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Catholic Social Teaching and Conventional Economics

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

Anyone who has spent much time trying to promote Catholic social teaching has probably met with a response something like this. “What you say is very fine and certainly evidence of good will.  But, you see, most of what you are asking for is simply impossible. Society would break down.  For there are economic laws which it is as foolish to try to circumvent as those of gravity.  We certainly ought to try to eliminate poverty and all that.  But this can only be done if we obey the laws of economics.  If you study economics a bit, you’ll soon see why you’re barking up the wrong tree.”

And it is easy to understand why economists or those who have studied economics say this.  For mainstream economics does teach a simple yet powerful approach to all of the multifarious questions arising from man’s relations of producing, buying and selling, lending and borrowing, and so on.  Everyone wants to maximize his welfare, the desire to produce and sell can be matched against the desire to buy and consume since there are market forces which balance these two exactly, and even if they do not always result in what Christians would call justice, to interfere in their workings is to bring about (ultimately) inefficiency, waste and poverty.

According to this conception, then, economic activity works more or less according to a few simple principles, which can be applied over and over again with great sophistication to analyze a wide variety of behavior.  And to try to escape from the inexorable working of these economic principles is to court disaster.  For example, one might think that some workers are underpaid, and that this problem could be easily solved by passing a law requiring that all workers be paid a minimum wage.  But, no, that would result only in more unemployment.  It may be a shame that some get paid so little, but there is nothing that can be directly done about it.  Certainly passing minimum wage laws is the last thing we would want to do.

Economics, therefore, describes what will happen if you do a certain thing.  It is a predictive science, able to tell you that if you do A, B will result.  It is thus reduced to something like mechanics, a sort of mechanics of human behavior.  This approach is well illustrated by Milton Friedman in his famous 1953 essay, “The Methodology of Positive Economics.”

I venture the judgment, however, that currently in the Western world, and especially in the United States, differences about economic policy among disinterested citizens derive predominantly from different predictions about the economic consequences of taking action – differences that in principle can be eliminated by the progress of positive economics – rather than from fundamental differences in basic values…. An obvious and not unimportant example is minimum-wage legislation.  Underneath the welter of arguments offered for and against such legislation there is an underlying consensus on the objective of achieving a “living wage” for all, to use the ambiguous phrase so common in such discussions.  The difference of opinion is largely grounded on an implicit or explicit difference in predictions about the efficacy of this particular means in furthering the agreed-on end.  Proponents believe (predict) that legal minimum wages diminish poverty by raising the wages of those receiving less than the minimum wage as well as of some receiving more than the minimum wage without any counterbalancing increase in the number of people entirely unemployed or employed less advantageously than they otherwise would be.  Opponents believe (predict) that legal minimum wages increase poverty by increasing the number of people who are unemployed or employed less advantageously and that this more than offsets any favorable effect on the wages of those who remain employed.

According to this conception of economics, economists must chiefly engage in manipulating graphs, mathematical formulas and the like to predict the results of actions.  Things either happen or they do not. Though it may be more difficult to discover what will happen because of the multiplicity of variables, in principle there is no more room for discussion then if it were a matter of asking what happens when we drop a ball of a certain height and weight or project something with a certain force against some obstacle.

Friedman’s discussion of the minimum wage that I just cited is a good entry point to begin to unravel such economic dogmas.  It is easy to understand the logic behind Friedman’s argument.  Like most arguments in the economic tradition descending from Adam Smith, the notion that “minimum wages increase poverty by increasing the number of people who are unemployed or employed less advantageously” by increasing employers’ costs has an obvious plausibility.  But yet one may question it on several grounds.  Aside from the fact that there is little recognition here that in something as complicated as human affairs it is unlikely that one can pronounce once and for all about something such as the minimum wage, more importantly there is an assumption of a certain legal structure which is simply accepted as given.  For whatever side of this question mainstream “positive economics” may eventually take, such a judgment presupposes a specific legal and social framework.  The distribution of income and economic power that mainstream economics apparently accepts as a given depends more on human law and custom than on any immutable laws of economics.  What I mean can be illustrated by the well-known story of the Antigonish cooperatives in Nova Scotia in the 1930s, as recounted in B. B. Fowler’s 1947 book, The Co-operative Challenge.

