Chapter XIX: Building the Ownership Society

The last chapter--finally!

Distributism and the Current Crisis

Discussions of what to do about the current crisis commonly take the form of an argument between “socialism” and “capitalism.” However, such a discussion is flawed in both of its terms. Real socialism collapsed in 1989, and few would want to return to that horrific system. What is less well understood is that pure capitalism itself collapsed in 1929, never to rise again anywhere in the world. There are few citizens with any living memory of real capitalism, and the memories they have are generally unfavorable. Capitalism collapsed for the same reason as communism, a victim of its own internal contradictions that caused chronic instability. Workers found the system unacceptable, to be sure, but so did the capitalists themselves, and few were very sorry to see it go. Pure capitalism had proved itself toxic to both capital and labor, just as Belloc predicted it would in 1913.

The first task in reforming the system to understand the system that we have, the system that is in full failure, and understand apart from the ideological terms commonly used to describe it. The system that replaced capitalism was first a hyper-active Keynesianism, brought about by World War II and which lasted until the late 70's; Keynesianism itself was then replaced by a pure mercantilism, the system which combines private privilege with public power and which so incited the wrath of Adam Smith. It is this mercantilism which finds itself in the midst of a full-blown collapse. Both the Keynesianism which replaced capitalism, and the mercantilism which replaced Keynesianism, depend on massive government controls and subsidies which are no longer practicable or sustainable. Nor can we go back to the capitalism of the 1920's without reliving the instability of that turbulent period.

If capitalism is not a viable alternative, if it represents a system that no living man has seen, why then do the arguments in its favor carry such weight? I believe the reasons are mostly ideological. Capitalists are quite willing to trot out libertarian arguments when dealing with some regulation or tax that they find odious, but they are just as willing to put such arguments aside when they seek some privilege or subsidy from the government. In this way, the most well-meaning of the libertarians serve as the fellow-travelers and useful idiots of the mercantilists. And although I have a great deal of respect for the libertarian arguments in general, in practice these arguments do not function apart from well divided property, as the older, pre-Austrian libertarians realized.

However, it would be totally unjust to critique the libertarians if the distributists did not have something of their own to offer, and something more than mere platitudes or even principles. Something programmatic and concrete, and applicable to our actual situation is required. Distributists have an advantage in this regard, since, unlike capitalism or libertarianism, there are actual distributist systems on the ground and working (Chapter XVI) and we can examine them for practical lessons to apply to our own troubles.

Distributism and Government

Critics of distributism often charge that the theory is no more than a variety of socialism. This charge is odd for two reasons: One, socialism is the theory that there should be no private property, while distributism is the theory that property ought to be spread as broadly as possible; the two are precisely opposite. Two, the actual practice of distributism, in Mondragón and other places, is more “libertarian” than anything the libertarians have been able to accomplish. Nevertheless, the critique cannot be passed off lightly because the very term “distributism” conjures up the specter of “re-distribution,” the idea that some committee of bureaucrats will decide who will, and who will not, own property.

But in the main, distributism is not so much about what the government ought to do as about what it ought to stop doing. The claim of the distributist in this regard is not much different from the claim of the pure libertarian: It is government which fosters the accumulation of property into fewer and fewer hands. Indeed, without the aid and protection of government, the piles of capital could not have grown as high as they have. And the higher the piles of private capital grow, the thicker the walls of public power necessary to protect them. Big government and big capital go together, and this is a simple fact of our history, beyond all reasonable dispute.

That being said, there are clearly cases where government must, in fact, redistribute property. The case of Taiwan comes to mind, where the population was held in virtual slavery to a few landowners. The remarkable prosperity of that island is traceable to the decisive action of the land-to-the-tiller program, which made most of the sharecroppers into independent farmers. Those who would defend the landowners and the sanctity of property over the misery and poverty of the people corrupt the very notion of property. Property is a sacred right, but not an absolute one. Every proper right is known by its limits, and an absolute right is not a right at all, but the seedbed of tyranny. Property that depends on the slavery of others is certainly not legitimate property. And in such egregious cases, the government can indeed take egregious action.

And then there is the case of the entities deemed “too big to fail,” or more accurately, too big to succeed without generous drafts from the public purse. It is quite legitimate to break up such companies and to distribute them either to the local or regional banks or to the employees. The same principle applies to the failed industrial giants that require public life support. They can be broken up and turned over to the workers through the simple expedient of placing contractual obligations for pay and pensions on the same level as the contractual obligations to the bondholders. Then we can see if the workers can run these factories any better than the geniuses in Detroit. If the similar experience in Argentina is any guide, they might do very well indeed.

Finally, we can note that as long as capitalism endures, distributists may legitimately call on the power of government to limit its manifold excesses. For example, so long as there are monopolies, price-controls are a legitimate public response. Ideally, we would want to eliminate such monopolies that are not strictly necessary, but as long as the government protects monopolies, it is reasonable to ask for protection from monopolies.

All that being said, our main interest in dealing with government is to deal it out of the game. It is not that there would be no government—we are not anarchists—but compared to the size and scale of the current mercantilism, it would look a lot like “no government.” Still there are functions which are properly left to the community and these would be left in place. Anyone who objects to any government whatsoever as a form of socialism ought not to pull that socialist lever in their home, the one that makes their waste disappear in a whirlpool into the socialized sewage treatment plant.

I present a “distributist program” not because I think our future will unfold programmatically; rather, it is likely to be chaotic, even violent, as such transitions often are. But one must be hopeful and hope for peaceful change, and even have a plan to accomplish that change. Most of the proposals presented here have already been discussed in detail in the previous chapters. Here in the last chapter it is appropriate to bring them all together and summarize them. I will refer to the chapter where each was discussed more fully.

Building an ownership society involves both political and economic goals. The political goals are based on the principles of subsidiarity and solidarity (Chapter XIII). The economic goals are built on the principle that justice is intrinsic to economic order, and not some added extra or exogenous feature (Chapter VI).

You Say You Want a Devolution?

Devolution as a Fiscal Problem. Conservatives express great frustration with the egregious violations of the Constitution by the legislatures and the courts, violations which ensure that power gravitates to the federal government, while the states become mere bureaucratic subdivisions of the federal apparatus rather than partners in a political union. In response, they call for a devolution, a return of power to the states. Many historical, political, and philosophical reasons could be advanced for the centralization of power, but at base this turns out to be a fiscal problem. Power follows property, as Daniel Webster noted. The political equivalent is that power follows funding, that it gravitates towards that level of government that has the most money to spend. When the federal government acquired the power to tax incomes with the 16^th Amendment in 1913—a source of funds with no natural limit—the rest of the constitution gradually became irrelevant.

The income tax makes the feds the most important source of funds, and hence the source of power. Local and state officials tend to kick problems “upstairs” to the largest funding source. Thus it comes as no surprise that a senator can run for vice-president on the claim that he “put 11,000 cops on the beat”; that is, that he did a job the city councilman should have done. But the councilman was happy to kick the job up to the senator, since the senator controlled the money. If you want the councilman and the senator to do their proper jobs, then you must cut the funding of the one and enhance the funding of the other. You cannot change the powers without changing the funding.

Income taxes are paid by capital and labor. Now, the more you tax a thing, the less you get of it. Yet labor and capital are things we want more of, not less. They should be taxed the least, if at all. Further, income taxes tend to degenerate into labor taxes, with the burdens shifted down the income scale, or forward to the next generation. The rich may claim that they pay the majority of incomes taxes, but this number is reached only by excluding the social insurance taxes, which only apply to the first $100,000 of income, and certainly don't include the taxes they shift onto their children and grandchildren.

In order to implement subsidiarity in government, we must also have subsidiarity in the funding of government. That is, funding must start at the local level and be dispersed upward, rather than the other way round. Further, we must tax that which has no economic value, that is, the tax should fall primarily on economic rent and externalities (Chapter XV). Economic rent can be confiscated with no negative economic consequences (except for the rentiers) and many positive ones. Externalities (the costs of a transaction charged to a third party not involved in the transaction, e.g., pollution) should be charged with the full cost of their mitigation. With any luck at all, the government will be sufficiently inefficient at mitigating externalities that businesses will prefer to perform the mitigation themselves and not pay the tax.

Economic rent is primarily embodied in ground rents (Chapter IX). Treated as a tax, ground rents are most efficiently collected at the local level, and indeed the bureaucracy to do so already exists. Obviously, there has to be national agreement on the methods used to value and assess ground rents and on the “split” between local, state, and the federal governments. But lower levels of government will then have an incentive to accept more responsibilities, rather than kick problems upstairs, because this justifies claiming a larger portion of the revenues, revenues which they themselves collect. Politically, the problem with a “ground rent tax” is that it sounds like a “property tax,” and that scares people. However, once it is understood that we are trading off the income tax for the ground tax, most people, I suspect, will see the advantage. They will have a tax easily predicted, easily collected, local, and all without the government prying into the details of their lives.

This would not entirely eliminate labor taxes, since there are still the social taxes. However, these taxes should be used solely for direct services to workers and their families, mainly unemployment and medical insurance, welfare, and old-age pensions. They should not be, as they are now, over-collected and used to subsidize the general fund, which requires that in a very few years the general fund will be required to subsidize the social funds, and this will prove to be impossible under the current system; the general fund is already broke and destined to get broke-er.

