Chapter I: What's in a Name?

This is the first chapter of my new book, The Political Economy of Distributism. As promised (or threatened) I will post the book a chapter at a time as I write it to get feedback for the final edition.

The most important thing, the first thing, in understanding anything is to get the name right. If you and I were to have a conversation on any subject, say horses, and you were to refer to them as “dogs” and I were to call them “cats,” there is a good chance that some misunderstandings might arise, misunderstandings that could never be resolved until we decided to agree on a name for the thing we were talking about. This book is an attempt to make clear certain matters concerning the material relations between men, and to correct what I see as the greatest errors in the field that deals with these matters, the field known as “economics.” But before I could correct anyone else’s errors, I had to correct my own. This book started with an essay that was published in The Distributist Review, an essay entitled “The Economics of Distributism.” But as I searched the text for errors, both theoretical and grammatical, I suddenly realized that I had missed the biggest error of all, and that error was the very title. This book, which grows out of that essay, has a slightly different title, but in that slight difference is a world of difference. I let the title of the essay stand, because economics has become the term under which most men recognize the topic, and because I did not have space to explain the difference within the bounds of the essay. But in a book, even a short book like this one, I may at least make the topic clear, even if I can do nothing else. And my topic is political economy, which is to say, the only kind of economy that actually exists.

Economics vs. Political Economy

Economics is, of course, a discipline which has an enormous amount of power and prestige. But one thing it does not have is a history, or at least not much of a history; the term “economics” is of comparatively recent origin. None of the great political economists of the 19^th century were familiar with the term “economics.” For Adam Smith, David Ricardo, Karl Marx, Jean-Baptiste Say, Nassau Senior, John Stuart Mill, etc., their science was political economy. In fact, the 20-volume Oxford English Dictionary, begun in 1878 and completed in 1928 and meant to be the final word on all English words, does not even have an entry for “economics,” neither in the main portion nor in the supplement. Given the recent provenance of the word, it is important to understand how and why it got here. The term, in its modern sense, may have first been suggested by the British Prime Minister Benjamin Disraeli in 1844 as a way of separating the political economy from the pesky topic of morals. It did not gain any currency until 1890 with the publication of A. E. Marshall’s Principles of Economics, which begins, “Political Economy, or Economics, is a study of man's actions in the ordinary business of life….”[1] Note that Marshall uses the old term before the new one and makes them out to be synonyms.

But if they were synonyms, there would be no reason for the change. The difference between the terms is that the political economists saw their science as a humane science firmly embedded in human institutions. The new “economists,” on the other hand, saw their discipline not as a humane science, but as something on the order of the physical sciences, which operate independently of human intentions. They wished to “free” the discipline from all social contexts. Of course, the first casualty of this “freedom” was freedom itself, since the markets were now moved in the same way as were the stars: by inexorable forces whose course no man could alter. It is ironic to hear otherwise intelligent men speak of the “free” market while denying its very freedom.

The problem with the new economists is not so much that they were wrong, but that they were very nearly right. There are certain tendencies in human beings that allow us to make law-like statements. People do tend to buy more of a product when it is cheaper, and they tend to make more of that product when it is dearer; between these two tendencies, we really can posit supply and demand curves, and we can, at least in the abstract, discover the equilibrium point between these tendencies. And while the result of our calculations will not be a “law” in the sense that gravity is a law, in that it cannot be violated, it will be law-like: that is, useful enough for us to give useful descriptions of a particular economy. All of this is true. But the real difficulties in human thought come not so much as an argument between truth and error (pure error is too easy to spot), but between greater truths and lesser truths. Correct thought is a matter of arranging truths in their proper hierarchies, of not allowing a lesser truth to displace a greater, or of not reducing all truths to one truth. This last error is the besetting sin of economists, because to make economics work as physics works, guided by physical measurement and ruled by pure mathematics, they had to reduce man to a physical object in a world of physical objects. They had to reduce man’s labor to a mere commodity, purchased at the lowest value like any commodity; they had to reduce man to an economic calculator, the mythical homo œconomicus. Mostly, they had to divorce the economic question, as Disraeli desired, from any question of ethics. But one cannot found a science on a myth. Nor can one reduce man to something he clearly is not, or at least not completely. Man occupies a moral universe as well as a physical one, and to ignore the place he occupies is to lose the man and hence lose the science. Man, in his relations with other men, is guided by whatever notions of justice he has. Even the man who claims to divorce the questions of morals from the economy will always be attempting to give a moral justification for his actions; the plutocrat who exploits his workers will rationalize it by claiming that in the end the exploitation adds to the commonweal, or that he is just acting under the forces of “economic” nature. But if there is no question of justice, why bother to justify it?

Without understanding the nature of man, we cannot hope to understand the nature of his economic relations. The new “scientists” hoped to trade good justice for better science, but it was a bad bargain; in losing one they lost them both. In losing the ability to properly describe their subject (the human person) they lost the ability to properly describe anything about him, and most especially his economic systems. They ended up not with a science, which could serve as an arbiter of questions disputed under the terms of the science, but as a series of warring ideologies among which there can be no arbitration, indeed no communication, because they have no common terms among them, no common understandings.

