UAWs Job Strategy

http://www.theonion.com/content/video/autoworkers_compete_to_keep_jobs?utm_source=EMTF_Onion

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Breaking the Oligararchs

Capitalism is as unsafe as the Bank. --G. K. Chesterton

Simon Johnson knows something about banking. In particular, he knows when banking goes wrong. As the former Chief Economist of the IMF, it was his job to know that. Nations that had gotten themselves into trouble would come to him hat in hand and ask for a bailout. He knows why these nations get into trouble, for the trouble is always the same, and he recounts the troubles in an article in the Atlantic Monthly. The trouble with these economies is oligarchy, the control of the many by the few:

But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms.

The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of default, and the local banks that have lent to them collapse. Yesterday’s “public-private partnerships” are relabeled “crony capitalism.” With credit unavailable, economic paralysis ensues, and conditions just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay for imports, service debt, and cover private losses. But these reserves will eventually run out. If the country cannot right itself before that happens, it will default on its sovereign debt and become an economic pariah. The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.

We have normally associated these conditions with “Banana Republics” and third-world kleptocracies. But these nations were only doing on small-scale what the American Bankers were doing on a grand-scale:

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Remarkably, the solution Dr. Johnson advocates is exactly the same one that Distributism does, break up the oligarchies:

The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.

Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.

As things now stand, the Obama Administration is mortgaging the future to restore the oligarchs to their positions of power, in the naïve belief that only oligarchy can save us. Even if the plans were to work, the best they could do is restore the conditions that created the current crises. Why this failure of vision? Johnson identified the reason last night on the Bill Moyers Journal:

I think the banks have control of the state, Bill. Not the state control of the bank. If the state had control of the banks, the banks wouldn't be able to turn around and say, no on your Chrysler deal and no way on modifying the rules about mortgages and allowing bankruptcy judges to modify mortgages in bankruptcy. These are two hot issues this week. The banks are saying no to the government.

While Dr. Johnson does advocate the Distributist solution, his analysis does not go as deep as does that of the Distributists. G. K. Chesterton identified the problem: Capitalism is as unsafe as the Bank. Modern banking is an inherently unstable business; you borrow short to lend long, which as any investor can tell you is a recipe for disaster. The problem is exacerbated by the fractional reserve system: the banks take the depositor's money and leverage it by printing 10 times the amount to lend out. This makes it a very profitable business in good time, but it also means that even a small amount of defaults can wipe out a bank's capital. Further, since the banks can print such enormous amounts of money, we need a “central bank” to control the level of lending with all sorts of Rube Goldberg financial contraptions. On this inherently unstable financial base rests the entire system of modern capitalism.

Since the banks do hold the system hostage, they can get whatever they want from the government. In fact, the more dire their situation, the stronger their bargaining position. They demand—and get—a veto power over the government; they are, in effect, the effective rulers of the state. But it is a state that is no longer sustainable. Johnson makes it clear that the oligarchies must be broken before economic order can be restored.

And if they are not? Simon Johnson leaves us with a dire warning:

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

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Chapter XVII: Distributism and the Health Care System

I am coming to the end of this, finally. Just a few more chapters to go. Your comments and critiques are welcome.

Distributism would be of little practical use if it could not provide useful answers to practical problems of the type we face practically everyday. I believe distributism does indeed provide a useful set of tools to analyze these problems and to devise useful solutions. But the proof of this claim can only come in the analysis of an actual problem. For this example of distributist analysis, I choose the American health care system, which is experiencing great difficulties, difficulties for which no one has yet devised a workable solution.

Some sign of these difficulties is shown by the fact that in 2007, the United States spent 16.2% of its GDP on health care, up from 8% in 1975.¹⁠ Of this amount, the government pays about 46%. Compare this with Great Britain, where they spend about half that amount, or 8.4% of the GDP (2006).²⁠ In other words, the United States spends almost as much in public money as the English do in total, yet we do not have universal health care. We spend more in private funds than the English do in total, yet we do not have a free-market system. We spend more than any other country in the world on health care, but we have neither a truly public nor a truly private system. Rather, we have a Rube Goldberg contraption that combines the worst features of capitalism and socialism. And for all the money we spend, we leave a large percentage of the population without insurance. 15.3% in 2007 (about 46 million people) and that number has risen by at least 4 million in the last year due to our economic problems. Further, even people who have insurance often find that it is inadequate and that a medical emergency leaves them with crushing debts. The insurance companies maintain large staffs whose only job is to deny as many claims as possible; indeed, their compensation is not based on how accurately they assess claims, but solely on how many they deny. Any claims adjuster who fairly assesses claims will quickly find himself unemployed.

Spending twice as much on health care might be justified if the results were significantly better. Yet the opposite is true. By every objective measure, we do far worse when compared to other industrialized nations. In terms of life expectancy, infant mortality, preventable diseases, and many other categories, the United States falls far behind Japan, Canada, Western Europe, and nearly all the other industrialized nations of the world.

The problem is not only the large share of the GDP that the system consumes, but also the continuing growth of that share. Over the last 10 years, the growth in health care expenditures as a percentage of the GDP averaged 1.86% per year. Even during this current recession, the cost of health care has been the only thing that is growing. Obviously, this cannot continue; sooner or later the system must fall of its own weight, and my guess is that day is coming sooner rather than later.

Some Possible Causes

Of the myriad of possible causes cited for this phenomenon, two are often given great weight in the discussion: improved technology and an aging population. However, there are serious problems with both of these “explanations.” Concerning improvements in technology, it is certainly true that there have been great advances in medicines and machinery. However, improvements in technology normally lower costs, not raise them. Health care is the only industry where an executive could get away with saying, “Our technology has vastly improved, therefore we are far less efficient.” That being said, there is a case where improved technology actually raises costs; it is where the technology is provided under monopoly conditions. More of this in a moment.

An aging population seems a more plausible explanation, seeing that the problems of aging tend to be more chronic and expensive than those of easily repaired youth. However, this cannot be the full explanation, since aging is not a problem unique to the United States. All of the developed countries have similar demographics—or worse—yet still spend far less than the United States. So by itself, aging cannot be the problem. However, there is something unique about the American situation which raises the costs of aging, namely, senior health care is socialized while care for most of the rest of the population is not. This means that the elderly can outbid the young and middle-aged in competing for scarce medical resources, thereby raising the costs for everybody. You have, in effect, a socialized system competing with a private system (more or less), and the socialized system seems to have endless resources, since they are the resources of the United States government.

Many other causes are often cited: the cost of malpractice insurance, immigration, fragmentation, greed, regulation, and so forth. While each of these may play a role, neither any one of them nor all of them collectively are sufficient to explain the rapid and continuing rise in costs.

Free-Market vs. Socialist?

The debates on this issue usually take place within the framework of “free market” vs. “socialized” medicine, yet the system we have is neither and both. It cannot be a free market system because the supply of medicine and medical services is limited by licenses and patents. Milton Friedman advocated abolishing the licensing of doctors altogether. Friedman argued that medical licenses restrict the supply of doctors and thereby raise the cost. He believed that the free market would judge medical competence better than any license board, rewarding the competent doctors and punishing the incompetent.

The problem with Friedman's argument is that we have already tried that. Right into the early 20^th century, doctors were unlicensed; they took perhaps one or two years at a medical college, usually a for-profit institution run by local doctors who lectured at the college. After their course of lectures, and without ever having touched a microscope or a cadaver, they set up as doctors. The results were disastrous, as became evident in the great Spanish Influenza pandemic of 1918; the level of medical training was simply inadequate to deal with the crisis. After that disaster, the move to improve education and require licenses gained public support to produce the system we have today, a system largely controlled by the American Medical Association (AMA).

