The Distributist Review

But Is He More Popular Than the Beatles?

2009-12-31T09:51:00.003-06:00

An editorial in Politiken, Denmark’s largest newspaper, states that Obama is greater then Jesus. And if you are perplexed by this remark, The Reformed Pastor, David Fishchler helps you understand the logic:

There’s not a hint of satire there that I can see. They seem to be quite serious: they believe that Obama has several nation or world-changing accomplishments to his name… while Jesus…doesn’t. The “marginal Jew” did a few parlor tricks that might have helped a few people, and He said some lovely things, but get real. The One is saving the world, stopping the oceans’ rise, ending poverty and ensuring world peace. What did Jesus ever do that can compare with that?

Nuff said. Happy New Year!

The Economic Stork

2009-12-29T14:42:00.000-06:00

The answers we get are dictated by the questions we ask, but there was one question which always grated on my wife's nerves, no matter who frequently she was asked. That was the question, “Do you work?” As she had five small children and a husband (or, as some would reckon it, six children), she did quite a bit of work. But what the questioner really meant was, “Do you work for a wage?” Being a “housewife” (a term which seems to designate someone wedded to a house) carried no status at all; only work in exchange for wages could have any value, precisely the value of the wage. Work that has no wage has no value.

But we cannot blame the average person for asking this question when the economists have no better understanding of the family and no better questions to ask. Modern economics is a theory about how individuals exchange goods and services, but it has no explanation of how these goods come into being in the first place; that is, it has no coherent production function. Exchange theories deal merely with the change of ownership of already existing goods among freely contracting individuals; it can never explain the appearance of new goods. In these theories, everything is treated as a commodity (even the human person gets commodified as “labor”) but the actual existence of these commodities cannot be explained. But of all the “commodities” whose existence economics cannot explain, the first is the existence of the individual. And without such a explanation, how can economics understand the growth of the economy?

John Mueller of the Ethics and Public Policy Center, has characterized these shortcomings as “The Economic Stork Theory” (EST). Mueller explains this theory in Redeeming Economics: Rediscovering the Missing Element, which will be published this Spring by ISI Books. In the Economic Stork Theory, workers arrive in the economy fully grown, fully trained, and fully socialized. These stork-borne workers are a “given”; that is, there is no way to explain the growth in workers or their level of training and socialization, and hence little reason to support them with political or fiscal policies. Mueller describes the theory as follows:

I call this the Stork Assumption, since it literally means that adult workers spring from nowhere, as if brought by a large Economic Stork. Under the Stork Assumption, the accumulation of workers’ tools—buildings and machines—is the only possible source of economic growth that can be affected by policymakers. Moreover, under these assumptions the total tax burden not only should, but inevitably must, fall entirely upon the incomes of workers (who by assumption cannot avoid such taxes by having fewer or less-educated children, though property owners are assumed able to avoid taxes on property income by investing less in property). The Stork Assumption, not economic theory, underlies the perennial proposals to abolish taxes on property income, which are advocated by a cottage industry of (mostly my fellow Republican) economists centered in Washington, D.C.

As a corollary to the Economic Stork Theory, the only “useful” work done in the economy is work done for wages or other economic rewards, and hence there are only two kinds of human activity, work and leisure. Hence, there are only two kinds of Individuals in this theory: Partially Useful Individuals (PUIs) and Totally Useless Individuals (TUIs). The PUIs are partially useful because they spend a part of their time at “work” producing things in the money economy. The TUIs, however, don’t “work” at all because they earn no wage. Rather, some of the TUIs, otherwise known as “mothers,” spend their time in such leisure activities as taking care of the household pets; some of these pets are called “cats” or “dogs,” and others are called “children,” another form of TUIs.

Since the standard of living in the EST is the result of a positive capital-to-labor ratio, increasing the number of PUIs does not increase the standard of living unless the amount of capital is increased by at least an equal amount. In other words, you can increase the standard of living by decreasing the number of people, or at least slowing the growth of the population. Therefore the crucial element in growth is capital, and people are problematic. The policy implications are that capital should not be taxed, only people, in the form of labor or consumption taxes. This will help to discourage the formation of new PUI/TUIs, while raising the capital-to-labor ratio.

Mueller points out that the EST’s most glaring error is the failure to recognize that the family is the basic economic unit. And within the family, the choice is not so much between work and leisure as it is between production for exchange and production for use. Of course, economic theory simply has no way to account for production for use, even though it is actually the whole point of production for exchange; we work to provide money to buy meat and potatoes which we then use to produce dinner. Production for use does not show up in the GDP, but in fact the GDP presupposes such production; indeed, it is the whole point of the exchange economy.

What the TUIs known as “mothers” are doing is crucial not just to the continuation of the economic system, but to the continuation of civilization itself. There is no economic growth without mothers and the job they do. Moreover, the social shifts of the last 50 years have moved us away from production for use to more production for exchange. Now, one may debate as long as one likes the soundness of this move into the workplace in terms of, say, women’s liberation. But as the feminists point out (quite rightly), if mothers were paid a salary for everything they do, they would earn a hefty salary indeed. But the attempt to monetize the work of mothers, to convert it from production for use to production for exchange, is futile and leads to endless debates that have no possible resolution. There simply isn’t enough money on the planet to replace what mothers do everyday. The transfer of work from use to exchange does indeed show up as an “increase” in the GDP, but not as an increase in any actual output of goods and services, and likely involves an actual decrease in such services and in their quality. When mom cooks you a dinner, the GDP does not record the fact; but when she takes the family to MacDonald's, the GDP rises. But do fast-food stands really substitute for family meals? Do day care centers really provide the same level of “care” as does a family?

The Economic Stork Theory isn't even compatible with the commodification of labor. After all, economic theory recognizes that the price of any commodity must cover all of its costs, not only its production costs, but its maintenance and depreciation costs as well. But labor also has a “production cost” (the family, the school, etc.) maintenance costs (subsistence and health care) and depreciation costs (old age). If the price of labor does not cover these costs, then the economic system does not meet its own basic requirements. An economic system that doesn't understand the basic economics of the family will gradually erode the family, which is precisely what has been happening in the last 30 or 40 years.

Distributism and the Entrepreneur

2009-12-26T19:24:00.002-06:00

My address to the Academy of Economic Studies in Bucharest:

My great thanks to Dr. Claudia Tuclea for the invitation, and to the students of the Academy for their attendance and attention to a wandering foreigner.

Distributism and Global Warming

2009-12-20T16:38:00.001-06:00

Not a Single Cube of Ice

In November of 2008, the cargo ship Camilla Desgagnés delivered supplies to the Arctic village of Kugluctuk. It did so by traversing the Northwest Passage and was first commercial voyage through the passage in recorded history. Normally, the Northwest Passage can be traversed only by powerful ice-breakers, if at all, but on this voyage they did not see a single cube of ice. It is likely that the passage will soon be open to regular commercial shipping, and on a year-round basis. This is likely to cause some problems for Canada, since it claims sovereignty over the passage, a claim which no other nation (including the United States) recognizes. It could even be a causus belli, if Canada decides to defend its claims.

Canada's claims are not my subject; I am concerned with the meaning of this voyage. The voyage of the Camilla Degangés should be sufficient to prove the reality of global warming, which has cleared the passage of ice. At one time, perhaps, it was possible to deny global warming, or to claim that the evidence was not weighty enough to reach a conclusion, but the voyage of a ship of 5,000 metric tonnes should be weight enough to settle the question. But while it settles the question of whether there is global warming, it does not settle the questions of the causes or the cures.

The major question is whether global warming has its roots in human industrial production, and the tons of pollutants spewed into the natural environment. To be sure, there have been changes in the climate within human history prior to the Industrial Revolution. There was the Medieval Warming Period which allowed the expansion of Viking power, and the “Little Ice Age” which ended it. Nevertheless, it would also be a mistake in logic to conclude that because there are natural causes of climate change, there can be no human causes as well.

I must confess up front that I am not smart enough to reach any informed conclusion about the subject; the scientific debates exceed my poor knowledge by several orders of magnitude. But I would be very much surprised to learn that you could dump unnatural chemicals into the environment, or natural chemicals in unnatural amounts, and not have any effect. To expect nature to handle a chemical it has never seen, or to rebalance chemicals it has already balanced, is to expect too much of the natural order. Of this I am sure: The burden of proof must rest on the polluters. Those who wish to use the air, the rivers, the ocean, and the land as public dumps should be forced to demonstrate, on sound evidence, that it will do no harm. Those who would limit such dumping do not have to prove a thing, other than that such dumping is not natural; it is up to the dumpers to prove that nature can take it.

Suspicion about “Environmentalism”

I believe that conservatives express great skepticism about global warming for two reasons at least. One, it is frequently connected with theories of “overpopulation,” theories which by now should have been thoroughly debunked, and two, they view it as an attack on capitalism and a back-door route to global socialism. These are legitimate grounds for suspicion. Concerning the first, if population control is the solution, then China, with its one-child policy, should be well on the way to solving its pollution problem. But in fact, the reverse is the case. China's pollution problems are growing with its demographic problems, not shrinking. Indeed, the one-child policy has made China's problems all that much worse. No matter how bad things get in the United States, they will still be better than what happens in China.

It is not too many people, but too many wasteful people that are the problem. One can confirm this with a little thought experiment. Imagine that the population of Africa is doubled at an instant, but their levels of consumption are held constant. It is likely that there would be little, if any, environmental effect; Africa has more than enough resources to support a much larger population. But now, imagine that the population is held constant, but their consumption levels are raised immediately to that of the Americans or Europeans. This is likely to result in an environmental catastrophe. This thought experiment is being tested in fact as both China and India aspire to American forms of consumerism.

Pollution as a “Property Right”

The other problem is that conservatives see environmentalism as an attack on capitalism and industrialism. However, even if that were true at one time, the reverse is happening now, namely that capitalism itself is being proposed as the solution, through the means of establishing pollution as a property right. This is the meaning of the “cap and trade” system. Government will give the biggest polluters the biggest rights to pollute, and then slowly withdraw the rights, leading to a market in pollution rights. And since the market knows all things, sees all things, the market will solve the problem without any further government involvement.

It is hard for me to imagine a worse solution than making a pollution a “right,” essentially a legal right to poison your neighbor. When you create such rights, you are likely to get more of a thing, not less. And since there are such huge measurement problems, not to mention a host of loopholes, cap and trade will create a vast and profitable market without materially reducing pollution. Indeed, creating a property right in pollution creates a constituency to continue that right, and extend it. The “trade” part of cap and trade will be real enough; the “cap” part is likely to be ephemeral. (For a good left-wing analysis of this program, see Annie Leonard's The Story of Cap and Trade; while you are at her site, see The Story of Stuff.)

Distributist Solutions

The proper answer to bad solutions is not no solutions; it is better solutions. Nor is denial an answer. Even if we are in a “natural” warming period, unrestrained industrial action can only make it worse. Distributism is capable of providing these better solutions, and recognizing the reality of pollution, for distributism itself is an exercise in realism. And distributist solutions are rooted in two sound principles: proper cost accounting and community rights.

Pollution is an “externality.” An externality is the cost of a transaction that is borne by someone not a party to the transaction. When a company dumps mercury into the river, there will be health problems downstream, a real cost. The price of a product should reflect all the costs, but this cost will not show up in the price. The people downstream of the plant will subsidize the company through increased birth defects; the company will get the benefits of using the river as a sewer, and the downstream babies will get the cost of a lifetime of problems. By definition, an externality cannot be handled by the market; it is external to the market. To ask the market to handle the problem is asking it to do something it cannot do, and that is asking for trouble.

The first step in any solution is not to see pollution as a right, but as a wrong. And the nature of that wrong is that it appropriates a community resource (such as the air, the river, the ground) as a private property, and does so without any compensation to the community. The community has every natural right to forbid this, or at least to charge for the use of these resources, up to their full value.

