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Distributism: Moral Economics

Rowan LobdellJan 14, 2021, 2:47:38 PM
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One of the biggest flaws in modern economic thinking is the notion that all transactions operate on either left or right-wing spectrum. People are often torn between the two extremes of Capitalism or Communism without any regard to Pre-Enlightenment Economics. Both Capitalism and Communism are relatively new and unstable systems of trade, and thus, the idea that a global or national economy would be able to smooth out the consequences of each system is ludicrous. So many other advanced societies have thrived without the use of modern economic theory. 

So how does a nation or state conduct trade without Capitalism or Socialism?  While there are other schools of economic thought, most still adhere to the binary dichotomy of the Left and Right-wing. However, as we move past the Industrial Revolution and shift into a Post Capitalist America, the flaws of both government intervention and corporate power have already begun to dissatisfy both entrepreneurs and the working class. 

The Problems of Capitalism

Capitalism can never achieve economic equilibrium on its own. It is an unstable system for two reasons: divergence from its own moral theory and from the insecurity of two kinds. The moral theory of Capitalism is based on freedom, but it tends to accumulate property in the hands of a few owners; as ownership becomes more and more limited, more and more power passes to a small capitalist class. The state increasingly becomes a tool to protect “wage contracts” which are increasingly leonine, that is, based on inequality. One side may refuse the contract (the employer), but on the other side, the worker, generally has no choice but to accept it because the alternative is starvation. The state can no longer be a neutral arbiter between classes but becomes a defender of one class upon whom jobs and growth are increasingly dependent.

Lack of Security

In addition to this moral problem, Capitalism also has two kinds of insecurity: insecurity for the workers and even insecurity for the capitalists. There is insecurity for the workers because the wage fetches less in old age, nothing in sickness and jobs themselves are at the discretion of capitalists (e.g., “outsourcing”). But Capitalism also produces insecurity for the capitalist. Competitive anarchy makes the system as unstable to owners as it is to workers and results in gluts and underselling. Capitalism responds by becoming less capitalistic; it uses the law to raise barriers to competition and to limit liability; the corporation itself is an adjustment to the inherent instability of Capitalism that allows investors to limit liability.

Distributists and free marketeers are often at each others’ throats. But there is a great deal of common ground to be found among those who hold a more generally pro-market position and those who describe themselves as distributists. 

The Foundation for Socialism

The ardent socialist does not fear pure Capitalism nearly as much as does the ardent capitalist. Given its instabilities, Capitalism must, perforce, find some way of stabilizing itself. There are only three stable solutions: slavery, socialism, or wide-spread ownership of property, (or some mixture of the three.)

To solve Capitalism you must either get rid of restricted ownership, or of freedom, or of both. Of the three solutions, slave societies have shown themselves to be highly stable over long periods of time, but this solution is precluded by heritage and basic ethics. But the third solution, called the “proprietary state,” is regarded as untenable by the intellectual and political elites, which leaves only the second solution, some sort of socialism. Thus in practice Capitalism breeds a collectivist theory which leads to a servile state

The transition from capitalism to socialism follows the line of least resistance because nothing really changes when the state buys up the waterworks or the rail lines. But socialist practice does not really mean socialism. In practice, socialism merely means increased regulation, a solution that appeals to both corporate interests and socialist “reformers.” Although the rhetoric is different, the results are the same. The “socialist” reformer continues to pile regulations on top of big business, a situation big business is more than content to see because in return these regulations serve as entry barriers to potential competitors and thereby guarantee greater security from the competition and hence greater security of profits. 

In turn, the capitalist becomes increasingly responsible for the welfare of the workers in return for greater security of property and profits. In the end, you have neither socialism nor Capitalism, but servility, the servile state. The practical result of all of this is an increasing dependence of workers on the government and corporatist solutions. Health care, unemployment insurance, and retirement benefits pass from control by the individual to control by the corporation or the state. The servile system has already begun. Indeed, it is already here. 

