21 May, 2015

Justice, Fairness and Taxation, Part Two

This article was originally published by
The Distributist Review on 8 November, 2010

In Part I of this article, I pointed out that a purpose of the Keynesian redistribution of wealth was to keep the engine of Capitalism working. It’s adherents advocate it from a sincere belief that this is the best way to help everyone. It sustains the poor and maintains the wealthy. The conservative and libertarian pundits who praise the small business owner do so on the assumption that he is an entrepreneur seeking to become a wealthy monopolist. They also believe that wealthy monopolists are required in a society to provide enough jobs for the mass of people. In other words, they advocate the growth and consolidation of businesses into wealthy monopolies because they sincerely believe it is for the common good. Distributists, on the other hand, seek to eliminate monopoly as a means of establishing the common good.

When many people hear the name “Distributism,” they assume it means a Keynesian style redistribution of wealth. Actually, Distributism refers to the idea of distributive justice in all aspects of society. In the economic sphere, distributive justice is accomplished through the widely distributed ownership of productive capital. While there could still be a wealthy class in a distributist economy, the elimination of monopoly by establishing widely distributed ownership would mean that the disparity between the wealthy and the other classes would not be nearly as great as it is under Capitalism. Therefore, a Keynesian style plan for the ongoing redistribution of wealth is not necessary in a distributist society.

We are really discussing a completely different way of looking at business, and this difference is what makes the ongoing redistribution of wealth unnecessary. In Distributism, managers and workers would be cooperative owners in most cases. This means that management and worker would not be in a combative relationship as they now are. Employees would certainly still exist, but they would no longer constitute the overwhelming majority of citizens. Large monopolies would not exist, so no single business could grow large enough to be able to devastate a local economy – and it would not have the political power that comes with that ability. All businesses within a particular industry would cooperate through guild-like associations to establish standards and regulations for their industry and for funding research and innovation for the mutual profit of all.

I can hear the questions coming.

“Doesn’t this destroy the free market?”

No, it ensures the free market continues to exist. Businesses are allowed to be self-regulating through their associations as long as they treat customers, employees, and each other with justice. Distributism actually prevents monopolies from destroying the free market.

“Won’t this actually stifle innovation?”

Innovation helps business to succeed in more profitable ways by providing new and better products and services. In our capitalist system, only large monopolies have the resources to do expensive research. They patent the results of this research and force others to pay for the benefits. In the distributist system, the associations can pool contributions from their many members to do the same research cooperatively. The benefits are shared by everyone, who can incorporate the findings of that research into their own business as they see fit. The overall cost is distributed, as is the benefit. Therefore, there would be just as much incentive for smaller businesses to get the research done cooperatively as there now is for monopolies to do so exclusively. The difference is that the benefit cannot be withheld from the community at large.

“What if they don’t?”

Government certainly has a role in protecting the economy, but the role of regulation does not exist solely with the government. Legally enforceable regulation is also the function of associations based on trade or service. In many cases, the role of government would be to support and reinforce more locally established bodies that regulate economic activity at the local level. However, government can resolve conflicts within the associations and compel the associations to fulfill their function within the society when necessary.

In the political sphere, Distributism accomplishes distributive justice by distributing authority throughout all levels of society. The basic unit of society is the family and all other levels of society ultimately exist to fulfill the common needs of society that cannot be met by the family or other more basic levels. In other words, the higher the level of society, the lower the scope of authority. With Distributism, the role of every level of society is ultimately to serve the common good. The role of each level of society, including government, is (1) to assume only those functions necessary to accomplish what cannot be accomplished by the lower levels, and (2) to assist those lower levels when necessary, but never by assuming their functions.

However, while distributists share common goals, there can be different views within its philosophy on how best to achieve them. There are differences in situation and culture that must be accommodated, which means it is possible for there to be different paths to establishing the wide enough distribution of ownership of productive capital so that it becomes the identifying nature of the economy. Taxation has the potential to impact every level of economic activity. We must look at both the purpose and methods of taxation, not just as it would exist in an established distributist society, but as it might be utilized to transition society to Distributism. Whatever actions are taken, we must remember that it must meet the criteria of moving society in a direction for the common good. This is important to keep in mind. Any transition from our Keynesian system to Distributism would likely involve strong government intervention that may even seem Keynesian in nature. However, if done properly and with the support of the people, these transition phases could end fairly quickly. Distributism must not only answer the question of what forms of taxation should be used to pay for the functions of government once it is established, but also whether or not taxation can be used to help accomplish the transition to Distributism.

In the next part, I will discuss some of the different methods of taxation and offer my own reflections on them for consideration.

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