But the most forlorn picture lay in northeastern Nova Scotia and the island of Cape Breton.  Along the coast lived the fishermen.  Their catch of fish and lobsters was handled by local dealers who in many cases kept the fishermen in a state of peonage.  While Maine fishermen were getting about fifteen cents a pound for lobsters, the Nova Scotian fishermen were receiving as little as two cents a pound.  All other prices were scaled down in the same ratio.  For everything they bought, however, from their scanty food purchases to nets and lines, they paid top prices, with the result that they were invariably bowed down with a load of debts.  Appalling poverty, illiteracy, poor health and the worst possible housing conditions existed throughout this section.

After priests from St. Francis Xavier College had begun to educate the fishermen and others in the philosophy of cooperatives, a

few lobster fishermen got together and made up a crate of lobsters which they shipped express to a commission agent in Boston.  When the mail brought a check the group sat around, afraid to open it.  So much depended upon that check; upon its size rested their hopes for better prices and better living. Probably there had never been a more momentous moment in all their lives than that moment when one of the boys finally opened the envelope and took out the check.  After all shipping charges and commissions had been paid, there remained fifteen cents a pound for their shipment.

The point of this story is that the distribution of income follows the distribution of economic power, which in turn depends in large part upon the legal and social structure.  Doubtless one could have found economists who would have said that the penury of the fishermen while they were at the mercy of the middlemen of their province simply reflected the inevitable laws of economics and that the price they received for their lobsters faithfully reflected the economic contribution they made and therefore the two cents per pound was simply the equilibrium toward which they were forced as if “by an invisible hand.”  But this obviously was not the case.  Rather, it faithfully reflected certain economic and legal arrangements and structures, which, as it turns out, could be changed.

This same argument can be made about the question of minimum wages.  As long as the employer/employee relationship, the essential note of capitalism,[1] is the common method by which labor is engaged, then the desire of employers to reduce costs can and probably sometimes will conflict with their ability to hire more workers at a statutory minimum wage.  But this reflects not unchanging laws of economics drawn from the nature of reality or human society, but rather certain legal, social and cultural arrangements which are by no means immutable.

The unequal power of employer and employees, especially of unorganized employees, our societal ideals which deny that there is any just or reasonable amount of profits with which an employer or firm should be satisfied, our general incorporation and limited liability laws – all these create a situation where Friedman’s dilemma, or rather the dilemma he sets up for society, has some plausibility.  But how if some or all of these legal and cultural norms were changed?  How if, as in the case of the Antigonish fishermen, the framework in which these economic transactions occur were changed?  For example, how if employees themselves became owners, as so often recommended by the Popes?[2]

These types of considerations should lead us to see that perhaps the framework that conventional economics presupposes is not the only possible framework.  That is, with a different legal system, different cultural and societal norms, different personal goals and expectations, many of the so-called laws of economics would appear not as universal laws of human behavior, but as limited by place and time, as taking for granted certain institutions, incentives and motives which are far from being universal principles of human society or action.

My thesis is that Catholic social principles will often seem at odds with economic facts as long as we accept mainstream neoclassical economics as descriptive of how the world actually operates.  But as soon as we begin to question orthodox economics, then all this can be looked at in a new light.  And there are in fact many reasons to suppose that orthodox economics is not descriptive of how the real world operates.  Let us look at a few more examples.