The differences between a “socialist” Europe and a “capitalist” America are merely differences of degree rather than of kind. Both depend on the same bureaucratic organization and social welfare systems. This state of affairs did not come about by way of conspiracy but by way of necessity; Belloc seems to have been absolutely correct in his predictions. Until the 1940s, Capitalism was a highly unstable system suffering ever-increasing cycles of economic euphoria and depression, culminating in the Great Depression of the 1930s.

Post-Keynesianism aka Re-Distributivism

The system needed help to stabilize itself.  The real change came with the introduction of Keynesian economics, which made the government responsible not just for this or that social welfare program, but for making up shortages in aggregate demand by redistributive taxes. In other words, Keynesianism is itself “distributist,” or rather “re-distributist”; but it redistributes income rather than property. Therefore the debate, in practical terms, is not between Distributism and its opposite, but between kinds of Distributism, between redistribution of income and distribution of property. 

But one way or another, economic liberalism cannot provide stability on its own; it needs the help of distributists of one sort or another. Income redistribution, being a constant and ongoing process, will always require a vast state apparatus to assess the funds on the one hand and determine eligibility on the other. Keynesianism has been adopted by nearly every modern regime, whether of the right or left, because it seemed to work. As a result, the inherent instabilities of Capitalism have been rendered less extreme, with depressions rendered much milder than the convulsion which shook this country and Europe at the end of the 1920s. 

But Keynesianism enlarged state power, taxes, and the size of government to previously unimagined levels. We have become accustomed to having the government solve all problems and do so at the highest possible level. Even right-wing administrations have dropped all pretense of “federalism” and seek to intrude more and more on daily life; the teacher in his classroom, the cop on the beat, the shopkeeper in her store become increasingly the objects of federal concern and less of local regulation. But today the future of the Keynesian arrangement seems in doubt. 

In both Europe and America, the costs of government seem ready to outstrip the ability of society to support them. Further, the willingness of corporate interests to continue the arrangement is ending; they have invested great sums and great energies in seeking an end to the system and their efforts are paying off. Corporations are seeking to externalize social costs that have heretofore been part of the wage system, such as medical insurance, pensions, and unemployment costs. However, it is doubtful that shifting these responsibilities can be accomplished without introducing the very insecurities that occasioned the arrangements in the first place. Thus the Keynesian system seems to be caught in a conundrum. It cannot continue its Keynesian bargain (and this is especially so in the face of global competition), and it cannot drop it without risking chaos.

What Distributists Can Teach Us

Morality and Ethics

First, distributists are right to emphasize the place of morality and ethics in economics and our working lives.  We are called to be good stewards of time, talents, and treasure.  And the witness of Christian social teaching throughout the ages provides not an only a powerful incentive, but guidance in thinking precisely about how we should be stewards.  As John Henry Newman observed in The Idea of a University, too many economists believe there is nothing to be gained from the perspective of other disciplines, including theology and ethics.  Distributists rightly call out some neoclassical economists for considering the human being as simply homo economicus and thinking only about efficiencies and not about ends of action.  What can be frustrating is that distributists often talk about all free-market-oriented economists as if they held this view.  Murray Rothbard, a twentieth-century Austrian school economist, could join right in with such criticisms, observing in an essay called “The Myth of Efficiency:

Economists have been long engaged in what George Stigler, in another context, has called ‘intellectual imperialism.’ Economists will have to get used to the idea that not all of life can be encompassed by our own discipline.  A painful lesson no doubt, but compensated by the knowledge that it may be good for our souls to realize our own limits—and, just, perhaps, to learn about ethics and about justice.

Michael Novak, a theological and economic writer whom distributists think they hate, has written extensively about how a free enterprise system must be embedded in a healthy moral culture and political culture to bear fruit.