Further, a free market solution depends on the availability of information and the ability to judge that information. In comparing doctors, information about them is hard come by, and even if I had such information, I would not be able to make an informed judgment. And if I am having a heart attack, I am in no position to do the comparison shopping that a free market requires.

Yet for all that, Friedman has a point. By limiting the number of doctors, we restrict the supply and raise the cost. Further, because of the high training requirements required for the license, the education of a doctor is long, arduous, and expensive. New doctors are frequently burdened with huge education loans, and setting up a practice requires a huge capital investment. This forces doctors to act more like businessmen than medical professionals; they have to turn a large profit just to break even on both their costs and the amount of income forgone while they were getting their educations. And it has frequently been charged that the AMA restricts the number of “slots” in medical schools so as to further restrict supply.

Licenses are not the only problem in making medicine a free-market service. A greater problem results from patents for medicines and medical technology. A patent is a government-granted monopoly right which gives the patent holder the exclusive right to manufacture some particular product. Currently, patents run 20 years, during which the patent holder may place any price he chooses on his product, and he usually chooses a monopoly price. Monopoly pricing is the antithesis of free-market pricing. A free market, in theory at least, prices products to produce the highest possible amount of goods at the lowest possible price; the equilibrium point between supply and demand, under conditions of perfect competition, guarantees the lowest practical price to the buyer and the lowest practical return to the producer. But none of this is true under monopoly conditions. The producer supplies the least amount of product for the greatest possible price, and in the case of medicines, it is like selling water to people dying of thirst in the desert: they will pay any price to save their lives.

Monopoly pricing also has another and more insidious effect. In a competitive market, price serves as an allocation signal. A price that is too high will leave some goods unsold; a price that is too low will result in a shortage of goods. The market will provide the proper signals to producers telling them how much product to supply to the market and at what price. But monopoly destroys this mechanism; the monopolist may demand a share of whatever funds are supplied to a given market, and the more funds supplied, the higher the prices go without increasing the supply of the product. This is sufficient to explain why medical expenses consume an ever increasing share of the GDP without increasing the number of people covered. More funding means only higher prices, not more actual goods supplied. But as the monopolists claim an ever-larger share of the total GDP, the system must sooner or later collapse.

The argument for patents is that they increase innovation; without the prospect of great wealth, people will have no incentive to develop the miracle drugs and marvelous technology that we enjoy. In other words, for the sake of science and progress, we must accept monopolies.

Health Insurance

It is often suggested that insurance can function as a middle term between the market and socialism. However, this involves a misunderstanding of what insurance is. Insurance can only be a means of cost-averaging; some must pay too much and others too little, but one way or another, the cost must be paid by the users, which, in a monopolistic market, will price many out of the market. And healthy purchasers will seek plans that eliminate as many “risky” applicants as possible; they will seek the safest “risk pool” which is reflected by the lowest cost. People with higher risks will be placed in higher risk pools with higher prices, which will price many out of the market. So nothing is gained towards a universal, affordable system.

Further, insurance works differently in a monopolistic market. Cars and homes can be efficiently insured because the home and car repair businesses are relatively free markets, which means that insurers can rely on the market to control costs. Insurance will have some inflationary effects, as people perform repairs they might otherwise have deferred, but in general the effects are mild. This is not true in the presence of monopolies; the monopolistic market cannot be relied on to control costs, quite the opposite: the more money supplied to a monopoly, the more the prices will rise. This in turn raises the cost of insurance, which drives more people out of the market. The effect is the prices rise while coverage shrinks, or precisely the effects we are seeing in the real world.

Some have suggested that these problems will go away if we make insurance mandatory and universal, as in the Massachusetts Plan. However, a mandatory purchase is just another name for a tax; since everybody is required to purchase the product, it cannot really be a free market. Again, some argue that even though the purchases are mandatory, the system is still “free-market” because of the variety of plans and prices provided. However, the price differences in the plans can only come from differences in coverage. Some will cover more, and some less; some will deny more claims, and others less. People will have to guess in advance what diseases and medicines they are likely to need, and to the extent that they guess wrong—which is inevitable—they will be uninsured. You will have, essentially, the same situation we have today but in a different form: instead of the insured and uninsured, you will have the fully insured and the partially insured, with partial insurance being the equivalent of non-insurance for many situations.

Again, some will counter that the government can require all the plans to cover the same things. However, a standard, compulsory plan is no different from socialized medicine, and is likely to be a good deal less efficient. There are likely to be high expenses for profit and marketing, even though profits are not justified for compulsory purchases, and the “marketing” can be no more than an effort to convince people to buy the same product with a different label on it; it serves no useful purpose and only adds useless expense. Finally, there is likely to be duplication in administrative expenses. If all the companies are selling and administering the same plan, there is simply no reason to have multiple administrative organizations. In such a case, a “single-payer” system makes more sense.

Some will argue that Health Savings Accounts (HSAs) combined with catastrophic insurance will go a long way towards solving the problem. HSAs allow people to put a portion of their income in tax-free savings accounts, usually up to about $6,000 per family, to pay for ordinary medical expenses and then buy high-deductible policies to cover anything beyond that. The benefits are that people will be paying for most care from their own funds and are thus likely to make better use of the funds. At the same time, high-deductible policies are much cheaper. Between the two, great efficiencies are gained.

However, HSAs or some variation have been in place for many years, but have done little to address the underlying problems. The reasons are not hard to find. The first problem is that the people who are least able to afford insurance are also those who are least likely to have a surplus that they can save. In an economy that has seen a stagnant median wage for 30 years, even in the face of rapidly rising productivity, this should not be surprising. HSAs will not help the unemployed or the underemployed at all. Further,the majority of those who cannot afford any insurance are already in the lowest tax bracket, hence the tax advantages are minimal. And the majority of taxes that they do pay are the FICA taxes, and HSAs are not exempt from these. The greatest advantages of HSAs go to those who need them the least. A person in the lowest tax bracket, assuming he can save $6,000, might get a $600 tax advantage, but a person in the 35% bracket gets a $2,100 government benefit. Although the intentions behind HSAs are laudable, in effect they are mere subsidies to those who already have sufficient surplus.

Ending the Oligarchies and Monopolies

It should be clear that the vast majority of current thinking about the problem does little to address the underlying causes of our dilemma. And this is odd because the mechanics of prices are well known and have been since the time of Aristotle. No competent economist of whatever school disputes these mechanics. There are two bedrock facts about any market system that we must confront :

1. You cannot lower prices without raising supply relative to demand

2. You cannot raise the supply in the face of oligarchies and monopolies.

Therefore, the key to the whole problem is first to control or eliminate the monopolies. Without addressing this problem, the system will be as it is, and any “reform” will only make it worse. However, there can be no question that a continuing stream of innovations have been provided under the patent regime, and medical licenses have guaranteed at least a minimum level of training for medical personnel. Is there any way to reform these systems and yet maintain their advantages?

The Problem of Patents. Contrary to received wisdom, patents are not necessary for research in any field. Even today in the medical field, 40% of research funds come from the government or from non-profit organizations. Hence, even a sudden end to the patent system would not end medical research. What research does require is a reliable funding source, which can come more efficiently from manufacturing licenses than from patents. That is, when a firm develops a new medicine they get the right to license that product to any number of production firms. The licenses should be for a longer term than the current patents, which will provide R&D firms with a much more secure revenue stream from which to fund further research. The license fee would be small relative to the current monopoly profits, but they would continue for a longer period of time, after which the product would enter the public domain and be appropriated by everybody.

Manufacturers, on the other hand, will have to compete on price and service, and will therefore have to find the most efficient ways to manufacture and distribute the medicines. The effect of such a license system would be to divide R&D and manufacturing firms. R&D firms would want as many companies as possible to distribute their product, and would have an incentive to keep the fees low. There may be a role for the government in setting the license fees.