Proper cost accounting insures that all costs show up in the price of a product. In the case of externalities, the market cannot do this; it is up to the community. The community must put a price on its resources, just like any other owner of a resource must do. Some resources cannot be assigned any cost. In the case of mercury poisoning, it can only be forbidden. Other things can be priced, even at a price that restricts their use. Carbon outputs can be priced, and ought to be; the community ought to recover something for the use of its resources, and the overuse of certain things ought to be discouraged. Only proper cost accounting and the proper recognition of community rights can do this. It is amazing, by the way, just how many questions of social justice come down to questions of proper cost accounting. Indeed, one of the great uses of distributism is to ensure that costs are properly charged to cost causers.

Distributists should be leaders, not laggards, in dealing with these questions. Aside from the economic issues, distributism is rooted in Christian principles which dictate a reverence for nature. This reverence is not a worship of nature in the raw, but a proper respect for the created order over which man has proper dominion. This dominion is not a tyranny which allows us to abuse nature, but rather to care for it. We make nature serve human ends; this is right and proper. But in doing so, we do not violate its “natural” status; we do not convert the river into an open sewer, the ground into a cesspit. At that point, it is not natural, and quickly ceases to serve any human purpose, other than the purpose of letting a few humans get rich at the expense of their brothers.

Into the Deep

2009-12-16T09:40:00.003-06:00

My friend and Co-editor on the Romanian anthology, Dr. Ovidiu Hurdezeu, has put together a little film of our journey to Romania.

I have written of the village depicted in this film at Burn the Vineyard!

Fall of the Republic

2009-12-13T18:56:00.004-06:00

There is an interesting video produced by Alex Jones called "Fall of the Republic", which in my view merits watching, and is available for free here.

Though I don't agree with everything in the video, and think certain things are overly sensationalist, the main points of the video are sound.

One of the amusing things is in the beginning is that one of the contributors attributes to America the concept of the separation of powers, limited government and the establishment of government in such a way that it serves a common good. This idea actually comes from St. Robert Bellarmine, whose political treatises never left Thomas Jefferson's desk.

Nevertheless, they trace the work of globalism and the current globalist banking industry in creating the crises that grips us presently. The contributors to this documentary compare it to oligarchy, and demonstrate how the international elite function by that and force various policies to erode the rights of the general population.

The video also exposes the establishment of a world governing body of scientists who enforce the state doctrine of population control, family planning, social engineering and climate change.

The significance of global warming doctrine is that by identifying carbon dioxide as the evil which is "destroying the planet", the world governing body will have the right to tax you and me for the right to breathe. This is essential to breaking down sovereignty and self government, which are so necessary to defending a society from control by an external force.

It also shows us many examples of how a police state is on the verge of being created, and (in my opinion) strongly makes the case for a hidden hand controlling Obama by demonstrating the numerous flip flops from his campaign promises of transparency and change and the reality of continuation of Bush policy, and has nothing at all to do with change.

The movie also has the benefit of not being partisan with respect to right and left, taking aim at both Obama and Bush and demonstrating continuity of Obama and Bush's administrations. In reality of course (as it seems to me), there is total continuity of government since 1988.

The film, bringing us several contributors in the form of economists, climate scientists, researchers and bloggers, really hits the nail on the head of the present crisis. It is also aided by numerous video clips of the elites themselves telling us from their own mouths that accountability, sovereignty and freedom do not matter.

Where the movie fails in my view, is in the concluding half hour they describe the work of the global financial elite as trying to destroy capitalism. What they fail to note is that it is the logical and necessary conclusion of capitalism. The instabilities of capitalism are only solvable, those who have can only make certain they continue to have if they turn modern economies into a slave state. The world the film attempts to show us was predicted by Hilaire Belloc nearly 100 years ago in his work "The Servile State", which he makes the case that capitalism must ultimately end in the restoration of slavery.

Another shortcoming (in my view) of the film is that they do not spend enough time explaining the mechanisms of banking. They spend some time talking about derivatives, and the breakdown of regulation with respect to them, but they do not spend enough time talking about banking either in its proper role or its abuse which is at the heart of today's problems.

The proper function of a bank is to put capital into the community. If x number of people have invested in a bank, and they find (as has always been the case) that people need only 10% of their money at a time, they make an investment on some kind of productive enterprise. This gains the bank a profit, and it was on a productive loan for something say such as mining or manufacturing. The fee they charge for the use of their money is just, it is a percentage of the profit earned with their productive loan. In that sense their money was capital, without which the productive venture could not have worked, and thus the bank has infused capital into the community.

Banking today by contrast takes capital out of the community, and then demands more from the government when they run out of money.

Another of the film's flaws is they act as if America is now the last country standing in the way of the global elite. There are many other countries with many members of their populace just as alarmed as we are, albeit they might be a little less organized and noted than resistance in this country.

Nevertheless, in spite of these and other shortcomings or its Amero-centric outlook, "Fall of the Republic" is an important movie with an important message, our allegiance ought not be to democrats and republicans, neither to 3rd parties, but to a unifying principle of society guaranteeing our freedom and sovereignty, which as Americans is the constitution and the bill of rights. Even as a monarchist I can take that over the new order that is coming.

The Reality of Localism

2009-12-07T12:32:00.003-06:00

As distributists, we're all strongly committed to localism; that is, to making our society, particularly our production, less remote and more local. Indeed, distributism is a name for that economic system in which more, rather than less, of the population is the owner of productive property; such a system necessarily entails more local production. Many distributists, however, forget that this economic localism corresponds to a very real cultural localism, one which is part of the universal experience of mankind.

Culturally, we are all localists, even our so-called cosmopolitans. (Indeed, the problem with our modern cosmopolitans is that they are too local, not that they are not local enough.) The "it takes a village" mantra that the modern nation-state constantly uses as an excuse to preempt the just powers of parents is often grotesquely overextended, but nevertheless there is real and substantial truth in it. We are raised by our parents, but we inevitably have substantial contact with others around us, and others around us are inevitably those who come from the same locality as we do. They, in turn, were raised by parents, but also had substantial contact primarily with other locals. As a result, whole cultural systems rise up which are confined primarily to a given, localized area, distinguished from all others throughout the world.

Localities are distinguished from others in countless ways. Those in a given area sing songs that are unlike those sung in other places; they eat food that is not eaten elsewhere; they adopt curious hairstyles and clothing; they play games that others find odd. Men tend to share things with other men with whom they have more in common, rather than with those with whom they have less, and they have more in common with those who live near them than with those who live far away.

It's sometimes hard to recognize this in our age of distributed computing, but look at the question from a natural point of view. If a hurricane knocks my neighbor's tree down into my yard, who will help me clean up the flotsam? When my lawnmower breaks down, to whom do I turn to borrow one? When the city garbage collectors are careless with their task, with whom will I join my voice to obtain redress? When my house is on fire, who will call the firemen for me? When I lock my keys in my home, whose phone do I use to call for help? When the grocery store runs out of bread and milk before a snowstorm, who can I rely on to share?

Yet even in light of all this, many claim that localism is outdated, that we now live in a "global society." Now, after all, we have Twitter; many of us have more in common with individuals we've never even met than with our neighbors. But this overlooks the vast majority of our daily and necessary lives. While I'm sure many people find it wonderful that another person halfway around the world can know exactly what I'm having for lunch today, it hardly compares with the localism we're discussing here. These globalists, these cosmopolitans too good for the universal localism may have global news sites and global networking, and these things are all fine and good. But the things of the earth, the things that are closest to who we are and what we need to maintain our safety and even our existence, are and must be local. And these things, by necessity, we have in common with our neighbors, with those who live in real, physical proximity to us. We have more in common with these fine people than we do with anyone else in the world, no matter how closely we follow someone's Facebook feed.

My neighbors are really my best friends; I have more in common with them than I do with anyone. And there is absolutely nothing in the world that can change that. No matter how cosmopolitan our society becomes; even if we begin a national policy of moving to another state at least twice a year; for as long as we live in a place, we are dependent upon that place and the people who share it with us. For anyone who doubts it, let him wait for his Myspace fans to call the fire department when they see smoke coming out of his windows while he sleeps. For the rest of us, we will rely on what men throughout the world have always relied on---the people who live next door. We can try to ignore it, but we cannot change it. Man is an inherently local creature.

Yet modernity has long been on a mission not only to ignore it, but to positively oppose it, like Harold the Usurper commanding the waves to cease. Our modern economy, in particular, has been a great force attempting to undermine this unavoidable localism. There are great incentives for leaving localities, particularly smaller ones, to gravitate toward great centers where, we are told, people aren't so "provincial" and "small-minded." Economic production is increasingly centralized; even that most quintessentially local activity, agriculture, has been warped into an industry, producing corn and hogs as though they were parts in a great machine. Television, radio, and other modern media have rendered the culture of our locality less and less important, as people increasingly follow whatever culture they see emanating from New York and San Francisco. Consequently, we are told, localities are irrelevant; only the "global society" is important.

One might as well say that men are irrelevant, and only the commune matters; yet without the parts, the whole will inevitably collapse. And that's precisely what's happening. As our localities weaken, as everything from our culture to our economy centralizes and our people increasingly ignore their roots, our larger societies become increasingly untenable. With nothing to anchor it, the ship continually blows further adrift, and our deracinated citizens continually invent newer and more disgusting debaucheries for the public approval, which is never long in coming. A people which forgets its roots will die as surely as will the branches of a rootless tree; and our people's roots, like all peoples', are in localities.

For how can we contribute to or benefit from our new global society if we're not even really part of our local one? The leaf can gather all the sunlight it can, but if the roots aren't in the ground the tree will die. The West is like a man so busy pressing his suits and gelling his hair that he forgets he still needs to eat. We are physical beings, necessarily tied to a particular place at a particular time; when our culture and our economy no longer reflects this reality, we know that the corruption of our society has reached a critical stage.

For the distributist, dedicated to men living as men and not as disembodied brains (for what else is the man without a place?), the solution is obvious: become more local. There is no need for me to rehash the many economic means of doing so, but think of the cultural means. These are simple; the most basic is, the next time you see your neighbor out mowing his lawn or washing his car, do the most revolutionary and countercultural thing you can imagine: walk up to him and say hello. Really; it's that simple. Once upon a time, people used to have block parties; when the weather gets nice in the spring again, throw one. Invite not your friends from work, but your neighbors. Help organize a neighborhood watch to protect your community from becoming crime-ridden and keep your children safe.

You may even go the extra mile. Learn about your place's history and culture. Learn local songs, tell local stories. Go to local festivals and cultural events. Join local organizations, like museums or community centers. Get involved in local politics. Simply be local; really live in your place, rather than just store your earthly flesh there for a while. Plant your roots, or your branches will inevitably die.

Praise be to Christ the King!

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.

Burn the Vineyard

2009-12-04T10:44:00.003-06:00

I have just returned from one of the most remarkable journeys of my life, a ten day tour of Romania to promote an anthology of distributist and localist essays, Economic Freedom: The Renaissance of Deep Romania. Each day brought a new adventure, and I will be writing a great deal about all the marvelous things that happened and wonderful people that I met. But I think it most appropriate that I start this story at the end, for it was the last day that illuminated all the other days, that made sense of the whole trip and showed what it is we are fighting for, both on this journey and on The Distributist Review.

Along with my co-editor, Dr. Ovidiu Hurduzeu and the publisher, Alexandru Ciolan and his son Andy, we were driving from the city of Iasi, in the North of Romania, where we had gone to debate a mainstream and an Austrian economist. More of this debate another time. Since the book was about "Deep Romania," my colleagues wanted me to see this Romania, a Romania that comprises 46% of the population. On the way up, we had driven the National Roads, but on the return trip we were taking the back roads along River Prut, which forms the border with Bessarabia, which is now called Moldava, though it isn't. The Bessarabians and the Romanians speak the same language and share a good deal of their history.

It is a country of rolling hills, populated by a succession of farms and villages. We pass endless horse-drawn wagons, small Orthodox churches, and roadside shrines. Our destination was one of these villages, Oancea, where Alexandru's relatives have a farm, and where we stopped for lunch and a tour of the village. We were the guests of the Gorovei family: Florica, the family matriarch, her daughter and son-in-law, Dorina and Georghe, and their son and daughter-in-law, Mihail and Domnica, who is Alexandru's daughter. The Gorovei's took a great deal of pride in showing us the farm, and indeed there have a lot of reasons for their pride.