Avoiding the Concentration of Power

Second, distributists object to the concentration of power that is so endemic in modern Western economies.  Whether it is Chinese state capitalism or the type of crony capitalism that makes up so much of the West, they are correct to see this as abusive.  Again, what is so frustrating is that they seem to think that free-market supporters favor this arrangement.  On the contrary, Milton Friedman himself once said that a choice often needs to be made between the interests of a free enterprise system and those of businesses themselves.  Michael Matheson Miller is sharply critical of “managerial capitalism” or “Davos Capitalism.”  Noting that Adam Smith warned of corporate collusion and its dangers to the public, Miller says we are “experiencing something much more insidious—not just businesses, but business and government and a host of others all meeting, and colluding, at the posh Swiss resort town of Davos.  It is Adam Smith’s nightmare.”  This “managerial economy,” he says, “has become equated with free markets” and so its 2008 collapse meant that though managers and technocrats lost faith in markets, they “did not lose faith in themselves, and now they want us to entrust even more of the economy to them.”

A Healthy Society

Third, distributists are right that a wider distribution of wealth is essential to a healthier society. They are rightly bothered by monopolies in business and the fact that too many people are kept out of what John Paul II called in Centesimus Annus the “circle of exchange.”  They are right to point out that large businesses often rely on the powers of the state to create hindrances to smaller entrepreneurial competitors, while also creating ways in which government coffers can come to the—corporate welfare is indeed a bad thing.  Distributists are right to point to a number of positive programs by which people might become active in entrepreneurship and ownership.  Cooperatives, employee stock option programs, community-supported agriculture, farmers markets, and all manner of creative ways of doing business are indeed alternatives worth exploring.  The market-friendly Acton Institute’s Poverty Cure program is a solution distributists should flock to, which aims at empowering people in developing countries to become entrepreneurs. Let a thousand flowers bloom!

Idealism

Fourth, distributists believe, and rightly, that too much of the modern welfare state hinders the moral and social development of the human person.  Like Hayek, Chesterton and Belloc castigated the beginnings of modern social programs under David Lloyd George’s government, observing that such things made people more dependent upon the state—a nation of takers, in the phrase of economist Nicholas Eberstadt—and less dependent upon mediating institutions and, indeed, their own labor.  Dorothy Day opposed Social Security and other manifestations of the New Deal, acidly referring to “Holy Mother State.”  While most people will agree that a government safety net is, on the whole, not the worst thing in the world, coming up with programs that do not demean and diminish people is essential.  And we can all agree that if Christians gave more time, treasure, and talent to the poor, the average person in most countries would not find welfare statism either necessary or attractive.

 

Origins

Distributivism, also known as Distributism, is an economic theory formulated by Hilaire Belloc and G.K. Chesterton largely in response to the principles of Social Justice laid down by Leo XIII in his encyclical Rerum Novarum. Its key tenet is that ownership of the means of production should be as widespread as possible rather than being concentrated in the hands of a few owners (Capitalism) or in the hands of state bureaucrats (Socialism). Belloc did not believe that he was developing a new economic theory, but rather expounding an old and widespread one against the novelties of both Capitalism and Socialism. 

Aristotle

The anthropology of Christian distributism, at its deepest level, reaches back to Aristotelian ethics, locating the individual within a web of natural human relationships: marriage, children, kinfolk, friends, and neighbors. Each person’s identity is shaped by these bonds. Political entities larger than villages and neighborhoods are best viewed as aggregations of intensive, natural communities for limited ends such as mutual defense.

The economic theory of Distributism is based on the distinction between distributive justice and corrective justice found in Aristotle. Distributive justice deals with how society distributes its “common goods.” Aristotle defines these as “things that fall to be divided among those who have a share in the constitution” (Nicomachean Ethics, 1130b, 31-33). 

This refers to the common goods of a state, a partnership, corporation, or some cooperative enterprise. For Aristotle, these things should be divided by “merit” based on contributions, but what constitutes this merit will be a matter that is determined culturally, “for democrats identify it with the status of the freeman, supporters of oligarchy with wealth (or with noble birth), and supporters of aristocracy with excellence” (Ethics, 1131a, 25-29). Corrective justice, on the other hand, deals with “justice in exchange”; that is with transactions between individual men. In this case, justice consists in exchanging equal values, in “having an equal amount before and after the transaction" (Ethics, 1132b, 19-21). 