If, however, the pharmaceutical firms insist on maintaining their current monopolies, then the only way to control costs is to have government set the prices. This is anathema to a free-market system. However, monopolies are the antithesis of the free market. And the monopoly cannot have it both ways: they cannot insist that the government enforce their monopoly rights while demanding that the government take no role in pricing. If they wish the government to withdraw from pricing, then the government should cheerfully agree, but it should also withdraw from enforcing their patents. This system of price controls already obtains in countries with a “single-payer” system. The government negotiates the price of the drugs with the manufacturers. This is why American drugs are usually cheaper in other countries than they are in America. The American taxpayer bears all the burdens of research, but gets none of the price benefits.

The Problem of Medical Licenses. Milton Friedman is undoubtedly right that medical licenses restrict the supply of medical services, and under the current system, this will not change. However, the current system may be an over-reaction to the lax standards of the 19^th century. And any group that sets its own standards is likely to set them too high in order to limit supply and keep their income high.

I believe that we can drastically increase the supply of medical services—and therefore decrease the price—by providing a range of licenses: midwives, nurse practitioners, medical practitioners, medical doctors, and more advanced doctors of medicine. First-line care could easily be provided by NP's and midwives working in their own neighborhood clinics, perhaps under the general supervision of a medical practitioner or medical doctor. Another area where this applies is in orthodontics. There is no reason why anybody needs a degree in dentistry to install orthodontics; the work could be as safely performed by orthodonturists, and at a far lower cost. It is only the legal monopoly that dentists have on the business which keeps the prices so high, thereby denying this useful and normally affordable service to many poor people, while charging the rest of us unreasonable prices.

A series of licenses would provide another benefit. As things stand now, a student will spend most of his youth and all of his fortune in getting an MD, and will still be left with staggering debts. Yet, he will have a degree in a profession he has not actually practiced. A series of licenses will provide the student with a career path by which he may alternate education with practice. He will have an income stream with which to finance his education, but he will also have practical experience to take to each successive layer of education. This will produce doctors who are more practiced.

Medical Guilds

It is not enough, however, to address supply and demand problems. All social goods, medical services included, are delivered by institutions, and the structure and control of these institutions will dictate the outcomes. If our social institutions are organized solely around the profit motive, as they are now, they will find clever ways of defeating any attempts to restrain their power to set prices. People who are only concerned with supply and demand are usually baffled by how easily the mechanism breaks down and monopoly and oligopoly take control. But the answer is not surprising: if profit is the only measure, then the entire institutional effort will be towards breaking down the limits on profit, the major limit being a truly free market. (See Chapter V on mechanisms businesses use to defeat market pricing.)

This is not to say that there is anything wrong with the profit motive per se. Indeed, without making a profit, no firm or institution can be sure that it is delivering a useful product and correctly allocating its resources. But it is to say that a single measure—any single measure—is always self-defeating. As an analogy, suppose we designed cars solely on the basis of safety. We would indeed produce cars that were absolutely safe in nearly any circumstances. However, such cars would be so heavy and expensive that few people would want them. In the same way, a system where profit is the only measure will eventually fail even to make a profit. Other measures must come into play. But an institution solely devoted to profit cannot allow such measures. So what institutional framework should medicine have?

I believe that the answer lies in a well-tested institution from out past, and that institution is the guild. The guilds were associations of professionals in a given field who took responsibility for the training of their members and the quality and price of their products and services. They were the sole judge of the qualifications of their members, and had the power to set both standards and prices. What I propose is that we allow medical professionals to form guilds with the power to grant various licenses. They would be the sole judge of the qualifications required, and they would set the practice standards and prices. But most importantly, the guild would stand surety for its members. That is to say, when a patient had a complaint, he would sue not the doctor but the guild. The guild would be responsible for the competence and good conduct of its members.

You might ask, “Why would one doctor stand surety for another?” But in fact, this is what already happens in malpractice insurance. Insurance is merely cost averaging. If the losses go up for one doctor, the rates for every other doctor in that insurance pool go up. But doctors have no control over who is in their insurance pool; the quack and the competent get thrown in the same insurance system, with the latter required to pay for the former. In a guild system, the guild would have a strong incentive to ensure the competence of their members and monitor their practice standards; they would want to weed out the incompetent or downgrade their licenses. The guild would purchase insurance for all its members, or even provide the insurance itself, thereby removing the profit motive and lowering the cost.

Since the guild would be the sole judge of the qualifications and practices of its members, there would be a greater diversity of practical approaches. The Guild of St. Luke, for example, might favor one approach to medicine, The Galen Guild might favor another, and natural competition and practical experience would be sufficient to discover the superior approach. And while it might be difficult for the public to judge one doctor against another, it would be easier to judge the performance of one guild versus another. Further, this also provides space for “alternative medicine.” I have no way to judge whether such things as acupuncture or Chinese herbalism are medically valid. But when joined in a guild and required to stand surety for each of their members, practices which do have some value would likely thrive, even if conventional medicine does not, as yet, recognize their value. And if they have no value, it is likely that such practices would simply disappear because the insurance claims would bankrupt them. Likely the government would still have some minimal role to prevent outright quackery; they would not likely allow a Guild of Peach Pit Cure-alls.

In addition to insuring their doctors, the guild would offer insurance to the public. That is, they could offer to treat people for a fixed annual fee. This would give the guilds an income stream, but also a great incentive to insure that small problems do not go untreated to become big problems. In other words, such health insurance would actually be concerned with insuring health rather than denying claims. Further, the guilds could be required to devote a certain amount of their resources to free or low-cost care for the impoverished or indigent. The government might play a role here in qualifying people as eligible for such reduced-cost treatment, and could even pay a part of the cost.

The guild would be empowered to establish its own clinics, its own training and education programs, its own pharmacies, labs, administrative structures, and whatever else is necessary to medical practice. This would also make it easier for medical professionals to enter practice without worrying about setting up the business and administration that consumes so much of doctor's time today. The doctor, and every other member of the guild, would be the “owners” of the guild, and while they would certainly be interested in their own incomes, it would be impossible for that to be their sole interest, not so long as they are providing insurance to each other and to the public.

The Future of Reform

The current system, consuming 16% of GDP—and rising—is simply unsustainable. Moreover, the great burden it places on our businesses makes us uncompetitive in world markets, as we have discovered in the auto industry. The status quo is no longer an option. But here we come to a great conundrum: either we return to the chaos and quackery of the 19^th century, or we move to a European-style socialist system, in which medical services are allocated by the state. European socialism has resulted in better over-all health statistics and at least a perception of fairness in allocating services. However, socialism converts everybody from being a citizen to being a ward of the state. Nevertheless, if one has a life-threatening illness or injury, one might prefer to be a live ward rather than a dead citizen.

But there is a great problem in establishing universal health care, whether by socialism or any other method. Namely, there will be an additional 50 million persons in the system who are currently uninsured, plus the untold millions who are under-insured. This is a tremendous increase in demand with no corresponding increase in supply. Either there will be huge price increases, or the government will be forced to severely ration health care. Both courses of action are untenable, and the system will collapse before it gets started. Without increasing the supply, you cannot control the costs, and this is impossible without curtailing or eliminating the monopolies and oligarchies that currently restrict supply.

But if costs are brought under control by market forces, and the institutional problem is solved by the guild, then the problem of universal care will turn out to be a relatively easy one; providing medical insurance to all will be no more difficult than providing car or home insurance. No system of reform currently on the table addresses either the supply or the institutional problems. Instead, they all exacerbate both problems. It will become painfully clear that as we move towards universal care, we will increase the demand but leave the supply unchanged. This will result in a disaster. I firmly believe that only a distributist analysis can give us the tools to look the problem squarely in the eye and provide rational solutions.

1Center for Medicare and Medicaid Services, “NHE Fact Sheet National Health Expenditure Data,” National Health Expediture Data, http://www.cms.hhs.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp.