The notion that economics can be based on market forces, such as a more or less constant tendency toward equilibrium, etc. seems to depend on the prior notion that people are motivated primarily by economic motives, that is, by the desire to buy cheap and sell dear, to increase their material wealth as much as possible.  But it seems to me that history, as well as our own experience, tells us that reality is much more complex.  Often people or firms do not strive to maximize their profits or income, as even such conventional economists as Laurence Miners and Kathryn Nantz, associates of the late Paul Samuelson in preparing introductory economics texts, admitted in their 2001 Study Guide to accompany Samuelson’s textbook.  Sometimes this is because it is too irksome to do so, other times because people prefer leisure to increased wealth and are content with simply a sufficiency.  Sometimes habit and custom dictate a standard with which people are satisfied. They may shop in the same store even though it is more expensive because they are accustomed to do so.  To say, as Samuelson might, that this is an example of imperfect competition because the two stores differ in some way, is to try to prove too much, because then everything becomes a matter of economics.  Certainly people are always motivated by a desire for their happiness, but to say that this human striving for happiness is always an example of economic behavior and ought to be analyzed according to economic criteria, would be to make economics, rather than ethics, the architectonic science of human behavior.

One example of the way that habit often makes us satisfied with customary gain is mentioned by Max Weber in his classic work, The Protestant Ethic and the Spirit of Capitalism.

Until about the middle of the past [i.e. nineteenth] century, the life of a putter-out was, at least in many of the branches of the Continental textile industry, what we should to-day consider very comfortable.  We may imagine its routine somewhat as follows:  The peasants came with their cloth, often…principally or entirely made from raw material which the peasant himself had produced, to the town in which the putter-out lived, and after a careful, often official, appraisal of the quality, received the customary price for it. The putter-out’s customers, for markets any appreciable distance away, were middlemen, who also came to him, generally not yet following samples, but seeking traditional qualities, and bought from his warehouse, or, long before delivery, placed orders which were probably in turn passed on to the peasants.  Personal canvassing of customers took place, if at all, only at long intervals.  Otherwise correspondence sufficed, though the sending of samples slowly gained ground. The number of business hours was very moderate, perhaps five to six a day, sometimes considerably less; in the rush season, where there was one, more.  Earnings were moderate; enough to lead a respectable life and in good times to put away a little.  On the whole, relations among competitors were relatively good, with a large degree of agreement on the fundamentals of business.  A long daily visit to the tavern, with often plenty to drink, and a congenial circle of friends, made life comfortable and leisurely.

It would seem that the constant desire to maximize income or output simply does not exist without a cultural imperative to that effect.

Another area in which we may question the descriptive nature of conventional economics concerns the role of market forces in allocating income.  The allocation of economic rewards does not always come about because of market forces, rather, whoever holds economic power generally receives more economic rewards, as in the conspicuous example of CEO compensation.  The remarkable fact about CEO compensation in the United States in recent years is that certain CEOs have received large compensation packages even though the companies they headed were losing money or going into bankruptcy.  Why then did they receive these salaries and benefits?  Because of market forces?  Hardly.  It was because they were able to appoint their cronies to the compensation committees of their boards of directors.  Their salaries and other compensation were almost entirely insulated from the market forces of supply and demand for executives.  Let us look at a few specifics.

As described in The Washington Post, April 22, 2003, while Apple Computer’s “shareholders’ return declined by 34 percent” CEO Steve Jobs received $78 million, and while Lucent’s “shareholder return declined by more than 75 percent” Pat Russo received $38 million (Carlson 2003:C1).  Even more striking is the case of Disney’s Michael Eisner.  Eisner, “after he failed to clear his bonus hurdle two years running, his board lowered the performance bar, and then…he finally cleared it.  An Olympian effort worth $5 million”

An April 2003 article in Fortune magazine explained another method by which much CEO compensation is hidden from shareholders, the legal owners of the corporation.  Delta Air Line’s CEO, Lee Mullin, after the company lost $1.3 billion and laid off thousands of workers, in response to criticism, grandly announced that he was going to give up 25% of his salary and other compensation.  But what he did not mention was his pension plan.

You see, Mullin has been employed by the airline for only five years and eight months.  But a special pension plan that Delta’s board created for top executives has credited him…with another 22 years of service.  Thanks to those phantom years, the 60-year-old CEO could walk away from the airline today and be entitled to receive a payout of about $ 1 million a year, starting at age 65, for the rest of his life.  And if the airline goes bankrupt, no problem:  Special Delta-funded trusts protect the pensions of Mullin and 32 fellow executives from creditors.