Christian Influence

And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you, and ye shall return every man unto his possession, and ye shall return every man unto his family. In the year of this jubilee, ye shall return every man unto his possession.

— Leviticus 25:10.

The distributist social ideal is a market in which ownership of property is as widely spread as practicable among all families. Unlike socialism, it does not aim at equality of outcome nor even at guaranteed economic security for each individual; but it does envision a society in which, as with the Hebrew tribes in the Year of Jubilee, no family is left permanently without property, nor any family reduced to absolute destitution: “And if thou sell ought unto thy neighbor or buyest ought of thy neighbor’s hand, ye shall not oppress one another: According to the number of years after the jubilee thou shalt buy of thy neighbor, and according to unto the number of years of the fruits he shall sell unto thee: … The land shall not be sold for ever: for the land is mine, for ye are strangers and sojourners with me.” (Lev. 25:13-15, 23) It is interesting that in this verse we see a definition of oppression — I am unaware of any other in scripture — as holding onto land indefinitely (so that we oppress those without land entirely).

Through these measures — and of course, God’s abundant blessings — the promise was made to the Hebrews that there would “be no poor among you.” (Deut. 15:4) Distributism, like the prophets, also rails against the unlimited concentration of property: “Woe unto them that join house to house, that lay field to field, till there be no place, that they may be placed alone in the midst of the earth!” (Isaiah 5:8)

Of course, similar goals must at times be pursued with dissimilar means. We do not live in a land where we can appeal to a divine allotment to distribute property, so the laws of Jubilee are not practicable in our society in precisely the same way they were for the Hebrews. However, that does not mean we can ignore the Jubilee laws entirely as we try to articulate a biblical view of economics and property, because in the absence of the laws of Jubilee our tendency is to absolutize the right of property and become functional libertarians, at least fiscally speaking.

Biblical Property Rights

But scripture does not treat the property as an absolute: though it obviously prohibits theft, it frequently relativizes the right of the property when it serves the interests of solidarity with the poor. Therefore the right to sell land was not absolute, nor the right to exclude the poor from your land (as in the gleaning laws). Measures, then, that limit the right of property — provided always that they are pursuing the goal of a more equitable distribution of property — cannot be dismissed as flatly unbiblical, nor as contradictions of “thou shalt not steal.”

For example, a Georgist-style land tax might be one way of implementing a modern Jubilee. By taxing massive land holdings speculation would be discouraged and wider ownership of land would be encouraged. Landlords would also not be able to monopolize economic rents that accrue to land values because of population growth or increased productivity (effects that landlords have nothing to do with causing). John Médaille lays out a good case for the measure in his Towards a Truly Free Market.

Much of the how of a distributist economy remains to be hashed out, but as for the what of distributism, its social ideal, it is nothing more or less than a modern Jubilee. For too long we have ignored the implications of the Jubilee laws for Christian economics. By recovering them, we can recover a fuller sense of what it means to “proclaim liberty throughout the land,” liberty not annulled but perfected by the promises of the Gospel

 

Is it Really “Socialism with Mutton Chops”?

Distributists like to describe themselves as an alternative or third way that avoids what they describe as the pitfalls of both capitalism and socialism.  They also claim that their system (alone, they sometimes say), is faithful to papal social teaching and the Catholic social tradition more broadly.  Their goal, they claim, is a society of widely distributed property and widely distributed wealth and power.  This differs, they say, from both socialism, in which the state owns the means of production, the vast bulk of wealth, and all power, and from capitalism, which is, they say, a system in which a very few private people own the means of production, wealth, and have the lion’s share of power.  The problem with capitalism, as Chesterton liked to say, was that there are too few capitalists.  Distributists advocate a family-centered economy, invoking the time before the Industrial Revolution as a time in which small family farms and family businesses were capable of providing a more humane environment in which people were healthy, happy, and not subject to the depredations of wealthy industrialists.  While some distributists acknowledge that not every business can be carried on in the home, that some sorts of businesses require too large an amount of capital to do so, they make it their goal that larger businesses operate as worker cooperatives in which all act as co-owners.