2OECD, “OECD Health Data 2008 - Frequently Requested Data,” http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_37407,00.html

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Distributism, the State...

... and a long awaited for announcement!

... and a long awaited for opportunity!

Anarchism is a fools errand. It is all too unfortunate, then, that there happen to be so many fools running errands. One may understand (albeit with a smirk) how the unbeliever or Protestant could believe in a stateless society. But I find it rather strange when running across distributists who would envision a stateless society, or even the "night watchman" notion reminiscent to the likes of Utopians who apparently can't distinguish between liberty and license. How a distributist, advocating a political economy that best reflects the entirety of Catholic Social Teaching, can advocate such notion of the central government is truly remarkable. So remarkable, in fact, that I believe it to be an impossibility, or at least a most horrific inconsistency.

As I stated earlier, the anti-State mentality may very well fit into the non-Christian or even Protestant scheme of things. In fact, it would be quite natural for them to maintain such a position concerning the State. I say as much because it would be in no way inconsistent with their concepts of autonomy, be it radical individualism or ecclesiological relativism. 

Take the Protestant. He maintains both the notion of radical individualism (we see this most clearly in regards to hermeneutics) and ecclesiological autonomy. Left to himself and contractual religious bodies that have no hermeneutical authority or ecclesiastical jurisdiction over him without his consent, he is an island of sorts. The religious assembly he chooses to attend holds very little sway over his faith and practice, unless he willingly gives is assent. Otherwise, to the religious assembly next door we go! One sect's heresy is another sect's orthodoxy, and the origin of ecclesial (as well as civil) authority comes from the individual's personal consent. 

In much the same way, Distributists who ignore the Church's teaching concerning the origin of civil authority and proper role and functions of the State are playing pick-and-choose with the Magisterium. These folks have assumed the kind of autonomy that causes them to believe that they have the right to overlook or under-emphasize portions of Catholic Social Teaching that either bumps heads with Chesterbelloc and Co. or goes beyond select portions of encyclicals that cover details already dealt with, explicitly or implicitly, in Rerum Novarum. I mean, it is a given that distributists have a special love for the Magna Carta of Catholic Social Teaching. But what about Diuturnum, Graves de Communi Re, Immortale Dei, or even Sapientiae Christianae? Well, unfortunately, these are tough sells. 

Why not stick with Diuturnum, as this was the encyclical first mentioned in the above list. Not so ironically it deals with the origin of civil power. Pope Leo XIII lays out here a number of functions the state is responsible for, or at least has a hand in. Among these are public safety (1); to reign, to rule, and to decree justice (9); to govern the wills of individuals so as to make one will out of many and to impel them rightly and orderly to the common good (11); and to study the welfare of the people (26). To say that this description of the state, as taken from bits and pieces of Diuturnum, is a far cry from the kind of stateless society advocated by certain distributists would be as daring as declaring that Thomas Woods doesn't believe the Church has jurisdiction or competence in the realm of economics.

One could very well delve into other encyclicals which lay out still more functions and responsibilities of the state, but the list is rather extensive. This is especially true once we get to Blessed Pope John XXIII. A cursory glance of Mater et Magistra or Pacem in Terris would leave the reader curious as to whether the Church has more in common with culturally conservative, populist democrats than their culturally conservative republican counterparts. 

When push comes to shove, distributist are not bound in time to the writings of the early distributists or confined to the text of Rerum Novarum. It is their duty, as faithful Catholics wishing to embrace and live out the entirety of Catholic Social Teaching, to toss aside such anti-Catholic concepts as a stateless society or "night watchman" state, refusing to run errands for the fools any longer.

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Distributism

by Thomas Storck

[Dear friends, below is a copy of Thomas Storck's presentation from the recent "Catholicism and Economics" conference.]


Distributism is an economic system which encourages the widespread ownership of private productive property. This productive property is to be well-distributed so as to discourage extremes of wealth and poverty. The ideal of distributism is for each owner to work his own property, whether that is farm land, a workshop, a retail store or some kind of service, even if that ideal cannot always be realized.

Distributism is grounded in Catholic social teaching, for example in Pope Leo XIII's call that "The law, therefore, should favor ownership, and its policy should be to induce as many people as possible to become owners" (Rerum Novarum, no. 35), and this teaching is repeated by later popes, including Pius XI in Quadragesimo Anno (nos. 59-62, 65) and John XXIII in Mater et Magistra (nos. 85-89, 111-115). Distributists seek to minimize the employer/employee relationship by making as many people as possible owners of their own productive enterprises. Although the wage relationship, as Pius XI explained in Quadragesimo Anno (no. 101), is not unjust in itself, provided we are speaking of a living wage, distributists believe that when the employer/employee dichotomy becomes the usual way that an economy and a society are organized, this is dangerous and unwise.

Why so?

To answer this question we must look for a minute at the purpose of economic activity. Why did God create man in such a way that we have both the capacity and the need for external goods? What is the purpose of our production of goods and services? A Christian, and indeed any thoughtful person, will realize that we need external goods not as ends in themselves, but to sustain a life that is truly human, a life in which more important matters, such as our families and friends, artistic and intellectual activity, and our relationship with Almighty God can flourish. Material goods are of course not evil, but in general, they are subordinate to more important values and they must be judged on whether and how well they serve these values. We wear shoes, for example, to protect our feet. That is their primary purpose. I might well need several pairs of shoes, but it is hard to see how anyone would need dozens of pairs of shoes. Similarly with dozens of cars or dozens of houses. In fact, our acquisition of material goods is or should be limited by their relationship to fulfilling human needs. As St. Thomas Aquinas wrote, "...the appetite of natural riches is not infinite, because according to a set measure they satisfy nature; but the appetite of artificial riches is infinite, because it serves inordinate concupiscence..." (Summa Theologiae, I-II, q. 2, a. 1 ad 3). Very few people would collect a hundred pairs of shoes, but people do tend to collect much more artificial wealth than they have any possible need for and in so doing they serve "inordinate concupiscence."

Now if what I have said about material goods is true, then the production of goods and services ought to be oriented toward human use and human need. Any society which understands that material things are subordinate to human life in its fullness and are meant to serve human needs, will not produce simply for the sake of piling up goods. Still less will it engage in financial transactions which have little or no relation to production or to the fulfilling of genuine human needs.

But when the employer/employee distinction becomes widespread and characteristic of an economy, and especially when it has assumed the form of the business corporation, there will exist a class of people one step removed from the production of real goods. That is, for the most part, owners and managers of capital who employ others to work are no longer directly focused on the production of goods to serve human needs, but gradually become preoccupied with what St. Thomas calls "artificial riches," either by concentrating their efforts on simply sales or, even worse, on manipulating financial instruments for their gain. So in time the managers of corporations tend to become more interested in mergers, buyouts and providing themselves generous salaries and pensions rather than in the actual product their company produces, because they have become to some degree separated from that product. If they are likely to make more money more quickly with a merger or acquisition than with the steady production and sale of useful goods or services, they will often opt for the former. And the mergers and acquisitions frequently result in less actual economic activity, less production of real goods and services, since the new company often must fire some of its workers in order to service the new debt it has taken on.

The stockholders, meanwhile, although legally the owners of a company, usually have little interest in what the company actually manufactures, so long as their dividend checks keep coming or the stock price is rising. Owners of mutual funds do not even own part of a company, but a form of artificial riches twice removed from real goods, traded on a market in which ownership of the actual company can change hands by the hour or the minute.

Here is Hilaire Belloc's description of the process.

