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Distributism v Capitalism

The people who argue that “capitalism works” are the same people who argue that we should have less government interference in the market. Now, I am all for less government; however, the plain fact of the matter is that capitalism cannot function without this interference; capitalism relies on an expanded state to balance aggregate supply and demand. Consider this fact: in the period from 1853 to 1953, the economy was in recession or depression fully 40% of the time. Since 1953, that is, since the economy became fully Keynesian, the economy has been in recession only 15% of the time. Moreover, the pre-war recessions were, on average, twice as deep and twice as long as the post-war ones. -link

I am one of the people who believes that in many ways, “capitalism works”. It has worked, historically, to reduce poverty and to provide opportunity for unprecedented levels of personal freedom, especially in the mixed economies of western Europe. I am not “the same people” who argue for radically small government approaching laissez-faire anarchy. And, no, I’ll never jump onto the distributist bandwagon. I will say, however, that the distributist critique of American capitalism hits the mark in ways that the socialist critique does not, and does a better job of garnering my sympathies in those areas.

Under the free market rhetoric of “conservative” regimes, the government has not shrunk, but expanded, so much so that we now have a government of nearly imperial power and privilege, headed by an imperial presidency that ignores not only the laws of congress and the Constitution, but even basic human “laws” such as the law against torture as an instrument of state policy. Government expenditures as a share of GDP are about the same as they were before the conservative ascendancy, but the cost of government has far exceeded its tax base. The result has been an increased dependence on borrowing. At the start of the Reagan administration, the federal debt was about $700 Billion; at the close of the Reagan-Bush era, it had tripled to $2.1 Trillion. It doubled again and then doubled again, and then grew some more and now stands at about $11 Trillion and rising rapidly. This increased debt represents an effective tax increase, since borrowing is taxing too, but a tax shifted on to the next generations.

This leads us to an unavoidable conclusion: capitalism and the free market are incompatible.

What’s refreshing to me about this evaluation is that it begins to draw a good distinction between the modern system of Capitalism and the economic ideal of a free market. That these two are the same has been so ingrained into our thinking by politicians and pundits of a conservative bent that we are scarcely able now to consider them other than synonyms. Looking at the tub of American capitalism, we have a habit of seeing all baby or all bathwater. It’s good to have a look and discern more than one thing inside.

I fear, along with the author, that American style capitalism is unsustainable. This latest Keynesian bailout (under Obama and the tail end of the Bush administration) of the results of a quarter century of Hayekian economics may be a bridge too far. If recovery does come and the economy starts to move again, there is no guarantee that we will be able to sustain it through consumerism, through government spending, or even through a combination of thm. Next time, the bailout needed may not even be approachable.

Add the rapidly diminishing supply of easy energy, and the notion of eternal economic growth begins to show serious cracks in the here and now.

All that said, there are devils we know tied up with distributism as surely as there are devils we don’t know. There are fascist, nationalist, and racist political movements that take up a distributist economic philosophy (the BNP looms large in this regard), and there is a question of whether that banner can be taken up without joining these factions in solidarity. There is an unfortunate grounding in the Roman Catholic church, whose doctrines impact the philosophy in both positive and profoundly negative ways. Can the positive elements of distrubitism be removed from a sectarian context and will they stand on their own there?

I don’t know. But I do understand what Chesterton meant when he said “too much capitalism does not mean too many capitalists, but too few capitalists.”

11 comments to Distributism v Capitalism

  • For “free” markets to function effectively, they must also be “fair” markets, in that they truly bring together willing buyers and willing sellers, rather than merely concentrating wealth and power in the hands of the already wealthy and powerful, who are in a position to exploit the needy and the powerless just about any way they choose. Likewise, the Marketplace is NOT an all-knowing God, it’s just a tool for creating better, faster, cheaper commerce , which in many ways is intrinsically beneficial to everyone, providing the OTHER elements of the economy are sound. Likewise, economics is not really a science; it’s more o philosophy of value — the science which sustains it is Ecology, a principle which was clearly stated in Xenophon’s Socratic dialog oikonomikus, in which Socrates declares “furthermore the Earth (Gaia), being a goddess, teaches us justice, in that she gives the most to those who treat her best.”