The social taxes are efficiently collected (at least in regard to wages) because they are a flat tax paid by businesses in behalf of the employees and which require no complex filings. The income limitations ought to be removed, and the tax made steeply progressive for the top 2% or 3% of incomes (since there is an implied economic rent in these cases), but otherwise, there is surprisingly little that needs to be done. The problem is a bit more complex when dealing with non-wage income, but I believe those problems can be solved efficiently.

Devolution and Deficits. A ground rent tax would collect about 20% of GDP on the best estimates. However, current government expenditures at all levels total closer to 35%. Hence there will be a shortfall under a ground rent scheme. Whether this is an advantage or not depends on whether the budget can be cut. We cannot use the “starve the beast” strategy that has characterized Republican Party policy. Such a strategy does not curtail the growth of government: it enables it. Cut off from any fiscal restraints whatever, it breeds a “deficits don't matter” mentality that divorces the budget from any fiscal reality. Further, tax cuts without spending cuts are not really tax cuts at all; they are tax shifting, mainly from the current to the future generation. Spending our children's money is both economically unsound and morally reprehensible.

Moreover, it is not just the problem of getting government to live within reduced means, there is also the problem of the enormous debt that must be paid off (or significantly reduced) if both sanity and subsidiarity are to be restored. The federal debt is, as I write this, $11.8 trillion and rising rapidly. The interest on that debt exceeds half a trillion dollars; after the defense budget, it is the largest expenditure of the federal government and will soon be the largest. These are monies that must be paid out before a single bullet is bought or a single bridge rebuilt. Thus, we seem to face intractable problems. On the one hand, we would like to reduce both taxes and the expenditures of government, and on the other we must pay a seemingly insurmountable debt from these reduced revenues. Nor is that all. Our infrastructure is aging and much of it needs to be rebuilt, at enormous expense. The freeway system, for example, was begun in the 1950's, and many parts are nearing the end of their useful life. And the same goes for many other parts of the infrastructure, such as levees and dams. This will put enormous pressures on any attempts to rein in the budget.

To add to the problems, we are about to face the retirement of the post-war baby boom generation, which will arrive like a fiscal tsunami on the Social Security and Medicare budgets. In the face of all these problems, it would seem that we need not lower taxes, but higher; not a devolution to the states, but an even more powerful central government empowered to tackle these enormous and growing problems. However, this would be to gorge on the medicine that made us sick in the first place, which can only make us sicker. How then should we confront these problems?

In regard to the federal budget, we argued in Chapter XIV, not only would it be relatively easy to cut one third or more from the general fund, it could be done without reducing (and usually enhancing) any essential services. I will not here rehearse that argument, but only mention that some of the measures are obvious, such as abolishing pointless departments like education and ending subsidies, recalling the military to our shores (do 700 overseas bases really enhance our security?) and shifting from taxes to fees wherever there is an easily identifiable group of users for a service.

Eliminating the Debt. But the largest line item, after the defense budget, is the interest on the debt. No real progress can be made if this debt is not eliminated, or at least substantially reduced. In thinking about the debt, one has to think about money itself. In Chapter VII we noted that the creation of money is the private monopoly of the banks. This money is created out of thin air, and represents no prior savings or production. Yet, it forms a claim against things that have been produced. In the case of government debt, the banks lend money they invent, but demand payment in the equivalent of real goods and services. Hence, the government must tax real goods and services and turn over the money to the creditors. But this will become increasingly less of a possibility in the near future.

About 41% of the debt ($4.3 trillion) is owned by agencies of the government, mainly the Social Security Trust Fund. This portion of the debt can simply be monetized over a ten- to fifteen-year period. That is, the government will print the money to pay off the debt to the trust funds. Some may be shocked by the suggestion that the government be allowed to simply print money into being, but this is certainly preferable to having the banks lend it into being. Will it be inflationary? It might be mildly so, but if done over ten to fifteen years, it will be no more than simply converting the current interest payments into principle and eliminating both.

There isn't much else that you can do with this debt. The only alternatives (other than just reneging on the commitment) are to raise taxes or increase borrowing. Up until now, the social security taxes have formed a vast subsidy to the general fund, with IOUs being placed in the fund. But in just a few years, the cash flow will go the other way: from the general to the trust funds; but the general fund does not have, and will not have, enough money to pay the trust fund. In order to pay off these IOUs, there would have to be a vast tax increase over and above the high social security taxes we now pay. Our children—and the economy—simply cannot tolerate that burden. Or we can simply borrow more money, but that is problematic, to say the least.

The next portion is the 29% owed to foreign governments, banks, and individuals. This portion of the debt could be monetized, but likely shouldn't be. My belief is that paying this debt should be the responsibility of the financial sector. A small tax, about 0.25%, on the transfer of financial instruments such as stocks, bonds, CDOs, CDSs, etc. should be levied and placed in a sinking fund to pay the interest and principle on these debts. Such a small tax would be sufficient to pay off the foreign debt over a term of five to ten years.

That leaves only the 31% of the debt held by American citizens and institutions. This portion of the debt could be partially monetized (as financial conditions dictate), partially paid off by the sinking fund, or simply left in place and allowed to shrink as a proportion of the economy. What is critical, however, is that the debt not be allowed to grow. And this requires abolishing the Fractional Reserve System, whereby the banks get to create money for nothing. This is the fiat money that is “lent” to the treasury. Its origin is thin air and a legal monopoly, a monopoly that must be abolished.

Monetary Reform. One of the greatest forces for the unjust accumulation of property is this fractional reserve banking system, which grants a monopoly privilege to a small group of people, namely the bankers and their allies. These private citizens have the power to create out of thin air nearly all the money in circulation. Such a system is intolerable on both moral and economic grounds, and must result in periodic credit crises, as greed and necessity moves bankers to create more money than the economy needs or can be reasonably “repaid.” That last word is in quotes because you can't “repay” what was never paid in the first place, to repay in real goods a “debt” that was only an accounting entry on the books of some bank.

I do not believe that an ownership society can be reconciled with such a money system. The creation of money is a public power, and the public ought to take it back. Coining money into being ought to be the sole authority of the federal government, or even the states that wish to do so (although this is not currently allowed in the Constitution).

There is no reason why the federal government should not create its own money and spend it into circulation for capital projects. Capital projects, in the main, create more wealth then they cost, hence there would be little inflationary effect. The Federal Government could also act as a banker to the states and cities to lend them money, at little or no interest, to finance their own capital needs. This would shift the power inherent in capital projects back to the states and cities. In any case, control of the money supply should not be in private hands; it is a public power, and the public should take it back.

Localizing the Economy

Industrial Reform. Political subsidiarity would mean little if the industrial system remained concentrated; it does no good to collect taxes locally if the production of goods, and therefore the production of taxable values, is not also widespread. In Chapter XVI, we noted the problems and inefficiencies of the current system, a system that is highly dependent on subsidies and externalized costs. Once these subsidies are removed, it is unlikely that the current production model could actually produce anything at a profit. Localized production will follow in the wake of the demise of the subsidies.

Indeed, the large corporations themselves have already opted for distributed production, divesting themselves of actual factories and seeking to retain centralized control through cheap transportation and legal control of the patents. The highly integrated, vertical model pioneered by Henry Ford has been in decline for some time; distributism is the order of the day in corporate America. Unfortunately, they have dispersed the factories around the world, rather than around the country. Nevertheless, this still plants the seeds of their own demise. One day, the workers in Vietnam making shoes for Nike will realize that they can ignore the patents, rip the swooshtika off the shoes, and sell them locally for a tenth of the price, while paying their workers three times the wages and still making twice the profit. Indeed, the Chinese have already discovered this, and all the talk of “piracy” will not change these facts.

This may help the worker in Shanghai or Hanoi, but it doesn't do much for the worker in Des Moines or Sioux Falls. For these workers to be helped, they will have to have the same privileges as the Chinese and other foreign workers. Moreover, they will have to have a production system that respects localism. Distributism offers here not just abstract models, but functioning, stable systems that anyone can examine and adapt to their own situation. That is, distributism does indeed have a coherent and functioning industrial policy. Here we just summarize the elements of these systems as it was presented in Chapter XVI:

• Flexible manufacturing able to shift between product lines as demand dictates

• General purpose machinery instead of product-specific machines.

• Demand-pull rather than supply-push manufacturing

• Local supply chains wherever possible

• Widespread worker ownership and open book management

• Scalability, production techniques that are scalable from the level of the family farm right up to the large factory.

Agrarian Reform. Distributists are frequently accused of being romantic agrarians. We are agrarians, but we are not romantics. “Agrarian” means, in this context, not “moving everybody back the farm,” but “restoring the proper relationship between town and country.” Contrary to corporate opinion, a tomato does not taste better if it is picked green and shipped a thousand miles before it is consumed. But apart from the question of flavor, there is the economic inefficiency inherent in such a system, inefficiencies that are covered up by subsidies.

