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Selling Out: The Perils of Capitalist Small Business

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

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Not too long ago it was announced that Wicked Weed Brewing in Asheville, North Carolina, which had been a craft brewery, was being sold to Anheuser-Busch, the gigantic beer corporation. The founders of Wicked Weed announced optimistically that

Partnering with Anheuser-Busch means great distribution opportunities, more resources, and connections to other breweries…. More opportunities for Wicked Weed means bringing craft beer to more people….

It is of course hardly uncommon for a small business in the United States to be bought out by a large corporation. If a small business has a successful or unique product, it seems to some that its natural destiny is to be absorbed by some existing large company, and that this is somehow according to the laws of nature. But although it is very understandable why in a capitalist economy small owners would want to sell out to a big firm, this is a sad effect of capitalism, not some natural law.

As is so often the case with an Internet article, the comments that readers posted illustrate some interesting facets of popular thinking. And in this case they also bring to light some of the difficulties that naturally adhere to small business in a capitalist economy. (Comments have disappeared from the website, but are paraphrased as originally posted.)

In the first place, one of the commenters noted that craft beers are made by people concerned more for the product than for profits. In contrast to this, however, others not only defended the Wicked Weed owners, but defended the principle that selling out to a large company was simply what should be expected. One reader stated that it sounds as if the owners believed in the American dream. Why are people upset about that, he asked. Maybe because they’re too lazy to think of something themselves and market it.

Still other commenters offered other kinds of defenses of the founders of Wicked Weed. One noted that the owners deserve to obtain financial security, and along the same lines, someone pointed out that for most people the goal of having a business is selling out to a larger company after years of back breaking 80 hour weeks. And still another stated the undoubted fact that it’s difficult to resist when a major company offers to buy you out and make you very very rich.

Now what are some things a distributist can say in reply? First of all, the commenter who spoke of craft brewers as people who cared more for their product than for profits showed a correct understanding of what mankind’s economic motivations should be. Although profit rightly understood is a necessity for a business of any size, nevertheless brewers, bakers, and other craftsmen ought to have more interest in their product and their craft than simply viewing it as a means to make money. The money or profit should, in a sense, be a by-product of their work, not its goal. A passage from Hilaire Belloc that I’ve quoted elsewhere more than once expresses this very well.

But wealth obtained indirectly as profit out of other men’s work, or by process of exchange, becomes a thing abstracted from the process of production. As the interest of a man in things diminishes, his interest in abstract wealth – money – increases. The man who makes a table or grows a crop makes the success of the crop or the table a test of excellence. The intermediary who buys and sells the crop or the table is not concerned with the goodness of table or crop, but with the profit he makes between their purchase and sale. In a productive society the superiority of the things produced is the measure of success: in a Commercial society the amount of wealth accumulated by the dealer is the measure of success. [1]

One suspects that the owners of Anheuser-Busch, that is, the stockholders, don’t care over much about product quality provided that the accustomed revenues continue. For them it is not a passion to provide good beer, but merely a smart investment, perhaps recommended by their broker as an up and coming stock. The difference in outlook between a craftsman, enthusiastic about his product, and a stockholder perusing brokerage house statements illustrates this immense difference very well.

Let us go on to the other readers who posted comments. The reader who defended selling out to Anheuser-Busch on the grounds that this was a fulfillment of the American dream is a good example of someone who has completely absorbed the capitalist understanding of economic activity. For him economics is not about supplying the needs of mankind with a good product while at the same time earning a sufficient income for oneself and one’s family. Instead economic activity is about becoming rich. The product takes second place, indeed, at times the product becomes totally irrelevant, as in the case of someone who makes a fortune by various kinds of financial manipulations entirely devoid of any connection with a real product.

But the other defenders of the Wicked Weed founders have a point. Financial security as well as relief from 80 hour weeks are both legitimate and reasonable desires and goals. Unfortunately under capitalism selling out to a larger entity that probably will have little intrinsic interest in your product is often the only way to achieve such security and relief. But with distributism this is not so. If we accept the basic view of distributism that the economy exists because God has created human beings so that we need external goods and have the capacity to provide them for ourselves, we can begin to grasp that there is something wrong with an economic system in which insecurity, especially for the little guy, is inherent, and which in turn leads to back breaking 80 hour workweeks.

Brewers are meant to supply a real need for the human race, good beer. Of course they must also earn enough profit that they can support themselves and their families. But there is no reason why supplying our need for beer must necessitate either insecurity or 80 hour workweeks. The brewers in any particular locale are not by nature enemies of each other, not even rivals, rather they are cooperators in supplying a need. The medieval distributist urban economy perfected the institution of the craft guilds so that those working in the same trade to supply a public need, such as beer or bread, would cooperate in fulfilling that need. The guilds sought by their regulations and by fostering an atmosphere of spiritual and fraternal unity to prevent any one producer from seeking a larger market share than he reasonably needed or trying to put his brother craftsman out of business. Therefore none would labor under such fear of financial insecurity that he would be impelled to work 80 hour weeks. The guilds, of course, did limit the number of brewers according to the reasonable needs of a locality. They did regulate and restrain competition. But they did this in the interest both of themselves and the public. The brewers needed a reasonable guarantee of stable work, the public a sufficient supply of good beer at a fair price. The guilds aimed to accomplish both, by institutionalizing the natural, God-given equilibrium between human needs and the human capacity to supply those needs.

