16 February, 2017

Distributism and Capitalism: Some contrasting features - Part 1


G. K. Chesterton's younger brother, Cecil, gave what is probably the most succinct definition of distributism, or rather of a distributist in an article he wrote in 1917.
A Distributist is a man who desires that the means of production should, generally speaking, remain private property, but that their ownership should be so distributed that the determining mass of families - ideally every family - should have an efficient share therein. That is Distributism, and nothing else is Distributism. ... Distributism is quite as possible in an industrial or commercial as in an agrarian community. ...[1]
This is an excellent definition of the formal economic arrangements of distributism, and moreover it points out the fact that distributism does not require that everyone become a farmer and that it will not hinder the progress of technology, as our critics sometimes assert. But while this definition highlights the structural aspect of well- distributed property ownership, which is the heart of distributism, there is more to distributism than that. For if distributism were simply a rearrangement of who owns what, but to be carried on in the same spirit with which capitalism is carried on, then eventually it would lead to the same economic and social ills that capitalism has produced. Rather, distributism requires a very different approach to mankind's economic activity, an approach that is focused on providing for our legitimate needs but not on inflaming our fallen appetites for more and more consumer goods.

Capitalism, as Pope Pius XI characterized it in his encyclical Quadragesimo Anno, #100, is the separation of ownership from work. In other words, in a capitalist economy some people own the means of production and hire others to work for them. Now, strictly speaking, as Pius XI points out, there need not be anything unjust about such an arrangement, provided that a just wage is paid and the other stipulations of justice are observed. But in actual practice capitalism has rarely if ever observed the demands of justice. And it is not hard to understand why. An owner of capital has at least three strong temptations to exploit the economic process by turning it away from service to the common good toward merely his own enrichment.

First, since he is not directly the producer of a product, not himself a maker, he tends not to be focused on quality products out of pride of workmanship, but rather on producing by means of his workforce something that will sell. Attention to quality is governed by considerations of expenses versus profits, and even by consideration of possible product liability costs versus profits. In the most extreme form of capitalism, the corporation, most shareholders, although legally owners of the firm, have absolutely nothing to do with what it makes or sells, and hence are interested merely in their dividends or in rising share prices. And in one step even further removed, mutual funds, owners often do not even know what companies their funds invest in, and such investments are often short-term and change rapidly. It is true that in some old-fashioned capitalist enterprises the owner is involved in the business and may have some pride of craftsmanship. But as long as the owner is actively involved in the business, then there is still a distributist element in the firm, however small.

Secondly, because he is chiefly and directly interested in sales, not production of a quality product, if something will sell, that is pretty much the only question he considers. By means of advertising capitalists engage in persuasion to convince people to buy their products. In cases of authentic need, people know they need something and will go to seek it. If they are hungry, they will buy food, if they want something to read, they will buy a book. But advertising attempts to convince people that they need things they had no previous idea they needed. It directly stimulates people's acquisitive appetites, and thus helps create a society preoccupied with consumer goods.

The third temptation which capitalist enterprise puts before an owner is to withhold justice from his workers. Workers are always a negative item in a capitalist balance sheet, and hence a strong temptation to reduce labor costs by holding down wages, laying off workers, moving jobs overseas, or even replacing the workforce with robots, if that is possible. For a capitalist all these choices can seem entirely rational. And they are all rational according to the logic of capitalism. But they all miss the point with regard to the logic of man's economic activity, which is not about making unlimited profits for those who happen to hold economic power. If all workers could be replaced by robots, the workers might legitimately ask, Hey what about us? How are we supposed to obtain what's necessary for us and our families if we are replaced by robots? How are we even supposed to buy what you yourself produce in your factories? But the actual trajectory of capitalism has too often seen workers replaced by machines, laid off, or underpaid, so that they cannot procure what they and their families need.

With distributism, however, while certainly social and economic difficulties would exist, the pathologies fostered by capitalism would be eliminated or at least reduced. A small business owner generally takes pride in his work and his customer service, and sees his craft or trade as more than merely a means of moneymaking. He usually derives from his work more than merely an economic return, for, as John Paul II pointed out in his first social encyclical, Laborem Exercens, the "various actions belonging to the work process...must all serve to realize [the worker's] humanity, to fulfill the calling to be a person that is his by reason of his very humanity" (#6).