"But wealth obtained indirectly as profit out of other men's work, or by process of exchange, becomes a thing abstracted from the process of production. As the interest of a man in things diminishes, his interest in abstract wealth - money - increases. The man who makes a table or grows a crop makes the success of the crop or the table a test of excellence. The intermediary who buys and sells the crop or the table is not concerned with the goodness of table or crop, but with the profit he makes between their purchase and sale. In a productive society the superiority of the things produced is the measure of success: in a Commercial society the amount of wealth accumulated by the dealer is the measure of success." (An Essay on the Nature of Contemporary England, 1937) p. 67.

Distributism therefore seeks to maintain a healthy relationship between ownership and production by maintaining and encouraging small businesses, small workshops, small farms in which the owner would always be personally involved in the actual production of the product or service. He would see himself primarily as a craftsman or a farmer or as some kind of service provider, rather than as someone who could indifferently make and sell books or shoes or computers depending on where the greatest profit could be made at the moment.

What about industrial entities that because of the technology involved necessarily must be large-scale? How could you break down Ford Motor Co. into ten thousand micro-companies? This objection or question is hardly new to distributists and Belloc addressed it himself in one of the original distributist books, The Restoration of Property. The distributist solution is simple: in any entity that necessarily is large because of the technology involved, the workers themselves should be the owners of the firm. With regard to worker ownership, more than one model is also possible. John Paul II notes some of them, mentioning "proposals for joint ownership of the means of work, sharing by the workers in the management and/or profits of business, so-called shareholding by labor" (Laborem Exercens, no. 14).

Moreover, even large companies like Ford began years ago to outsource aspects of their manufacturing, showing that production can be decentralized even in a capitalist economy.

This question of the size of industrial enterprises brings up a related point about technology. It is often said that distributists are luddites, opposed to anything more complicated than hammars and saws and that distributism would hinder technological development. But this is not the case. Different attitudes toward technology exist among distributists and the question of what level of technology is appropriate for mankind, although a real and urgent question for the health of human society, is a separate question from the proper distribution of property. Distributism is perfectly compatible with many different levels and kinds of technology.

One very important aspect of a distributist economy, again in accordance with papal teaching, especially of Popes Leo XIII, Pius XI and Pius XII, is that individual workshops, retail firms and farms would be organized into occupational groups, or to give them their older name, guilds. Occupational groups are autonomous societies consisting of all who produce the same product or provide the same service. Their purpose is the necessary regulation of the industry in question with the twin aim of its honest prosperity and the provision to the public of a quality product or service. They would concern themselves with matters such as product quality, technological research, safety standards, prices, training programs and compensation for trainees, supply of raw materials and the like, and would represent the industry or trade in dealings with the government.

On the local level, an occupational group might purchase for common use an expensive piece of machinery which no individual owner could afford. Note that much of the economic and industrial regulation which the modern state undertakes would, under distributism, be exercised by these lower bodies. Occupational groups would not be agencies of the government, neither would they be voluntary organizations. They are true intermediate groups and have both private and public aspects. Membership in them would be required for all who exercise a trade or profession. Their governance, like that of the medieval guilds, would be democratic. In cases where an occupational group had started to act like a cartel and to ignore the common good, the public authorities would be empowered to step in to prevent or end the abuse in question. The nearest analog in our society would perhaps be a bar association, whose membership in some states is mandatory for attorneys and which regulates some aspects of legal education, admission to the bar and professional discipline.

These occupational groups or guilds would in fact free the government from many tasks which it now undertakes, but which it is not especially well suited to perform. Whenever possible the regulation of the workplace and the economy should not be done by the central government, but by smaller and lower bodies, in accordance with the principle of subsidiarity articulated by Pius XI. These occupational groups will also aid in spreading the spirit of solidarity or social charity among those engaged in the same line of work, so that instead of regarding each other as competitors, they will tend to see each other as engaged in a joint task to provide the public with a needed good or service, at the same time of course, receiving a sufficient remuneration to provide decently for themselves and their families.

The establishment of a distributist economy would necessarily take place gradually. Right now there is much we can do on our own, including patronizing as much as possible local markets and small stores, use of local currencies, establishing cooperatives and the like. Chesterton and Belloc saw favorable tax treatment for small firms or for transactions in which property becomes more widely distributed as important means for the legal establishment of distributism. But right now it is to our own collective actions that we must chiefly look.

Distributists do not desire an equality of incomes or heavy-handed regulation by the state. Distributism is an effort to provide an institutional framework in which our use of external goods would not conflict with our pursuit of holiness. At the heart of distributism is the attempt to place man's activities in a right relationship with God, insofar as human institutions can do that. Distributists realize that grace perfects nature, as St. Thomas taught, and that only if human institutions have a basic orientation toward justice and right can we expect divine grace to abound in human society.

Capitalism

I must now say a word about the other two economic systems represented here today, capitalism and socialism. If we are to talk intelligently about either of them we must be clear what we mean, otherwise we may be talking at cross purposes. As for capitalism, despite its ubiquity in the modern world, there is surprising little consensus among economists and economic historians as to exactly what it is. I will use the definition of Pope Pius XI in the encyclical which I have more than once quoted today, Quadragesimo Anno. Pope Pius calls it "that economic system in which were provided by different people the capital and labor jointly needed for production" (no. 100). In other words, the widespread separation of ownership from work, the general presence of the employer/employee relationship, which I have been criticizing today: this is capitalism, since "different people [provide] the capital and labor jointly needed for production." I have already said why distributists think that capitalism is dangerous and unwise. All the ills of capitalism, what is sometimes called the "spirit of capitalism," such as its excessive concentration upon amassing riches, the loss of genuine quality in production, the periodic instability of capitalist economies with their regular cycles of boom and bust, their tendency toward labor conflicts, all these are simply the more or less necessary results of that original separation between capital and labor, between ownership and work.

It is often assumed that capitalism is simply the system of private ownership of property. We have seen that this is not the case. Capitalism has entirely forgotten the reason private property exists and in reality is no friend of property. Above I quoted St. Thomas to the effect that "the appetite of natural riches is not infinite, because according to a set measure they satisfy nature." That is, natural goods have a purpose, an end, and should be judged on how well they fulfill that end. Under distributism the purpose of private property is clear: the support of the producer and his family and the provision of a quality product to society. But capitalism has divorced property from its natural purpose. The mere amassing of property beyond any rational need cannot be the reason why God gave man the use of material goods. G. K. Chesterton once wittily wrote,

"One would think, to hear people talk, that the Rothchilds and the Rockefellers were on the side of property. But obviously they are the enemies of property; because they are enemies of their own limitations. They do not want their own land; but other people's.... It is the negation of property that the Duke of Sutherland should have all the farms in one estate; just as it would be the negation of marriage if he had all our wives in one harem." (What's Wrong with the World, p. 42)

Moreover, under capitalism, property is considered valuable only because of its exchange value. There is no essential legal difference between your property in a farm or home handed down in your family for five generations and your ownership of a share in a hedge fund. Both are equally sacred to the law only because both are equally capable of monetary exchange, of being bought and sold. Pope Leo XIII wrote (Rerum Novarum, no. 35), that "Men always work harder and more readily when they work on that which is their own; nay, they learn to love the very soil which yields in response to the labor of their hands, not only food to eat, but an abundance of the good things for themselves and those that are dear to them." This is the Church's defense of private property, a defense based on the intimate connection of person and property. But under capitalism property is anything from which I can make a buck. We can learn to love our farms and even our workshops, but it is pretty hard to love bank accounts or stock certificates. And if we ever do learn to love them, then perhaps we should tremble at the thought of the coming judgement of God, when we recall that St. Paul said that the "love of money is the root of all evil" (I Timothy 6:10).