One thing is for certain: neither the environment nor the economy will tolerate much longer the current system of factory farming. The cabbage grown in Oregon and consumed in Texas consumes more energy in its growing, picking, transportation, and marketing than it supplies in calories. If the energy inputs—the chemical fertilizer, the heavy equipment, the fuel for machinery and transportation, and so forth—were properly priced and the subsidies removed, this transcontinental cabbage would not be a paying proposition. And it will not be in the very near future. Even today, the system depends on an easily exploitable workforce that does not participate in the benefits offered to the rest of society, creating a vast underclass whose legal status is ambiguous, even as their numbers proliferate.

Trade Reform. Trade is a basic part of the human condition; no family, firm, city, or nation can or should be self-sufficient. But trade is only good when it really is trade, that is, when you earn enough to buy the things you purchase. A “trade” that is based on borrowing to finance consumption is not really trade at all, but the prelude to bankruptcy. This is a basic fact overlooked by our trade policies, which are based on a doctrinaire application of the basic “free trade” theory, called the Theory of Comparative Advantage. However, the people who argue the theory most strenuously seem to be the ones least familiar with the actual theory. The theory is valid only under three conditions: one, that capital is relatively immobile; two, that there is full employment in both countries; and three, the trade is balanced between both countries (Chapter XVII). Absent these conditions, a doctrinaire “free trade” makes both parties poorer, as the poor in both countries are played off against each other. In the United States, it has resulted in a hollowing out of our industrial base. But no country can expect to grow prosperous except by making things; if we lose this ability, we guarantee ourselves and our children a life of dependence and poverty.

Without the necessary conditions, an insistence on free trade ceases to be a useful economic paradigm to become a mere political ideology. When conditions are less than the ideal of the pure theory, then trade between nations must be managed, just as trade between firms is managed. We should make those deals which make sense, and reject the others.

Distributism and Reform

Since the current system is not sustainable, it will be reformed, one way or the other. The only question is whether we shall get out in front of the collapse and begin an informed movement towards sanity. Since the Enlightenment, the world has experimented with laissez-faire capitalism, socialism, communism, Keynesianism, and mercantilism. While each of these systems contains some partial truth, they are all insufficient to the whole truth. All of these systems have been weighed in the balance of history and found wanting. It is time to return to a more natural system, and that is system is, I believe, distributism, or something very like it.

For the past few decades, distributists have mostly withdrawn from the purely economic debates to rest their case on moral and social claims. This is, of course, a necessary aspect of the problem. However, these claims cannot be made credible unless there is also a credible economic argument behind them. As Cardinal Ratzinger (as he then was) stated,

A morality that believes itself able to dispense with the technical knowledge of economic laws is not morality but moralism. As such it is the antithesis of morality. A scientific approach that believes itself capable of managing without an ethos misunderstands the reality of man. Therefore it is not scientific.

My intention in writing this book is to demonstrate that distributism is a robust economic theory, demonstrated by actual practice, and is capable of tackling the difficult and sophisticated problems that we face. I hope that this book will enable the distributist to enter the debate and stand his ground against all comers: socialist, capitalist, Austrian, Keynesian, or whatever.

This is the distributist moment. We must seize this moment; it will not come again. We must arm ourselves with both the moral and technical knowledge that will be required to reform our world and preserve our freedom. For make no mistake, although all these other answers have been tried and found wanting, there is yet another answer: slavery. Slave societies have proven themselves stable over long periods of time, and so provide a solution, no matter how distasteful to our Christian heritage, to the problems of social and economic stability. In the end, the question will be, as Belloc predicted it would, between freedom and slavery.

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Will the Real Subsdiarity Please Stand Up?

*italics are mine and only used for emphasis*

One difficulty facing those who take a borderline libertarian view of subsidiarity is that doing so fails to take into into account what encyclicals have said concerning the state, its proper role and functions, and particularly its rightful involvement in the market. This, as I have contended elsewhere, results in allowing the distributist tail to wag the CST dog.

It is my hope, then, to herein demonstrate what I believe to be a more accurate understanding of subsidiarity and how it should function alongside the powers and responsibilities belonging to various spheres of authority within the political economy, be it the individual, the family, the workforce, the church, or even local, regional, state, national, or international civil authorities.

Let me demonstrate what I mean.

We would do well to first consider the role of what the Magisterium has said concerning the State. For sake of time and space, as well as the fact that this particular encyclical is an excellent source for material pertaining to this matter, I will focus most all of my attention on the papal letter Mater et Magistra. I will also add a few tid-bits from the CCC and its Compendium, both of which substantiate and further clarify those issues dealt with by the popes in their universal letters.

Pope John XXIII was no foe of the state. As with Pope Leo XIII and all those pontiffs before and after him, he saw the state as being a authority deriving its power from God. He believed its existence to be most natural in the order of men. And as we will see, he believed the role and function of the state to be much more broad than many of the libertarian-leaning distributists.

Read Mater et Magistra, and search out those portions I will reference here. See what the pontiff says of the State. Consider whether or not this view of the state is in harmony with the position advocated by those whose definition of subsidiarity would make the State an almost non-existent entity.

Take for example #20-21. Here we are told that the State “whole raison d’etre” is the realization of the common good in the temporal order. Echoing the Leonine theme of the Church’s insistance that the State take special, and even preferential treatment of the poor and working class, he praises “labor laws” regarding environmental conditions of laborers, child labor laws, and anything harmful to their material and spiritual interests.

Number 44 requires the state to intervene on occasions where individuals cannot work out matters concerning the division and distribution of work.

Number 60 makes explicit the responsibility of the civil government in areas of healthcare, education, career opportunities, and even the rehabilitation of those who are physically and mentally handicapped.

We find in 74 the civil authorities responsibility to “secure without interruption” the material conditions in which the citizens of the nation may fully develop. Number 79 goes further, indicating that the state is to be vigilant over and within the economy, assuring that work will be maximized amongst the citizenry, that privileged classes would not be permitted to rise up, that there would be an equilibrium amongst wages and the price of goods, that both goods and services would be accessible to the greatest number, and that the three branches of the economy (i.e. agriculture, industry, and service) would be regulated in such a manner as to ensure that they will grow together rather than for any of them to be absorbed with the dominance of any other. To top it off, the civil government was to have the authority necessary to direct the current contract system that divides capitalists from wage-earners to one resembling a partnership.

We could also deal with #s 104 (regulating Big Business so as to operate in a manner promoting the common good over against special interests), 115 (putting in place an economic system wherein the distribution of wealth, land, houses, tools and equipment used by various industries, and shares in medium and large business concerns would all be maximized), 116 (granting to the state various activities that “carry with them power too great” to be left to lower orders), 88 and 127 (dealing with state involvement in ventures such as roads, transportation, communication, drinking water, housing, healthcare and service providers, technical and professional education, religious and recreational facilities, and subsidies for family farms), 150-151 (demanding vigilant care as to the further elimination of economic and social inequalities and imbalances, the supply of labor, drif of population, wages, taxes, credit, investment, and the promotion of useful employment, enterprising initiative, and hte exploitation of local resources), and 168 (the redistribution of riches amongst all within the community and working towards ensuring that agriculture, service, and industry progress evenly and simultaneously). The list goes on an on.

For anyone to walk away from even this one encyclical with the idea that it proposes the kind of “lowest rung possible” subsidiarity regarding virtually every economic activity under the sun would be a sure indicator that they either didn’t really read the encyclical or they have a terrible case of selective memory.

But what of those places that deal with subsidiarity? We have discussed at some length the role and proper functions of the state, but what then are we to make of this principle of subsidiarity? Well, let’s go back to Mater et Magistra for a moment.

Number 53 within Mater et Magistra sounds much like the version of subsidiarity commonly promoted by those harboring a general distrust (or disdain) for civil government. But it would be injurious to tear it from its surrounding context. For number 53 is surrounded by affirmations that make absurd the notion that the pope(s) have promoted this “lowest rung possible in any and all situations” subsidiarity. Looking at #52, we see Pope John XXIII explicitly stating that “the civil power must also have a hand in the economy.” And this intervention is not merely an afterthought, or functioning as a clean-up watchman waiting for an otherwise private market to make a mistake. No, it is to “promote production” in a way that is “calculated” and has as its aim “social progress and the well-being of all citizens.” Remember, this is what immediately precedes the popes take on subsidiarity.

Following #53 we see the pope go right back into promoting state intervention and direction of the economy. In #54 he affirms the state’s obligation to minimize imbalances amongst various sectors within the economy, to implement policies that do not pit one people, region, or nation against another, and to erect safeguards against mass unemployment and fluctuations within the economy. Again, this follows on the heels of the section dealing with subsidiarity.

The pope further deals with subsidiarity in #117, but he presupposes what had already been established by other popes regarding the various spheres of authority within the political economy as well as the rights and responsibilities belonging to each. The civil government (as with the individual, family, the marketplace, and the church) had been assigned various functions. These were always to be kept in view when talking of subsidiarity, as it would be just as wrong for a lower sphere to take upon itself what rightfully belongs to a higher sphere as it would for the higher sphere to deprive or absorb those responsibilities properly acknowledged as belonging to a lower sphere. While libertarians may tend to see only a higher sphere absorbing a lower sphere as a form of aggression, the traditionalist and encyclical enthusiast would do well to see it as a two-way street.