In addition, a distributist economy would not be complete without guilds or occupational groups, whose purpose is to orient economic activity toward fulfilling human needs rather than toward selling products of dubious quality or usefulness. And lastly, the employer\employee divide would be largely done away with under distributism. Larger enterprises would be run as worker cooperatives, and so decisions about automation or new equipment which could potentially replace workers would be made with more than an eye on profits alone. Certainly technological development would continue, but we should note that technology can take more than one direction. When capitalists make the decisions and directly or indirectly determine what kinds of technological research is done, then new inventions will often be of the kind which increase profits by making workers unnecessary. But in a distributist society research will focus on other ways to reduce costs or increase efficiency without necessarily reducing the need for workers - who, after all, will now themselves be the owners.

Because of this altered focus of the economic system, and of the society as a whole, many things that are taken for granted in a capitalist system would hardly exist under distributism. A short time ago I pointed out here why this would be the case with unemployment, certainly one of the perennial scourges of capitalism. In the next part of this article I will take up the subject of business cycles, and show how in a distributist economy their presence and importance would be considerably lessened.

Continued in Part 2

Notes:
1: Shaw and My Neighbour's Chimney," The New Witness, May 3, 1917, p. 13.

11 comments:

  1. Do you have any comments on the arguments of Henry George? He asserted that the root cause of poverty is the private ownership of land and all other elements of nature that no man produces. These things belong to everyone and the rent for their use ought to go to everyone through taxes. No other human activity should or need be taxed.

    Has the church ever made this critical distinction between property produced by humans and that created by God? Perhaps not because it benefits so hugely by not doing so.

    George predicted that if this ancient injustice was not corrected it would rightly destroy our civilization as it has every other. If corrected in the reasonable way he layed out poverty as we know it would be eliminated and many other ills much reduced.

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  2. Dear Mr. Fotheringham,

    The Church has affirmed the right to own property, including property in land, not, as you unfortunately suggest, because "it benefits so hugely" thereby, but because ownership of property in land is a human right. That said, the Church also affirms the social nature of property and the legitimate limits which the state is able to place on property, its ownership and use. Thus I see no reason why some sort of taxation scheme as Henry George suggested could not be justly implemented, without denying the right of ownership of property.

    As you may know, Fr. Edward McGlynn, a priest of the Archdiocese of New York, was excommunicated by Archbishop Corrigan in the 1880s for supporting Henry George and his taxation proposals. However, Fr. McGlynn was reinstated by the papal delegate sent by Pope Leo XIII without having to withdraw his support for George.

    The question depends on whether or not one denies the right to property in land, or whether one argues that, without denying that right, only property in land should be taxed, since, as you say, it is simply given by God and we have not created it. The former is wrong, the latter is acceptable and could well be correct.

    Thomas Storck

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  3. Mr. Fotheringham,

    I also touch upon some of Henry George's positions in another article.

    Distributism Basics: Distributism vs. Christian Socialism

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  4. Mr. Storck and Mr. Cooney,

    Thank you for your response. I would like to understand the basis for the ownership of land being a human right. I have a right to my life and to the product of my labour but why can I claim exclusive ownership to a tract of land I didn't make? What gives me the right to forbid all others any use of it whatsoever? Because I inherited it? Because some king granted it to my forefather for doing him a favour? How could anyone at any time simply claim some part of nature for their exclusive use? By force? Does that make it right? I honestly don't understand.

    Land in the middle of nowhere has no value. Say I stake it out and work it and pass it on. Then my grandson "owns" it but does nothing with it. By that time a city has grown up around it and it has become really valuable. He pays the taxes on it which aren't much because it's not productive. He holds it and speculates it will grow ever more valuable simple because of increasing demand. Or he can let people rent bits of it and grow rich doing nothing but holding the deed. If he's smart he will buy other properties just before they boom and get richer still while doing nothing productive. If you believe in the absolute right to own land then it can't be taken from him even if he can't pay the taxes. If you agree he forfeits the land for non-payment then you don't believe in the absolute right to own land. We must mean different things when we refer to land ownership.

    I don't see that it's necessary to suddenly change things with the stroke of a pen. Taxes could gradually be shifted away from income, sales and other human effort toward taxing the use of raw land. Nor do I see that this has to be done at the highest level of government. Taxing land could and should be done at the local level. It is my understanding that they are done this way now. The city or town sets the mill rate and properties are taxed relative to their market value. But why are two identical adjacent properties taxed differently just because the current possessor of one makes good use of it while his neighbour let's his go to ruin? They ought to be taxed identically thus eliminating land speculation while maximising the value to the community.