In a capitalist economy and society property generally has no particular relation to any person. The U.S Supreme Court decision of a year or so ago that allowed a local government to exercise eminent domain to confiscate neighborhoods for building luxury housing shows how capitalism values property. So long as the residents receive money value equivalent to their homes, it makes no difference that a neighborhood and a way of life are destroyed. A capitalist society is incapable of seeing property as having anything other than market value, because for capitalism value is equivalent to money value. But distributists know that each piece of property is unique just as each person is unique, and that only when property is widespread and well-distributed can this intimate relation with what is one's own develop. Although material things are subordinate to the ultimate purposes of human life, they still have their appropriate and unique place and value. Hilaire Belloc thought that in a distributist society people would be more attached to their property and more opposed to excessive taxation or confiscation in the name of the public good. People would more easily see the difference between genuine property and the kind of legal fiction that looks upon a share in a futures contract as a form of real wealth.

Since the separation of ownership and work is the keynote of capitalism, wage labor will always be the most characteristic kind of labor under capitalism. Now what is one consequence of this? For the capitalist, wages are always an expense, always an item in his balance sheet which he would like to reduce or even eliminate. Hence the constant pressure under capitalism to reduce wages, lay off employees, to find cheaper places to manufacture, to ship jobs overseas or to import foreign workers at lower wages. And on the other hand, the periodic struggles by labor unions to increase or maintain workers' incomes. Labor unions have not always been just or reasonable in their wage demands, but they quite rationally felt that since the capitalist was usually going to pay as little as he could get away with, they would try to get as much as they could. Usually neither party felt itself bound by a standard of justice, so each tried to get as much for itself as it could. I am not arguing that there is a natural opposition between labor and capital, but rather that under capitalism, willy-nilly they are put into a situation where their own interests usually seem opposed to the interests of the other party. Distributism, however, eliminates or minimizes this opposition by eliminating as much as possible the wage relationship. Distributism thus reduces or eliminates an additional cause of the tension and strife which characterize capitalist economies.

Despite the frequent homage paid to small business in the United States, under capitalism the tendency is always toward bigger firms. This is because of what St. Thomas said, that "the appetite of artificial riches is infinite." When you separate economic activity and production from its immediate relation, on the one hand, to the legitimate needs of the producer and his family, and on the other, to the genuine needs of consumers, there is no reason not to expand your business as much as possible and in the process lose touch with the actual product you make. And with advertising even the natural need of consumers for material goods is stimulated and increased not according to what is needed, but according to what they can be convinced to buy. In 2004, although there were almost four times as many proprietorships as corporations, it is corporations that dominate our economy and in that same year corporate receipts were almost 20 times that of proprietorships. Americans profess to prefer small businesses, and if this is so, then it is not capitalism that we should promote, but distributism.

Capitalism is often given the credit for the prosperity that characterizes the Western world. But is this true? Capitalism did not create the scientific or technological revolutions, in fact, in some areas, such as public health, improvements were carried out by governments, sometimes over the objections of supporters of free markets. And when we speak of prosperity we need to be careful as to what we are talking about. The mere piling up of goods is not true prosperity. But capitalism fails to make any distinction between useful and harmful goods. It is ready to sell anything, provided it is legal, and it does not always scruple at that. It seeks the cheapest way of doing things regardless of how that affects product quality, for as Belloc pointed out, its sole criterion of excellence is wealth. The present crisis of capitalism is not an aberration, but simply the inevitable result of the forces that capitalism both unleashes and depends upon. Human greed has always existed, but capitalism has institutionalized it and made it the mainspring and virtue of its operation. Because of the strength of the human desire for gain, and because of the power of organized capital, when capitalism controls an economy it tends to take over the entire society so that, as one writer put it, society itself becomes an adjunct of the economy. The result is what some call a commercial society. Everything is now for sale or is measured in money price. The average cost of a wedding is around $30,000; average house size has increased since 1970 while average family size has shrunk; the share of aggregate income of the richest Americans has grown while that of the poorest has decreased in the last 29 years. In 1980 the lowest 20% of the population received 4.2% of the nation's aggregate income, while the top 20% received 44.1%. In 2006, the last year that I have data for, the lowest 20%'s share had fallen to 3.4% while the top 20% has risen to 50.5%. And for the top 5%, their share had risen from 16.5% to 22.3%. Incidentally, the share of aggregate income fell for every segment except the highest. And most recently the capitalist system has been kept going only by massive infusions of wealth from government in a series of cynical bailouts by both the Bush and the Obama administrations. This is capitalism in action.

Socialism

Now socialism is a more slippery thing to define even than capitalism. This is not so much because conceptually it is more difficult, but because socialists, over the course of almost two centuries, have been modifying their economic ideas, very often in the right direction. Already by 1931 Pope Pius XI noted that socialism had split into two groups, the Communists and the moderate socialists, and that the programs of the latter "often strikingly approach the just demands of Christian social reformers" (no. 113).

But nonetheless the Church made the definitive statement in that same encyclical that "No sincere Catholic can be a true socialist." And why is this? Not necessarily because the proposals put forward by moderate socialists are always unjust, but because the socialist movement, as it historically has existed, has had at bottom a materialist philosophy, one that was hostile to supernatural religion and looked upon mankind as a purely material creature with purely material needs. Incidentally in Centesimus Annus (nos. 13, 19), John Paul II shows that the philosophy that gave rise to capitalism is equally as materialistic and atheistic as that of socialism, and that the post-World War II capitalist quest for the affluent society sought to defeat Marxism on the level of pure materialism by showing how a free-market society can achieve a greater satisfaction of material human needs than Communism, while equally excluding spiritual values. In reality, while on the one hand it is true that this social model shows the failure of Marxism to contribute to a humane and better society, on the other hand, insofar as it denies an autononous existence and value to morality, law, culture and religion, it agrees with Marxism, in the sense that it totally reduces man to the sphere of economics and the satisfaction of material needs. (no. 19)

Conclusion

I have spoken of many of the specific structures that would characterize a distributist economy. But in closing I should say something about the effect which such an economy might have on our society and our culture, on each of us in fact as Christian believers. Fr. Ian Boyd, editor of The Chesterton Review, once described distributism as a "different rhythm of life." By that he meant, I think, that in a distributist society the external things of life, and especially what St. Thomas called "artificial riches," would have a much more subordinate role than they do in American society today. Around three-quarters of our gross domestic product consists of consumer spending, consumer spending moreover that is constantly stimulated by advertising and that for some has become a form of recreation. Yet does this make us happier? Does it help keep marriages and families together? Does it increase our piety, our love of God and neighbor? Has it contributed to outstanding works of art and literature and music? Most of us know that the answer to these questions is No. Holy Scripture long ago warned us of the corroding effect of seeking after riches. Since this is the Year of St. Paul, let me quote his words on the subject again. "If we have food and clothing, with these we shall be content. But those who desire to be rich fall in temptation, into a snare, into many senseless and hurtful desires that plunge men into ruin and destruction. For the love of money is the root of all evils; it is through this craving that some have wandered away from the faith and pierced their hearts with many pangs" (I Tim. 6:8-10).

Distributists do not desire poverty for the human race, but we do desire a society in which economic goods are seen for what they are. To put material goods in their proper place is, of course, ultimately a work of divine grace. No economic system, including distributism, is sufficient to reform human nature, but the sacraments of the Church will be more efficacious if their natural setting is not the arid and toxic atmosphere produced by a society which makes commercial gain its highest aim. Grace perfects nature, St. Thomas said, but grace will not usually substitute for a deformed nature. Distributism therefore hopes to aid in the construction of our earthly city so that it will be, as much as possible, like the city of God. This is not Utopianism, this is simply attempting to carry out the commandments. For if I know that I must try to make my own life something fit for eternal life, why would Christians imagine that the life of their society should be based on any other aim?

I do not want to ignore or minimize the real difficulties that would accompany any attempt to establish a distributist economy. Although we know pretty much what we are aiming for and have some idea of the method for attaining it, necessarily many things would arise which we would not foresee. Moreover we realize that if we were to make a transition to distributism, it would have to be gradual. But we need not fear either the process or the endpoint. Distributists do not desire to deprive anyone of the legitimate fruits of his labor or to force an equality of incomes on society or to increase the state's power to interfere in our lives. We want only to turn man's attention to those things that matter, to those things that promote real happiness in this world and in the world to come.