The oldest building is a mud and straw house with a thatch roof. "Mud" sounds very temporary, but in fact the building is at least 100 years old and as sturdy as concrete. Indeed, it survived an attack of Russian katusha rockets. The thatch roof, however, has to be replaced every 40 or 50 years. The building is now used for storing the farm's wine in barrels, while the wine is fermented in the cellar. The "new" house (about 50 years old, I suspect) is heated by two wood stoves, one covered in decorative ceramic tiles. Georghe, a jack-of-all-trades, is wiring the house for electricity and has just added an indoor bathroom to replace the outhouse. The front yard is part of the vineyard, and underneath the grapes they grow strawberries. In the back there are two chicken coops. There used to be a sty, but they no longer keep pigs. There is a workshop, were they keep the grape press, oak barrels, and other wine making and distilling equipment.

The meal began with home-make polinka, a distilled plum wine that the Romanians drink as an aperitif, and for most any other reason as well. This particular bottle was triple distilled, quite potent but very good. Then came deviled eggs and salami as an appetizer. This was quickly followed by Romanian Borsh, which unlike the Russian borscht, is fermented from wheat bran, and filled with meatballs, pork, and potatoes. Topped with sour cream and served with bread, it was suburb. And, of course, the farm's own wine.

After these first courses, we then went off to tour the village while Georghe grilled the chicken on a fire, not of charcoal, but of corn cobs from his own corn crib. We saw the Orthodox Church, recently renovated with its complex iconography and surmounted with the traditional Christ Pantocrator (all-ruler). We saw a monument to King Carol I who gave the land to the peasants. His charter is reproduced in brass on the monument, the guarantee of the farmers’ freedom, that is, of their land. The communists, of course, destroyed the monument and it had to be rebuilt. We toured the vineyards, with soil soft as butter.

When we returned the chicken was ready. These were birds from their own farm, not only fresh, but of a different variety from the American, where we breed avian Dolly Partons for quick growth, large breasts and a bland taste. But this chicken, done to perfection and served with cucumbers (their own, of course), was easily the best chicken I have ever tasted. It was served with the red wine of the farm, and it is worth having more than one glass of this, which of course I did. Maybe a lot more than one. After that came a desert of fritters, crepes, and thick, Turkish coffee. And while we were enjoying this, Georghe was grilling catfish fresh from the Prut, prepared rather like the blackened catfish of New Orleans. It was the first time I ever had fish as a last course.
As we ate (and ate and ate), we filled the room with laughter. Wouldn’t it be a great thing if Phillip Blond, Stefano Zamangi, and a few of the Front Porch Boys and Girls could be around that table, drinking Polinka and laughing the capitalists to scorn. Then we could get the International Distributist Conspiracy off to a fine start.

Grandmother Florica sat in the corner watching us. She could not understand our talk, but certainly understood our laughter and enjoyment; the proud smile never left her face. 87 years old, she still stands ramrod straight and still works the grape harvest. She was showing us the abundance and goodness of her farm, and she had good reason for her pride. Her farm has been threatened nearly every one of her 87 years. She has seen the fall of the kingdom, the rise of the peasant parties, and their fall under coming of the German Übermensch. These would fall in turn to the new Soviet Man from Russia, who is now replaced by the cosmopolitan Capitalist, another abstract creation ripe for an extinction as definitive as the others. But of all these invaders, none of them, not even the communists, did as much damage to village life as the new globalists, with their own Internationale sung to the tune of a cash register, with accompaniment by the unholy trinity of the WTO, the World Bank, and the European Union.

These farms are efficient and abundant, and should be prosperous, but they are not. The post-communist government had to break up the collectives and return the land, but they withheld the equipment; indeed, they closed the tractor factory. They were never very enthusiastic about Romania’s farmers, labeling the rural economy “bazaar Capitalism.” Which sounds pretty good to me, but the new rulers, like the old, saw Romania’s future in heavy industry. There is some sense in this, if not pursued exclusively, since it is a mineral rich country with a trained workforce. But even then, they sold the industry off to foreigners. In one bizarre example of “privatization,” they sold the state telephone company to the Greek state. It never occurred to them to sell it to the Romanian telecom workers.

More than half the farmers have to supplement their incomes with work in the cities, work that is becoming increasingly difficult to get. The next generation has great doubts about their ability to do this. As one son told his father, "Burn the vineyard; I can't take care of it." And villages of mud streets and outhouses have little appeal to the young. Nor to me, but the remedy is rather easy and inexpensive. The irony of the situation is that with so much of the population having relatives on the farms, much of the produce goes the cities to supplement the inadequate incomes of the urban sectors. The farmers must work in the cities to supplement the farm, but the farm supplements the urban areas gratis. But why should such prosperous places be in such poor shape?

I will not pretend to be an expert in Romanian agriculture, but I do know that the country runs a large trade deficit in food (and in everything else). This makes no sense in a country that consists mainly of fertile fields and experienced farmers. It is not the farms that are inefficient, but the system of financial capitalism that understands neither finance nor capital. Indeed, with just a modest amount of capital, these homes and villages can be brought up to modern standards, with graveled streets and indoor plumbing. And the farms should be able to generate such capital themselves, with the proper system of finance. But, alas, "finance" now means something entirely different; it does not mean, as it should, the capitalizing of productive ventures in return for a share of the produce, but only of financing speculative schemes and government waste in return for a share of the plunder. A system of producer and marketing cooperatives, for example, would improve both the productivity and market power of the farms, and this would take very little investment, compared to that required by the grand and (usually) bankrupt schemes of the globalists.

Ceausescu, the last communist president of Romania, starved his people to pay off the foreign debts, and the new "democratic" government took office without a penny owed to anyone. Now they have a debt comparable to the Americans, and are still begging in Brussels for more of the Euros that will make them poorer, as debts usually do if not properly invested. These loans will make Romania even more dependent on their masters in the European Union. Indeed, it is likely that Basescu, the current president, will not have even as much independence from Brussels as Ceausescu did from Moscow. These days, the proper pose for a President of Romania is on his knees to get yet another round of loans to finance yet another cycle of waste.
I am grateful that I got this opportunity to see and enjoy "deep Romania." It is a meal and a family I will not soon forget. And it is also a constant reminder of what we are fighting for: the right to the fruits of one's own labor earned from one's own resources, whether that labor occurs on the farm, or in the factory, the mine, or the shop. And I do not think it trivializes the question to say that we are fighting for a decent lunch as a routine part of life, one enjoyed with friends and family. Life offers few greater pleasures.

Cleveland works

2009-11-28T09:27:00.001-06:00

http://blip.tv/file/2749165

Dear Colleague,

“Something important is happening in Cleveland.” That was the theme of the community event that inaugurated the opening of the Evergreen Cooperative Laundry on October 21st – a worker-owned commercial-scale “green” business based in the Glenville neighborhood, one of the most severely disinvested areas in Cleveland.

More than 300 participants – including leaders of the city’s major anchor institutions, business, and government representatives, and community development practitioners and neighborhood residents – heard Mayor Frank Jackson call the laundry, “a model for how we can put our people back to work and rebuild our community.”

The Evergreen Laundry is the first in a network of worker cooperatives that is being launched in the city. Next up: Ohio Cooperative Solar and Green City Growers. For more background on the Evergreen Cooperative Initiative:

View the 5-minute Evergreen video and meet the worker owners of the Evergreen Cooperative Laundry.
Read the article that appeared on the front page of the business section of the Cleveland Plain Dealer
Learn more about the Evergreen Initiative through The Cleveland Foundation’s newest publication.
Listen to this six-minute radio broadcast by journalist Daniel Denvir.
For the past two years, The Democracy Collaborative has been privileged to work with our partners in Ohio – including The Cleveland Foundation, ShoreBank Enterprise Cleveland, Towards Employment, and the Ohio Employee Ownership Center at Kent State University – to develop and implement a community wealth building strategy. All of us are committed to making the Evergreen Cooperative Initiative a pioneering and innovative model of job creation, wealth building, and sustainability.

We look forward to continuing to update you in the coming months and years. If you would like to explore how the Evergreen strategy might be adapted to your community’s needs, please feel free to be in communication with us.

As always, we have added dozens of new links, articles, reports, and other materials to the site. Look for this symbol *NEW* to find the most recent additions. And don't forget to view our regularly updated C-W Blog.

Ted Howard
Executive Director, The Democracy Collaborative

http://www.evergreencoop.com/

Is America Ungovernable?

2009-11-20T11:21:00.000-06:00

Otto von Bismark, the 19^th century Iron Chancellor and architect of modern Germany, once remarked that “If you like law and sausages, you shouldn't watch either being made.” One could observe that this is not quite correct; the process of stuffing offal into sausage skins is far less disgusting than that of stuffing bribes into legislators. Still, statute law will always be a matter of negotiations between those who have an interest in the bill at issue. Thus it has always been, and thus it will always be. In itself, this is not too bad; everybody should have a voice in drafting legislation, and compromise, while cumbersome, is likely to be better on the whole.

Democracy is supposed to solve the problem by giving everyone a voice in the process. And this would certainly be true, if we were speaking of a local assembly. But in a nation of 300 million plus, it can't be true; the very size limits the number of voices that can be heard. Hence, a “place at the table” becomes a scarce commodity, and like all scarce commodities it has a market price, a price that prices the public out of the process; as the nation grows, the size of the legislative “table” shrinks; there aren't enough places to go around, and the form of democracy is easily converted into the substance of oligarchy. But even at the local level, government must be guided by some notion of the common good, even when the parties are seeking their own interests. But as the cost of participation rises, this becomes less possible.

Think on this: A congressional race can easily cost $1,000,000 but the congressman is in office for only 730 days. That means he must raise $1,370 for each and every day he is in office, weekends, Christmas, Easter, and Flag Day included. And now consider that this office represents but 1/435^th of ½ of 1/3^rd of the Federal power. When you do math, enormous sums of money are involved, and there are limited sources for that kind of money. The money appears as a “donation,” but it is in fact a purchase, an investment, and the investors expect a decent return on their money. Or rather, an indecent return.

What kind of returns? Well, when the prize is the public purse, the rewards are unlimited, far higher than one could possibly achieve from making things or providing a service. Thus we read with no surprise Gretchen Morgenson's column in the New York Times that the bill to extend unemployment benefits for another 20 weeks also includes a $33 billion dollar gift to businesses, especially the home builders, whose overbuilding is part and parcel of the current crises. These businesses will be allowed to offset their 2008/9 losses against profits going back to 2004, and hence receive huge refund checks from the Treasury. According to Ms. Morgenson, Pulte homes will reap $450 million, Hovanian $250 million, Standard Pacific $80 million, while a Beazar Homes will get a measly $50 million.

How much did it cost them to get these rewards? Gretchen counts their costs:

Securing this tax break was a top priority for home builders, lobbying records show. The Center for Responsive Politics reports that through Oct. 26 of this year, home builders paid $6 million to their lobbyists. Last year, the industry spent $8.2 million lobbying. Much of this year’s lobbying expenditures were focused on arguing for the tax loss carry-forward, documents show. Among individual companies, Lennar spent $240,000 lobbying while companies affiliated with Hovnanian Enterprises spent $222,000. Pulte Homes spent $210,000 this year. That’s some return on investment. After spending its $210,000, Pulte will receive $450 million in refunds. And Hovnanian, after spending its $222,000, will get as much as $275 million.

Again, none of this surprises us, no matter how much it may sicken us. But the raid on the public purse is not half as problematic as the disappearance of the common good in government. The whole purpose of government is to look towards the common good, however imperfectly; when governments lose this function, they gradually cease to function.

I had some hopes for Obama. Not so much for his politics—certainly not that—but for his fund-raising. He was able to raise enough on-line to make a credible candidacy. He was thus in a position to establish an independent force in American politics. But in the end, he accepted more corporate money than any of his rivals. In that success was his failure.