While one could possibly construct a way that a specific function assigned to a particular sphere may be done by another sphere, be it replacing the function of the individual or family with the state or vice versa, this would not constitute subsidiarity. Rather, it would be for one sphere to break ranks, absorbing what does not belong to it. In short, even subsidiarity works in a manner that accepts the rightful authority and functions of other spheres within the political economy, be they higher or lower, belonging to the state or the individual.

Let us just for a moment take a peak at the encyclical known as Quadragesimo Anno. It is here where we find the birthplace of subsidiarity in Catholic Social Teaching. Yet even here we see civil and church authorities granting special care for the poor and weak in society (#25), the praise of labor laws (#28), the redistribution of wealth for the common good (#57), requiring the state to work towards establishing an “ownership society” (#82-83), the condemnation of laissez faire (#88 and #109), and even demanding that the state take hold of the reigns of the “free market” in order to direct it towards the common good (#110).

None of this sounds unfamiliar to those holding a position concerning subsidiarity and the state detailed ever so consistently in the papal letters. But it would sound awfully strange to those granting to subsidiarity a function and reach it was never meant to have, nor ever recognized by our most highly esteemed Roman Pontiffs as ever having in the first place.

Before bringing this entry to an end, I believe it would do us well to look at what the Catechism of the Catholic Church (CCC) and Compendium have to say regarding the definition of subsidiarity. I believe that these two sources, and the definition they provide the Catholic, vindicate the premise of this entry, as well as the arguments used to substantiate it.

CCC 1883: Subsidiarity: according to which “a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to co-ordinate its activity with the activities of the rest of society, always with a view of a the common good.”

Compendium: 403: Subsidiarity: “The principle of subsidiarity states that a community of higher order should not assume the task belonging to a community of a lower order and deprive it of its authority. It should rather support it in case of need.”

Notice that both the CCC and Compendium make it very clear that subsidiarity does not mean that if one were to concoct a means by which a lower order could perform a task as good (or even better) than the order to which the function belongs, then it should absorb that function. Not at all!

In conclusion, each order, each sphere within society, is given various tasks it must or ought to perform. Sometimes these are clear-cut. Sometimes they overlap. Sometimes we are left with a great deal of gray. But subsidiarity must not be understood as some libertarian wishbone. Instead, it is restricted to the overlapping areas and those gray regions. Unfortunately for the libertarian-leaning distributist, this turns out being more of a bust than a boom, as so many of their policy proposals stand or fall on an accurate understaning of subsidiarity.

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The Fear Monger's Shop

One of the more interesting “advertisers” on A Prairie Home Companion is the “Fear-Monger's Shop,” catering to all your phobia needs. Garrison Keillor is of course satirizing what commercial advertisers have long known: that our fears are stronger than our loves when it comes to our purchases. Fear of losing our looks, of appearing unfashionable, of getting old, of life itself, leads us to spend a great deal on objects of questionable utility, while constantly throwing away objects that are perfectly serviceable. Love may make the world go round, but fear keeps the economy humming.

Long before the commercial world discovered it, politicians grasped instinctively the value of fear in selling themselves and creating political dependency. This is especially important in an electoral democracy, where keeping your supporters loyal is often a matter of demonizing the alternative. The road to power is paved with phobias, and even positive terms like “hope” and “change” really refer to darker fears that we hope will change.

One never needs to search very far for examples of this. Still, some examples are better than others, with the recent “death panels” controversy being among the most egregious. The end-of-life counseling that is the subject of the debate is recommended by just about every organization that deals with the elderly or those with terminal diseases. Making it part of Medicare was originally a Republican idea proposed by Senator Johnny Isakson of Georgia. Newt Gingrich was an enthusiastic supporter of the idea as late as July 2, claiming it would save 32% of Medicare costs. Sarah Palin was also a great supporter of the idea, and even proclaimed, in her half-term as governor, a “Healthcare Decisions Day” for all Alaskans.

Then, on July 16^th, came an interview with a certain Elizabeth "Betsy" McCaughey on former Senator Fred Thompson's radio show. Thompson described McCaughey as a “constitutional scholar” and “health care researcher,” although I suspect one would be hard-pressed to find any articles of hers on either subject in any scholarly journal. What McCaughey was really known for was a series of bizarre claims that few took seriously. Nevertheless, she used the Thompson interview to claim that these consultations where really about forcing euthanasia on the old and constituted death panels. The blogosphere lit up like a Christmas tree, with (I am ashamed to say it) the Catholic bloggers taking the point position on this excursion into fantasy land. Then came Sarah Palin's famous “death panels for Down syndrome tweet” and the game was on. Sarah likely can't remember her position on any given issue from week to week, but Newt Gingrich can. That didn't stop him from getting on the death panel bandwagon and denouncing the plan he had previously supported.

We are all familiar with politicians whose principles are, ah, flexible, but this is the kind of volta face that gives cynicism a bad name. People were amazed that the “Town Hell” meetings were so raucous; I was amazed that they were so calm. After all, if somebody had convinced me that my congressperson was out to off grandma to kill all the handicapped, I might have shown up with a shotgun myself. (Can I say that? Will I be getting a visit from Homeland Security?) Since the famous Palin tweet, any serious discussion on health care reform has been seriously impaired, with even Chuck Grassley signing up as a Palin-ite. But then, stopping debate was the object. In any contest between fear and reason, bet on fear every time.

The death panel debate will provide, I am sure, subject matter for more than just a few doctoral dissertations in political science schools. However, let me suggest a more promising field for the budding academic pundit, and that is the use of fear in commercializing politics. What I am speaking of here is fear as a political business model. At this point, political etiquette requires me to be fair (or unfair) to both sides and denounce both equally. Nevertheless, I value truth more than fairness, and hence I must praise the Republicans far more than the Democrats. I can make this judgment because I am somewhat politically ambidextrous and hence my inbox is always stuffed with appeals from both sides, each denouncing the other and asking for funds, seeing as how the fate of the Republic depends on my $25 dollars, this week, and will require a further infusion next week if freedom is to be preserved. I love to read the mutual denunciations, but I never click to send cash. I should mind you; the entertainment value alone is worth it.

The internet has certainly changed the game of fund raising. The techniques were pioneered by Howard Dean, Ron Paul, and preeminently, Barrack Obama. Indeed, Obama could not have survived as a candidate without his team's internet acumen. But these operations were still about fund-raising; they were about making their case and asking for cash. They were never properly commercialized. Were these internet geniuses missing the whole point? Were they throwing away the vast commercial potential of their donor base? Could the donor base be converted into a pure sales channel?

Yes it can be; the same techniques used to save the Republic—on a daily basis—can also be used to save your colon, and the organization that realized this commercial potential is Endeavor Media Group, LLC, and its President Bobby Eberle, a mechanical engineer from Houston turned political entrepreneur. Eberle's company runs a site called GOPUSA which has found a way to convert the bad news of politics into the good news of colon cleansing. After all, what's the advantage of being a good citizen if your colon is shot? I tell you frankly, I am in absolute awe of Eberle's achievement. Within a few years, he moved from obscurity to being a power broker (according to his site) and made not just a few bucks along the way.

The actual marketing is simplicity itself. Each day, the “subscribers” get an email. The email, in patriotic tones and colors, consists of a series of links to various columnists and news stories, interspersed with messages from the “sponsors.” They don't have advertisers; that would be vulgar, only sponsors and in purchasing their products your are supporting the work of GOPUSA, a work that seems mainly about enriching Bobby Eberle. The first of the links is always to the daily thoughts of Chairman Eberle. Bobby seems to be a man who has many thoughts without ever being thoughtful. But tastes vary, and anyway that's not the point. The point is the “sponsors,” who offer a collection of causes (the Republican Party and its various campaign committees buy lots of space), cures, stock tips, books, investment advice (from Ann Coulter, no less), survival advice and the like. Knowing something of these matters, I strongly suspect that Eberle's pitch to his “sponsors” is that he can deliver a constantly frightened audience who are susceptible to nearly any appeal.

Some of the appeals are more appalling than others. For example, one “sponsor,” the “Coalition to Support America's Heroes.” raised $20 million “to salute our troops.” The “salute” consisted a calling card good for a sports hotline. Just what the fighting man needs: news about the Cubs, as if things weren't bad enough already. Others connected with the scam received better “salutes”; Richard Vigurie got $14 million of it. And an Air Force bureaucrat, General Chip Diehl, received a lucrative payoff, as did General Tommy Franks. You can read the rather disgusting details here, but in my opinion, Diehl ought to be court-martialed and stripped of his pension, while Franks ought to be disciplined.

If there is a Democratic equivalent of this, I haven't seen it. Maybe one of our loyal readers will know. But I think a party that cannot realize the commercial possibilities of fear is simply not fit to run a commercial empire like the United States, and all the corporations for which it stands. At the base of so many enterprises—and so much of our marketing—stands the “Fear Mongers Shop.” Garrison Keillor was making a joke and a point; Bobby Eberle turned it into a business and a pile. I leave it to you to judge which is the more quintessentially American.

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Who Owns Our Jobs?