(This by the way while Delta’s workers’ pensions were being cut.) This same article details many more examples of CEO’s receiving exorbitant pensions while their companies went bankrupt, lost stockholder value or cut workers’ pensions.  And the article goes on to ask the reasonable question:

So why, you may wonder, aren’t investors up in arms over these jaw-dropping retirement giveaways?  The answer is that hardly anybody knows about them.  The complex details surrounding executive pensions are typically buried deep within a company’s SEC filings, far removed from the salaries, bonuses, and stock options that dominate the headlines.

Both the example of Disney’s Michael Eisner, whose board kindly made it easier for him to get (I will not say “earn”) an extra $5 million, and the fact that boards hide the details of CEO retirement so that shareholders will have trouble finding out about them, illustrate my point:  Market forces are not the only or even the most powerful forces operating in the economy, and moreover market forces always work within a legal, socio-cultural and technological framework.  It is a CEO’s cronies on the compensation committee of the board of directors that determine his compensation, not impersonal market forces.  If we changed the law so that CEO salaries were decided by a free vote of the stockholders, not many of them would get these huge salaries and retirement packages, especially when their companies were failing and stockholders were losing the value of their investments.

This principle of the importance of non-market factors is true throughout the economy.  Without labor unions workers received low pay and had poor working conditions and benefits.  Unions helped them to achieve gains in all these areas.  This was because it helped to give the workers power to offset that of their bosses, not because the law of supply and demand had been changed.

All of these instances of economic behavior presuppose certain norms, generally both cultural and legal.  Without limited liability laws, for example, corporations could not exist, at least in their present form.  Without patent, trademark and copyright laws, the provision of inventions and other kinds of intellectual property would doubtless be very different.  Moreover, the kind and degree of taxation, technology, the physical infrastructure – all these affect to a great degree the workings of the economy.

Markets and market forces, then, are always embedded in social, legal and cultural systems.  Economic forces, such as the equilibrium of supply and demand, are certainly real, but seldom if ever the most important forces operating in an economy.  Thus the objection to Catholic social teaching based on the notion that it violates the assured findings of economic science is not valid.  Rather, economic outcomes depend on power, cultural and legal institutions, and other factors.  Since laws and institutions can be changed, there is in fact ample room in economics for a consideration of ethics.  Thus those who seek to promote Catholic social doctrine should acquaint themselves with those economic schools, chiefly the German historical school and the institutionalists, whose conception of the economy recognizes that it does not operate like clockwork, but is chiefly determined by who holds economic power, which in turn is chiefly determined by law and custom.  Clarence Ayres wrote with regard to institutionalism in a discussion in 1957 in The American Economic Review:

…the object of dissent is the conception of the market as the guiding mechanism of the economy or, more broadly, the conception of the economy as organized and guided by the market.  It simply is not true that scarce resources are allocated among alternative uses by the market.  The real determinant of whatever allocation occurs in any society is the organizational structure of that society – in short, its institutions.  At most, the market only gives effect to prevailing institutions.  By focusing attention on the market mechanism, economists have ignored the real allocational mechanism.

As soon as one considers this, its truth should be obvious:  the human desire for happiness certainly very often includes the desire to maximize material gain and minimize loss, but this desire is channeled through existing customs and institutions, and to a great extent even shaped by them.  So that a conception of “economic man” which isolates him and posits certain things about him which are then universalized, is erroneous.

Similar criticisms were made by the German historical school.  As described in the well-known reference source, The New Palgrave: a Dictionary of Economics, this school of thought faulted the

classical school’s deductive method…as being too abstract [and] puts the emphasis on the inductive method.  Historians point out that economic development is unique, so there can be no `natural laws’ in economics…. Instead of searching for generally applicable laws, the historical school therefore tried to describe the particulars of each era, society and economy.

