04 October, 2009

Distributism vs. Capitalism

There is a great deal of uninformed “analysis” and commentary being made about distributism. Die-hard capitalists in the present day U.S. accuse distributism of being nothing more than a new form of socialism. Distributists accuse capitalism of being immoral, but often fail to explain exactly what makes it so. There are also some learned philosophers, such as Dr. Rafael Waters (with whom I would loathe to disagree), who argue that capitalism is not immoral. Therefore, in order for a practical discussion of distributism to exist, there must also be clarity regarding these terms and what is meant.

Is distributism socialist? Nothing could be further from the truth. Socialism denies private ownership. Now, we are not discussing how a society moves toward socialism; which would include a mix of public and private ownership for a period of time. We are discussing these economic views in their purest forms. In socialism, everything would be owned in common (i.e., owned by the state.) and there would be no private ownership. Distributism desires the widest possible distribution of private ownership. In the distributist ideal, everyone would own their own land and house, own their own business, and would not be impaired by unjust government regulation that would make these ideals difficult to be reached.

What, then, is the difference between distributism and capitalism? The key difference is the attitude toward monopoly and the methods used to achieve it. Dr. Waters points out that, in our current economic environment, ten dollars is spent on trying to prevent or eliminate competition for every dollar spent on producing goods or providing services. This anti-competitive spending takes the form buying out competitors, securing exclusive rights to technology and methods, and trying to gain the largest share of the business possible. In other words, while modern capitalists extoll the advantages of competition, capitalism itself has nothing to prevent anti-competitive actions. If a metropolitan area has ten local shops that all compete in the same market, and one of them grows by buying out the others and becoming the exclusive provider. People, who were previously proprietors have been reduced to employees. This is viewed as acceptable by the capitalist. It is also acceptable if a large chain shop with no local ownership move in and eliminates all of the local shops. “That's just how a free market works,” is the explanation for accepting this. Dr. Waters laments that “competition” is actually a cooperative concept, whereas, the current capitalist environment views it as a sort of war where one excludes or eliminates the others.

To the distributist, the real difference between distributism and capitalism is rooted in the philosophy that underlies their systems. Both believe that the existence of competition and private ownership will help ensure economic justice and freedom. Adam Smith said that the key to his economic view was the existence of enough competition to prevent abuse. The problem is that he believed self-interest would ensure the continued existence of effective competition. Capitalism tends to rely on human greed to preserve competition and private ownership. Because everyone will naturally work to protect their own individual good, the common good will naturally be be achieved. Capitalism, as a distinct economic system, was born of a view that, for the most part, rejected centralized authorities. Because of this, it rejects, to the greatest extent possible, the influence of anything other than “free market forces” on the free market. Adam Smith also lived in a time when technological conditions prevented anti-competitive behavior from extending very far. Because of this, the economic system he envisioned did not provide any protection against anti-competitive behavior. I would also question whether he would have included such protections even with our current technological abilities. He believed that, because everyone will act in their own self-interest, everyone will naturally act to protect their own economic freedom and, thereby, ensure economic justice. Therefore, there would be no real need for a central authority to prevent monopolies from forming through anti-competitive behavior. The result of the capitalist view, and its underlying philosophy, is that greed cannot be truly regarded as a vice. In fact, in our society, it is only viewed as such when some gross injustice is perpetrated out of greed. General injustice, such as the deprivation of general ownership throughout society, are tolerated. This will tend to result in an ever increasing number of poor classes, who are completely dependent on a small group of very wealthy for their livelihood. The shrinking middle-class who are, more or less self-sufficient, have only a minor influence on the economic health and stability of a society. This is where distributism departs from capitalism.