We have all been trained up to the belief that jobs are something in the gift of great corporations or government bureaucracies. True, there are still places in the economy for the small businessman or -woman, the sole practitioner, the craftsman, or the small farmer. But in general, we regard the capital requirements of job creation on a large scale as exceeding the resources that most people can command. Even business students are trained not really to be in “business,” but to be in the bureaucracies of business or government. Even the name of the degree, “Master of Business Administration,” indicates a bureaucratic bent. Thus, while we may be, as citizens, politically free, we will always be economically dependent. For most people, the plain truth is that we may vote for whom we wish, but we must work for whom we must. Our ability to set up on our own is limited by capital requirements, government regulations, and the market power of great corporations that increasingly colonize economic spaces that were once dominated by the small retailer, producer, or farmer. The result of such arrangements is that one group of citizens—a relatively small group—is in command of capital, while the mass of men supply only labor.

This division between capital and labor is not required by any economic theory. Economics as such is indifferent to the question of the division of capital and labor, even though most economists take it as a “given.” It makes no difference, in theory, whether capital hires labor and claims the whole output, or whether labor hires capital. However, the social and political effects of these two arrangements are quite different.

Nor is this division due to any supposed “economies of scale.” While size may confer some economies, past a certain point these economies disappear to be replaced by diseconomies of scale. For example, in great corporations, the cost of gathering and processing information frequently exceeds the value of the information. And the reliability of the information itself is compromised, because management is increasingly remote from the actual production process; their ability to comprehend the information (or even to know what information to request) decreases with the square of the distance from the shop floor. Further, subordinate managers, mindful of their own careers, tend to give upper management the information it wants rather then the information it needs.

The division of management and labor is mirrored by the division of ownership and management. Too big to be managed by the entrepreneurs who founded them, the great corporations are “owned” by anonymous groups of shareholders. But this raises agency problems. Whose interests does upper management serve? Their stockholders' or their own? When management becomes divorced from both labor and ownership, they form a “third force” who not only have their own selfish interests, but have the power to enforce those interests, power they may lord over both ownership and work.

Thus, it is neither economics nor efficiency that requires the division of capital and labor. Rather, it is a set of institutional, governmental, and financial arrangements that favor the big over the small, the gargantuan enterprise over human-scale business. But even beyond that, it is a set of expectations that we have, a set of beliefs about what is “possible” and “impossible,” and the dominant belief is that owning our own jobs would simply not be possible in an advanced economy like our own.

The argument that “something is not possible” is finally refuted by pointing out that the supposedly impossible already exists. Economic theory is interesting, no doubt, but every social theory must be tested by practice. The proper question that must be put to any theorist--the capitalist, the libertarian, the communist, the distributist, or whatever--is, “Where can I see a functioning example of your system?” Sound theory is not enough, since without actual practice there cannot be a proper judgment. In response to this question, the capitalist can point to the existing system. However, that system turns out to be not “capitalism” at all, but corporatism or mercantilism, that peculiar combination of private interest and government power sustained by vast bureaucracies—public and private—and by huge and expensive government interventions. The libertarian can point to nothing, while the communist can point to something but would rather not. That leaves the distributist.

“Distributism” is an economic philosophy that arose in response to the poverty of 19^th-century England and to the first of the so-called “social encyclicals,” Rerum Novarum, written in 1891 by Pope Leo XIII. It was developed by two English thinkers, G. K. Chesterton and Hilaire Belloc, whom G. B. Shaw called the “ChesterBelloc.” Distributism posits that the economy works better when productive property—the land, tools, and education needed to produce things for the economy—are widely spread throughout the population. It is the theory of small property, rather than large accumulations of capital. Under such a system, a person would have the option of making his or her own way in the world, or joining with his neighbors in larger enterprises, or of working for somebody else. And since he always has the option of working for himself, any wage he negotiates to work for another is more likely to be a fair wage.

Such a theory obviously needs to be “fleshed out” and, more importantly, needs a practice to see whether in fact it works on a large scale. Can we really produce the complex products of modern life by giving each family a little, rather than a few men a lot? The answers to these questions are tackled by Race Mathews in Jobs of Our Own: Building a Stakeholder Society, Alternatives to the Market and the State (The Distributist Review Press, 2009).

Mr. Mathews is a former member of the Australian parliament who writes widely on the subject of distributism. His book tackles the history, theory, and practice of distributism. The book is divided into two sections, the first dealing with the history and theory of distributism and the second with actual practice of the theory. The history starts with the early socialist attempts to answer the question, “Why are the poor so many?” The socialists identified the accumulation of property as the cause, however they wanted to “cure” the problem of accumulation in a few hands by further gathering property into even fewer hands, namely those of the state bureaucrats. But many that were initially attracted to socialism began to find that course problematic.

Distributism begins with the efforts of Cardinal Manning, a most remarkable cleric. An archdeacon in the Anglican Church, he converted to Catholicism and became the Archbishop of Westminster. His influence on Catholic social teaching was profound. He converted Elizabeth Belloc to Catholicism and her talented son, Hilaire, became his protégé. But he also urged his friend Pope Leo XIII to tackle the social issues in an encyclical, which the Pope did. This was the masterful document Rerum Novarum, which laid the foundation of modern Catholic social doctrine and which reflected the influence of Manning.

Young Hilaire took the ideas of Rerum Novarum and forged them into the economic philosophy known as distributism. Among his converts were two young writers, Gilbert and Cecil Chesterton, and the rhetorical talents of all three were sufficient to establish distributism as a serious movement. The greatest competitors of the distributists were the Fabian Socialists, led by such figures as Sydney and Beatrice Webb and George Bernard Shaw. The Fabian Socialists wanted to impose socialism by stages, gradually eroding the rights of property, which would fall increasing in the hands of the government. Like all socialists, they saw the great fortunes and immense power conferred by private property as the root of the problem.

Against this plan the distributists reacted forcefully. The problem of property was not that there was too much of it, but too little. Productive property was becoming the domain of a small class, gathered into great estates and huge piles of capital. The answer was not to restrict it to fewer hands—the government bureaucrats—but to spread it among a greater number of citizens, hence the name “distributism.” Belloc argued that the accumulation of property, whether in the hands of the state or a few industrialists, would lead to a servile state in which people might be politically free but would certainly be economically dependent. The interests of the capitalists and bureaucrats would merge into The Servile State.

For all the brilliance of Belloc and Chesterton, they were never interested in pursuing distributism as a purely economic theory. This put them at a great disadvantage in regard to the Fabians, who always insisted on first-class economic research. It would remain a task for the implementers of distributism to develop a practice that would amount to a theory. Distributism thus became not a textbook exercise, but an evolved system based on its own practice.

This evolved distributism is the subject of the second half of Mathews' book, which deals with two large-scale examples of distributism in practice. The first is the Antigonish movement of Nova Scotia which flourished for a long while before failing. The second is the Mondragón Cooperative Corporation of Spain, which survives to this day as one of the largest corporations in Spain, and is comparable in size and range of products to the great corporate conglomerates of Europe or the United States.

Both the success and the failure are instructive. The Antigonish movement began in the 30's, and elements survived into the 80's. It went a long way towards giving many families in the Maritime provinces some economic independence, but it suffered from being insufficiently concentrated on property and production. In the end, it suffered “de-mutualization.” That is, the cooperatives were turned over to “professional” management and abandoned the principles that made them successful in the first place. As Race Matthews puts it,

The lesson from all the consumer co–operatives and co–operative movements that have failed, either wholly or in part, is that the experience of consumption either of goods or services is insufficiently central to the lives of ordinary people to provide the foundation on which a lasting co–operative consciousness — and thereby an enduring immunity to the basic agency dilemma — can be established. As the account of Mondragón in the following chapters makes clear, the only experiences equal to the task of developing a lasting co–operative consciousness or culture are those of work and property. It is only through stakeholding in property and the exposure on a daily basis to workplace democracy that members can acquire the habit of seeing themselves as the masters of their own destiny, and fully accepting the entitlements and obligations consequent on their status.

It is the sense of ownership alone that can build an enduring distributist culture, and this sense that makes Mondragón the more interesting example. Founded in 1953 by students of a rather remarkable parish priest, Don José Maria Arizmendiarrieta, it has grown from a simple paraffin stove factory into a giant corporate conglomerate with several hundred worker-owned firms involved in the manufacturing of the most sophisticated products, banking, retailing, research, education, construction, business services, and insurance. Today, the Corporation has €33 billion in assets, does €16 in sales, employs 104,000 workers, 81% of whom are worker-owners to whom they distribute 52% of the profits. But Mondragón is more than a mere “corporate success story.” It is a business model that is completely counter to the modern corporation.

In the first place, Mondragón is ruled by the principle of subsidiarity; that is to say, the higher level exists to serve the lower levels. Indeed, the individual cooperatives have the right to leave the corporation; participation is voluntary. This makes it impossible for a centralized authority to “lord it over” the member cooperatives. The corporation itself is ruled not by outside investors (there are none) but by the workers themselves. You might call this an inverted model of corporate organization. The firm is built from the ground up rather than the top down.

But that is only part of the story, because Mondragón is more than just a business enterprise; it is a social one. It is of course a profit-making enterprise, but profit is not an end in itself, it is merely a means to a much broader set of ends. In addition to its normal business enterprises, Mondragón runs an education system, a university, social safety networks, retirement systems, research and training institutes—things normally provided by governments through taxes—and provides all on its own resources, without the help of government. The guiding principle is solidarity, people caring for each other with the help formal structures and institutions.