Now the common capitalist response to this is to claim that, whatever ill effects excessive competition might have, in the long run it guarantees better beer to the consumer. Only when brewers fiercely compete and the better ones win out, will the public be assured of good beer. But does experience support such a notion? It is free competition that has led to behemoths like Anheuser-Busch and to the corporate beer which it purveys. I readily grant that guilds are not free of temptations to abuse their status, to settle into a mediocre routine, but, due to the Fall of our first parents, there is no human institution which is free of the possibility of corruption. If a guild becomes corrupt that is because of the unfortunate corruption of fallen human nature, it is not due to anything lacking in the guild principle itself.

If beer drinkers think that it is craft brewers who offer good tasting beer, and that it is the corporate breweries who offer something less than that, then the question is how to preserve the small brewers without subjecting their owners to 80 hour workweeks and a constant fear of going out of business. The guild system of distributism does exactly that, while the unrestricted competition of capitalism subjects small brewers to the same forces that led to the consolidation of breweries in the first place. If mankind’s economic activity is meant both to supply our genuine needs and provide a means of supporting ourselves in a reasonable and human manner, then distributism offers a way of doing that, while capitalism does not. If our dream is to become rich, then we have misunderstood both the purpose of economic activity and why we are placed on the earth in the first place. It is not to become rich but rather to live well so that we can attain to a better life afterwards.

Notes:
1: An Essay on the Nature of Contemporary England (New York :  Sheed & Ward, 1937), p. 67.

You can find the original publication on Practical Distributism here.

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Yessource: The Ultimate Yes: 35th Anniversary Collection (bonus disc)

Here are my latest uploads to YesSource, my Yes rarities youtube page (about which you can read here).  This post is another addition to my series of Yes music posts and a collection of all my Yes-related posts is here.  Yes, of course, is a, if not the, premier progressive rock band, and I am an enormous fan of it.

You can see all of my Yessource uploads here.

My latest YesSource uploads can be found here:

Subsidiarity vs. Single Payer

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

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In his article, “Subsidiarity and the Single Payer,” Jack Quirk argues that a Single Payer system for health care services is consistent with the principles of subsidiarity and Catholic Social Teaching. He concludes his article by stating that the “principle of subsidiarity cannot legitimately be used to argue against a single-payer healthcare system. … Those who argue against it will need to avail themselves of something outside of Catholic social teaching for support.” His argument seems to depend on two points which I think are incorrect. The first is that the question of subsidiarity “does not turn on jurisdiction, but on competence. Subsidiarity is not federalism.” The second is the fact that some health care services are very expensive, and the fact that health insurers in the United States lack the power to contain those costs, means that the highest level of government has the right and responsibility, according to the principles of subsidiarity, to step in to assist paying for all health care services. This response is an explanation of why I believe he is wrong on both points.
When Mr. Quirk says subsidiarity does not “turn on competence,” it isn’t clear if he means the term in the sense of “ability.” However, it is clear that he is proposing competence as opposed to jurisdiction, and he seems to equate jurisdiction with federalism in his article. Subsidiarity is based on human nature and the natural and moral laws. This is what determines who has the natural role for given responsibilities, and those who have a role have a natural jurisdiction, which we could also call competence, to fulfill it. Following the principles of subsidiarity, we understand that the higher orders of society have the function and responsibility to provide assistance (subsidium) to the lower orders when needed. This is why the state has no right to usurp a parent’s role in educating children, but does have the right to assist (but not to compel) parents with the education of their children. The Church teaches that “it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do.” [1] One can use subsidiarity to determine what roles are proper to the different levels of society. In other words, competence in the sense sense of Catholic Social Teaching is not incompatible with jurisdiction, and we can discuss jurisdiction and authority without resorting to, or resulting in, federalism.
The initiative, freedom and responsibility
of lower orders of society must not be supplanted.
“Subsidiarity, understood in the positive sense as economic, institutional or juridical assistance offered to lesser social entities, entails a corresponding series of negative implications that require the State to refrain from anything that would de facto restrict the existential space of the smaller essential cells of society. Their initiative, freedom and responsibility must not be supplanted.” [2] Just because a condition is common across the country does not make it the responsibility of the federal government. If the assistance can be rendered community by community by more local social institutions or governments, then the federal government would be violating the principle of subsidiarity if it took over the role of rendering that assistance. The federal government could only justify stepping in where those more local institutions didn’t already exist or lacked the resources to address the issue. “In light of the principle of subsidiarity, however, this institutional substitution must not continue any longer than is absolutely necessary, since justification for such intervention is found only in the exceptional nature of the situation.” [3] In other words, part of that assistance would be to help establish the more local institution and help it to arrange acquiring the necessary resources on its own so that the assistance being given will become unnecessary. In addition, the principle of subsidiarity means that the federal government cannot step in where the more local institutions exist and have the ability to deal with the issue at the local level.

Many people assume that only the federal government can afford to adequately assist those in need. This is simply not true. If the taxes to provide this assistance were collected by the state rather than the federal government, then the state could render the assistance. If they were collected by county government rather than the state, then counties could render the assistance. If the principle of subsidiarity were really being applied, then the tax structure would be distributed so that higher levels of government would not need to step in except where the need went beyond the more local governments.

In regard to the supposed inability of health insurers to contain the costs of health care, in what way does this justify implementing a single payer system? It is arguable that the payment structure imposed by those insurers (and the government) have contributed to the overall increase of costs. Insurance companies make money from people paying premiums. Therefore, it is beneficial for them if the costs of even relatively inexpensive health services remain high enough to make the overwhelming majority of people rely on insurance to pay for all health care.