Since the human institutions within which economic activity occur undoubtedly vary widely over time and place, and to some extent, even the human desire for gain takes on different forms according to custom, it would seem rational to include such historical factors in economic analysis, and further, that any economic analysis that omits or downplays them is not dealing with the real world.  Conventional neo-classical economics, however, largely does just that.  If its defenders regard it as the only acceptable scientific form of economics, we must point out to them that any economic science that strives more for mathematical precision and consistency than conformity with the real world has deeply misunderstood its task. Thus there is a simple way out of the intellectual trap that is set for Catholic social teaching.  We do not have to abandon our intellectual rigor or scientific orientation.  Rather we can retort that it is our critics who are unscientific.  But above all we should begin to bring the insights of heterodox economics into the debates over social doctrine.  Without them, the critics of Catholic social teaching will always claim that they alone understand economics.  For to attempt to defend Catholic social teaching while explicitly or implicitly accepting conventional neo-classical economics is not only to allow one’s adversaries to set the terms of the debate, but it is to adhere to an economic methodology which distorts facts and attempts to compress reality into a straitjacket.

Notes:

[1] This way of characterizing capitalism comes from the encyclical of Pope Pius XI, Quadragesimo Anno (1931).  Pius speaks of “that economic system in which were provided by different people the capital and labor jointly needed for production” (no. 100, Paulist translation).

[2] Those papal documents which recommend widespread property ownership include Rerum Novarum, nos. 4, 10, 26, 35; Quadragesimo Anno, nos. 59-62, 65; Mater et Magistra, nos. 85-89, 91-93, 111-115; Laborem Exercens, no. 14. ”

You can learn more about this issue here.

The Bogus, Self-Serving Notion that Poverty is Simple

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

In a recent article for The Week, Jeff Spross makes a fair claim against the standard “conservative” rhetoric that the real solution to the problem of poverty is for those in poverty to start working. He also addresses the position of some conservatives who say that we can never truly address the issue of poverty because it is such a complicated human problem. Mr. Spross points out fatal flaws with this claim, but fails to see the fatal flaw in what he presents as the solution.

To start with the flaws of the “conservative” solution he criticizes, Mr. Spross rightly points out that, in the so-called “advanced” countries, it is not as simple as going out and getting a good job. Thanks to the continued outsourcing of unskilled labor to “third world” countries, our own poor are deprived of the ability to simply go out and get a job which will provide enough pay for the basic needs of every day life; especially if they are trying to support a family. Instead, we have become a society where one already has to have ready access to money in order to get a job that pays well. You can’t just graduate from high school and get a low skill job that will provide food and shelter for a family. It is increasingly the case that you have to go to college, or at least to a trade school, to get a good job, and that means that you have to already have access to money to get the education needed to get a job that pays even a subsistence wage.

Therefore, the typical conservative position fails to account for that large portion of the population that does not have the necessary access to money. These are the people they tell to go out and get better jobs, but don’t seem to realize the true difficulties that exist in doing so. Ironically, they simultaneously want to cut funding for the education they need to do so on the basis that such government handouts inculcate government dependence. This failure to see the incompatibility of the solution they propose and their cutting off the means to achieve that solution is the fatal flaw in the conservative position. They don’t see how their own economic beliefs and policies created the poverty that made social welfare programs necessary.

Mr. Spross finds it “incredibly galling when Brooks declares that ‘surely the solution is to throw everything we think works at the problem simultaneously.’ Because this is exactly what he and his Brookings-AEI colleagues are not willing to do.” The “what” Mr. Spross says they are not willing to do is money. Mr. Spross is representing the so-called “liberal” side and advocating the idea that what needs to be done is for government to throw money at the problem. However, he is being unjust in claiming that Mr. Brooks and Brookings-AEI are not willing to thow everything they think works at the problem because that is precisely what they are willing to do. What they are not willing to do is what Mr. Spross and the “liberal” side thinks will work. Conservatives don’t think that increased government spending on social programs will work, liberals do.