Between these two principles, subsidiarity and solidarity, Mondragón takes the principles of Catholic social doctrine and turns them into a living reality. And a successful one at that. The fear of implementing a “morality-based” system is that it might compromise the necessary business goals. But the opposite seems to be the case; the cooperative model doesn't merely work, it works to produce a strong and growing network of firms that are fully profitable and competitive in local and world markets. Moreover, it lessens the need for big government by providing social services from its own resources. But more than these successes, what Mondragón really builds up is community, that sense of mutual caring and obligation that must be the real point of any sane economic system.

And therein lies the significance of Race Mathews' book. The Pope has just published a new social encyclical, Caritas in Veritate, “Love in Truth,” which speaks in terms that most businessmen and -women will find difficult to comprehend. Benedict calls for a “principle of graciousness” in business, that is, that beneath (or above) the logic of exchange stands the logic of the gift (grace). Naturally, these gifts must reside in self-sustaining institutions, that is, must make a profit. But that is not the end of it:

Alongside profit-oriented private enterprise and the various types of public enterprise, there must be room for commercial entities based on mutualist principles and pursuing social ends to take root and express themselves. It is from their reciprocal encounter in the marketplace that one may expect hybrid forms of commercial behaviour to emerge, and hence an attentiveness to ways of civilizing the economy. (38)

A businessman reading these words may not be able, from his own experience, to assign them any meaning or significance. But after reading Mathews' book, he will be able, one hopes, to realize both the moral and business possibilities of this task of civilizing the economy.

Jobs are not a gift from on high, from the great bureaucracies of corporations and governments. They are a gift we give ourselves through our mutual care and concern for each other. Great capital may appropriate this gift to itself, but that always produces a less stable society, and one more dependent on government expense and subsidy. Catholic social teaching shows us another path, a more civilized path, and Race Mathews is able to show us what that means in concrete terms. Everyone interested in the health of the family, the community, and their own nation, ought to read this book.

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Health Care: The Australian Option

Australia has had universal health insurance in place since shortly after the enactment by the Whitlam government of its Medibank legislation in 1974. Changes have been made to the system from time to time, but its core principle of universal access to medical treatment and public hospital care has remained the same. Basically, Medibank - or Medicare as it has been known since 1983 – provides an 85% refund of an agreed fee schedule for medical services, along with free public hospital treatment and accommodation. Doctors can either ‘bulk bill’ Medicare for 85% of the scheduled fee as payment in full for their services, or charge the fee directly to the patient who then claims the 85% rebate against it. Public hospitals also recover their costs directly from Medicare. Social Security pensioners usually are bulk billed, as also in most instances are low income earners.

In return, taxpayers other than those on low incomes pay a 1.5% income tax surcharge known as the Medicare Levy. Insurance against the cost of private hospital accommodation is available from a government insurer (Medibank Private) or a number of private sector insurers, some of which are mutuals or former mutuals. Measures introduced by the former government encouraged private hospital insurance through a 30% subsidy of the premium. Taxpayers with incomes of $AU75,000 and over who fail to take out private hospital insurance are penalised with a 1% loading on their Medicare levy. Currently, some 43% of Australians choose to be privately insured. There is a separate Pharmaceutical Benefits Scheme, whereby most prescribed medicines are priced down in negotiations between the government and the manufacturers, and subsidised at the point of delivery to patients.

The upside is that nobody – and in particular no child – is denied necessary medical treatment or hospital care, and the aggregate cost of health services has been contained well below that of comparable countries. Conversely, public hospital waiting times for some procedures are unacceptably long – albeit also currently being systematically reduced – and, as regard private medical services, there is a gap in many instances between the scheduled fee on which the 85% rebate is payable, and the amount actually charged by practitioners either to maintain their profitability or because they believe they can get away with it. However, Australians overwhelmingly and with good reason support Medibank/Medicare, see its continuation as being in both their own and the public interest and have indicated repeatedly at elections that they would reject any attempt to weaken or dismantle it.

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Caritas in Veritate, the bane of Austrianism

I've been beleaguered with requests for my take on the new Encyclical, and I believe part of this is due to the flaws of the encyclical itself. People are confused and unsure what to think of it. If it were a great encyclical, few would be asking a lay theologian for his opinion but instead would be praising it and looking forward to my praise as well. The lack of interior unity in the encyclical has allowed socialists to praise it, the libertarian-Austrian outlook to praise it, and various other groups to praise it. I'll deal with the specific difficulties of the encyclical in a part II, since this whole post is already perhaps too long.

Nevertheless, it has been interesting to note very shallow and narrow-minded organs such as the Acton Institute attempt to spin this encyclical toward Austrian economics, something founded upon an atheistic market view, when even other American Free-market thinkers such as George Wiegel and Michael Novak have the honesty to tell us that the encyclical does not agree with their worldview. More on that in a moment.

However some people, usually die hard Republican voters, take this view that the Church is right on life issues, but is run by these liberals, and is politically liberal, therefore I don't have to listen to them since the Pope is only infallible on faith and morals. Who in the history of the Church would have held that position and applied it to a papal encyclical?

Besides that, the Pope is not infallible in faith and morals, he is infallible when speaking ex cathedra on faith and morals. If the Pope speaks on faith and morals in an allocution, or an audience (such as Theology of the Body), or in an encyclical where he does not make use of the extraordinary magisterium, then his teachings are not infallible. Documents teaching the whole Church (an encyclical or motu proprio) which are not apart of the extraordinary magisterium are authoritative though they are not infallible in themselves. As I discussed before in my sedevacantist refutations, the ordinary magisterium may be infallible if it confirms what the Church has always and everywhere believed, but it is not infallible by itself as the extrarodinary magisterium is. This which is where modern neo-conservatives such as Wiegel and Novak, and even the Acton institute, get into trouble. They treat documents which attempt to teach the world in matters economic as not authoritative merely because their personal definition of economics and social activity is different than the Popes. They argue that since economics deals with science, the Pope has no authority to speak on them. This view is heretical, since it denies the authority given to the Pope at Vatican I.

This should surprise us little since they follow Lord Acton, an English liberal who denied the definition of Papal infallibility and died a heretic outside of the Church, according to several of his contemporaries. Economics, since it is based on the choices of men with their money, is bound up with social consequences which render the actions of men immoral or moral, and the Church has authority even to speak infallibly on those matters. Economics is not 2+2=4, it is a social science such as psychology, and is bound up inherently with moral behavior. Thus the Church has authority to speak on economic matters, even infallibly. It would be one thing if the Pope was trying to redefine necessary laws of economics, such as supply and demand, but he can say it is not moral to reduce everything (including employment) to a matter of supply and demand like some kind of Darwinian economic scheme. Moreover, while it is to be admitted that no ex cathedra statement exists on social teaching starting with Rerum Novarum onward, that is not grounds to reject the teaching, as say Wiegel does. Such a position is both intellectually facile and theologically dangerous, on par with the left which rejects Humanae Vitae and Ordinatio Sacerdotalis on the same grounds (not being ex cathedra) and those who reject Vatican II out of hand as non-authoritative and binding. Ordinary magisterial teaching is an act of the teaching magisterium (which this encyclical forms a part) and as such is authoritative and requires a certain level of assent. It does not require absolute assent as an article of faith does, as in you can't question it in any way, but it does require obsequium religiosum, that is religious assent. It could also be translated as religious respect, or deference. It does not mean an absolute assent upon which your eternal salvation is based, that is what is required of Ex Cathedra teaching, the articles of faith of Popes and councils teaching from the extraordinary magisterium. With ordinary magisterial teaching that does not pertain to infallibility, one may suspend his Judgment and even his assent if the teaching is not sufficiently clear or if it appears to contradict former teaching, so long as the authority in question is still respected. In the case of a contradiction, the more recent teaching always gives way to the older teaching until the magisterium should clarify it. Thus with Humanae Vitae, the liberals are correct that the teaching is not ex cathedra, but in order to withhold one's assent there need to be proportionate grounds, namely that there is a contradiction in the tradition. No such contradiction exists, Humanae Vitae's teaching is consonant with the whole Church tradition in every way. There is not one dissension in the tradition.

By contrast liberals accept the current teaching of JPII on the death penalty which is in the catechism, even though it contradicts what the Church, and even Popes have declared historically on the right of the state to put a criminal to death for proportionate crimes against society. This shows that the left simply picks and chooses, which is modernism, truth begins in the individual. Thus, I'm thankful Wiegel and Novak have admitted what we already knew, they are both modernists, since there is no proportionate reason in the Church's tradition, that is in her magisterial teaching either among the Fathers or Popes and Councils for rejecting what the Church teaches on social issues. Wiegel's position is particularly defiant, the Pope didn't write this, it came from a committee, therefore I don't have to pay attention to it. Yet, there are many instances of documents written by others, even Rerum Novarum. Once the Pope puts his name on the document and promulgates it, it is authoritative unless by an act of the same Pope, the document is rescinded.

So where does this leave us with the encyclical? Before I move to my criticisms of it, there are positive elements which are wholly in accord with Catholic social thought over the centuries.