Obama will fail. Indeed, he has already failed. I believe he failed before he started, as soon as he became dependent on big money. The biggest sign of that failure was his appointment of Timothy Geithner to the Treasury. Geithner was President of the New York Federal Reserve Bank, and the person more than any other responsible for the AIG bailout, which was shameful. His is Big Money's man in Washington, one of many such men.

The Health Care Bill is a perfect example of the process. Starting with decent motives, whether one agrees with them or not, it becomes merely a series of subsidies to established monopolies. Big Pharma is on board, of course. In exchange for removing any threat of public control of prices, they voluntarily agreed to lower their prices by $80 billion over ten years. But first they raised the prices by 9%. Obama was totally out-maneuvered by them. They will end up with a huge public subsidy. The AMA, the AARP, and most other big players are on board, all for the same reasons. The only holdout is the insurance industry. They will get on board once the public option disappears; they like the prospect of 30 million new customers supported by the government.

But the bill will not fix any of the problems because it does not address them. It is the current system, only more so, and with more public money going to an elite group. It will hasten the collapse of the health system. The same failures are evident in the bailouts and in the stimulus package. Even the administration's best impulses make them look ridiculous, as with the effort to make the spending transparent by posting it on a website, along with bogus estimates of the number of jobs created.

There is no chance, I suspect, that things will get better in time for the 2010 elections, and by 2012 the Republican Party will give us another Bush, or Palin, or Cheney to rule. But none of them will rule anymore than Obama does. They will campaign to run the country, only to find upon victory that the country runs them, or rather that small slice of the country that controls the political funding. While this is profitable in the short run, it is disaster in the long, and the long is about to overtake the short; without some notion of the common good, the government collapses.

Von Bismark understood how laws were made, but being a good aristocrat, he retained some notions of the common good. After the revolutions of 1848, he understood that new terms would have to be negotiated between the classes, if Germany were to survive. Even though he was a monarchist and no supporter of democracy, nevertheless he accomplished great social reforms in the 1880's, reforms that included health insurance, Accident insurance, and old-age pensions. In doing so, he laid the foundations of the modern European states. He gave the powers their due, simply because they were powerful. But for all his “blood and iron” talk, he did have a notion of the common good. He could actually govern.

We cannot. We have no real place at the table, a table that is itself shrinking, even as our debts grow. If you want to see the future of America, look at Europe of the 1920's and 30's.

More on Mondragon & the USW

2009-11-11T09:51:00.001-06:00

http://www.companywekeep.net/an-historic-alliance/

The Fall of the Wall

2009-11-09T23:16:00.003-06:00

In my misspent youth, I was a politician. And in my role as a politician, I did all the things that politicians do. Well, not all the things; I say that in case there are law-enforcement agents who read this blog. Now, one ought to repent of one's sins, and in general I try to do so with a sincere heart. For example, I generally repent of all the boondoggles I took at the expense of the taxpayers. Of course, I doubt that I will ever reimburse the city treasury, so one may question the sincerity of my repentance. But there is one boondoggle at least that I do not repent. It was a trip that allowed me to witness a unique moment in history in a unique way. And for that, I will always be grateful to all the anonymous visitors to Our Fair City who paid their room taxes to the city's Convention and Visitors Bureau.

These were high taxes, and we have a lot of hotels, which makes the Bureau a rich organization. And since the taxes were paid by visitors and not our own citizens, the council didn't really watch the activities of the Bureau all that closely. Besides, the Bureau was adept at keeping the council happy with the odd boondoggle, among other things. And in March of 1990, the Bureau wanted to keep me happy, being a senior member of the council and the Mayor Pro Tempore.

And so it was in March of 1990 I was dispatched by the Bureau to the International Tourist Trade Fair in Berlin, and the date is important. The world is now celebrating the 20^th anniversary of the fall of the Berlin Wall on November 9, 1989. But in fact, the Wall did not fall on that date. What did happen on that day was that a minor East German Politburo member, Günter Schabowski, let it slip in a press conference that the travel restrictions which trapped East Germans in the East would be lifted. He said “sofort” (immediately) but in fact the decision had not yet been formally made. Nevertheless, tens of thousands of East Berliners moved towards the crossings, and the outnumbered and demoralized guards, who in the past would simply have opened fire, first stalled for time and finally gave way. The Wall was not down, but it was irrelevant.

The dismantling of the Wall would not begin until June of 1990, and reunification would not take place until October of that year. And so the Berlin I visited was still a divided city, and still divided by the Wall. But the celebrations that had begun on the ninth of November continued, although somewhat more commercialized. Still, there were constant parties at the wall, immense crowds, unending music, couples making love, vendors making money, and tourists making pictures. It was the entire world's Kodak moment.

And the joy was justified. The history of the world since 1918, and particularly since the end of World War II, had been dominated by the struggle with communism, and most of that time it looked like we were losing. Yalta had allowed Stalin to swallow up Eastern Europe, which quickly became a prison for its own people. China fell, and a bloody stalemate was reached in Korea. The United States suffered a humiliating defeat in Vietnam, where I served nearly two years (the loss of that war, I want to make clear, was not my fault.) Castro brought communism to the Western hemisphere, and it appeared to be on the march in Asia, Africa, and the Middle East.

The Triumph of the West was by no means assured. But suddenly, communism fell. Just like that. It was like a dream. The joke was that it took 10 years Poland, 10 months in Germany, 10 weeks in Czechoslovakia, 10 days in Bulgaria, and 10 hours in Romania. The Great Political Question of my youth was settled, or so it seemed.

One thing a politician does NOT do is to pass up a photo op, and so it was that we went out early one morning to take some pictures, “Mayor Pro Tem Tears Down the Berlin Wall.” One of the pictures in its full absurdity is reproduced here. But while making the pictures, something marvelous happened. We went out very early in the morning to avoid the crowds that would so be there. We were at a spot on the wall near the Brandenburg Gate, where there was a small gap between the Wall and the Gate. Then we heard, “psst, psst.” There in the gap, the East German border guards were motioning us to enter the German Democratic Republic in a rather unauthorized fashion. These were the men who had shoot to kill orders for anybody attempting to exit the Workers' Paradise, and had in fact shot hundreds of them over the years. And so of course, we went into East Berlin. Now the guards had not murder but commerce on their minds. They were selling their bits of the Wall, the Eastern side. The contrast was startling. While the Western was covered with a riot of graffiti, the Eastern side was whitewashed and without a single mark on it. I could not resist having tangible evidence of the contrast between East and West. I bought a bit of the Wall, I bought one of the guard's medals, I bought his uniform blouse. He would sell anything, Deutschmarks only; nobody, not even the GDR wanted the East German Reichsmark.

And that was when the Marvelous Thing happened. The guard picked up that weapon common to bureaucrats the world over, be they communist, or capitalist, or corporate, or Fascist, or whatever. He picked up the date stamp and click-thump stamped the clean bit of wall. I am sure he would have stamped the medal as well, had there been a practical way to do so. I was amazed. And amused. “He will do well in the new order of things, since they are likely to be a lot like the old order.” More on this point in a moment.

I will be returning to Eastern Europe in a few days, this time to Romania. Much has passed in the East in the last 20 years. In 1991, John Paul II issued his encyclical Centesimus Annus which dealt with the question of what the East should do with its new-found freedom. He warned the people against thinking that “the defeat of so-called 'Real Socialism' leaves capitalism as the only model of economic organization.” but the Pope's warning would not be headed. Indeed, the Solidarity movement of John Paul's native Poland of which he was so proud for the leadership it had shown in its ten-year struggle with communism, whitered shortly after that freedom was won. Instead “Experts” from the West flooded the East with plans for economies they knew nothing about based on models which had never actually worked in the West. The best minds of Harvard were easily outsmarted by a small number of players who gamed the new system to loot the wealth of their countries and become the new ruling oligarchs.

It is small wonder, therefore, that the Pew Foundation, in its recent poll of Russia and Eastern Europe has found that,

The initial widespread enthusiasm about these changes has dimmed in most of the countries surveyed; in some, support for democracy and capitalism has diminished markedly. In many nations, majorities or pluralities say that most people were better off under communism, and there is a widespread view that the business class and political leadership have benefited from the changes more than ordinary people.

Currently, most of the nations of the former Soviet block must go hat in hand to the moguls of the IMF or the European Union to ask for loans that cannot be repaid but which will bind these nations further to the Western oligarchs and make them as dependent on today as they were on new Sultanate in Brussels as they ever were on Moscow.

I will not be going to Romania as an “expert” on anything, and I certainly don't have plans for remaking its economy. Rather, my message is not to listen to experts at all, and not to listen to foreigners, not even me, or especially not me. Rather, they should look at what works and devise their own plans. The should look at Mondragón, or Emilia-Romagna, or the thousands of successful cooperatives large and small that make goods from the simple to the most complex, and allow a nation to chart its own course, a course neither capitalist nor communist. I will simply state the obvious, that it does no good to replace the old “SovRoms” (Soviet-Romanian joint enterprises used to drain the wealth of Romania into Russia) with EuroRoms or AmerRoms; what they need are RomRoms.

The Wall has long since fallen, but in many ways it remains. Globalism has not worked, nor for us and not for the East. This new collapse, which is hitting the East particularly hard is also a new opportunity to think in ways apart from the now outdated paradigms of the bloody 20^th century. If this century is to avoid the mistakes of the last, it must avoid the political and economic systems of the last. The celebrations over the Fall of the Wall should be a time for seriously thinking how to build a new order.

Who Invented the Internet?

2009-11-03T08:40:00.005-06:00

Capitalists, we'll often hear. Just about any discussion of distributism on the Internet will, at least once, involve the phrase, "I can't believe you're attacking capitalism on the Internet, one of the greatest of capitalism's inventions!" Take, as a typical case, the example of John Clark, from the distributism debates of 2002:

Seeing an attack on capitalism appear on the Internet is like hearing a sermon on the evils of flying from the cockpit at 40,000 feet. Using capitalist tools to spread anti-capitalist thought is a strange irony.

This argument lacks merit in any case; it's like saying that fighting a war against the Chinese using gunpowder is a strange irony. But leaving that aside, is it true? Is the Internet one of the vaunted "capitalist tools," an invention of private enterprise operating unstinted by the interference of evil government?

Before we begin to examine this historically myopic claim, let's define what the Internet actually is. It is not the World Wide Web, which is only a part, albeit a large one, of the Internet. The Internet is, in fact, simply a global network of computers connected via a computer communications protocol called TCP/IP. It operates by a very simple server-client system; the client (like the computer you're reading this on right now) asks the server (where the document resides) for a given file (like this one), and the server responds by sending that file to the client. There are some complications to this description, some of them significant---we haven't even mentioned server-side and client-side scripting, for example---but for our purposes, this description is accurate enough.

Where are the servers for "the Internet"? Everywhere and nowhere. Servers all over the world are responsible for answering clients' requests for various files; requests are sent to the appropriate servers---that is, the ones that actually have the requested files---via a complex system of routing that we don't really need to worry about here.

The Internet has no government. There is no entity that controls the Internet or makes sure that it's working properly. However, there are some organizations that make sure things don't go completely crazy. Various standards organizations ensure that the protocols and languages used on the Internet are standard; that is, conform to a given specification in order to ensure that everyone will know what to expect when they use them. Most importantly, the Internet Corporation for Assigned Names and Numbers, or ICANN, is in charge of making sure that names and numbers are kept unique and orderly; its board is made up of members from across the spectrum of private enterprise, voluntary organizations, and academia. The United States federal government is still more or less in charge of ICANN.

Notice that I said "still." I said this because the United States federal government has always been "in charge" of the Internet, insofar as anybody has been (and strictly speaking, nobody is). In other words, insofar as anybody keeps the Internet running, it's the government, not private enterprise. Hardly a capitalist tool. But moving beyond that: who invented the Internet? Is it a creation of capitalist ingenuity, as so many assert?

In its earliest incarnation, the Internet was invented by the United States government's Advanced Research Project Agency, ARPA. In an attempt to ensure that we stayed ahead of the Russians in every field of technical endeavor, the government funded ARPA, which in turn funded a variety of programs, including the one that led to what we now call the Internet. The first connection in this network, originally called the ARPANET, was made on 29 October 1969, between UCLA and the Stanford Research Institute. (You may also hear the ARPANET referred to as the DARPANET, formed from adding the "Defense" to the beginning, which gives you an idea of what it was originally designed for.)