    The board game that evolved into Monopoly was originally created to illustrate the arrangement Henry George advocated. There were two sets of rules. By the set we know the owner of each property takes all the taxes eventually resulting in every player going bankrupt except the winner. But if the rent for landing on each square is divided such that the base part goes to the community chest while the part for the houses and hotels goes to the square owner, then the game doesn't result in other players being driven into poverty and bankruptcy - they keep receiving their $200 for passing Go. You might say it makes for a more boring game but I would rather play that version than bare the guilt of ruining all the other players (as I assume I would win!).

    Which brings me to ask what you think of the Guaranteed Annual Income (or Basic Income Guarantee) proposal. This plan would give every citizen enough regular income to meet all their basic needs ensuring that no one falls into abject poverty. No one has to prove they need or deserve it - just that they are a human being with a natural right to their share in the wealth of their country. I favour the idea myself although I believe it would have to be accompanied by something like the ideas of Henry George. I don't believe the rich are inherently evil or even greedy - they're just smart or lucky enough to take advantage of the rules of the game. As a systems analyst I tend to look at the systems we have put in place and how they are often dysfunctional but taken for granted because of long use.

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  5. Dear Mr. Fotheringham,

    I think that ownership of land is somewhat different from ownership of something else, for, as you point out, land is simply there, we did not create it. Pius XI in Quadragesimo Anno pointed out the social and individual characteristics of ownership, and that (#49) "public authority, under the guiding light always of the natural and divine law, can determine more accurately upon consideration of the true requirements of the common good, what is permitted and what is not permitted to owners in the use of their property."
    It is possible to subject property ownership, and especially land ownership, to the requirements of the common good without denying that right, and especially by distinguishing land ownership from other types of ownership.

    In effect, the justification for land ownership rests on its service for the common good, and, as I understand it, according to Henry George's program, possession of land would be stable, and would actually operate in much the same way as ownership of land does at present. I never said I believed in the absolute right to own land, and neither has the Catholic Church. All ownership, including land ownership, must be according to the requirements of the common good. I'm not aware, for example, that the Church ever said anything against the notion that land could be taken for non-payment of taxes. It may be that you and I are simply using different terms for the same thing, and that you are reluctant to speak of land ownership, since that implies for you an absolute right, while I am willing to use that term since I never suggested any such absolute right.

    As to a guaranteed annual income, I'm inclined to think that there are better ways to achieve income security for all. Since work is usually necessary to produce the external goods that mankind needs to live, I see no reason why we should be exempted from that necessity or why those able to work should not be expected to work. I emphasize, however, that there is no reason why the rich should own all or most of the means of production and leave others only a small portion of the profits. Worker cooperatives and widely distributed property would eliminate the owner/worker divide and place economic power in the hands of workers themselves. I'm not speaking, of course, of those who for whatever reason are unable to work - obviously some means must be created to provide an adequate living for them.

    Thomas Storck

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    1. Dear Mr. Storck,

      I am so glad to read your articulate response and find myself in agreement with what you say. It seems obvious to me that serving the common good is or should be a fundamental goal of any economic system, firstly because it is just and right - all areas of human activity should serve the common good, or at least not be inconsistent with it; and secondly because it leads to peace and prosperity for all in the long term. If a large percent of the population is poor who will be able to afford the goods and services of a thriving economy? I am equally opposed to unbridled capitalism or any system that puts accumulating money and power before the needs of people; and to imposed socialism which forces the redistribution of wealth disrespecting peoples' rights to the legitimate fruits of their labour, ingenuity, and enterprise.

      I am attracted to George's ideas because they represent a decent alternative to capitalism and socialism. I first learned of him from a course entitled Justice and Economics (two words I would never have expected in the same sentence) from Dominican College here in Ottawa. I learned how he was one of the last classical economists before the current neoclassical school subverted the field just as it was becoming academically formalized, funded by land owners threatened by his alarming popularity. The clarity and persuasiveness of his arguments, the beauty and simplicity of his writing, impressed me like few others have ever done. That he has not had much influence attests to the dead hand of inertia regarding wrong-headed attitudes about land going back to the Romans. I am thinking of the vast estates of latifundia taken from the common workers and granted to retuning generals by the Senate thereby making slaves of free men, ultimately leading to the fall of the empire – a pattern that continued through the middle ages even to our time.