An absent or insufficient recognition of 
private initiative – in economic matters also – and the failure to recognize its public function, contribute to the undermining of the principle of subsidiarity …” [4]
Our current model of providing and paying for health care is not the only possible one. To take just one example, subscription based medical providers have proven to make general and preventive care very affordable for the average family. For poor families who cannot afford the subscription, the costs are low enough that religious and other more local organizations or government can render the assistance of paying for their subscriptions. If we implemented this type of system as a standard, medical insurance would only be needed for emergencies and long term conditions and for particularly expensive procedures. This would lower the overall costs of insurance making it more affordable for families and making local institutions more capable of assisting those who cannot afford insurance. Subscription based medical services is only one of many ways that the means of acquiring health care services and lowering their costs could be addressed.
Single Payer is proposed as a permanent solution established at the highest level of government to render assistance that could be rendered by more local social institutions and governments if we only had the will to give those more local institutions and governments the ability to perform their roles. It is not limited to assisting with only those health care costs which are prohibitively high or only those people who cannot afford other means to pay for health care. In the name of “assistance” it usurps the responsibilities of the family and more local institutions and absorbs their natural roles into the highest level of government. It might be true that assistance from the federal government will be needed during the process of implementing better access to health care and transitioning the role of government support to more local levels. However, as a permanently instituted system, Single Payer is clearly a violation of the principle of subsidiarity and Catholic Social Teaching.

Continued in Part 2
Notes:
[1] USCCB/LEV, Compendium of the Social Doctrine of the Church, 2011 [Kindle edition], Section 186
[2] Ibid. Emphasis in the original
[3] USCCB/LEV, Compendium of the Social Doctrine of the Church, 2011 [Kindle edition], Section 187
[4] Ibid.

You can find the original publications here.

The Disease of Being Busy

I saw a dear friend a few days ago. I stopped by to ask her how she was doing, how her family was. She looked up, voice lowered, and just whimpered: “I’m so busy… I am so busy… have so much going on.”

Almost immediately after, I ran into another friend and asked him how he was. Again, same tone, same response: “I’m just so busy… got so much to do.”

The tone was exacerbated, tired, even overwhelmed.

And it’s not just adults. When we moved to North Carolina about ten years ago, we were thrilled to be moving to a city with a great school system. We found a diverse neighborhood, filled with families. Everything felt good, felt right.

After we settled in, we went to one of the friendly neighbors, asking if their daughter and our daughter could get together and play. The mother, a really lovely person, reached for her phone and pulled out the calendar function. She scrolled… and scrolled… and scrolled. She finally said: “She has a 45-minute opening two and half weeks from now. The rest of the time it’s gymnastics, piano, and voice lessons. She’s just…. so busy.”

Horribly destructive habits start early, really early.

How did we end up living like this? Why do we do this to ourselves? Why do we do this to our children? When did we forget that we are human beings, not human doings?

Whatever happened to a world in which kids get muddy, get dirty, get messy, and heavens, get bored? Do we have to love our children so much that we overschedule them, making them stressed and busy — just like us?

What happened to a world in which we can sit with the people we love so much and have slow conversations about the state of our heart and soul, conversations that slowly unfold, conversations with pregnant pauses and silences that we are in no rush to fill?

How did we create a world in which we have more and more and more to do with less time for leisure, less time for reflection, less time for community, less time to just… be?

Somewhere we read, “The unexamined life is not worth living… for a human.” How are we supposed to live, to examine, to be, to become, to be fully human when we are so busy?

This disease of being “busy” (and let’s call it what it is, the dis-ease of being busy, when we are never at ease) is spiritually destructive to our health and wellbeing. It saps our ability to be fully present with those we love the most in our families, and keeps us from forming the kind of community that we all so desperately crave.

Since the 1950s, we have had so many new technological innovations that we thought (or were promised) would make our lives easier, faster, simpler. Yet, we have no more “free” or leisurely time today than we did decades ago.

For some of us, the “privileged” ones, the lines between work and home have become blurred. We are on our devices. All. The. Freaking. Time.

Smart phones and laptops mean that there is no division between the office and home. When the kids are in bed, we are back online.

One of my own daily struggles is the avalanche of email. I often refer to it as my jihad against email. I am constantly buried under hundreds and hundreds of emails, and I have absolutely no idea how to make it stop. I’ve tried different techniques: only responding in the evenings, not responding over weekends, asking people to schedule more face-to-face time. They keep on coming, in volumes that are unfathomable: personal emails, business emails, hybrid emails. And people expect a response — right now. I, too, it turns out… am so busy.

The reality looks very different for others. For many, working two jobs in low-paying sectors is the only way to keep the family afloat. Twenty percent of our children are living in poverty, and too many of our parents are working minimum wage jobs just to put a roof over their head and something resembling food on the table. We are so busy.

The old models, including that of a nuclear family with one parent working outside the home (if it ever existed), have passed away for most of us. We now have a majority of families being single families, or where both parents are working outside the home. It is not working.

It doesn’t have to be this way.

In many Muslim cultures, when you want to ask them how they’re doing, you ask: in Arabic, Kayf haal-ik?or, in Persian, Haal-e shomaa chetoreh? How is your haal?

What is this haal that you inquire about? It is the transient state of one’s heart. In reality, we ask, “How is your heart doing at this very moment, at this breath?” When I ask, “How are you?” that is really what I want to know.