Still no profit motive involved here; this is merely the government funding programs which it deemed useful for itself. ARPANET continued to grow, going international for the first time in 1978. It utilized "IP," or "Internet Protocol," for its communications. This still isn't technically "the Internet," however, because by definition the Internet uses TCP/IP, as we mentioned earlier. However, it's definitely the precursor to the Internet, and as yet private enterprise has had no significant role in its development.

The TCP/IP protocols were developed in the mid-1970s at Stanford University; their specification, RFC-675, was the first time the word "Internet" was used in reference to a global TCP/IP network. In 1983, the entire ARPANET was placed on this protocol. In 1985, the National Science Foundation started its own network, NSFNET, which elected to use the TCP/IP protocols of ARPANET. Already at this time the bedrock of the Internet was in place. People had email and could work on and contact other computers around the world. Once the NSFNET was connected to the ARPANET, the Internet could, for the first time, really be said to exist. And still private enterprise had had no significant role.

Indeed, commercial use of the Internet was strictly forbidden; it wasn't considered appropriate to allow private corporations to profit from a publicly funded international network. Private enterprise wasn't involved in the Internet until 1989, when the commercial MCI Mail was added to the NSFNET. Usenet arose about that time, along with the first of the Internet service providers (ISPs), including the recently defunct Compuserve. But the fact of the matter is that the Internet was conceived and developed entirely by non-profit entities, not by capitalists engaged in private enterprise attempting to make a profit.

Well, what about the World Wide Web, then? Surely that must be credited to capitalism?

No. The World Wide Web is that subset of the Internet which is governed by a weblike system of interlinked pages, largely written in HTML, or HyperText Markup Language. The "hypertext" part refers to what we now mostly call "links," which keep documents linked in to one another. HTML and the World Wide Web were developed primarily by one person, Sir Tim Berners-Lee, while working at the European Organization for Nuclear Research (the French name of which becomes CERN). CERN is itself a governmental laboratory with many member states contributing to it; this development, too, cannot be credited to capitalism.

Nor was the popularization of the World Wide Web a capitalist phenomenon. The Internet, already widely used by academia, governments, and to a lesser extent hobbyists, was accessed through a number of different means prior to the development of the World Wide Web. Computer old-timers (and even not-so-old-timers like myself) will remember the old gopher system (also developed by a public organization, the University of Minnesota), along with many others. The Web, however, with its hypertext system, made all of this much easier and more manageable. But it needed a browser, capable of displaying and following hypertext links, in order to function properly. The Internet therefore really took off among hobbyists and other private systems with the development of the Mosaic web browser---another creation of a government entity, this time the University of Illinois. Its development was funded by the High Performance Computing and Communication Act of 1991, sponsored by Al Gore. (Incidentally, sponsoring this act was the source of his infamous comment about taking "the initiative in creating the Internet," which is hyperbole at the very best.) None of this is even remotely capitalism at work; as late as 1993, when Mosaic was released, private enterprise had still had little role in the development of the Internet at all, much less a significant enough role to justify calling it a "tool of capitalism."

Only at this point did private industry begin to get involved, and even then governments and voluntary, non-profit agencies continue to play an enormous role. Indeed, such non-profit organizations govern the Internet. Standards organizations like W3C and ISO make sure that the protocols, languages, and other structures at use on the Internet are well-defined and universally accepted. The United States government plays a large role to this day in ensuring the orderly operation of the Internet as a whole. All in all, this can hardly be counted a great triumph of capitalism.

Indeed, capitalism didn't create the Internet, nor did capitailsm perfect it. Capitalism swept down on a fully formed and fully functional Internet, developed and supported by the efforts and money of the community as a whole, and turned it to their own personal profit. While utilizing the work of others to benefit oneself is perfectly acceptable at times, it's the height of vanity to them appropriate that work as one's own and call it one's own tool.

Now, of course, large portions of the Internet are commercial, large portions are government, and large portions are neither, which is really as it should be. But the Internet certainly wasn't created by these commercial interests; it wasn't popularized by these commercial interests; it wasn't perfected by these commercial interests; and it's not maintained by these commercial interests. All of these things were done by governments and government-funded organizations, supposedly the antithesis of all free enterprise.

Does it still seem incongruous to use the Internet to argue against capitalism?

Praise be to Christ the King!

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.

Andrew McCleod's Co-op Blog

2009-10-30T09:29:00.000-05:00

http://coopgeek.wordpress.com/

He will be in Detroit Nov. 8.

US Steelworkers and Mondragon: An Australian Response

2009-10-29T18:14:00.002-05:00

My FaceBook response to the US Steelworkers/Mondragon Agreement announcement was as follows:

This is incomparably the most exciting positive news story I've seen in a very long time. The massive complex of worker-owned manufacturing, retail, financial and civil engineering co-operatives at Mondragon in the Basque region of Spain is reflective of an integrated industrial and political philosophy that has lessons for all of us, not least here in Australia. My 1999 book 'Jobs of Our Own: Building a Stakeholder Society' - long since sold out its Australian and European editions and only very recently back in print in a US Distributist Review Press edition that's available through Amazon.com - is about where the ideas behind Mondragon came from, how the system works and the reasons for its stunning success. And I'm currently writing about how something similar might have been achieved in Australia, and why it didn't happen. Is it too much to hope that, now the US Steelworkers have shown the way, individual unions, Trades and Labour Councils and the Australian Council of Trade Unions will sit up and take notice? And might not Kim Carr, Martin Ferguson and other federal Ministers detour in the course of their overseas travel for a visit to Mondragon, and see for themselves what it has to offer us?

Steelworkers see the Light!

2009-10-29T13:40:00.000-05:00

Steelworkers Form Collaboration with MONDRAGON, the World’s Largest Worker-Owned Cooperative
http://talkingunion.wordpress.com/2009/10/28/uswmondragon/
Pittsburgh (Oct. 27, 2009)—The United Steelworkers (USW) and MONDRAGON Internacional, S.A. today announced a framework agreement for collaboration in establishing MONDRAGON cooperatives in the manufacturing sector within the United States and Canada.. The USW and MONDRAGON will work to establish manufacturing cooperatives that adapt collective bargaining principles to the MONDRAGON worker ownership model of “one worker, one vote.”
“We see today’s agreement as a historic first step towards making union co-ops a viable business model that can create good jobs, empower workers, and support communities in the United States and Canada,” said USW International President Leo W. Gerard. “Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants. We need a new business model that invests in workers and invests in communities.”

The Dialog Between Veritas and Caritate

2009-10-28T17:17:00.002-05:00

The following is my address to the American Maritain Association Convention

In his latest encyclical, Caritas in Veritate, Pope Benedict covers much ground that had been addressed by his predecessors, particularly the point that the virtue of justice is necessary to economic science. But Benedict kicks the rhetoric up a notch by insisting not just on the natural virtue of justice, but on the supernatural virtue of love, caritas. Moreover, he insists that caritas is not confined merely to the level of personal affections, but that is has systemic and practical consequences and must be embodied in human systems of trade and government. Benedict therefore confronts us with the question posed by that great theologian, Tina Turner, namely, “What's love got to do with it?”

Benedict insists on a dialogic relationship between truth and love. What is implied by this statement is that there is a dialogic relationship between theology, the Queen of the Sciences, and economics, or indeed every other humane science. However, since each science is the master of its own methods, theology must speak to each science in terms intelligible to that science. This places a double burden on the theologian to learn his own language and to be able to translate it into another tongue. However, it is a burden that theology cannot refuse; She must comment on the mundane affairs of the world in terms intelligible to the world, or She must abdicate her responsibilities and lose her social utility. Theology must, on the one hand, exercise sovereignty over the other sciences, and on the other hand, humbly learn from every other science. This sovereign humility is a burden theology cannot refuse without making the gospel of no effect in the world, without reducing it to a mere academic specialty or literary curiosity.

The economic scientist tends to view such claims with great skepticism. He is, after all, a scientist and feels perhaps that he should no more be required to consult the theologians than should the physicist or the chemist. Questions about the movements of the markets, no less than questions about the movements of the stars, should be left to those who actually know something about these subjects. Hence he sees no need to enter into this dialog, to subject himself to the sovereignty of theology, no matter how humble that sovereignty might be. So the question is, “Can we, as theologians, present the economic scientist with compelling reasons for entering into Benedict's dialog?”

I believe we can. What I will attempt to show is that economic order, that is, the rough balance between supply and demand known as equilibrium, is dependent upon equity, that is, upon distributive justice. Indeed, it is the very lack of equity that makes equilibrium impossible and inefficiency inevitable, and the failure to recognize this makes economic science incomplete. Then we must show that even justice is insufficient, but must be completed in love, in Benedict's principle of gratuitousness. But before we can address either of these tasks, we must first situate economic science within the hierarchy of the sciences.

Science, Normative and Positive

Some wag somewhere has remarked that economists suffer from “physics envy.” Sciences like physics have no need for concepts like justice. Hence, if one attempts to model the movement of markets in the same way as the movement of molecules, then terms like “justice” can only be an embarrassment which compromises the purity of the science, while equity could only compromise the efficiency of markets.

Underlying such a claim is the so-called “positive-normative” duality, wherein economics is merely a positive or descriptive science, one in which normative considerations have no place. But this is a false dichotomy. Every science, insofar as it is a science, must be both positive and normative. Every science, insofar as it is a science, must be “normalized” to some criteria of truth. These truths will arise from two sources, an internal and an external source. The internal criteria involve a science's proper subject matter and methodology. But these criteria are insufficient to found any science as a science. In addition, there must be external criteria of truth, and these truths can only come from one or more of the higher sciences. In the absence of such an “external” check, the “science” will merely be circular, dependent on nothing but its own axioms and unconnected to the hierarchy of truth. Thus, for example, biology is responsible to chemistry and chemistry to physics. No biologist can violate the laws of chemistry, and no chemist can reach a conclusion contrary to physics. Thus every science is responsible to its own methodology (and therefore "positive") and to the higher sciences (and therefore "normative"). Every science has, therefore, both its own proper autonomy, based on its subject matter and methodology, and its own proper connection to the near sciences, based on the hierarchy of truth.

Without submitting itself to this hierarchy of truth, no truth can be called a “scientific” truth. Without this proper scientific humility, no study can find its proper place in the hierarchy. Merely being mathematical, or empirical, or axiomatic is not enough, no matter how precise the mathematics, how careful the observations, or how certain the axioms. An astrologer, for example, will make observations as precise as you like, will draw charts as complex as you like, and make predictions as specific as you like. And all of it will be consistent with astrology's own axioms. However, these axioms are never subject to the judgment of any other science; lacking the requisite scientific humility, astrology can never be a science. It may be, for all I know, God's own truth; it can never be man's own knowledge. It must be accepted or rejected sola fide; no scientific judgment can ever be made because it can never be science.

So the proper question is not whether economics is positive or normative; since it is a science it is both. The question is, “To which of the higher sciences is it subject?” The physical sciences normally terminate in physics, but the humane sciences—the sciences of human relations—terminate in some view of man and particularly in some view of justice. It is justice that regulates human relationships, not only in the moral sense, but in the practical sense as well. That is, an economics that has no sense of justice will make no sense at all; it simply will not work. Justice is not some arbitrary “value” imposed on the science, but a principle of practical reason that keeps things reasonable. Therefore, some theology must be the ultimate source of truth for economics with some intermediate stops at psychology and sociology. It would seem to be self-evident that a complete view of man would involve the sources of knowledge about man, yet this view is not at all universally (or even generally) accepted by economists.