      I agree with the teaching of the Catholic Church which ultimately calls us to reject sin and love our neighbour. Once all are fully converted and greed disappears, poverty and injustice will also be no more. But we live in a corrupt world where many will take advantage of whatever weaknesses any system presents. No system is perfect but some are better than others. At least obvious temptations should not be presented and the weak should be protected from the strong while encouraging them to become more self-reliant. George's thought seems realistic as it is based on a good understanding of human nature. Rather than seeing greed or laziness he speaks of man's desire simply to satisfy his needs with the least possible effort.

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    2. Regarding a guaranteed annual income I was initially enthusiastic years ago. I remain in favour of the idea in principle but see problems with its implementation, the devil being in the details. I am also uncomfortable that it doesn't address the underlying cause of poverty and extreme income disparity as George does. But it's not an either/or. Nor perhaps is a Georgist/Distributist mentality necessarily at odds (or is my thinking fuzzy?). One reason I favour a GAI is the ever increasing automation of work. I do not see this as necessarily negative at all; rather it may be putting us in the position of the privileged of classical Greece who enjoyed their life because of many slaves. Like distinguishing property made by humans from property created by God/Nature, work should distinguish between that which is dangerous or distasteful and that which enlightens and fulfills. Instead of training humans to do jobs for their survival intelligent robots may soon do better we should educate people to love learning for its own sake, for the sake of their lifelong enjoyment, self-realization and contribution to human culture. The wealth of the nation will not derive from individual effort so much but from the technology we have inherited and which, as part of our culture, will continue to develop for the good of all. My career and my hobby were and continue to be software development. I learned much of what I know from freely available information and tools and I contribute without always thought of personal gain. A well implemented universal GAI and universal access to affordable technology could free every person to pursue their own dreams. I have a sister who is trapped in the current dysfunctional social welfare system which penalizes those who start their climb out of poverty by withdrawing benefits as soon as their income improves. I'm sure it was initially well intended but it's simply not achieving its objectives. I believe every human being has an inherent right to a healthy life and the means to sustain it, economic and otherwise. Yes, people should be encouraged to work but for the purpose of becoming the best human they can regardless of their material or economic productivity.

      In conclusion I am seeking the best combination of approaches which will eliminate economic poverty and extreme income disparity while respecting private property, taxing and monitoring the use of nature for the common good.

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  6. You said "it will not hinder the progress of technology, as our critics sometimes assert." Yet, your defense of that statement does not at all address the concerns I have relating to this. In technology and many parts of science, each breakthrough takes significantly more time and resources than the last. (This is not as true as the extent Big Pharma claims when price gouging, but it is still true.) Many of the advancements we've seen especially of late would not have been possible without a large accumulation of funds in one entity. While I think the ideals on which distributionism is based are great, I cannot see past this fault. Additionally, the only defense I've found to the "economies of scale" argument is that diseconomies of scale also exist. However, anyone with an understanding of economics knows that that diseconomy takes place well beyond the production capabilities of an individual, with economies of scale having the strongest benefit at the beginning, e.g. compared to the smallest unit of production, which is what's being advocated here. It seems certain the price of goods would increase in this model, and I worry it would increase so drastically that it couldn't be sustainable.

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    1. Remember that distributism does not deny the necessity or utility of large entities per se, it only says that they should be owned and controlled by those who do the work. Thus, granting for the sake of argument your claim about technological breakthroughs, there could well be large-scale enterprises, but they would be worker owned. Furthermore, as I've pointed out many times, guilds or occupational groups would be a feature of a distributist economy, and these guilds could well conduct research, which would then be shared with all guild members. One of the functions of guilds could be akin to trade associations or research institutes established by particular industries. Lastly, as I'm sure you realize, right now much research is done by the government or under government contracts, not by corporations themselves, and thus this is hardly an argument for the benefits of large-scale capitalist corporations.

      Thomas Storck

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  7. I would love many or all of these articles to be made into YouTube Videos or Itune talks. I do much more listening as I drive, or walk than being able to stop and read.

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  8. Fr. Pomeroy,

    Thank you for bringing this up. This is something I have been considering for some time. Unfortunately I haven't managed to get everything together to get a podcast set up.

    David

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