I want to be very clear here that I am not denying economic science. Indeed, I am affirming it. But I am denying that it is a physical science; I deny that it can draw its proper methodology from physics or astronomy or chemistry or any other physical science. I affirm that it must be a humane science and use the methods of those sciences. In a later chapter, we will delve more deeply into the implications of this. For the moment, we can say that the humane sciences all rest in some vision of human justice, because justice is the virtue that regulates proper relations between man and man, between a man and his society. And if we lose justice, and most particularly distributive justice, we lose any hope of science; indeed we lose any hope for society. Here then, is the over-riding theme of this book: Economics, or more properly, political economy, cannot be a proper science unless it is a humane science; to be a humane science it must embody some notion of justice, and particularly of distributive justice. Indeed, as a practical matter, as well as a theoretical one, there can be no balance between supply and demand without distributive justice; the moral question and the “economic” question are, in reality, one question. Economic equilibrium cannot be divorced from economic equity, and the attempt to do so will lose both equity and equilibrium; the economy will be unable to balance itself, and so will fall either to ruin, or to ruinous government attempts to redress the balance.

The Failure of the Distributists

Although this book must be a critique of modern economics, it must start with a critique of modern distributists. I say “modern” distributists because distributism itself is nothing more than the rediscovery of an older view of economics. Until the 16^th century, there was no real dispute that economics was a colony of ethics, rooted in the political order and dependent on distributive justice. No philosopher or theologian worthy of the name, beginning with Aristotle, was without his economic commentary. He felt it merely part of his natural function to comment on the real affairs of real men, and the economic and political orders were simply part of that commentary. So very nearly the full weight of human opinion, taken as a whole, comes down on the side of the distributists. While distributism adds to modern economics precisely what it lacks to become to a real science—the science of Political Economy—distributists themselves have often been reluctant to put their case in economic terms. They have often argued from moral terms; they have placed their arguments in the necessary connection between free property and free men; they have argued on agrarian terms, on the natural rhythms of life and social order often disrupted by modern capitalism; they have argued from Catholic teaching and the social encyclicals. But on the whole, they have been unwilling or (I’m afraid) unable to enter the economic debate on purely economic terms.

This is not a new problem. G.K. Chesterton and Hilaire Belloc, though they had an intuitive feel for political economy, lacked both the training and the interest to formulate a purely economic theory. Belloc’s The Servile State was a shrewd critique of the economic order of his day, and it has proved prophetic about the decay of that order into a quasi-socialist order, dependent on big government, which is itself dependent on big capital. But even after the The Servile State, neither The Restoration of Property nor Economics for Helen was of sufficient depth, economically, to establish distributism as a separate and distinct economic theory. Likewise, Chesterton’s What’s Wrong with the World and other writings showed great economic insight but little economic theorizing. This is unfortunate because the great opponents of the distributists in Chesterton’s time, the Fabian socialists, insisted on first-class economic research. And although both Chesterton and Belloc were popular figures, and distributism a popular movement, the Fabians were able to carry the day because they could focus the debate on purely economic grounds, grounds the distributists were reluctant to enter.

This is not to deny that some great economists have been guided by the same principles as distributism. John Ryan, Heinrich Pesch, E. F. Schumacher, R. H. Tawney, and many others have made great contributions to our understanding of the political economy. Nor is this to deny that distributist practice has had tremendous successes: the long-standing success of the Mondragón Cooperative Corporation, with its 50-year history and 80,000 worker-owners; the remarkable distributive economy of Emilia-Romagna, where 40% of the GDP is from cooperative firms, and where the standard of living is one of the highest in Europe; the “land to the tiller” program of Taiwan, which lifted that nation from grinding poverty to economic powerhouse in only one generation; the success of so many ESOPs; and the success of micro-lending programs across the world. Indeed, distributist principles go from triumph to triumph, while capitalist societies go from government bailout to government bailout.

Despite these successes in both theory and practice, however, it is too often the case that in any discussion of economics, the distributist is likely to be the least well-versed in the science; he is, too often, the one least able to place his argument in economic terms, and too ready to retreat to moral arguments. This has unfortunate consequences for distributism as a movement. First, we often fail to convince others of the economic soundness of our case. Second, those distributists who have an interest in economics find insufficient sustenance in distributism, and often drift off to Austrianism or Keynesianism or socialism, things which are nearly the opposite of distributism. Finally, we cannot recognize the similarities between our own positions and allied positions like Mutualism and Georgism. And failing to recognize these similarities, we fail to recognize our natural allies. We even fail to recognize, too often, that which is valid and useful in neoclassical and Keynesian theories. All of this gives distributism a parochial cast. We end up marginalizing our own theory, simply because we often have a marginal understanding of the theory.

But if the distributist will only enter the economic lists, he will find weapons to hand and armor enough to stand against any opponent. Our theory is competitive at the intellectual level and thoroughly demonstrated at the practical level; we fill the gaps in the science of political economy that neoclassical economics, and all its variants, cannot. We do not need to stand on the margins, but in the mainstream. And in this particular historical moment, when capitalism itself seems to be in crisis, we need to make our voices heard, and heard in a language the world can understand. This book is not the great tome that distributist political economy deserves; that is a task above my abilities and one that I leave to the next Pesch, or Tawney, or Schumacher. It is intended to give the non-specialist reader the intellectual arms and armor necessary to enter the debate on more equal terms.