I am not asking how many items are on your to-do list, nor asking how many items are in your inbox. I want to know how your heart is doing, at this very moment. Tell me. Tell me your heart is joyous, tell me your heart is aching, tell me your heart is sad, tell me your heart craves a human touch. Examine your own heart, explore your soul, and then tell me something about your heart and your soul.

Tell me you remember you are still a human being, not just a human doing. Tell me you’re more than just a machine, checking off items from your to-do list. Have that conversation, that glance, that touch. Be a healing conversation, one filled with grace and presence.

Put your hand on my arm, look me in the eye, and connect with me for one second. Tell me something about your heart, and awaken my heart. Help me remember that I too am a full and complete human being, a human being who also craves a human touch.

I teach at a university where many students pride themselves on the “study hard, party hard” lifestyle. This might be a reflection of many of our lifestyles and our busy-ness — that even our means of relaxation is itself a reflection of that same world of overstimulation. Our relaxation often takes the form of action-filled (yet mindless) films, or violent and fast-paced sports.

I don’t have any magical solutions. All I know is that we are losing the ability to live a truly human life.

We need a different relationship to work, to technology. We know what we want: a meaningful life, a sense of community, a balanced existence. It’s not just about “leaning in” or faster iPhones. We want to be truly human.

W. B. Yeats once wrote:

“It takes more courage to examine the dark corners of your own soul than it does for a soldier to fight on a battlefield.”

How exactly are we supposed to examine the dark corners of our soul when we are so busy? How are we supposed to live the examined life?

I am always a prisoner of hope, but I wonder if we are willing to have the structural conversation necessary about how to do that, how to live like that. Somehow we need a different model of organizing our lives, our societies, our families, our communities.

I want my kids to be dirty, messy, even bored — learning to become human. I want us to have a kind of existence where we can pause, look each other in the eye, touch one another, and inquire together: Here is how my heart is doing? I am taking the time to reflect on my own existence; I am in touch enough with my own heart and soul to know how I fare, and I know how to express the state of my heart.

How is the state of your heart today?

Let us insist on a type of human-to-human connection where when one of us responds by saying, “I am just so busy,” we can follow up by saying, “I know, love. We all are. But I want to know how your heart is doing.”

By Omid Safi, published in On Being, and can be seen here.

 

Yessource: Live in Loveland, 9/11/04

Here are my latest uploads to YesSource, my Yes rarities youtube page (about which you can read here).  This post is another addition to my series of Yes music posts and a collection of all my Yes-related posts is here.  Yes, of course, is a, if not the, premier progressive rock band, and I am an enormous fan of it.

You can see all of my Yessource uploads here.

My latest YesSource uploads can be found here:

Distributism and Capitalism: Some contrasting features

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

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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.

There are many supposed facts of economic life that any student of economics, or even any observer of political and economic news, is familiar with, matters such as unemployment, corporate mergers and acquisitions, labor relations, business cycles, and so on. I call these supposed facts, not because they do not exist, but because their existence is contingent upon man-made economic arrangements, such as laws and tax structures or even cultural norms. Contrary to the impression one takes from writings both of professional economists as well as from journalists, these things and events are not natural and necessary facts like the changing of the seasons or the daily rising of the sun. They need not exist, certainly at least not to the extent that they do in a capitalist economy. Let us take one of the items from the above list, business cycles, and consider it more carefully.

What are business cycles? “A business cycle is a swing in total national output, income, and employment, usually lasting for a period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of the economy,” is how the economist Paul Samuelson defines business cycles in his macroeconomics textbook.[2] Although everyone living in a capitalist economy is familiar with such cycles, or their effects, one might wonder why, apart from the special and external factors I will note below, such cycles exist. Consumer demand for necessary and reasonable goods normally will not fluctuate much – demand for food, clothing, housing, books and the like. Nor will the size of the workforce, and hence of the economy’s ability to provide consumer goods, usually experience short-term major decreases or increases. Thus there is no reason to expect the two most important factors in moving an economy, demand and the ability to supply that demand, to change significantly in a short period of time. Of course, external factors, such as famines, natural disasters, wars, migrations, and so on can cause a sudden and large increase or decrease in either demand or the capacity to supply that demand. As such, a distributist economy will be as subject to such external dislocations as is a capitalist economy. They are simply an inescapable part of life on this earth. But there are other factors which are peculiar to capitalism which have caused probably the majority of business cycles, at least the majority of those which have occurred in recent decades.

Capitalism is fueled by an imperative of production for the sake of sales, regardless of consumers’ needs or of their spontaneous desires for the goods or services in question. As such, it always rests upon foundations which are liable to be shaken. Distributism, on the other hand, rests upon the solid foundation of human nature and its natural needs and reasonable desires. But capitalist demand, which is usually artificially stimulated by advertising, is necessarily fickle or fragile. The artificial desire for larger and larger houses or cars, for example, tends to drive up prices of those goods, and can lead to so-called bubbles in which prices rise exponentially. Eventually these bubbles will burst. Such extreme up and down movements of prices can cause numerous related economic dislocations, such as panics or depressions, which are simply instances of severe business cycles.