Adam and Eve were put in the Garden of Eden to "till and keep it." Many centuries later we are still subject to the same necessity, that of working upon the raw material which God gives us. But if human labor is, as Pope John Paul said, "a participation in God's activity" (LE, no. 25), we cannot allow it to become detached from its twin purposes of providing a living for the worker and his family and providing society with the useful goods it needs. This distributism seeks to do without neglecting man's ultimate vocation to a life in which production and consumption will no longer matter and we will look upon God himself face to face.

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Capitalist-Socialist-Distributist Conference

Dear friends,

On April 4th, Thomas Storck, Dr. Charles Clark, and Michael Novak participated in the conference “Catholicism and Economics,” a presentation and debate featuring three economic systems: capitalism, socialism, and distributism. They were tasked with presenting their positions, discussing their viability, and relating them to Catholic Social Teaching.

The conference commenced with a luncheon provided by the host and sponsor of the event, the Nassau Community College Center for Catholic Studies. Many familiar faces were in attendance including Tim Ehlen, Director of Building Catholic Communities, Fr. Ian Boyd and Dr. Dermot Quinn from The Chesterton Review, as well as author and Taki’s Mag contributor, Mr. James Kalb. John Médaille, Bill Powell, Ryan Grant, Jeremiah Bannister, our speaker Thomas Storck, and yours truly represented The Society for Distributism. Literature was available for sale by the Campus bookstore, including Thomas Storck’s “The Catholic Milieu” (Christendom Press) and Belloc’s “Economics for Helen” (IHS Press). Both virtually sold out by the time lunch was over.

180 people registered, but due to intense weather conditions in New York, we estimated somewhere in the vicinity of 120-130 arrived at the event. The numbers were impressive and we were delighted to see a full house. We must thank Dr. Joseph Varacalli, President of the Center for Catholic Studies, for the opportunity to not only debate Mr. Novak and Dr. Clark, but to expose the public to Distributism. This conference successfully exceeded our expectations and we owe Dr. Joseph Varacalli all our deepest thanks for inviting us to take part in it.

Dr. Joseph Varacalli was also kind enough to arrange a table for us to use throughout the conference. We mounted a colorful display with hundreds of our pamphlets (including a promo sheet for Distributist Review Press), our brochure, and a mailing list sign up sheet. Our readers may be excited to know dozens joined our mailing list and we barely had any material left once the event was over.

Attendees varied from layman to academic, so we couldn’t have asked for a better opportunity to dig in and introduce Distributism to a large group of people who probably have never heard of it.

Following the initial tributes for Avery Cardinal Dulles, Msgr. Wrenn, and Fr. Neuhaus, the debate started with a half hour presentation by the three participants. Dr. Clark was the first to commence. Some of our readers are probably familiar with Dr. Charles Clark, who penned the Foreword to the IHS Press edition of Amintore Fanfani’s Catholicism, Protestantism, and Capitalism. Dr. Clark is a Professor of Economics at St. John’s University. He opened up with the Democratic Socialist argument by offering a phenomenal attack on capitalism from a practical lens. Clark chastised capitalism for failing to provide workers with a family wage, for its profit seeking at the expense of labor, outsourced manufacturing, and debt enslavement. Clark did an excellent job and in one poignant part of his tit for tat with Michael Novak regarding our financial economy, Clark reminded us of John Médaille’s famous article, “Buy it up! Break it up! Fund it right!” where John argued for a government buyout of our financial institutions, so they could be broken into small businesses, and end the havoc wrought by corporations riding on the coattails of the public. My only critique of Dr. Clark’s presentation is that while he struck the first blow against the capitalist position, we didn’t entirely know how advocates of socialism planned to solve the problems capitalism wrought. From what we gathered, his argument highlighted an expected heightened role of the central government in our economic and social affairs, distant from Marxism and probably likened to a moderate Christian Socialist position.

I believe I share the same frustrations as my colleagues when I say I was very disappointed with Michael Novak’s presentation. Mr. Novak made no attempt to either define his position or to relate capitalism with Catholicism at all. Neither did he give any mention about our current crisis. He began by contrasting capitalism’s departure from a society in favor of stability and poverty relief to societies paving the way for wealth creation as a solution to massive poverty. In an attempt to minimize distributism, Mr. Novak claimed capitalism exemplified the widest distribution of goods and property, by oddly pointing to the Homestead Act. The Homestead Act, signed into law by Abraham Lincoln in 1862, allowed Americans within the 13 colonies to claim stakes of undeveloped land outside its borders. The Homestead Act was not only the antithesis of capitalism and a victory for government, but also a devastating exploitation of the Native American nations, which were driven off their lands by military forces.

Perhaps Novak’s harshest distinction between the three economic systems came in the form of an ethnocentric jab against Europeans. Comparing the United States to Europe, Mr. Novak claimed Europeans simply drank coffee in cafes and contrasted this with American ingenuity. Europeans enjoyed life, while Americans were the true innovators of the world. Considering Europe is arguably responsible for the bulk of our architecture, arts, sciences, education, and history, I found the comment rather strange.

In another baffling moment, Mr. Novak claimed trade unions were a staple of capitalism and not an association rallied against the abuses resulting from it!

Thomas Storck presented a precise definition of Distributism, its practicality as an economic model, and correspondence to Catholic Social Theory. Mr. Storck brilliantly began by focusing on the purpose of economic activity within the realities of our human use and need. Quoting St. Thomas Aquinas Storck said, “…the appetite of natural riches is not infinite, because according to a set measure they satisfy nature; but the appetite of artificial riches is infinite, because it serves inordinate concupiscence…” (Summa Theologiae, I-II, q. 2, a. 1 ad 3) Mr. Storck went on to define capitalism by separating it from its flat definition and repeating the definition offered by Pope Pius XI’s encyclical Quadragesimo Anno, which described capitalism as the separation of ownership and work. Thomas Storck argued that recognizing this friction between ownership and production in a capitalist state, Distributism dispensed with this problem by making ownership and work one and the same. Thomas Storck also argued for capitalism’s clash with productive property and illustrated this particular point by stressing how laws such as eminent domain, capitalism’s obsession with money to the detriment of the human person, lack of innovation, and creation of artificial needs are in actuality enemies of true progress. Once Mr. Storck concluded his portion of the presentation period, we took a break, and I was quite pleased to see a line of people waiting to speak with him.

When Michael Novak took the opportunity to ask our speaker a set of questions, I was surprised to hear him openly state his sympathies with Distributism. Arguably, the question he posed to Mr. Storck regarding the feasibility of health care in a Distributist State might have appeared to him to be the Achilles Heel against the Distributist platform. But to his surprise, Mr. Storck proposed a solution. His favored the restoration of occupational groups (or creation of co-ops) within a Distributist State to operate, regulate, develop, and research in the medical -or any- large scale field. It was a sharp reply for those who have never heard of Distributism before or those unconvinced of its viability in large-scale markets. Mr. Storck concluded his answer by stating that guilds and cooperatives exemplify the limitless potential for the decentralization of large entities through the use of smaller firms as practiced by the automotive industry today.

Following the exchanges, Franciscan University’s Dr. Stephen Krason offered a fifteen-minute talk on Heinrich Pesch and Solidarism. Dr. Krason delivered a passionate lecture and we commend him for it given Solidarism’s brief allotted time. My only objection to his talk came from his perception of the masses as uninterested in working for themselves and preferring to work for others. While self-employment always comes with an elevated risk, employment today is a comparable risk. The problem as I see it, isn’t the lack of desire on the part of most people to own, the problem is the red tape. After all, I am sure Dr. Krason would agree with Pope Pius XI that man works best on that which is his own.