Distributed Property

While many free-market critics of distributism—and many distributists themselves—seem to think that under such a system every household will be a sort of complete world where Pa builds the house, farms the property, do the plumbing, electricity, and develops his own software while Ma cooks, cans, makes all the clothes, and practices medicine while homeschooling all the children, this does not seem to be necessary.  As Bruce Brommel emphasizes, the defense of widely distributed property does not mean that individual families must become perfect societies in which everything is done within the home; nor does it mean that there will be absolutely no division of labor.  While many distributists favor an agrarian society, it is not necessarily the case that distributism can be conflated with agrarianism.  While many modern distributists point to the more than 8,100 farm cooperatives in Emilia Romagna, the region of Italy including the provinces of Ravenna and Bologna, the success of this region includes a variety of other industries, not all of them agricultural and not all involving cooperatives.  Most distributist advocates like to point to the success of the Mondragon Corporation, a Spanish cooperative that includes 80,000 workers doing over $25 billion of business a year creating a variety of different items, in the process providing social safety nets, credit unions, and other options.  Brommel notes that Belloc’s hope was first for a suburban distributism. 

Each in society will concentrate upon what he has the best opportunity for producing and, by exchanging his surplus of it for that which another has the best opportunity of producing, will increase the wealth of all; or what comes to the same thing, lessen the burden of labor for all …. For though the family exchanges its surplus, or even all its production, for the surplus of others, yet it retains its freedom, so long as the social structure, made up of families similarly free, exercises its effect through customs and laws consonant to its spirit:  the Guild; a jealous watch against, and destruction of, monopoly; the safeguarding of inheritance, especially the inheritance of small patrimonies.

Libertarian Distributism

While distributist Joseph Pearce calls Belloc’s distributism “essentially libertarian” and free-market critic Todd Flanders refers to Belloc’s “opposition to state power and to the coercive power of laws that expropriate and transfer wealth and labor,” the fact of the matter is more complicated.  As the contemporary distributist Allan Carlson points out, Belloc loved liberty and would certainly be considered quasi-libertarian in respect to his distaste for the modern regulation of so much of ordinary life, but the term is “misleading given his massive resort to state intervention.”   As he wrote in his 1936 Essay on the Restoration of Property, “We shall find as we proceed in our search for Economic Freedom, that we cannot follow it for any distance without calling in the powers of the State, to contrast with, and as far as possible to destroy, the usurped powers of Big Business.”

The Role of Government

The state’s job in the distributist economy is to make sure that property is divided fairly and to run the state in tandem with the various guilds.  Most distributists argue that problems of inequality of power, and to a lesser extent wealth, will be lessened by this division of property.  Concerning the guilds, distributists themselves are opposed to labor unions, though this is because they think that labor unions are ways of keeping workers pacified and thus preventing them from seeking the freedom of co-ownership in their businesses or starting their own.  Workers who accept wages they label “wage slaves.”  Similarly, many distributists believe that monetary welfare payments to people are dangerous, insufficient, and corrupting.

The Power of Guilds

Instead of labor unions, distributists generally advocate guilds—mixed class syndicates (Belloc and Chesterton cooperated with other “syndicalists” and many who called themselves “guild socialists”) that govern a particular industry or craft, determining the rules for who gets to work in an industry, setting minimum prices, minimum wages and maximum wages, and various other regulations.  So, though Belloc did not propose that the state be able to micromanage business, it seems clear that he believed that the guilds, often in collaboration with various local to larger governments, could and should do so.   Most distributists acknowledge that not every business can be carried on in the home, that some sorts of business require too large an amount of capital to do so, so they make it their goal that larger businesses operate as worker cooperatives in which all act as co-owners.