However, this solution by the liberal side is just as bogus and self-serving as that of the conservatives. It starts by setting up the false premises that modern society, defined as one where “land and infrastructure is governed by private property rights, where we trade money rather than goods, and where labor is highly divided and specialized,” somehow prevents people from being able to learn the skills and obtain the capital and resources they need to provide for their own living. Mr. Spross seems to jump straight from “primitive” agrarian societies to modern industrialized capitalism without considering any of the economic history between the two. We are taken straight from the ability to stake out unclaimed land to needing to go to college or trade school.

This bogus premise becomes the self-serving basis of the so-called “liberal” position that the solution to poverty in a “modern” society is increased intervention and spending by the highest level of government. Looking at the level of national spending on social programs in other Western countries as an example to follow, Mr. Spross criticizes the US because its federal programs are too small, to diffuse, and too ill targeted. However this is a very simplistic view of how to address the problem of poverty. The economic situation in these other Western countries is rapidly approaching a more wide spread application of the so-called austerity measures, cutting back the programs Mr. Spross advocates because they are unsustainable. I maintain that the reason they are unsustainable is because they were too centralized, which made them too large to effectively target those in need. Mr. Spross claims that it was increased social spending at the national level that maintained full employment in the mid-20th Century, but it was actually a much more complicated formula of social programs, subsidies to large corporations, federal regulation favoring those same corporations, and easier access to personal debt. In other words, the perception of economic prosperity was false because it was actually based on people and corporations being economically supported by government and banks rather than being economically productive in a sustainable way. If they had been truly economically productive, and if this productivity had developed along the lines of supporting the wide-spread and independent ownership of production, then the need for government programs of assistance to the poor would have decreased.

The reality is that private property rights do not create a need for government programs to get the skills needed to earn a descent living. The earliest historical records reveal societies that already had land and infrastructure based on private claims to property. Even the “primitive agrarian” Mr. Spross uses as his example staked out unclaimed land, thereby claiming private ownership. Unless you discuss nomadic tribes or those striking out to form new cities, societies were based on private property rights and used some form of money to exchange goods for thousands of years before the rise of capitalism as understood by modern society. A look at different societies at different periods of time reveal that there is a way of providing the means to learn the skills and acquire the capital needed to be self sufficient. The establishment of wide spread private ownership of property and the guild structure during the High Middle Ages were key elements in nearly eliminating slavery, which was subsequently brought back by capitalism. The apprenticeship program of the guilds provided the means of support while learning the basic skills needed to do productive work. Once you became a journeyman, you could seek out further work and instruction to achieve the highest level of skill – that of master. When you were achieved the master level, you continued the process by having your own apprentices. It was these elements that allowed the slave to become first a serf and then a peasant – that is an economically and politically empowered citizen who was able to provide for himself and his family.

No, the solution to the problem of poverty is not, as Mr. Spross suggests, “as easy as pie.” I’ve talked to people who know how to bake, and pie isn’t actually that easy either, especially making a good crust. I do not say that government spending, including at the federal level, is no part of the solution to the problem of the poor not having access to a good job. It seems that this may be necessary in our current economic environment. However, I do not agree that the solution is as simple as having the government borrow, print and spend money.

If conservatives believe that the problem of poverty is too complex to be solved, it is because they are unwilling to see how economic liberalism increases poverty. Their blind adherence to economic liberalism prevents them from seeing this. If liberals believe that the problem of poverty is simple, it is because they are unwilling to see how political liberalism fails to actually help those in need to get out from under the state. Their blind adherence to political liberalism prevents them from seeing how the big state with a powerful centralized authority is unable to exist without big business. They don’t see that increasing levels of centralized government spending will only enable big businesses to consolidate more wealth, pay lower wages and outsource more jobs. Big government supports big business not only through direct subsidies and regulations that give them advantages over small independent businesses, but also through social welfare programs which allow big businesses to ignore an economic problem they actually created.