How is it possible that a humane science can cut itself off from these indispensable sources of knowledge about humans? The answer is, it can’t. It is not possible to theorize about human actions without some theory of humans. The selection of an economic system is also the selection of an underlying ethical system. The task is not to bury the ethical assumptions under the pretense of “objectivity,” but to make those assumptions explicit, where they can be examined by all. What actually happens is that neoclassical and Austrian economists accept as a purely economic truth that which is, in fact, a purely philosophic stance, namely that of Jeremy Bentham’s utilitarianism, and its various descendants. This philosophic assertion has become a pseudo-scientific dogmatism, placed beyond all question and critique and hence the science has become less scientific and more dogmatic.

Having said that, it is now incumbent on me to make plain my own ethical assumptions, at least those which lie nearest to the economic question. My primary ethical assumption concerns distributive justice, and by that I mean something very specific with a very specific economic signature. The specific meaning is that the output of production is divided proportionally to the contribution to production; that is, one takes no more than what one contributes. And the specific signature of distributive justice is that the returns to wages and capital are normalized to each other; that is, one cannot earn much more by investing than one could by working, which implies that there will not be vast differences of wealth and poverty, that the income gradient will be relatively flat. This is the technical requirement for the condition of equity. But the question immediately arises, why should this condition, this distributive arrangement, be vital to economic equilibrium?

Equity and Equilibrium

When people come together in families or firms to produce things, they add wealth to the economy; in fact, this is the only economic way to add wealth. If they and others also get an equitable share of the output, or the wealth they create, there will be enough purchasing power in the economy to buy all the things the firms produce. This is the much-maligned “Say’s Law of markets,” which states that “supply creates its own demand.” Say’s Law is much criticized because if you examine it closely, it says that recessions are impossible; there will always be enough purchasing power to clear the markets. Clearly, we purchase things in terms of other things. The total number of things created equals the total number of things that can be used for purchasing the other things. And yet, recessions do happen, quite obviously. Long ones. Deep ones. Serious ones. And they happened more so in Say’s day, the heyday of the laissez-faire economy, than in ours. So, what is wrong with Say’s “Law”?

To understand the problem, we have to look at the sources of demand in a money economy: wages and profit. Wages are, of course, the rewards of labor and profit the reward of capital. In another sense, however, these are the same rewards, since capital is merely “stored-up” labor, or things produced in one period to be used to continue production in the next period. For example, if a farmer wishes to have a crop next year, he must save some seed-corn from this year’s crop. Now, the corn he consumes and the corn he saves are the same corn from the same crop. But by saving some corn for seed, it becomes “capital.” Hence, the return on this capital is really a return on his prior-period labor, just as his wages are a return to current-period labor. Clearly the returns to capital and labor, profit and wages, spring from the same source (labor). Capital, then, ought to have roughly the same rewards as labor, plus some premium for saving.

If wages and profits are normalized to each other, economic recessions are unlikely to be protracted or serious. There will be enough purchasing power distributed equitably to clear the markets. In capitalist economies, the vast majority of men are not capitalists; that is, they do not have sufficient capital to make their own livings, either alone or in cooperation with their neighbors, but must work for wages in order to live. And since the vast majority of men and women work for wages, then the vast majority of goods will have to be distributed through wages. In conditions of equity, this will not be a problem; so long as there is equity, there is likely to be equilibrium, and periods of disequilibrium are likely to be brief. But it may happen, and quite often does, that profit and wages are not normalized to each other. Usually, this means that capital gets an inordinate share of the rewards of production. This, in turn, means that the vast majority of men and women will not have sufficient purchasing power to clear the markets, and the result will be a disequilibrium condition, that is, a recession.

At this point, the neoclassical economist might object that the division of rewards doesn't matter, since there will still be the same amount of purchasing power in the economy; even if capital gets more and labor less, there will still be the same amount of money, and hence of purchasing power. Alas, this is not true. The CEO may get 500 times what the line worker gets, but he cannot wear 500 times the shoes, eat 500 times the food, or live in a 500 bedroom manor. Nor can he productively invest the excess, because the very fact of receiving the excess narrows the market, which is always measured by the number of solvent consumers in that market. Hence, instead of productive investment, the investor finds no use for his money and he turns to speculative instruments like the CDOs, MBSs, CDSs, and the whole alphabet soup of financial gambling instruments with which we have become all too familiar. Thus, both purchasing power and investment funds leach out of the economy to produce structural shortfalls. When this happens, societies look to non-economic ways of restoring equilibrium.

Non-Economic Equilibrium

The major non-economic means of restoring equilibrium are charity, government spending, and consumer credit (that is, usury). Each of these methods transfers purchasing power from one group, which has an excess, to another, which has a deficit. The first method, charity, will always be necessary to some degree because even in the most equitable economies, there will always be people who are incapable of making a decent living, perhaps because of mental impairment, moral deficiency, or physical handicap. One hopes that there is enough generosity and benevolence in society to voluntarily cover these needs. However, when low wages become widespread, and when self-interest becomes the dominant motivation in society, it is likely that charity will be insufficient, and other means must be used.

The second non-economic method is government spending, by which the government seeks to re-establish equilibrium conditions either by supplementing the income of some portion of the population, or simply by increasing its spending to create more jobs and thus add more purchasing power to the economy. This strategy is at the heart of Keynesian economics.

Despite the fact that Keynesian transfers now consume a huge portion of the public expenditures, these transfers have been, for some years now, insufficient to balance supply and demand, and for some time now the economy has depended chiefly on the third method, usury or consumer credit. This is the plastic economy, an economy based on credit cards. And to the extent that an economy depends on consumer credit, it is, quite literally, a house of cards, and will be as unstable as those structures usually are. In fact, usury is the most destructive way of increasing demand, since a borrowed dollar used to increase demand today must be paid back tomorrow and hence decrease demand in a future period by that same dollar—plus interest. This requires more borrowing, which of course only makes the problem worse. Eventually, the system falls of its own weight, as credit is extended to an increasingly weakened consumer, and a credit crisis results.

The “Standard” Model

If this connection between equity and equilibrium is so obvious, then why have economists missed it? The truth is, they haven't. Rather, the problem is that they have inadequate tools to handle the problem of equity. This is because over 100 years ago the professional economists made the conscious decision to eliminate distributive justice and try to explain everything in terms of commutative or corrective justice alone. The economy was modeled as a series of exchanges originating in an “exchange with nature.” At each step of the series of exchanges, each factor of production would be compensated by contractual arrangements. The belief was that free bargaining is sufficient to insure that the contracts are fair and the wage just. This is the theory of marginal productivity, which states that in a perfectly free market, contract alone is sufficient to guarantee each factor of production a share proportional to its contribution to production.

Now, there are any number of critiques we could offer of this theory, but I will mention only three. The first is that the idea of “an exchange with nature” is absurd. Who, we may ask, negotiates in nature's behalf, and what precisely does she get in return? “Dear mountain, let us have your coal, and we will give you this nice heap of slag in return.” Nature, it seems, needs a better agent.

But the second problem was actually pointed out by Adam Smith 100 years before the theory of marginal productivity was formally proposed. Concerning any dispute over wages, Smith says,

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily. …In all such disputes, the masters can hold out much longer. ... Many workman could not subsist a week, few could subsist a month, and scarce any a year without employment.^¹

In other words, Smith recognized that it was power, and not productivity, that determines the outcome of wage negotiations, and power will generally favor “the masters.”

The third problem is that commutations, corrective justice, cannot account for production. Commutations are merely an exchange of ownership of commodities that already exist, such as when we exchange money for bread. But in the process of production, we deal with something that was not there before. When we take a tree and make some chairs, we bring something new into being. In this case, a principle that deals only with changes in ownership will not be sufficient. The problem of distributing the new chairs among the factors that had a hand in their creation can only be solved by distributive justice, by definition. Now this leads us to a rather amazing conclusion: modern economic science, the science of production and exchange, lacks a coherent production function!

Again, the economist will counter that he does indeed have a production function, and one that involves a high level of sophisticated mathematics. The function purports to claim that the inputs of capital and labor to production are rewarded according to their actual contribution to the process of production. But in fact, the function assumes what it ought to calculate, namely what the share of the production should go to each factor of production, I.e., its price. But instead, the function uses the market price as an input for each factor. That is, it uses as an input that which should be an output. It is an example of circular reasoning.

The economists are forced to use this because they are trying to calculate a quantity that simply does not exist, namely the “independent” contribution of capital and labor to production. Such independent contributions do not exist, at least not in a way that can be calculated, because all production is a social process, and apart from each other, and from a particular configuration of factors, no factor has any productivity whatsoever. To illustrate this point, take the example of a football team. A quarterback who can throw a ball a long distance with high accuracy under great pressure certainly makes a big contribution to his team. However, his individual contribution cannot be figured just from looking at his statistics. If, for example, you were to replace all his 250-pound linemen with 175-pound weaklings, he would spend a good deal of the game introducing himself to the opposing linebackers. His contribution is not independent of the other “factors of production” on the team. A manager who allocated all his personnel funds to the quarterback and left little for the line would lose both line and quarterback. A sensible manager has to make a judgment about the relative importance of each position on the team and allocate his funds accordingly. This judgment is guided by the statistics, but is never reducible to them. There are indeed, individual contributions to the team, but their worth can only be judged in relation to the particular configuration of talents on that team.

Therefore, economic science, lacking a coherent notion of distributive justice, is not and cannot be a complete description of any actual economy. Hence, we are not surprised to learn that 90% of economists missed the coming of the current disaster, and the few who did note it were marginalized and ridiculed. Further, we can note that 90% missed the last train wreck, and the wreck before that, etc. Clearly, you cannot accurately predict the behavior of a system you cannot accurately describe.

Now, if what I have said so far is correct, then there are compelling reasons for the economic scientist to enter into dialog with theologian. We see throughout this encyclical that Benedict insists on the priority of distributive justice, and if the economists wish to include this notion, as they must if they are to have an adequate description of the economy, they must come to us, they must take up the dialog. However, this fulfills only half of Benedict's requirements, for so far we have dealt with the natural virtue of justice. But the Pontiff insists on the super-natural virtue of love. That is to say, we still have to face the Tina Turner question. Is the economist entitled to draw the line at this point, and say, “So far, but no farther; we do not need to understand love to understand the economy”?

Let me start by suggesting that a group like this can grasp intuitively the Pope's meaning. For while most of you are masters of the highest science, theology, you do not command the highest salaries. Or at least you wouldn't at my university. And yet I suspect that this is not a problem for you. For while your salary funds your research, it is not really the reason for it. What you do is offer your gifts to the common good, a task for which a salary is a necessary, but not a sufficient explanation. You spent many difficult years acquiring your skills, you teach, you research, you write, you come to conferences like this for reasons that must always exceed the compensation. Your work is a gift that the salary makes possible, but cannot possibly explain. It is ultimately a matter of love.

Does this fact of our profession have any application to the business world? I believe that it does. The entrepreneur may proclaim, in gruff tones, “I am in business to make a profit!” And this is the truth, for without making a profit, no one can be sure that he is producing a useful product or allocating his resources correctly. But even as the businessman makes this statement, he knows that it is not the whole truth, except in pathological cases. The entrepreneur knows that his work involves a range of values, such as expressing his own creative skills, supporting his family, supporting his associates and his community.

Now, with all of this as background, it is easier to see what Benedict means by gratuitousness. The worker and the entrepreneur offer their services to the community, and offer it in solidarity with all the other stakeholders. On the mere level of exchange, this is of course covered by the rules of contract, by the laws of supply and demand. Nevertheless, “in commercial relationships the principle of gratuitousness and the logic of gift as an expression of fraternity can and must find their place within normal economic activity. This is a human demand at the present time, but it is also demanded by economic logic. It is a demand both of charity and of truth" (36). This “logic of gift” does not negate the logic of exchange or the logic of duty or law, but transcends them both. It allows us to see our work in a new light, and thus enlightened, to contribute our talents to the commonwealth and the common good. This common good involves building not just a business, but a culture internal to that business devoted to the common good of the firm and the community it serves.

But as lofty as this vision is, are their any concrete examples? Yes, there are. We can speak here of such enterprises as the Mondragón Cooperative Corporation of Spain, a 50-year-old collection of cooperatives that do over $24 billion in sales, or the cooperative economy of Emilia-Romagna where worker cooperatives provide 40% of the GDP. Wages are about twice the average for Italy and the standard of living is among the highest in Europe. But I would like to focus here on an American company, the Springfield Remanufacturing Company (SRC) and its founder and CEO, Jack Stack.