First of all, justice. Ubi societas, ibi ius: every society draws up its own system of justice. Charity goes beyond justice, because to love is to give, to offer what is “mine” to the other; but it never lacks justice, which prompts us to give the other what is “his”, what is due to him by reason of his being or his acting. I cannot “give” what is mine to the other, without first giving him what pertains to him in justice. If we love others with charity, then first of all we are just towards them. Not only is justice not extraneous to charity, not only is it not an alternative or parallel path to charity: justice is inseparable from charity[1], and intrinsic to it. (CV no 6)

This is an important point to preface the start of the encyclical with, because too often we fall into the trap of modernism with respect to business. We feel that business owes us because it is rich. For that matter, if one meets a person who is wealthier than him, there is not only the feeling of jealousy (why am I not "rich") but of a positive feeling that he owes you. This is where charity is not rooted in justice, but is rooted in the selfish wants of the individual, and hence not charity. Catholic social teaching can not seek to eliminate justice in order to attain a better situation for the poor. It can advocate and predicate changes to the system based on truth and charity, it can never advocate robbing the rich to give to the poor. Confiscating men's wealth unjustly and giving it to others to create some great society is an act of injustice and does nothing to help society here we don't speak of preferential option for the poor, or other things to help the poorest in their time of need, but attempts to keep the poor strung along with material goods that do nothing for their dignity, rather than creating opportunities for them to work and not depend on the state.

Another important consideration is the common good. To love someone is to desire that person's good and to take effective steps to secure it. Besides the good of the individual, there is a good that is linked to living in society: the common good. It is the good of “all of us”, made up of individuals, families and intermediate groups who together constitute society[4]. It is a good that is sought not for its own sake, but for the people who belong to the social community and who can only really and effectively pursue their good within it. To desire the common good and strive towards it is a requirement of justice and charity. To take a stand for the common good is on the one hand to be solicitous for, and on the other hand to avail oneself of, that complex of institutions that give structure to the life of society, juridically, civilly, politically and culturally, making it the pólis, or “city”. The more we strive to secure a common good corresponding to the real needs of our neighbours, the more effectively we love them. This is the institutional path — we might also call it the political path — of charity, no less excellent and effective than the kind of charity which encounters the neighbour directly, outside the institutional mediation of the pólis. (CV no 7 emphasis in the original)

It is good and useful that the Holy Father argues that we need to strive for the "real needs" of the other, and not perceived needs. This is not Celine Dion defending looters by saying "let them touch those things!" Justice and charity require us to create justice in society. We can not say "that's the market!" when the market creates injustices. Because the truth is the market does not create anything, that is a bonehead idea which we need to be cured of. Men make the marked do things through their decisions, and when they act unjustly something must be done about it. Moreover, Benedict with this last statement is contending that it is the polis, the state, as well as the individual who must seek to remedy social evils. The government is not this benign clockmaker akin to deist thought which must never be involved beyond a basic thing like creating security. Government itself is required to provide for the common good of its citizens, and one of those ways is by ensuring justice in the marketplace, as we shall see.

Man's earthly activity, when inspired and sustained by charity, contributes to the building of the universal city of God, which is the goal of the history of the human family. In an increasingly globalized society, the common good and the effort to obtain it cannot fail to assume the dimensions of the whole human family, that is to say, the community of peoples and nations[5], in such a way as to shape the earthly city in unity and peace, rendering it to some degree an anticipation and a prefiguration of the undivided city of God. (ibid)

This is also important in as much as the Pope is now taking reference to the family and society's obligation to provide for the common good of the family, and extending it to the global family, that is he is arguing that society is responsible for the effects of it's actions on other continents and to other people's. We'll see how this pans out later in the encyclical.

The Encyclical Humanae Vitae emphasizes both the unitive and the procreative meaning of sexuality, thereby locating at the foundation of society the married couple, man and woman, who accept one another mutually, in distinction and in complementarity: a couple, therefore, that is open to life[27]. This is not a question of purely individual morality: Humanae Vitae indicates the strong links between life ethics and social ethics, ushering in a new area of magisterial teaching that has gradually been articulated in a series of documents, most recently John Paul II's Encyclical Evangelium Vitae[28]. The Church forcefully maintains this link between life ethics and social ethics, fully aware that “a society lacks solid foundations when, on the one hand, it asserts values such as the dignity of the person, justice and peace, but then, on the other hand, radically acts to the contrary by allowing or tolerating a variety of ways in which human life is devalued and violated, especially where it is weak or marginalized.”[29] (no 15)

Here the Pope, while pointing us back to some of the more positive ends of Paul VI's pontificate, speaks of his document Populorum Progressio and Humanae Vitae, to highlight that social issues are bound up with life issues. There is a lot of truth to this and it is a serious problem for Austrian economists who deny that there is such a link or that the Church should make such a distinction. G.K. Chesterton in his essay Three foes of the Family, argues:

"It cannot be too often repeated that what destroyed the Family in the modern world was Capitalism. No doubt it might have been Communism, if Communism had ever had a chance, outside that semi-Mongolian wilderness where it actually flourishes. But so far as we are concerned, what has broken up households and encouraged divorces, and treated the old domestic virtues with more and more open contempt, is the epoch and power of Capitalism. It is Capitalism that has forced a moral feud and a commercial competition between the sexes; that has destroyed the influence of the parent in favor of the influence of the employer; that has driven men from their homes to look for jobs; that has forced them to live near their factories or their firms instead of near their families; and, above all, that has encouraged for commercial reasons, a parade of publicity and garish novelty, which is in its nature the death of all that was called dignity and modesty by our mothers and fathers. It is not the Bolshevist but the Boss, the publicity man, the salesman and the commercial advertiser who have, like a rush and riot of barbarians, thrown down and trampled under foot the ancient Roman statue of Verecundia."

In destroying the family, by bringing the wife and kids to work (at that time, now its daycare for the kids) and eliminating common life, the social evils of today are made possible. When the family breaks down, the traditional means of educating children to carry on society becomes flawed. It is misdirected and half learned. Support is not there when children run into problems. Why else do we have teen pregnancy, abortion, divorce, families who do not want to take care of the elderly abandoning them to homes, or euthanizing (murdering) them? We have it because the family, the social unit of society has broken down. Thus the Pope notes this very thing when linking the ills of society with life issues.

In Populorum Progressio, Paul VI taught that progress, in its origin and essence, is first and foremost a vocation: “in the design of God, every man is called upon to develop and fulfil himself, for every life is a vocation.”[34] This is what gives legitimacy to the Church's involvement in the whole question of development. If development were concerned with merely technical aspects of human life, and not with the meaning of man's pilgrimage through history in company with his fellow human beings, nor with identifying the goal of that journey, then the Church would not be entitled to speak on it. Paul VI, like Leo XIII before him in Rerum Novarum[35], knew that he was carrying out a duty proper to his office by shedding the light of the Gospel on the social questions of his time[36]. (CV no 16)

Again the Holy Father takes a swipe at the Austrian outlook. Progress, the improvement of technology, changes to business and society, need to be rooted not in the immediate end, but in the eternal end. Namely, we need to get to heaven, not make money and if our business actions have an ill effect on society, if progress leads us not to creating better lives for people trying to get to heaven but rather to make their lives more difficult, or take no account of their legitimate needs, one's business actions are no longer just. Benedict likewise calls the Church's social teaching a "duty of office". Every Pope since Leo XIII has considered it their duty to speak on social issues, and arguably bl. Pius IX as well although the dynamic was different in that time.

Besides requiring freedom, integral human development as a vocation also demands respect for its truth. The vocation to progress drives us to “do more, know more and have more in order to be more”[41]. But herein lies the problem: what does it mean “to be more”? Paul VI answers the question by indicating the essential quality of “authentic” development: it must be “integral, that is, it has to promote the good of every man and of the whole man”[42]. Amid the various competing anthropological visions put forward in today's society, even more so than in Paul VI's time, the Christian vision has the particular characteristic of asserting and justifying the unconditional value of the human person and the meaning of his growth. The Christian vocation to development helps to promote the advancement of all men and of the whole man. (CV no 18, emphasis in original)

In other words the Church's vision of economic development can not be limited to a bottom line, it has to be oriented to the ultimate end of man, and justice owed to God or else it is completely invalid and a waste of time. It is not sufficient for more wealth to be produced in society, or for everyone to have the latest technological toy if man is not advancing to his ultimate goal, if justice is lacking in society.

These are all insights from Paul VIs encyclical Populorum Progressio which he is bringing back to our consideration. In chapter 2, the Pope moves to the current state of affairs in the world.

Paul VI had an articulated vision of development. He understood the term to indicate the goal of rescuing peoples, first and foremost, from hunger, deprivation, endemic diseases and illiteracy. From the economic point of view, this meant their active participation, on equal terms, in the international economic process; from the social point of view, it meant their evolution into educated societies marked by solidarity; from the political point of view, it meant the consolidation of democratic regimes capable of ensuring freedom and peace. (CV no. 21)

Although I have no love for democracy either as an ideal or a political system, it is worth noting that flawed political systems can work. In the Church's language since the council, there are often useless references to "democracy" as an end in itself, especially under JPII. What is useful in this reference, is the Holy Father qualifies democracy with "capable of ensuring freedom and peace". Thus not democracy just for the sake of it, but democracy based on the same principles of limited government as medieval monarchy, for those principles are the only thing which can give freedom and peace. Bloated oligarchies masquerading as democracy (such as ours or most of Europe) only lead to injustice, and consequently war.