History is marked by bubbles in which speculative prices were driven up far beyond their intrinsic value…. Speculative bubbles always produce crashes and sometimes lead to economic panics.[3]

In addition, although criminal greed is a characteristic of postlapsarian mankind in general, it is capitalism that has institutionalized such greed, and even praised and rewarded it. So, for example, exploitative or risky financial practices by banks are not always illegal, and even when illegal, those engaging in such practices often go unpunished or lightly punished because of the overall climate of opinion in a capitalist society, which tends to take a benign view of economic misdeeds. In the Middle Ages in Europe usurers were popularly regarded as among the most heinous of sinners, and this popular judgment was based on the teachings of society’s intellectual elite, theologians, canon lawyers, philosophers and so on. The popular climate of opinion in contemporary America, on the other hand, reserves whatever moral animus it still has for other types of misdeeds, and too often among Christians believers it is only sins against the 6th or 9th commandments which are seen as really worthy of condemnation. All this is the result of the pervasive commercial mentality which affects most Americans.

The point of all this is that the natural end of mankind’s economic activity is to supply our necessary and reasonable need for external goods and services. This is why God has given us the capacity to engage in economic activity. Given the fallen state of mankind, however, it is usually necessary to erect laws and institutions to guide our conduct toward its intended end. This distributism seeks to do in the economic realm. Capitalism, on the other hand, not only has done away with the safeguards against economic misdeeds which the Catholic civilization of an earlier age set up, but suffers from an inherent tendency toward economic exploitation and dislocation. And the commercial cultural climate which capitalism has produced fails to understand that any other way of carrying on economic activity is possible or feasible. But this is not the case. Catholics, in particular, who have a developed critique of economic conduct available in the Church’s social teaching, have an especially grave responsibility to form their thinking according to this teaching. Capitalism is not inevitable. There are other real possibilities. It is chiefly a matter of our having the will to bring about the changes that are necessary in our economic activity. But it can be done.

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

2: Macroeconomics, 16th ed., 1998, p. 125.

3: Ibid., p. 177.

You can find the original publications here and here.

Why Unemployment is a Pseudoproblem

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

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Unemployment a pseudoproblem? By calling it that, I do not mean that unemployment does not exist, or that it is not a very serious concern for the unemployed, their families and for society as a whole. What I mean and will argue here is that unemployment is not something natural to economic life, but is a problem created almost entirely by the capitalist arrangement of our economy, one that would largely disappear under a distributist economy, and that is taken for granted by the academic discipline of economics only because that discipline has long been captive to the ideology of capitalism.

The study of economics, especially in its neoclassical and Austrian forms, developed as a theoretical elaboration of capitalism and industrialism as they came to maturity in Europe in the 18th century and afterwards. Most often economic thought has not only assumed capitalism, but has been a mouthpiece for capitalism, in fact, a sophisticated attempt to provide a justification for the disparity in incomes and for the social dislocations that are such notable characteristics of the capitalist world. In face of this complex structure of thought, it can be helpful to return to the basics of human behavior upon which economic life is based in order to discover a different and more accurate way of conceptualizing mankind’s economic activity.

Let us first look at the three different types of economic unemployment as these are enumerated and acknowledged by economists.[1] First, and of little importance for our discussion, there is voluntary or otherwise short-term unemployment of people between jobs, between school and a job, and so on. This is sometimes referred to by economists as frictional unemployment. If the other two types of unemployment are eliminated or reduced, this type will be of little concern.

Then there is what economists call structural unemployment, which Paul Samuelson describes as

a mismatch between the supply of and the demand for workers. Mismatches can occur because the demand for one kind of labor is rising while the demand for another kind is falling, and supplies do not quickly adjust…. [For example], the demand for coal miners has been depressed for decades because of the lack of geographical mobility of labor and capital: unemployment rates in coal-mining communities remain high today.

Thirdly, there is cyclical unemployment, which Samuelson explains as occurring “when the overall demand for labor is low. As total spending and output fall, unemployment rises virtually everywhere.”[2]

These latter two types of unemployment require separate discussion. First let us look at the question of structural unemployment. It arises chiefly because of new technology or on account of some external cause, such as, in the case of coal miners, heightened concern about air pollution. The former cause, new technology, is the more common occurrence. In an economy dominated by capitalists, people who own the means of production, new technology presents an opportunity for higher profits achieved via lower costs. A new or improved device makes a certain number of workers unnecessary. Since labor is a cost item in a capitalist’s balance sheet, there is rarely any conflict in the capitalist’s mind about what to do: if he can save money by eliminating workers and buying machines he will do so. But in a distributist economy this would not be such an open and shut decision. When workers themselves control the enterprises in which they work, either individually or cooperatively, there are other considerations besides merely increased profits. New technology can and will be adopted, but its adoption will be balanced against other equally important economic and social needs, job and family security, social stability, and the like.

Moreover, we should recognize that technology can develop in many ways, and that replacing men by machines is not the only way to secure improved production. In any case, if we remember that the economy is an important but subordinate part of human social life, we will not regard technological improvements as the summum bonum. Right now, with capitalists mostly calling the shots in the economy, their view usually prevails, and what we like to call economic efficiency wins against any of the human concerns and needs that an economy is supposedly subservient to. If an economy could do without workers altogether and produce more cheaply and quickly solely by means of robots, would this really be a benefit to mankind? Would not the fact that the now unemployed workers could no longer afford to buy any of the robot-produced goods signify that such an economy had entirely inverted means and ends?

What if technological advances across the board make it possible for our consumption needs to be supplied by merely a portion of the labor force? The obvious answer to that is, if it is no longer necessary for everyone to work eight hours to supply mankind’s needs, let everyone work a little or a lot less, enough so that mankind’s needs are taken care of. If this can be done with everyone working six hours instead of eight, well and good. Here, though, we run into one of the shibboleths of neoclassical economics, the so-called “lump of labor fallacy.” Samuelson explains this notion as follows:

Whenever unemployment is high, people often think that the solution lies in spreading existing work more evenly among the labor force. For example, Europe in the 1990s suffered extremely high unemployment, and many labor leaders and politicians suggested that the solution was to reduce the workweek so that the same number of hours would be worked by all the workers. This view – that the amount of work to be done is fixed – is called the lump of labor fallacy.