The problem of poverty is one that we will always need to address. “For the poor you have always with you: and whensoever you will, you may do them good.” (Mark 14:7) If we truly want to minimize poverty by helping people get out of it, then we should look at what has actually worked. This may sound like a simple solution, but it isn’t because it involves changing our perception of economics and government to include subsidiarity and solidarity. It involves unlearning the lie that economics is a science that can be separated from ethics in any practical way. It involves working out the complex issue of how to achieve the wider establishment of private ownership without committing acts of injustice. These are not simple things. However, it is not so complicated that we should give up trying, or simply try the same failed solutions over and over again as though they will somehow produce different results than they did in the past.

Maybe it’s time to try distributism.

You can learn more about this issue here.

Distributism and Labor Unions

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“It has sometimes been said that distributism, the economic system that promotes widely distributed productive property – whether this is owned by a single proprietor, a family, or a worker cooperative – is hostile to labor unions and the labor movement. While I do not deny that there may have been someone who labels himself a distributist who at one time or another said something negative about the labor movement, the central distributist movement, exemplified by theorists such as Hilaire Belloc or G. K. Chesterton, and of late by organs such as Practical Distributism or The Distributist Review, has not embraced such a position. Any apparent hostility is based upon a misunderstanding of the differences between a capitalist economy and a distributist economy. For example, when Belloc wrote that a union “is a proletarian institution through and through and a proletariat and a proletarian spirit is exactly what we are aiming to destroy,”[1] he was simply noting that in a distributist society the labor market divide between owners and workers, which is the hallmark of capitalism, would not exist, or would hardly exist. Since distributists desire a proliferation of small economic units – workshops, stores, farms – it is obvious that in such entities there would be no labor movement because there would be no labor. Or to put it more precisely, the worker would be the owner, and the owner the worker. There would be no need for him to form a union to protect his interests against himself. Entities that of necessity required a large facility with a large workforce would, according to the distributist model, be employee owned and administered by the workers themselves. Again there would be no need for a union. Thus Belloc is not exhibiting any hostility toward workers but rather hopes that their status may be improved by making them owners.”

You can learn more about this issue here.

Socialism and the Early Distributists

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“Distributists are often accused of being socialists, or at least quasi-socialists. This is a claim which we vehemently deny. However, it might be a surprise to know that some of the early distributists were involved in the early socialist movement. Does this fact not give credence to the claim that distributism is a form of socialism? Does this mean that distributists are being dishonest or inconsistent about the origins and aims of the distributist movement? These are serious questions which we must be prepared to answer. Although many people seem to be growing disillusioned by capitalism, the majority are not so deluded as to accept socialism. In order to address the issue, we must look at the beginnings of both the socialist and distributist movements.”

You can learn more about this issue here.

Distributism or Capitalism: Two Ways to Work – Part 2

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

[see part one here]

“Next we come to what we term one’s competitors, that is, those producing or selling the same sort of product. Under capitalism such producers are pretty much the enemy. Though there is a certain amount of collaboration on shared concerns – such as lobbying the government on matters of interest for the entire industry – generally it is held that since it is the natural aim of each business to increase its income without limit, the success of one firm always comes at the expense of the other firms. Each is competing for as much market share as possible. And such an attitude flows logically from a concern solely with profit and “the amount of wealth accumulated by the dealer.” But if sellers and producers see themselves as supplying a need of the public, there is no reason why they cannot regard their fellow sellers and producers as partners in the same effort. Provided that sellers or producers make a profit sufficient to cover costs and provide for their livelihood, why should they wish that other sellers or producers of the same product suffer or go out of business?”

You can learn more about this issue here.

Distributism or Capitalism: Two Ways to Work

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“When human beings engage in economic activity they engage with other people. Even a gardener cultivating his own small plot has probably obtained his seeds and his tools from others and at least depends upon the larger society for the social stability that allows him to plant his garden with a reasonable expectation that he’ll be able to harvest his crop later. But most often economic actors relate in many more obvious ways with others, with employees, with customers, with those we call competitors, and in a sense, with the general public or society itself. Each way of organizing economic activity, each economic system, necessitates or at least makes probable certain ways of interacting with these other persons and groups. Let us examine the contrast between how capitalism and distributism do this. But first, how do we define these two economic systems?