We recognize, therefore, that the Church had good reason to be concerned about the capacity of a purely technological society to set realistic goals and to make good use of the instruments at its disposal. Profit is useful if it serves as a means towards an end that provides a sense both of how to produce it and how to make good use of it. Once profit becomes the exclusive goal, [free market economics] if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty. (Ibid)

Again, what can someone from Acton or Von Mises say in response to that, except to reject the encyclical as Wiegel and Novak have? The main idea of Austrian economics is that the profit motive in and of itself moves the most able men in society to produce and improve society, and if in the process self sufficient people get replaced by wage earners or poor dependent upon the state for survival, this is not an economic problem because it produced success in the one individual.

It is true that growth has taken place, and it continues to be a positive factor that has lifted billions of people out of misery — recently it has given many countries the possibility of becoming effective players in international politics. Yet it must be acknowledged that this same economic growth has been and continues to be weighed down by malfunctions and dramatic problems, highlighted even further by the current crisis. This presents us with choices that cannot be postponed concerning nothing less than the destiny of man, who, moreover, cannot prescind from his nature. The technical forces in play, the global interrelations, the damaging effects on the real economy of badly managed and largely speculative financial dealing, large-scale migration of peoples, often provoked by some particular circumstance and then given insufficient attention, the unregulated exploitation of the earth's resources: all this leads us today to reflect on the measures that would be necessary to provide a solution to problems that are not only new in comparison to those addressed by Pope Paul VI, but also, and above all, of decisive impact upon the present and future good of humanity. (Ibid, emphasis in the original, my emphasis)

This is probably one of the most useful sections in the whole encylical, if only for the mention of
"real economy". What does the "real economy" mean? It is a term that has come into parlance in recent years to denote real wealth produced from tangible sources, fields, mines, forests and fisheries, as opposed to wealth produced ex nihilo through financial dealing, such as banking and dividends, stock portfolios here today and vanishing tomorrow, which has come to be termed the "financial economy."

Thus the problem is not that there is too much regulation, as the free marketeers would have it, but the wrong regulation to direct the progress of society in accord with the common good, and while wealth is growing, it is not widely distributed, that is, we do not find well divided property or access to new technologies which are being developed, they are rather restricted to the wealthy classes, as we see in the rest of this paragraph and in nos. 23-24.

Today, as we take to heart the lessons of the current economic crisis, which sees the State's public authorities directly involved in correcting errors and malfunctions, it seems more realistic to re-evaluate their role and their powers, which need to be prudently reviewed and remodelled so as to enable them, perhaps through new forms of engagement, to address the challenges of today's world. Once the role of public authorities has been more clearly defined, one could foresee an increase in the new forms of political participation, nationally and internationally, that have come about through the activity of organizations operating in civil society; in this way it is to be hoped that the citizens' interest and participation in the res publica will become more deeply rooted. (CV no 24)

Here again the Pope is saying we need correct regulation to guide the conducting of economic affairs, not according to a semi-socialist vision where the government takes over companies. What needs to be done

In the context of this discussion, it is helpful to observe that business enterprise involves a wide range of values, becoming wider all the time. The continuing hegemony of the binary model of market-plus-State has accustomed us to think only in terms of the private business leader of a capitalistic bent on the one hand, and the State director on the other. In reality, business has to be understood in an articulated way. There are a number of reasons, of a meta-economic kind, for saying this. Business activity has a human significance, prior to its professional one[98]. It is present in all work, understood as a personal action, an “actus personae”[99], which is why every worker should have the chance to make his contribution knowing that in some way “he is working ‘for himself'”[100]. (CV no. 41)

This is yet another call for the meaning and dignity of work, and for us to escape the Scylla and Charybdis of Capitalism and Socialism. The Holy Father is calling us to transcend both systems and bring business back to human activity concerned with human beings not the bottom line of the capitalist or the quotas of a state political officer. Is the Pope calling for Distributism? In a way we could say that, however, without making special mention of the term or its adherents (particularly Chesterton and Belloc, both of whose families received telegrams from Pius XI and XII, I'm sure the Pope knows who they are) it would be rather shallow to claim this line of thinking for us exclusively as the Acton Institute or other libertarian think tanks have, particularly as there are things in this encyclical which should make a Distributist nervous, such as the an apparent violation of the principle of subsidiarity, but we will deal with that in the next post.

However it would be correct to say that Distributism proposes to conform economy to Catholic social teaching, and right here the Holy Father is speaking of moving the game away from principles of economy which address the system only, or utopian ideologies that put the state in charge of the family. He is talking about how to make the family, and the human being doing the work in particular, important in the economic process, since currently he is just a mere variable in an equation. Because for the Pope the individual precedes business, his needs and his dignity precede it and transcend it, business is part of the journey of man to his final end (heaven in case any capitalist is now thinking of the boon to the mortuary business) and needs to be considered within the integral nature of the person. The Pope is also saying, what we have now ain't working, and he isn't speaking of the economic crisis, but of the model in which it came into being. He brings this out more in the rest of the article:

It is in response to the needs and the dignity of the worker, as well as the needs of society, that there exist various types of business enterprise, over and above the simple distinction between “private” and “public”. Each of them requires and expresses a specific business capacity. In order to construct an economy that will soon be in a position to serve the national and global common good, it is appropriate to take account of this broader significance of business activity. It favours cross-fertilization between different types of business activity, with shifting of competences from the “non-profit” world to the “profit” world and vice versa, from the public world to that of civil society, from advanced economies to developing countries. (ibid)

In other words, business has a vocation to serve the common good not merely its profit margin, and in an increasingly globalized society it is not merely the common good of a given nation which must be considered, but of the maximum number of people on the earth affected by our business and financial decisions. If we are going to consider the common good of the globalized society, it in fact means the common good of everyone. Thus economic responsibility is not to shareholders alone, or owners alone, but to everyone affected by the businesses' decisions.

Now that of course leads to the most troubling and difficult part of the encyclical, to which we will draw this reading to a close. What consequences are there for realizing the need to conform business to a global common good?

In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth. One also senses the urgent need to find innovative ways of implementing the principle of the responsibility to protect[146] and of giving poorer nations an effective voice in shared decision-making. This seems necessary in order to arrive at a political, juridical and economic order which can increase and give direction to international cooperation for the development of all peoples in solidarity. To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority, as my predecessor Blessed John XXIII indicated some years ago. Such an authority would need to be regulated by law, to observe consistently the principles of subsidiarity and solidarity, to seek to establish the common good[147], and to make a commitment to securing authentic integral human development inspired by the values of charity in truth. Furthermore, such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights[148]. Obviously it would have to have the authority to ensure compliance with its decisions from all parties, and also with the coordinated measures adopted in various international forums. Without this, despite the great progress accomplished in various sectors, international law would risk being conditioned by the balance of power among the strongest nations. (CV no. 67)

First off, any libertarian reading of this document is dead with this passage, there is no way around it. Secondly, there is an interior contradiction which should give us pause. A world body governing world finance according to subsidiarity. The principle of subsidiarity is that the smallest possible unit should govern a thing, operate a thing or conduct a thing. If a group of 10 people running automated machines to produce computer chips and parts who co-own are able to produce computer parts more efficiently or as efficiently as a large factory with underpaid employees, it ought to as the smaller unit. If government can govern more efficiently as a smaller unit than a larger, bloated bureaucracy, it should. The whole history of large and expansive governments, from the first one world government of the Roman Empire to the present with large bloated oligarchies masquerading as democracies shows us that big government does only one thing, get bigger. There is no way to sufficiently regulate or limit the power of government to prevent it from pursuing its own interests, or from being beholden to the more powerful nations, because the more power nations will fund the thing. The only governments that run on the principle of subsidiarity are those which are small, and accountable to the local populace.

I think in an ideal world where nations were animated with charity for their fellow man and desired to make decisions for the common good, such an institution would follow naturally from the continued linking of society through technology. Following from such an idealistic view one would want a world court, a world political authority which could uphold international law. Such however given the militant Christophobic nature of modern governments in wealthy and powerful nations (US, UK, the EU, etc.) that anyone could seriously make this assertion let alone the Pope should give us pause. Who helped the Pope write this encyclical, and are we bound to it?

We are not bound to this proposition that we require a one world government firstly because it contains an interior contradiction which I have mentioned. It says a one world government needs to run on subsidiarity when the definition of such a thing is contrary to the principle of subsidiarity. It is little different than saying a bachelor is a married man or there are four persons in the Trinity, they are self contradictory.

Secondly, it is on faith and morals which we are required to render obsequium religiosum to the Pope when he teaches the whole Church using the ordinary magisterium. Therefore a political suggestion can not qualify as faith and morals, since it is not connected so intrinsically with the concept of the common good or any other moral teaching so that it could be said to be connected inherently with a morals teaching. The conduct of business is a question of morals, the conduct of governments is also a question of morals and requires our respect, even if we suspend our judgment over things unclear until they are made sufficiently clear. The nature of the governments, or what might ideally be the best government is not a question for morals. Nevertheless this statement raises other questions about this encyclical, which we will address in the next section.

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