What is wrong with this idea, according to Samuelson?

[T]he lump of labor argument implies that there is only so much remunerative work to be done…. A careful examination of economic history…shows that an increase in labor supply can be accommodated by higher employment, although that increase may require lower real wages.[3]

What is one to make of this argument? If we examine it, Samuelson appears to mean that if workers are willing to work for lower wages, some capitalist will employ them to produce something that he thinks he can sell, and thus absorb the unemployed workers. This is no doubt often true, but this says nothing about the relationship between the total amount of goods being produced at a certain point in time, the total number of workers existing at that time, and how that work is to be apportioned among them. At the point when the unemployment in question arose, why was it not a reasonable policy to distribute the work more evenly? If the economy hitherto has been producing a sufficient amount of goods to supply consumption needs, and then unemployment increases due to technological changes and a reduced need for human labor, clearly the total quantity of potential workforce effort is now greater than is needed. Thus reducing everyone’s hours seems like an entirely reasonable response. Society possesses the productive capacity to satisfy consumer needs but no longer requires the same amount of labor. Thus both the amount of work, as well as the product of work, can be distributed among the total labor force, taking into account the new technology.

The fact that Samuelson thinks that only by employing workers at lowered wages can this problem be addressed, shows that he is assuming as a fact of nature the position of dominance by capitalists and the corresponding subordinate position of workers. Of course, capitalists are not likely to pay workers the same wage they previously received if they now work fewer hours. But both the productive capacities of the workers remain the same, society’s need for goods and services remains the same (in the short run), and the economy’s capacity to produce has increased. Any mismatch is in the connection between the worker and the means of production. A response that has regard both for the purpose of an economy and its connection with the social fabric as a whole would see reduced work hours as a logical response to the situation.

Next let us look at the question of cyclical unemployment, that type which comes about “when the overall demand for labor is low” because of a business cycle downturn. I am afraid my argument will seem hopelessly naive to most economists. But that does not mean that it is wrong, only that the elaborate superstructure that economists have erected over the past couple centuries tends to obscure some obvious economic facts.
God created human beings with both the capacity for work and the need to consume. In fact, these two characteristics balance one another in that anywhere there are people, there are both producers and consumers. Thus it would seem that everywhere people can do the work which supplies them with the goods they need. The human capacity for work corresponds roughly with our need for the products of that work. The more people, the more workers, the fewer people, the fewer workers. What does this have to do with the question of unemployment? If in general each person is able to perform productive work sufficient to supply at least his own needs, then why should anyone be idled, unable to work? Does not each person create his own demand and at the same time provide the means for supplying that demand?
The reason that any particular person’s capacity for work cannot be the means of his supplying his needs is usually because he is denied access to the means for production, to land or tools, for example. On occasion a harsh environment makes it difficult to take advantage of mankind’s capacity to produce, but in general this is rare. This is not a problem, then, that arises from the nature of human economic activity, it is an organizational problem, one ultimately occasioned by the question of who owns or controls land or tools. The more complicated the relationship between individuals and the means of production, the more likely is some sort of organizational or structural difficulty which impedes people’s ability to work and produce. Capitalism heightens this tendency not only by the complexity of its structure, but by creating a class of owners whose primary and direct interest is not in producing for the needs of mankind, but in convincing people to buy their product, whether needed or not, whether well-made or not.
Hence in capitalism there exist business cycles, those alternating periods of boom and bust which are the causes for the cyclical decrease in the demand for labor, and which come about because of capitalism’s propensity toward overproduction and speculation. Since the tendency in capitalism is simply production for the sake of sales, not production for the sake of reasonable use, the tendency to overproduce is always present because the capitalist class, people one step or more removed from actual production, have little or no interest in production as such. But under a well-functioning distributism, with a healthy structure of intermediate occupational groups (guilds), part of whose aim is to match economic activity with society’s needs, business cycles would either not exist or would be milder and less disruptive.
We can see how the complexity of a capitalist structuring of the economy contributes to the imbalances that create cyclical unemployment if we contrast that with a very simple distributist economy. In such an economy, one in which all workers owned their land and tools and produced whatever was needed for themselves and their families, the immediate connection between work and consumption would be obvious, since each person would be the primary producer of most or all of what he and his family needed, and the one-to-one correspondence between a worker’s need to consume and his ability to produce would be obvious. Of course such an economy is hardly possible outside of a primitive level of culture, and in any case is not desirable. The division of labor, though it can be extended too far, has obvious benefits to humanity, and I know of no distributist who opposes it. Indeed, the medieval urban distributist economy assumed and fostered the division of labor up to a point. But what we should note here is that the more complex the connection or relationship between workers and the means of production, the more possibility that a worker will be hindered in the exercise of his ability to produce. Distributism tries to keep that connection as simple as the division of labor and other necessary factors will allow, while capitalism needlessly elaborates that by shifting emphasis from production for fulfillment of human needs, to production oriented toward sales, toward new products that often have little utility, together with a constant preoccupation with higher profit margins, so that capital seeks not merely a sufficient return, but an ever higher one.
Any society and economy that is structured toward man’s genuine welfare ought to seek to make use of the obvious connection between the human need to consume and the human ability to work and produce.
This must be kept front and center in our economic thinking, and any needless elaborations and complexities which are introduced into the economy must be eliminated or at least watched carefully lest they create conditions, such as unemployment, which are socially or economically harmful. In a distributist economy the natural relationship between production and consumption would be one of the fundamental principles of its economic organization.
But in addition to the three types of economic unemployment that economists note, there is another type which they are reluctant to acknowledge, or at least to regard as a significant problem. This is unemployment caused by trade agreements. Although the trade facilitated by agreements such as NAFTA can be called free only with numerous qualifications, still it is usually in the direction of freer trade that such agreements lead. Such trade pacts are based on the neoclassical doctrine of comparative advantage, which Paul Samuelson calls “one of the deepest truths in all of economics.”[4]
Comparative advantage is based upon a fact, to be sure, that countries excel better at some products than others, and from this it is argued that it is in the interests of all countries to specialize in the products that they can produce most efficiently in order to increase the overall living standard of all countries. While superficially plausible, in fact there are major objections against the theory. In the first place, it treats each country as if it were merely a site for production, ignoring cultural or legal factors. For example, the unique cultural and legal situation of Mexico included Indian villages which held land in common and which in consequence were able to be self-supporting in food. Trade agreements which require land to be freely bought and sold destroy such communities, despite any elegant graphs that economists concoct purporting to prove that everyone will be better off under these agreements. More fundamentally, the theory of comparative advantage assumes that more and more stuff, what is called economic growth, is the summum bonum of human life. Consider Samuelson’s discussion of objections to international trade agreements.