Capitalism, as I use the term here, refers to “that economic system in which were provided by different people the capital and labor jointly needed for production” (Pius XI, encyclical Quadragesimo Anno, #100). In other words, under capitalism, for the most part those who own the means of production hire others to do the actual work. Sometimes the capitalist owner manages the enterprise, but in its most extreme version, the corporation, the legal owners do nothing except collect their dividend checks or watch their stock prices rise or fall. They hire others to do the work of the corporation, including managing it. Many of these owners are not even real persons, but mutual funds or pension funds, and, in the back and forth of stock market transactions, they may own a particular stock for only a few minutes.”

You can learn more about this issue here.

Distributism: Price

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“I have presented in several articles that distributism is not just another way of juggling numbers in an attempt to make sense of economics. Just as capitalism and collectivism are fundamentally different ways of envisioning the economic and political environment of a society, distributism is yet another way that is fundamentally different than those views. Some people think that distributism is an attempt at a “middle ground” or blending of capitalism and socialism. In fact, such a blending will result in what Belloc called the Servile State – something entirely different than what distributism hopes to achieve. It can be difficult for distributists to appreciate just how fundamental these differences in economic views are, and that makes it difficult to appreciate just how much of a change we are asking of those we are trying to convince. We face tremendous obstacles in trying to establish even some of what distributism proposes. I would like to present an example of this by considering the concept of price, and the difference between the capitalist “market price” the masses have been taught to accept, and the distributist “just price” we are trying to help them understand.”

You can learn more about this issue here.

Justice, Fairness and Taxation, Part Four

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“I would like to wrap up this series with an examination of a few more types of taxation. Keep in mind, that this series is not intended to be exhaustive. It is intended to open the door to discussion by presenting ideas for consideration. I do not pretend to provide the definitive “Distributist view” on taxation. It is a complex topic and there can be legitimate differences of opinion while staying true to the idea of Distributism.”

You can learn more about this issue here.

Achieving Distributism – Part III

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“There are two social foundations of distributism; decentralized political authority according to the principles of subsidiarity, and the wide-spread private ownership of productive property. When established, these foundations will result in greater freedom for individuals and families throughout society in general and a more stable national economy supported by strong local economies. What is needed to actually achieve this? I believe it starts with shifting our philosophical outlook. We need to realize that economics is not the kind of science we have been told it is. We need to look beyond the immediate end of our economic activities and see how those activities fit within the overall community. If we do this, we will start to see how a local community is self-supporting in ways that corporate capitalism is not. We will start to see that, when we consider how our economic decisions can benefit or harm others in our community, we will all benefit.

Subsidiarity will empower citizens of local communities to make changes they need to fit their local circumstances. They could change zoning laws to eliminate the need to purchase multiple properties to live and work in most cases. This would eliminate the need to commute unless you didn’t work at a local business. They could choose for themselves what businesses will be in the community, and protect their local businesses from anti-competitive activities by those who would seek to undermine them. They could establish their own organizations to ensure health, safety, and quality standards. ”

You can learn more about this issue here.

Achieving Distributism – Part II

This article is part of my posts on the economic system of distributism.  This is from practicaldistributism.blogspot.com which you can find here:

“Asserting the right to own private property is not the same as asserting the right to acquire unlimited amounts of it, nor is it the same as saying there are no other limitations in regard to that acquisition. This is one point where capitalists will raise a huge objection. We must keep in mind that the basis of the right to private property is the right to secure for oneself, and one’s family and heirs, the basic needs of life and the ability to achieve a good standard of living according to the social norms of the society at large. This is not merely a social right; it is a right based on our very existence as rational beings. Those who do not have this must be able to better their situation so that they do, and society must be structured so that anti-competitive forces cannot act to hinder them from being able to accomplish this for themselves.”

You can learn more about this issue here.

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