In founding his company, Mr. Stack recognized that the first task was cultural:

People can accomplish almost anything if they have a common purpose, a higher goal, and they all know what it is, and they’re going after it together. Everybody needs to be going somewhere. People need a destination, or they get lost. It they have one, however, and if it’s really their own, there’s no telling what they can do. They can survive the darkest hours, beat the longest odds, scale the greatest heights.²

Building a common purpose, a goal that is owned and shared by all members of the firm, is the primary task in building a company culture, and hence of building the firm. What Mr. Stack especially wished to avoid was what he called “employee thinking,” that is, thinking only about one’s job or at best, one’s department, without considering the common purpose, the good of the whole firm.Yet, this is precisely the kind of thinking that most of us have been taught, both formally and informally. It is the kind of thinking implicit in Milton Friedman’s shareholder model of the firm, which states that the sole purpose of a firm is to improve the stock price. After all, if only the interests of the shareholders count, then there can be no common purpose that involves all members of the firm. But this kind of thinking, Mr. Stack says, is capable of destroying the company from within.

What Stack set out to create was a community of entrepreneurs, rather than just a collection of people with jobs; indeed, Stack wanted to do away with “jobs” and the employee mentality altogether.³ But the primary problem is that people have been trained to see themselves in terms of jobs rather than entrepreneurs; they see themselves as merely performing a function for somebody else, usually somebody very remote. Creating this community meant realizing that the business was not an end in itself, but a means to an end, “a tool that allows us to accomplish the things that matter most to us, and those things must transcend business to have real meaning and value.”⁴ To accomplish this goal, to create this community, SRC used two means: education and equity-sharing.

To educate the members of the firm (it would be wrong to say “employees”), Stack invented a system of informal but continuous education he called The Great Game of Business. If the workers are going to take responsibility for the firm, they must know the rules of business, and the Great Game was the means of teaching them these rules, from the simplest to the most complex. As Stack evaluates the results of this “game,” he notes that “we’ve had dozens of employees rise from the shop floor…to top management positions, and they’re far better qualified than a lot of MBAs I see.”⁵ The game required that the firm practice open-book management. If all members of the firm are to be responsible for the firm, then they all must have equal access to the books. Further, you cannot truly educate employees unless they can see how their actions affect the firm, and this is impossible without looking at the books. But the greatest benefit, as Jack Stack notes is that, “When you open your books—really open them—you also open your mind, and neither your mind nor your books will be closed again.”⁶

Continuous education and open-book management frees the firm from the constraints of the division of labor, which confines each worker to just one task, and from the quasi-militaristic “top-down” management, which confines responsibility to just one group. The results of this culture at SRC have been nothing short of phenomenal. In 20 years, they went from sales of $16 million to $185 million, with similar results for profit and shareholder equity. But it is in the area of shareholder equity that the firm really stands out, because all of the shares are owned by the workers. The company has 727 worker-owners, of whom only five were original members of the firm. The other 722 shareholders own 64% of the firm. This point is crucial, because “owning their work” must involve real ownership, and not just some psychic substitute. Equity-sharing defines the community, a community built on the premise that all the members of the community must share in the wealth that the community creates.

Note how Jack Stack's experience of the firm aligns with Benedict's vision of the civilized economy:

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. Charity in truth, in this case, requires that shape and structure be given to those types of economic initiative which, without rejecting profit, aim at a higher goal than the mere logic of the exchange of equivalents, of profit as an end in itself. (38)

What is common to all of these examples is that ownership is shared among the members of the firm; there are no remote and outside owners that can impose the stock price as an alien value, the only one to be respected. The workers who own their firm are more likely to work to a broader range of values; they are more likely to be concerned with the common good, not only of the firm, but of the wider community. Further, distributed ownership solves the problem of distributive justice. Workers who are also owners are more likely in wage negotiations to take account not merely of their own needs, but the needs of the firm, which is to say, the needs of their fellow worker-owners.

We can also note that solving the distributive problem also solves the governmental problem. Where distributive justice is satisfied, there is less need, and indeed less space, for government involvement in the economy. For example, The Mondragón cooperatives provide their own social security networks, unemployment insurance, elementary and high schools, training institutes, research and development centers, and a university, all from their own resources and without government help. Here, then, is a great irony: in order to see laissez-faire in action, you will have to go to the distributists. Libertarian economics is the subject of many a learned tome, but it has no actual examples; distributism, on the other hand, has fewer tomes, but a great many examples.

Hence, I believe that we can state that Benedict's principle of gratuitousness is not at all alien to business, not some outside requirement imposed on the subject of economics. Rather, it does more to explain why people act than do all of the volumes on “utility” and “self-interest.” Because indeed, people act because they love, and act in the way that they love. It is quite true that in any individual, family, firm or society, love may be reduced wholly to self-love, and hence the precepts of utilitarianism will hold. However, such cases are exceptional, and when we see cases where self-love is the only allowable value, we say that the individual, family, firm, or society is dysfunctional, if not downright pathological.

So then, what's love got to do with it? Everything. And not just at the level of the moral order, but at the level of practical science and everyday business. For indeed, no humane science can be practical without it.

1 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Amherst, New York: Prometheus Books, 1991), 70.⁠

2J. Stack, A Stake in the Outcome: Building a Culture of Ownership for the Long-Term Success of Your Business (New York: Doubleday, 2003), 21.

3Ibid., 57-60.

4Ibid., 5.

5Ibid., 9.

6J. Stack, “Springfield Remanufacturing Company--The Great Game of Business,” in Curing World Poverty: the New Role of Property (Saint Louis: Social Justice Review, 1994), 9.

Fall of the Republic

2009-10-27T17:01:00.002-05:00

http://www.moviesfoundonline.com/fall_of_the_republic.php

New Michigan Distributist Group

2009-10-23T17:14:00.001-05:00

http://www.meetup.com/Michigan-Alternative-Economics-Group/calendar/11670695/

Beyond Capitalism and Socialism

2009-10-22T17:48:00.004-05:00

I tend to think I am doing something right if people from both ends of the political spectrum are rabidly attacking me. The notion that one ideological camp has a monopoly on truth and justice is repugnant to me, even if I lean one way or another at times. At the same time, I never enjoy seeing civil discussion degenerate into uncharitable attacks.

Attachment to labels is part of the problem I encounter when putting forth alternative economic ideas. People on the political right are as agitated by the mere word "socialism" as people on the left are by the word "capitalism". It doesn't help that both sides hold radically different definitions of each word.

I'll start with the right. On the right, "socialism" (or these days, "fascism" as well) is what happens whenever government gets involved in the economy in almost any way, shape or form. But how it is applied is usually very selective - I doubt the average "tea party" protester would call Benjamin Franklin a "socialist" for establishing the post office. Meanwhile, "capitalism" is merely the freedom to own private property, start a business and participate in the free market.

Next, on the left, "capitalism" is the root of all evil, and is what happens whenever a person makes money for themselves somehow. It is by definition exploitative and must be either violently overthrown or withered away through government intervention. How it is applied is again very selective; if a business is "green" or "socially conscious", enough leftists may look the other way for it to be acceptable among their numbers. Meanwhile "socialism" is what happens when ordinary people, instead of fat cats and tycoons, have control of the economic system.

I realize of course that I simplify positions here a great deal, and that not everyone identifying themselves as left or right would necessarily agree - my apologies, but not every possible permutation can be explored in a small blog post. There are people on both sides who understand that political realities, not to mention political history and political theory, are far more complex than the rhetoric that emerges from popular movements, magazines, news shows, etc.

The point here is that the two sides have more in common than they realize. How the right typically understands capitalism, and how the left typically understands socialism, consist of two ideas that are not that radically opposed to one another. So it may be time to take a cue from my favorite political theorist, Aristotle. In the Politics, Aristotle presents us with the "true" forms and the false forms of each system of government. For Aristotle the possibilities are rule by a single man, rule by the few, or rule by the many.

Each of these types has a true form and a false form (which today, I suppose, we would substitute for a good form and a bad form): the true form of rule by a single man is monarchy, while the false is tyranny; the true form of rule by the few is aristocracy while the false is oligarchy; the true form of rule by the people is constitutional government, while the false is democracy. How Aristotle used these words and how we use them might vary to some degree; we might say democracy is the true form while anarchy or mob rule is the false form of rule by the many.

Might I suggest, in keeping with Aristotle's approach, that there are true forms and false forms of both capitalism and socialism? I think most of us already understand what they would be, but here is how I would set them forth: the true form of capitalism is "free enterprise", defined by the freedom to own private property, start one's own business, and engage in trade, while the false form is "plutocracy", defined by rigid economic stratification, the subordination of all social interests to the profit motive, and the disproportionate power of wealthy corporations. On the other hand, the true form of socialism is "economic democracy", whereby the people have varying yet substantial degrees of ownership and control of economic processes, while the false form is "command economy", whereby the state has the lion's share of ownership and control.

If we can at least temporarily agree to this understanding of terms, we might then take our next cues from a group of political theorists that looked to classical theorists such as Aristotle, among others, as they set out to apply their ideas to the real world: the American founding fathers. As students of their political thought may already know, the founders were interested in combining each of the true forms of government into a single system in order to get the best of each - monarchy, aristocracy, and what we would today call democracy each had a representative in the structure of the new American government. A system of checks and balances were to hold each element in its proper place, and prevent them from degenerating into their false forms.

Can the same be done with economic ideas? I believe it can, and I believe we find the answers in Catholic social thought, and particularly Distributist thought. Here the true forms of both capitalism and socialism are combined in a way originally envisioned by Aristotle himself, while the false forms are rejected and held in check. What I defined as "free enterprise" and "economic democracy" above are entirely compatible, provided only that society - be it through a national or, better yet, local government - have as its practical aim the gradual elimination of the unskilled or semi-skilled labor market by providing as many positive incentives as possible for the establishment of Employee Owned and Controlled Companies (EOCCs).

Why the labor market? Because it is here that human beings are ultimately reduced to the amount of profit they can provide an employer. Within Catholic social thought, labor always has primacy over capital - the human rights and dignity of the worker always take a great moral precedence over profit. When a worker is reduced to a cog in a profit-making machine, to be granted the necessities of life while it is convenient and yet denied them when it is not, it is a violation of human rights.

And yet the elimination of the market in unskilled labor would not deny anyone's right to private property, their own business, or trade in material goods. It simply means that a person who wishes to profit for himself by such means must now be a person in search of partners instead of a buyer in search of a "means of production" in human beings. This again must not be done in a single day in order for it to remain a goal towards which workers, investors, entrepreneurs and politicians alike can work towards. Between the typical business and the one envisioned, there are many transitory forms (profit-sharing plans, Employee Stock Ownership Plans, etc).

To those who might complain that this would result in less effective or efficient businesses, I would point to research that clearly shows that there is a positive relationship between ownership and productivity. When people are treated like people with dignity - even if not as equals in every respect - they do their jobs better, and everyone benefits. The reason for this should not be surprising to Christians; it is God who made it such that we should live in society with one another, and God who commands us to love our neighbor as ourself. God would not command that which was detrimental to ourselves. The moral law is not only good, but results in good.

To achieve these ends it is absolutely necessary that we change the way we think and speak. We must begin to agree upon the meaning of words and phrases so that petty disputes are finally put to rest. Leftists and rightists alike must embrace the true forms of the economic systems they criticize, and more loudly condemn the false forms. They must seek points of contact and agreement, and I think this can be done by finding ways to marry free enterprise to economic democracy while holding plutocracy and command economy at bay. In spite of our differences on other moral issues, particularly sexual ethics, modern technology offers us ways in which both freedom and equality, the rallying points of right and left respectively, can be effectively and efficiently combined.

Jib-Jab on Big Box Mart

2009-10-16T16:09:00.000-05:00

This is a real delight:

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Drying Clothes

2009-10-15T11:03:00.006-05:00

It's long been a matter of public knowledge that almost every "homeowners' association" in the United States forbids its members from hanging their clothes out to dry. Hanging clothes outside? Allowing the sun to dry them? Surely only the riff-raff engage in such foolishness. Use an electric dryer, or move to a trailer park!