    But this does not mean that every individual, firm, sector, or factor of production will benefit from trade…. Recent studies indicate that unskilled workers in high-income countries have suffered reductions in real wages in the last three decades because of the increased imports of goods from low-wage developing countries….

    The theory of comparative advantage shows that other sectors will gain more than the injured sectors will lose. Moreover, over long periods of time, those displaced from low-wage sectors eventually gravitate to higher-wage jobs…. Nations that disregard comparative advantage pay a heavy price in terms of their living standards and economic growth.[5]

Unfortunately, “over long periods of time” most of those unskilled workers will be dead long before they manage to “gravitate to higher-wage jobs,” and in the meantime the towns and cities in which they live will be devastated, their families often hurt, social problems will develop, and in general the real standard of living – which is not measured in terms of how much stuff we possess – will decline. The overall amount of available commodities might increase, at least for some people, such as economics professors, but at the cost of buying goods produced by poorly-treated workers in “low-wage developing countries.” International trade can be beneficial to all parties, but only if many more factors besides the total quantity of goods produced and sold are considered. Distributism, since it is more than an economic system, would tend to create a society which did not give material goods a greater value than they deserve. As St. John Paul II wrote in his encyclical Centesimus Annus,

It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed toward “having” rather than “being,” which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself. (no. 36)

Mainstream economic thought is based on the idea that human life is not about “being,” but about “having,” about, as Samuelson avers, producing enough stuff so that “the average American could live at the level of the average doctor or big-league baseball player.”[6] This is nothing other than the philosophy of Hell, a point of view opposed to any Christian conception of life. International trade need not create unemployment, but it will do so if it is based on the notion that any increase in the amount of commodities produced, sold or traded, is a good thing, regardless of any effect it has on human life, individual or social.
Unemployment need not exist, or at least, need not be the problem that it so often is in a capitalist economy. If we are willing to rethink economic principles in the light of fundamentals, then we will see that distributism offers a way out of the capitalist orientation of economic activity which diverts it from its natural end of providing for the genuine consumption needs of mankind.
Notes: 
1: Note that I am dealing with unemployment as an economic question only. It is arguable that there exists what might be called cultural unemployment, but this is outside of the scope of this article.

2: Quotations from Paul Samuelson, Macroeconomics, 16th ed., 1998, p. 259.

3: Paul Samuelson, Microeconomics, 17th ed., 2001, pp. 257-58.

4:  Paul Samuelson, Macroeconomics, 16th ed. 1998, p. 388.
5:  Paul Samuelson, Microeconomics, 17th ed. 2001, p. 306.
6:  Ibid., p. 4.
You can find the original publications here and here.

Yessource: Live in Morrison, 9/10/04

Here are my latest uploads to YesSource, my Yes rarities youtube page (about which you can read here).  This post is another addition to my series of Yes music posts and a collection of all my Yes-related posts is here.  Yes, of course, is a, if not the, premier progressive rock band, and I am an enormous fan of it.

You can see all of my Yessource uploads here.

My latest YesSource uploads can be found here:

Yessource: Live in Holmdell, 8/27/04

Here are my latest uploads to YesSource, my Yes rarities youtube page (about which you can read here).  This post is another addition to my series of Yes music posts and a collection of all my Yes-related posts is here.  Yes, of course, is a, if not the, premier progressive rock band, and I am an enormous fan of it.

You can see all of my Yessource uploads here.

My latest YesSource uploads can be found here:

 

DIVERSITY AND MERITOCRACY, TOGETHER

Every now and again I come across a fantastic article the warrants posting here; I recently came across one in First Things which, I thought, was pretty insightful. Be edified.

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Do our elite universities prize academic merit? Or are they more concerned to achieve diversity? Most of us assume that these values are incompatible. But in my lifetime, elite universities have intensified their concerns about academic merit and diversity—simultaneously. The logic lies in the changing social conditions of our country. By my reading of our history, most of our elite universities have been rigorous about merit from their inceptions. What’s changed is what counts as merit.