A common misunderstanding of distributism's by its critics is believing our insistence of “widely distributing” property as being a form of the type of “redistribution” (forcibly taking from the wealthy to give to the poor) promoted by today's liberals. Another misunderstanding is believing our insistence on self-sufficiency as the form that became a fad during the 1970's, where each family tried to independently provide for all of their needs. Both of these are distortions of distributism as an economic system. Distributism regards the common good, that is the good of each individual and of the whole society, as the primary factor that should govern economic activity. Because general, widely distributed, ownership of property is good for all individuals as well as for society, society must establish provisions to protect ownership from being consolidated to the wealthy few. Distributism does nothing to prevent or punish the accumulation of wealth in terms of money or fine things. The profit motive is definitely an active part of distributism. It does, however, prevent the wealthy buying up and controlling the means of production or from buying out other businesses. In other words, an individual can work to become wealthy, but cannot work to prevent others from becoming wealthy. Although distributism tends to have a higher regard to a rural, agrarian society, it does not reject technology or urban development. Indeed, distributism acknowledges that, in a healthy society, people will tend to produce one thing and then buy the other things they need or want from other producers. In other words, distributism operates on the very same basic principle as does capitalism. However, it provides the protections lacking in capitalism.

These protections take two forms; guilds and government. Part of the philosophy that underlies distributism is the idea of subsidiarity; those things that can be managed by the smaller unit of society need to be shielded from interference by the larger units of society. Individual economics entities (persons and small businesses) need protection from larger entities (government and big-businesses). Therefore, while government must have a role, it must be limited. If a guild can protect businesses local to an area from being bought out by a monopoly, then the government need not interfere. If a guild can protect the interests of the individual by establishing standards in its industry, then, again, the government need not get involved. The government needs to be available in case the guild fails to do its job, but not by taking over its function. Instead the government must be empowered to compel the guild to fulfill its function. Another role of the government would be to provide a stable means of exchange upon which the general public can rely. The deliberate, or even random, manipulation of currency's value means that people cannot rely on the value of the means of exchange and savings. The value (purchasing power) of $100 today should be the same as it was fifty years ago and fifty years from now. The “cycles” of inflation and deflation are not “natural” to money, nor are daily fluctuations of rates of interest, as we are typically taught today. These cycles are the result of banks manipulating currency to their own best advantage (to gather more wealth to themselves), and are therefore typically to the general public's disadvantage.

Another area of difference is the development of technology. Capitalism's reliance on individual greed led to a system of patents and copyrights to ensure further development of technology. The development of technology is encouraged by ensuring an exclusive hold, at least for a time, of the ability to profit from that development. Because of this, a great deal of capital is expended on duplicate efforts to develop new technologies. Cooperative efforts are thereby discouraged except when absolutely necessary. This results in the government becoming involved to settle disputes of ownership, and even in establishing standards. However, having the government involved in these things opens wide the door to corruption. It also opens the door for new technologies to be withheld from use by companies buying the patents in order to bury the technology when doing so would ensure their greatest profit. Under distributism, technology would be developed cooperatively. For example, let's say the makers of shoes want to develop a new technology for their manufacture. The various guilds to shoe makers would cooperatively conduct the research and development for this technology, which would become generally available once it was developed. The funding is provided by the members of the guilds through their membership. No single company could buy exclusive rights to that technology, nor could they possibly bury it. Because the potential for greater profit is still present, the guilds have the motivation to develop new technology. Because all of the members have an equal right to the use of the new technology, they all benefit equally, and the public in general also benefits. With an exclusive patent, a single company use its exclusive hold on the technology charge higher prices for its products (because it has the new technology). It can also use its exclusive hold on the new technology to try and deprive its competition of its ability to compete. Distributism prevents this anti-competitive behavior while still providing sufficient profit to encourage technological development. One should be able to see from this, that capitalism and distributism are very close in operation. The key difference is the ability to manipulate the ownership of capital (the means of production). In hearing Dr. Waters discuss his views on how capitalism can be moral, he seems to be discussing the same limitations on economic behavior that are provided by distributism. In other words, his view on what capitalism should be seem to be the same as distributism.

Under socialism, the general public is deprived of the means of production because they are denied ownership by the state. Under capitalism, the general public is deprived of the means of production because the wealthy are allowed to buy up the means of production, thereby preventing the general public from obtaining it. Under distributism, the right of the general public to own the means of production is protected by preventing the state from denying the right of ownership, and by preventing the wealthy from buying up and hoarding a disproportionate share of capital.

People in our society have been raised to believe that an unrestrained free market is the best means for ensuring both economic and individual freedom. Distributists face the up-hill, seemingly insurmountable, burden of convincing them why this is not the case.

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