consume what the economy can produce.

While all citizens have the right to earn an income through participating in production, only a few are privileged to effectively participate in production beyond their own labor to include their wealth-creating productive capital assets.

When the right to participate in production through productive capital ownership is effectively denied, especially when tectonic shifts in the technologies of production destroy and degrade the worth of jobs, then the people affected become increasingly insecure in satisfying their and their family's basic survival. Such conditions force them to seek low-pay, low-security jobs, or either charity or welfare, or desperately engage in illegitimate means. Such disintegration tears at society's sense of fairness and justice, and spreads resentment, alienation and despair.

The solution should be obvious -- that is to eliminate what amounts to an effective monopoly on productive capital acquisition. This will unleash the economy's full potential to harness and employ wealth-producing productive capital assets broadly owned by all Americans, while respecting the full property rights of all and without taking anything from the wealthy who now own America. The effect would be to democratize both political power and economic power.

The solution is to employ capital credit mechanisms to facilitate the productive capital acquisition by every citizen, whether poor or in the middle class, to fuel a larger and more affluent economy. This can be facilitated on the basis of self-finance, whereby the productive capital assets, after returning its acquisition costs, begin to pay a fully-distributed capital earnings dividend to its new owners, thus initially supplementing their labor income and reducing their taxpayer-supported welfare dependence, and over time building income to replace their dependency on job earnings and secure their retirement as they age.

Significantly, by facilitating the acquisition of future wealth-creating productive capital assets by all Americans, everyone will increasingly be able to afford to purchase with their productive capital earnings (dividend income) what is increasingly produced by productive capital. This in turn will create the market conditions for sustainable economic growth, and as private, individual ownership spreads, the larger the economy will grow as people's incomes increasingly grow and they purchase more products and services to satisfy their needs and wants. Thus, the effect created would be a self-propelling economic engine of growth capable of producing general affluence for every American, and not limited to those few who now own America's productive power and whose consumption needs are satisfactorily, if not overly met.

To reform the system and make universal productive capital ownership America's future reality requires limited government action. Traditionally, government programs for investment have produced jobs, but relatively few capitalist owners. Until the structural defects of the system are reformed to achieve effective individual ownership of future productive capital assets for all, the system will continue to perpetually benefit the well-capitalized wealthy, while everyone else is regulated to scarcer jobs and welfare dependency. The action that is required is to eliminate the financial mechanism barriers that effectively concentrate the ownership of productive capital assets, and establish an infrastructure necessary to protect the productive capital acquisition rights of all citizens.

Furthermore, all government incentives supported by taxpayer dollars and debt, to stimulate the economy with the object of providing more growth and jobs, need to have the stipulation that the corporations receiving the financial benefit demonstrate the creation of new owners, both employees and non-employees. Today, such stimulus does not effectively create new productive capital owners but benefits those who already own, in the name of job creation. But the jobs and corresponding wages, which actually result, are often short-lived and always insufficient to effectively assure financial security. The proposition that taxpayer dollars and debt stimulus be used to create new owners in future productive capital creation, acquired by using the earnings of productive capital, will enable people to harness for themselves the productive power of wealth-creating capital assets to pay for its own acquisition and restoration and thereafter to earn income indefinitely.

The wealthy ownership class understands and employs the strategy of investing in opportunities expected to pay for themselves in a reasonable period of time, typically five to seven years, perhaps 10 in some circumstances. This is the fundamental logic of corporate finance couched in "return on investment" terms. This same logic is the personal investment strategy steadfastly followed by successful capitalized and under-capitalized investors. The rich further understand that once the acquisition cost is paid for out of the future earnings of the productive capital investment, the asset then continues to earn income indefinitely, or in perpetuity. This is precisely the process used by the rich to get richer.

Thus, rather than preach austerity and redistribution, Americans should seek prosperity through economic growth financed through capital credit and paid for out of the earnings of productive capital while simultaneously creating new capital owners. This new earnings source will enable all Americans to earn sufficient income to live well, and not rely solely on a job. This will also strengthen individualism, personal responsibility and respect for equal rights and empower individuals to more fully realize their inherent potentials.

The end result will be to forge a true free market economy in which every American privately and individually participates in the increasing utilization of productive capital to create wealth, and in turn uses this viable dividend income source to satisfy their consumer needs and wants. Collectively, this will fuel affluence and sustainable economic growth.

This new paradigm is the subject of the Agenda of The Just Third Way Movement here and is founded on the concept of Monetary Justice.

A Petition to reform the Federal Reserve to provide capital credit to all Americans can be supported here. The proposed Capital Homestead Act would accomplish the necessary reforms.