Take Yale circa 1900. It sought the right sort of man. Good family (WASP). Athletic. Intelligent, perhaps, but not bookish. Church-going, but not too pious. “A leader,” as someone might say. The industrial revolution had made technical knowledge more important, and so the criteria for the “right sort of man” had shifted a bit. The ruling class needed some members who had aptitudes for the sciences and not just football. WASP elites saw the need to cast the net more widely (but not too widely). Soon, Jews (not too many). Always, they prioritized “merit.” The “best” men were those most likely to stand astride society in their maturity.

Then came World War II. It turned out to be impossible to send millions of men from Irish, Italian, and Slovak backgrounds into battle and then expect them to return to the old regime of WASP-dominated elites. So the net was cast more widely still. Harvard president James Bryant Conant (a non-elite striver himself) invented the SAT. The “best” men needed to be supplemented with smart kids from Kokomo.

The Cold War intensified the emphasis on academic merit. Conant, who had overseen the Manhattan Project, saw our competition with the Soviets as a technical challenge, not just in the development of weapons but in the scientific management of a free society. To win this global conflict, America needed “the best and the brightest,” not just the pedigreed. The country would still be run by white men, but not uniformly by scions of the old-stock families. We needed high IQs.

This phase, which ran from the GI Bill through the 1960s, is often remembered as a golden age of meritocracy. The universities grew rapidly. The sons of working-class fathers went to college. A rapidly growing economy (and government bureaucracy) absorbed the growing cohort of new meritocrats.

Then came the explosions of the 1960s. Yale’s Brahmin president, Kingman Brewster, and other grandees recognized that the legitimacy of America’s ruling class was in peril. Dramatic steps were needed to shore up the system. The elite consensus: Our ruling class needed to look more like the people it ruled. Elite colleges first tried a crude, mostly covert quota system, designed to recruit talented students from minority backgrounds. The Supreme Court’s 1978 Bakke decision forced a more indirect approach to racial preferences in college admissions. “Diversity” was born.

That takes us up to today.

These were dramatic and important changes. Yet Harvard, Yale, and other elite universities have maintained a continuous mission. They have always sought to educate those with the most merit, where “merit” means “ability to occupy the top positions in society.” Since 1970, “merit” is no longer defined by a WASP system—rather, it is defined by a diversity system oriented to renewal of the ruling class by ensuring its demographic legitimacy in a democratic culture.

I’m quite sure that the vast majority of students admitted to Harvard today merit admission, where “merit” is defined in this way. Harvard has an incentive to admit only those who will sustain its super-eminence by graduating to the ranks of the super-eminent—a feat that depends on all sorts of cultural factors, not just intelligence. No ruling class can live on good test-takers alone. These days, identity politics strongly correlates your “diversity” to your social status. Harvard attends to that kind of merit, not the older metrics of WASP pedigree.

LGBT issues have been a boon in this regard. No ruling class signs its death warrant, at least not knowingly. Diversity was always meant to shore up the legitimacy of our elites, not to overthrow them. Sexual “minorities” bring diversity in ways much less disruptive to our still largely white (and, of course, well off) ruling class. This is a not inconsiderable advantage, and it goes a long way toward explaining why these issues have achieved such prominence within elite institutions.

Many of my friends believe that the push for diversity in higher education has led to a decline in emphasis on academic achievement. They are mistaken. The last fifty years have seen a trend toward greater emphasis on both diversity and IQ. I went to a fancy-pants college in the late 1970s. It was far less preoccupied then with the fine distinctions of academic merit than it is now. At the same time, it has become far more preoccupied with diversity. As most professors will tell you, today’s student culture is fixated on identity politics and is terrified of anything less than an “A.” In sum: diversity and academic achievement, with “merit” defined as the maximization of both.

These days we seem to be entering another crisis of legitimacy, one very different from that of the 1960s but felt acutely by those at the top of society. Perhaps diversity is losing its power to legitimate, just as three generations ago WASP patrimony lost its power to legitimate. Diversity’s group-identity approach does not suit our individualistic culture, so there’s been a lot of cover-up and double-talk. Or maybe the academic-achievement side is in crisis. It’s become a terrible burden for young people (and their ambitious parents).

My intuition is that our problem runs deeper still. There can never be an entirely rational justification for the super-eminence of a ruling class. It always needs an element of aristocratic charisma, which is to say a quasi-sacred and mysterious source of legitimacy. The old WASP elite reflected the glow of our glorious past—Plymouth Rock, the ride of Paul Revere, Bunker Hill. That’s why overcoming the old system of legitimacy has required the active promotion of historical illiteracy, with the exception of instruction in America’s sins.

Some quasi-sacred sources of legitimacy remain. Warfare mints new elites. Some survive. Some triumph. In the dark mysteries of warfare, we sense the hand of providence. Diversity also trafficks in charisma. The cult of victimhood anoints some with special public roles. The very announcement of “diversity” has the capacity to inspire, a quality any ruling class needs if it wishes to rule. Even the grind of academic achievement participates in the aristocratic charisma of genius.

Our culture is modern, individualistic, and democratic. But we are human, and our desires, however much we analyze them with the tools of reason, are timeless. We want to be ruled by something higher. We half-believe in the anointing power of diversity and academic achievement. But only half-believe.

By R.R. Reno and published in First Things on April 5, 2018 and can be found here.

 

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