    So, the first principle of Economic Recovery/Prosperity is Environmental Sustainability, which means retooling our infrastructure for energy efficiency, the creation of more “Green Collar” jobs, weaning ourselves (and pretty dramatically!) away from fossil fuels, and generally cleaning up our act so that the laws that govern our home (oikonomos) are in line with the basic principles of good housekeeping (oikologia.

    Second fundamental reform is education: creating a system for teaching and training our young people to compete successfully for the good jobs of the 21st century, while at the same time recognizing that we are educating CITIZENS, and not just workers.

    Third issue is Health Care, which actually can stand for a variety of related questions involving the public good and private wealth. But as a society, we need to be clear about what is important to us all, and what is only important to a few…and then change our tax system to reflect that, rather than turning it upsidedown the way the previous administration did for the past 8 years. National, universal access to affordable health care is probably the most pressing of these areas — it will be good for individuals, it will be good for business (especially businesses like General Motors!), and it will ultimately be good for the health care “industry” as well. And does it bother anyone else that we speak so easily of a health care industry as opposed to a health care system? Personally, I think the whole system worked a whole lot better when hospitals were run by religious organizations rather than free market capitalists, and medical decisions were still made by physicians rather than insurance adjusters. But what the hell do I know?

    I do know this: Americans look at the tax rates in “socialist” countries like Scandinavia or the Netherlands, and shudder…but if you added up everything WE pay in terms of State, Federal, Local taxes, SSI, “user fees” and the like, it’s about the same (50%), and they actually GET something for their money, apart from the most impressive (and expensive) military the world has ever known. And don’t get me wrong: I know we need to have an army, and I’m very proud of my fellow citizens who serve. But at the very least we could provide THEM with decent health care when they return from service, and perhaps just keep going from there….

  • Hey, EC! I’m in general agreement with most of what you said here, but still working on figuring out the big picture… how individuals, private corporations, and governments can best work together toward the goal of a sustainable economy that allows the populace a way to provide for itself.

    One note about the mixed economies of Western Europe – an interesting effect, or side-effect, of their system is that there is better economic mobility. While we have greater “freedom” and “opportunity” here, Europeans are actually able to break out of their economic class of birth and become economically and socially mobile. Now, social mobility is not my number one priority, but I think it is important and it shows that Europeans may be better suited to living the “American dream” than maybe Americans are.

    I know a lot of Americans fear a health care “system” because they do not trust the government to administer it properly. That’s especially true for those who want to be able to pay for more comprehensive care, rather than having to accept the same standard of care as everyone else at a lower level than they feel they deserve. I think their concerns should be heard, and have some legitimacy to them – but I don’t know what the best answer is. I do know that the unintended consequence of a system where a middle class individual can pay for elective procedures but a poor person has to die for lack of a relatively basic treatment is a terrible flaw also. So, those are hard questions.

  • RW

    EC,
    The socialist countries don’t have the many billionaires & millionaires that we have in this country, they don’t have people sneaking in to get a piece of their “free” pie, they don’t have anywhere near the way of life & standard of living that we do. Oh, they get 8 weeks “paid” vacation, “free” healthcare (someone else deciding what procedure you’ll get) and “free” college, and then they go out and look forward to no one having their dreams fulfilled…’cept those that the gov’t decides.

    In America, you can have a poor kid from Ohio grow up to don #23 and become the biggest thing in sports right now (Lebron James). There are no Lebron James’ in Sweden or Scandanavia; and there won’t be, because there isn’t the capital for someone to create a top notch franchise (poor analogy, but the gist is true). If you don’t like the James analogy, go find the Swedish version of Trump, Gates, Winfrey, Buffett….they don’t exist. They exist in the USA because we’re where the “American dream” resides.

    Sure, Johnny Depp lives in France & Gwynneth Paltrow prefers Europe to we redneck Americans, but when it comes time to find the fulfillment of their personal dreams of prosperity, they conveniently enough sign on the dotted line of the big movie companies in teh USA instead of heading to the Royal theatre for a reading of Shakespeare.