We lament time made it impossible for a “Question and Answer” period between the speakers and the audience. That said, we are grateful to the Center for Catholic Studies for all the time and work they invested in the debate, as well as the meticulous and considerate manner this conference was managed from the onset. Under Dr. Varacalli’s leadership this Center is proving to offer some of the finest events I have ever attended. When Dr. Varacalli asked us to participate I knew it would be successful and all of us jumped right in.

Special thanks must be given to Thomas Storck for his intelligence, gracious support, activist spirit, and the incredible precedent he has bestowed on all of us.

Also, we must thank fellow distributist Jeremiah Bannister for the fantastic photographs.

I know our readers are interested if a transcript, audio or video recording of this event will be available. Yes, the event was recorded. However, please bear with us as we are praying and hoping this recording will be accessible for all of you through our website. I will keep everyone informed through our email list when and if this becomes available.

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You've Got to hear this...

Susan Boyle, 48 year old spinster, never been kissed, somewhat frumpy looking. They laughed when she stepped on stage. They made faces. And then she did this.

They stopped laughing.

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Local Food for Congress

John,

Calling all Distributists. Not sure if you can put this out to your audience w/out a conflict of interest but if there is a way to do so after checking it out I think this event will be pretty important.

If land ownership and the freedom to manage one's own land with integrity is impeded upon by government it will be another loss for Distributism. I believe there is risk of legislation being used to further increase the ability of large industrialized food companies to strengthen their control of what foods are legally available.

I don't know Liz, but was thinking I might call her to see about showing up myself to see how I can help.

Happy Easter.

Julian Malcolm

Join us in serving Congress a Local Foods Feast!

FARM FOOD VOICES DC 2009

The National Small Farm and Ranch Grassroots Lobby Day

& Legislative Reception

Tuesday April 21, 2009 Capitol Hill, Washington, DC

Lobbying 9:30 - 3:00

Reception 12:00 -12:50

Room Assignment pending—please check www.NICFA.com closer to date.

with

Joel Salatin, Emcee

and Guest speaker
Representative Ron Paul of Texas

• Come to DC and join the National Independent Consumers and Farmers Association (NICFA), state affiliates, and other groups as we joyfully serve our legislators the LOCAL FOODS FEAST OF THE YEAR from food produced by small, independent farmers and prepared by expert chefs at Dish Catering. We will illustrate that local foods are the true Safe Food System as we highlight the beauty, fun and nourishment of these foods.

• Invite your Representative and Senators to the reception. We are the face of this movement—we will become the faces and voices of local food to Congress.

• The Food Safety bills in front of Congress threaten the viability of your local food producers. Make an appointment now to meet with your Representative and two Senators on April 21^st (you will probably meet with legislative aides for agriculture rather than legislators, but aides are just as important. They are the eyes and ears of the legislators!).

CONTACT YOUR LEGISLATORS: www.House.gov and www.Senate.gov

If you have never met with a legislator or aide before, fret not.

We will provide encouragement and Talking Points!

(Talking Points, directions and schedule will be posted on www.NICFA.org closer to date).

Background and more information: www.NICFA.org

Or Liz Reitzig liz.reitzig@verizon.net 301.807.5063

Media inquiries: Deborah Stockton info@nicfa.org 434.295.7176

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New Evidence on the Shroud of Turin

The Shroud of Turin, which many (including myself) believe to be the burial cloth of Christ, has presented some interesting paradoxes. The vast majority of the evidence on the Shroud rules out any possibility of a forgery and is completely consistent with being a textile from the time of Christ. And yet, the carbon dating indicates that it is no older than 1300 years. This fact led Ray Rogers, the head of the Shroud of Turin Research Project, to declare it a fake, a reasonable conclusion from the carbon dating evidence.
But it turns out that there may have been problems with the sample used for the carbon dating. According to a story in The Daily Mail Online,

But after examining the fibres taken from an earlier investigation in 1978, Ray was shocked to find cotton present too.He said: 'The cotton fibres were fairly heavily coated with dye, suggesting they were changed to match the linen during a repair. 'I concluded that area of the shroud was manipulated by someone with great skill.

'Sue and Joe were right. The worst possible sample for carbon dating was taken.

'It consisted of different materials than were used in the shroud itself, so the age we produced was inaccurate.'

Ray Rogers died in 2005, but made a film made before his death, he conceded that the Shroud could be the Burial Cloth of Christ. A new documentary on the Shroud which includes Rogers' new findings will be broadcast on the Discovery Channel on Easter Sunday at 8pm.

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The Wealth Delusion

Often in these pages we have attempted to hammer home the difference between investment and speculation. The former creates wealth, the latter consumes it. The former is based on work, the latter is based on rents. Investment increases the wealth of society; speculation appropriates wealth created by others. It is a distinction that has been lost in the last 30 years, and with disastrous consequences. Just how much the line between investment and speculation has been blurred is documented by Tom Streithorst in the pages of The American Conservative. Tom points out that,

In the past four years, America’s 500 largest corporations made a profit of $2.4 trillion, more than 4 percent of GDP. Did they use it to increase productive capacity, improve quality, or strengthen their balance sheets? No, $1.7 trillion went for stock buybacks and $900 billion for dividends. Of the $2.4 trillion they made, they passed on $2.6 trillion to their shareholders. They gave away more than they made and invested nothing.

Investment, as defined by Adam Smith, Max Weber, and most economics textbooks, is the use of deferred consumption for the purchase of capital goods, which create a cash flow in the future. For the past generation, however, when most of us used the word “investment,” it meant that a greater fool could be found to buy our house or share of a derivatives contract for more than we paid.

A society that does not invest does not grow. It may appear to grow for a time, but this will turn out to be a delusion. The delusion is based on rising asset prices, which make people feel wealthier, even when they are actually poorer. So when a person rejoices that the price of his home has doubled, he does not think that so has the price of replacing it, so have the taxes, the insurance, and everything he puts in the home. He thinks that his home is his best investment, and that he doesn't really need to save; rising home prices will see him through retirement.

And yet, when his three-bedroom home doubles in price, does it magically become a six-bedroom home? Does its utility increase in any way? There may be some actual increase in value, due to population growth in the area, but the house in general is no more useful than it was at half the price.

The history of the real growth of the economy indicates why the recent asset inflation was not growth at all:

Barry Eichengreen, perhaps the leading economic historian of the Golden Age, tells us that much of the growth in Europe after World War II was due to a social pact. Labor agreed to restrain its wage demands, and in return, capital agreed to reinvest most profits into the business. As productive investment rose, so did worker productivity, and between 1950 and 1970 real wages more than doubled. Investment in productive capacity works: it makes the entire society richer—entrepreneurs, bankers, and workers alike.

That compact has broken down. As finance has grown to dominate the rest of the economy, with interest payments as a share of GDP rising from under 1 percent to over 16 percent, real productive investment has declined. If you build a factory or invent a new product using borrowed money, you create a cash flow that allows interest payments to be paid no matter what happens in the financial markets. But when “investment” creates no new productive capacity, when the link between financial investment and the real productive economy is broken, finance becomes a faith-based enterprise in perpetual asset-price increases. When that faith begins to crumble, the debt structure has no foundation to hold it up.

To those who understand the distinction between investment and speculation, the current crises comes as no surprise. But it also points to the way out of our dilemma, a way that is, alas, not being taken by the Obama administration:

The current crisis gives us an opportunity to rethink the link between the financial and real economies. For too long, those working in the productive economy of goods and services have subsidized bankers and traders who have done little to make the rest of us richer or more productive. Since we are bailing out their stupid bets, let us insist that from now on their investments serve our common future. We can no longer afford paper “investments” that merely represent a hope that since asset prices have gone up in the past, they will continue to do so forever.

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