Well, maybe not; some trailer parks don't allow it, either. I suppose those trailer parks have a different class of riff-raff; the upper crust of the lower crust, if you will.

The theory is that hanging clothes will decrease property values. After all, we can't have those dryerless hoi polloi in our neighborhood; if we've got those people here, then clearly this isn't the type of neighborhood we thought it was. A neighborhood, by this theory, is better, and thus the property values higher, the richer the people who live therein. Rich people have dryers. So we simply must keep out the people who don't have dryers, or our house won't appreciate, and we won't be able to flip it for twice its price in three years when we move to a still better neighborhood with still richer people living in it.

The distributist has to ask himself: what sort of people have we become? It's bad enough that we're so inorganic we refuse to rely on nature for anything ourselves; have we really become so antiseptic, so privileged that we refuse even to live next to people who might have a little less than, or choose a little differently from, ourselves?

We're not talking about someone amassing large quantities of dead cars to rust in his front yard; this doesn't involve a dog barking all night and bothering the entire neighborhood. It's not even a particularly unsightly paint job. This is people drying their clothes. This is people performing one of the daily and necessary tasks of existence, and using God's own dryer to do it. Granted, it doesn't match well with the chemical lawns and shiny SUVs that mark American's suburban wastelands, but surely hanging clothes out to dry is natural and good, a necessary function of life for those who choose not to buy an electric dryer.

Are there not many good reasons to choose to forgo this luxury? Dryers are expensive; perhaps a family's broke down, and they determined it was better to hang their clothes out than to go into or further their debt repairing or replacing it. Perhaps they decided they didn't want to waste the energy required to run such a power-hungry machine. Perhaps, most admirably, they wanted to increase their independence from power companies and appliance manufacturers and repairmen, trying to stay closer to God's nature than a complex machine performing such a basic task would allow. Why should anyone want to insert ordinances or regulations into such decisions? Aren't independence and frugality things we should be trying to encourage?

Still, while forbidding the hanging of clothes may be obnoxious, it's hardly pernicious. But these regulations don't stop there; they go well behind mandating a minimum wealth and consumption standard in order to actively discourage independence and production. Take, for example, the small-scale raising of livestock. Many single-family lots are sufficient to support a goat or two, or a few chickens, in a sanitary and beneficial way. This would provide families with valuable milk, eggs, meat, or even wool, all commodities which are constantly increasing in price. Producing food is a basic and everyday economic activity; indeed, it is the most basic and everyday economic activity of all. Nothing could be more conducive to economic independence. Yet in most urban and suburban areas, local ordinances prevent nearly all useful animals from being kept by citizens.

Generally our leaders cite sanitation as grounds for preventing citizens from exercising this kind of economic independence, just as aesthetics are cited as grounds for preventing citizens from hanging their clothes to dry. But why not then forbid unsanitary keeping of animals? Wouldn't this fit the purpose, without preventing the vast majority, whose animals would be kept in a sanitary and cleanly manner, from performing such a basic economic task? Don't we want to encourage our citizens to be productive and independent?

The answer, sadly, is no. Our society does not want productive and independent citizens; it wants consumptive and dependent ones. It wants us to depend on our bosses, to keep us laboring for others to make the money that we'll spend on ever-more-expensive necessities and ever-more-numerous luxuries. Luxuries like, for example, the electric dryer. A clothesline? That couldn't have cost very much! How does that help the economy?

As citizens subject to such intrusive and unjustified laws and regulations, we should voice our objections to our local and state leaders. Let's change our laws to encourage production, action, and economic independence, rather than mere consumption, passivity, and dependence. But more importantly, let's buck the trend and begin to actually produce some wealth, rather than merely consume it. Distributism, like all real reform, begins in the home.

Praise be to Christ the King!

Postscript: It appears the link about trailer parks forbidding hanging clothes out to dry, once publicly available, as been restricted by the Gray Lady. Apologies. Essentially, it recited a story about a trailer park resident who wanted to hang her clothing out to dry in order to use less energy, but was forbidden by the local regulations.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.

Is Economics a Science?

2009-10-10T16:19:00.001-05:00

One salient fact about this recession is that 90% of the working economists missed the warning signs, and those who predicted a disaster were marginalized and ridiculed. This, however, is not surprising; 90% missed the last disaster, and the one before that, and the one before that, etc. With that in mind, do we not have warrant for suspecting that economics is not a complete science and is unable to give us real information about the economy?

The Roman pontiffs have long insisted that something was missing. They have insisted on the role of distributive justice in economics. Beginning in 1891, with Leo XIII’s Rerum Novarum, they have insisted on the just wage as the basis of economic science, a position that has been repeated by every pope since Leo. The economists, on the other hand, have always found this problematic. A just wage can make no sense, since the wage is just the price of that particular “commodity” known as “labor.” Clearly, there is a dispute here about the nature of economic science. Given that the economists are presumed to be the experts in their own field, is there any reason for them to take the claims of the Roman Church seriously? In other words, can they subject their science to the moral claims of the Church and still be scientists, or would they be like Galileo, forced to recant what they know to be the truth?

Benedict XVI, in his latest encyclical, Caritas in Veritate, locates precisely the source of the disagreement.

The market is subject to the principles of so-called commutative justice, which regulates the relations of giving and receiving between parties to a transaction. But the social doctrine of the Church has unceasingly highlighted the importance of distributive justice and social justice for the market economy, not only because it belongs within a broader social and political context, but also because of the wider network of relations within which it operates. In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well. (35)

By insisting on the priority of distributive justice, the Pope poses a special problem for the economists, a problem that goes back to the late 19^th century. At that time, the study was known as political economy, a discipline firmly located within political and social structures. However, many practitioners of the discipline felt that this was far too “philosophical” and hence insufficiently scientific. In order to become a true science, they would have to reduce economics to strict calculations. In order to do this, they reduced all economics to a science of exchanges, that is, to commutative or corrective justice alone. The economy was to be modeled as a series of exchanges governed only by free contract and beginning with “an exchange with nature.” The absurdity of originating production with such an exchange is made clear when we ask, “Who negotiates in nature's behalf, and what, precisely, does nature get in return? “Dear mountain, please give us your coal, and we will give you this nice slag heap in return.”

But leaving aside the question of the exchange with nature, the new economists claimed that exchanges under free contract would result in workers getting a fair wage and capital getting a fair return. There would be no reason to bring up the messy questions of distributive justice; commutative justice, the justice that regulates exchanges between individuals and firms is sufficient to guarantee fair returns to labor and capital. “Fairness” was built in to the system, because free contracts are always fair, or so the theory has it.

All this seems very reasonable, but it is not. There are at least two problems. The first problem is that commutations deal only with change in ownership of already existing commodities, such as when we exchange money for bread or labor for money. But the first problem for any economics is not exchange, but production. Before the bread comes into existence, it must be produced by human labor. When we take a tree and produce a set a chairs, we call the chairs into being; we are dealing with something that did not exist before. The great question of economics is how to divide this new thing among those who had a hand in creating it. Production produces values that did not exist before, hence commutations cannot answer the question, “How many of the new chairs should be given to the labor that produced them or to the owners of the tools by which they were produced?”

This is a matter for distributive justice. The problem that the new economists had with distributive justice is that it can never be (as Aristotle pointed out) a matter of calculation, but a matter of judgment, and different social arrangements would produce different answers. This reliance on reasonable judgments struck the new scientists as unreasonable, and certainly as unscientific. Without being subject to a strict mathematics, economics could never be “scientific.”

The problem of trying to describe production as a series of exchanges came to a head in the 50's with the so-called “capital controversies.” Simplifying a very complex argument, the debate dealt with the adequacy of the standard production function, with purported to describe the appearance of new things by the function P=∫(K,L), where K aggregates all the different exchanges of capital and L of labor. However, K cannot be used directly in the formula, since capital comes in various shapes and sizes (trucks and tools and raw materials, etc.) without any common denominator. So in aggregating capital into the formula they used the price of the various capital goods. However, this turns out to be circular: The price of capital depends on the return to capital, but the formula is supposed to determine that return. In other words, in order to use the formula, you would first have to know the results of the formula. In trying to deny the role of reasonable judgments, they had to sneak a judgment into the formula. The whole thing is self-contradictory.

The interesting thing about the capital controversies is that the defenders of the commutative production function admitted defeat. In fact, Paul Samuelson, the leading economist of his day and chief defender of the function, not only admitted defeat, he actually refined the mathematics to show how the formula was internally self-contradictory. Samuelson did make some corrections to his textbook, but nevertheless the formula is still taught as if the controversies had never taken place. Why? Because there are no other alternatives available within a pure theory of exchanges.

This leads to a startling conclusion: Modern economic science—the science of production and exchange—lacks a coherent production function! And lacking such a function, it can never be a complete description of any economy. Hence, it can never accurately predict the course of any economy nor make any rational policy recommendations. Now we can understand how 90% of the economists fail to see its most obvious failures: they simply lack the tools with which to do a complete analysis of the economy.

The irony of this is that political economy become economics in the name of scientific computation, only to end up with a formula that can't be computed. In attempting to explain everything in terms of numbers, they explain nothing at all. But they needn't have worried for computation's sake. Although distributions depend on judgments, or on power, the results can be computed and compared. For example, if it is determined that labor ought to receive no more than bare subsistence, then economists can accurately compute the results, most likely in terms of over-supplied capital markets and under-supplied consumer markets. And if it is decided that the capitalist shall live in rags and the worker as a king, then the under-supply in capital markets will reduce everyone to rags.

If the positive claims of economics break down, so do the normative ones. Fair contract, the argument goes, is supposed to ensure fair wages, but Adam Smith destroyed this argument. In any dispute over wages,

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms....A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.

In other words, wages depend not on productivity, but on power, and the more powerful party will prevail. Contract alone cannot insure fair wages. And without fair wages, there will be an oversupply of capital and a shortage of demand, and a recession is the result. Recessions can be delayed by using government spending to prop up demand, or by usury, that is, by supporting demand by consumer borrowing. But both of these methods have their limits, and we are smack up against the limits of both remedies in the current crises. It is precisely this double failure which makes this recession so persistent.

With all this as background, we can ask, “Is economics a science?” The answer is, I think, “not in its present form.” The present form takes its cues from physical science, a science that rarely ventures into questions of justice. But economics, if it is to be a science, must obviously be a humane science, and such sciences cannot avoid questions of justice. This is to say, economics ought to be a science; it ought to be the science of political economy. In pointing to the importance of social and distributive justice, the Church is speaking only as a moral authority; but in doing so, she turns out to be a pretty shrewd economist. The moral requirement is not, as Benedict points out, something that is added to an otherwise complete science, but something that lies at its very core, and without which it cannot be a science at all.

Obama's Nobel Prize

2009-10-09T10:46:00.000-05:00

"When small men cast long shadows, you know the sun is setting."
--Lao Tzu

I Can't Read My New Book!

2009-10-04T11:08:00.004-05:00

My new book is an anthology of writings on economic liberty. Unfortunately, I’m not actually able to read the published edition, since it is in Romanian. My co-editor, Dr. Ovidiu Hurdezeu, asked me to put this anthology together to introduce Distributism and other localist economic ideas to the Romanian people, which should prove fertile ground for such ideas. Indeed, before the darkness of World War II and the communist occupation of Romanian, there was a vibrant peasants’ party in Romania, as Alan Carlson has noted in his Third Ways. Dr. Carlson has an essay in this collection. The title of the book translates as Economic Liberty: A Profound Romanian Renaissance.

Today, the Romanian economy is in shambles, with a government that is hostile to Romanian culture in the name of becoming “Europeans,” that is, subjecting the Romanian people to the bureaucrats in Brussels. The Romanians (and everybody else in Europe) can do better.

I will be in Romania for 10 days at the end of November to promote the book and the ideas contained in it. Romanian readers of this blog are invited to contact me for details of the trip.