    And don’t get me started on all the free stuff in Cuba, China or North Korea…

  • RW – you didn’t happen to see this (pdf) did you? Taking celebrity anecdotes out of the equation (or letting them get buried in with the rest of the statistics), we find that most European countries have more economic mobility than the U.S. So, we might not be aware of a rags to riches story in Europe that we might be aware of here, but it looks like we might have a better chance of getting ahead by hard work there than here.

  • Also, as I recall, David Beckham started out under some pretty humble circumstances… but weirdly enough, the UK is one of the few western European nations that are (slightly) less economically mobile than the U.S.

  • Danby

    Warren Buffett, son of US congressman Howard Buffett

    Bill Gates, son of corporate lawyer William Gates, founding partner of Preston Gates & Ellis LLC. His father was the employer of noted Republican bag man Jack Abramoff.

    Donald Trump, son of Fred Trump, wealthy NY real estate mogul.

    Not very good cases for American social mobility. Oprah Winfrey, I’ll grant you.

  • RW

    smijer,
    No, I didn’t see. The Brookings Inst. has an agenda, so one would can guess the outcome of the next 10 studies they publish.

    David Beckham started out under some pretty humble circumstances

    Got his huge payday by going to Los Angeles. But, soccer/football in the USA is an iffy example, as I wouldn’t think Norweigian baseball players make as much as the average New York Yankee.

    Danby,
    Warren Buffett’s success in purchasing stocks has little to do with his dad’s profession. Nice try, though.
    Where are all the billionaires that came from politicians/moguls in the grand Paradise-laden lands of the ‘free gimme’ states? Why aren’t there hoardes of people leaving the mean ol’ USA for the riches of Canada, she of the free health care system? Buffalo is a short distance from the border, one would think that proximity to one’s birthplace or where they grew up wouldn’t be that big a factor (since so many come into the USA for, well, prosperity).

  • RW

    I guess I’m just having a difficult time getting my head around the notion that the richest, most prosperous nation in the history of civilization should seek to emulate those which are a fraction as successful in both prosperity and freedom, and have been. Other than “there oughta be a law so that someone else pays some of my debts”, it doesn’t make much sense to me.

  • Baseball isn’t real big in Norway as far as I know.

    Anyway, I think I see the difference – tell me if this is right. Two rooms, each with 10 people. One room has this:
    1 person with $100
    1 person with $12
    8 people, each with $1
    - Total $ in room – $120
    Another room has this:

    1 person with $20
    2 people with $15 each
    6 people with $8.25 each
    - Total in room is $99.50

    You would call the people of the first room more prosperous. I would call the people of the second room more prosperous.

    Anyway – yeah.. Warren Buffet may not have learned the stock trade from his dad… maybe he didn’t even get any connections from his dad’s cronies, and maybe he worked at McDonalds to pay his way through college, and sold his Beatles album collection to fund his first stock purchase… but I suspect that even so, growing up with the rich and the powerful equipped him in other ways for the life of a future mogul.

  • Yes, 1+2+6 = 10. Don’t listen to the elitist math books. They are just out to stifle academic freedom, and keep us from even being able to discuss alternative theories. Ask Ben Stein.

  • RW

    Baseball isn’t real big in Norway as far as I know.

    That was my meaning, that soccer isn’t a big deal in the USA yet Beckham still got a monster deal from L.A..

    You would call the people of the first room more prosperous.

    The people in the first room left the homes of the people in the second room less than 300 years ago and accumulated that much prosperity due to their ideals of prosperity and capitalist system. And since those folks with $1 DO get free health care, DO pay no payroll taxes, DO get state & federal benefits, DO get free/reduced housing, I’d say that the $1 represented would really be much higher.

    There’s a reason, after all, that people are coming from all those $8.25 positions (not far from our minimum wage) in the socialist countries in order to do the jobs that those $1 folks refuse do do.

    I see the US spending records & know how much we spend on the poor, working poor and middle class. We are not stingy. Anything but, actually.

    Well, as a gov’t, that is. Personal giving in certain (cough, blue) areas are another story.

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