Capitalist-Socialist-Distributist Conference

Dear friends,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Mondragón and the Current Crises

We all know how American businesses are handling the crises: layoffs and bailouts, if they can get them. But how about the Mondragón Cooperative in Spain? Does it not face the same pressures? According to the Financial Times, one of the world's most respected business magazines, the Cooperative is taking another approach:

Fagor is a workers’ co-operative, one of dozens that dot the valleys of Spain’s hilly northern Basque country. Most belong to the world’s biggest group of co-operatives, the Mondragón Corporation. It is Spain’s seventh-largest industrial group, with interests ranging from supermarkets and finance to white goods and car parts. It accounts for 4% of GDP in the Basque country, a region of 2m people. All this has made Mondragón a model for co-operatives from California to Queensland. How will co-ops, with their ideals of equity and democracy, cope in the recession?

Problems may be shared with competitors, but solutions are not. A workers’ co-op has its hands tied. It cannot make members redundant or, in Mondragón’s case, sell companies or divisions. Losses in one unit are covered by the others. “It can be painful at times, when you are earning, to give to the rest,” Mr Zabala admits. Lossmaking co-ops can be closed, but members must be re-employed within a 50km (30-mile) radius. That may sound like a nightmare for managers battling recession. But co-ops also have their advantages. Lay-offs, short hours and wage cuts can be achieved without strikes, and agreements are reached faster than in companies that must negotiate with unions and government bodies under Spanish labour law.

Of course, Mondragón has seen this before. In the 80's, when unemployment in the Spain reached 27% and businesses where closing all over, they managed to survive with only a 0.6% unemployment rate, and only had to close three of the 103 cooperatives that made up the corporation at that time. And the three they closed were coops that had started just as the troubles began, and never reached profitability.

What distinguishes the cooperative approach from the corporate one is the notion of shared responsibility, which means shared gains and shared pains. In the United States, we have socialized the pains, and privatized the gains. Workers are also the owners, and they are able to make difficult decisions in a way that our corporations cannot. But then, there is very little difference, socially, between the highest and lowest in the company. The top pay is limited to eight times what the lowest worker makes (giving management a real incentive to keep the lowest pay relatively high). Compare that with the 300-500 times times the average wage an American CEO typically "earns."

Everybody can claim to have a good system in good times, but it is the times of trouble that really test theories. In the crises of the 80's, Mondragón passed with flying colors. the American banks restricted lending and sought bailouts; The Cooperative Bank (Caja Laboral) extended credit and took an active role in rescuing cooperatives in trouble. They went through the crises together, and survived it together. History is repeating itself, I suspect, only this time Capitalism may not be able to bail itself it.

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A For-Profit Organization That Embodies Catholic Social Thought

Here is a comprehensive review of the mechanics of the Spanish Mondragón Cooperative, and how their system relates to Catholic Social Doctrine.

Two years ago, San Sebastián's Bishop Juan María Uriarte opened the cause for canonization of the founder of Mondragón, Fr. José María Arizmendiarrieta.

Mondragon Cooperative

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Emilia-Romagna Cooperatives

Here is an interesting PDF on the cooperative businesses in Emilia Romagna, Italy. There are nearly 3,000 employee-owned cooperatives in the region, with the Communist Legacoop and the Catholic Confcooperative among the leading organizations.

Emilia Romagna

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Industrial-Strength Distributism

Some critics charge that Distributism is only suitable for small-scale and primitive economies, or "back-to-the-farm" movements. It is quite true that Distributists would like to see more small-scale and distributed production, including farm production. However, it has been known for quite some time now that Distributism works on large manufacturing, financial, and distribution firms. In fact, one of the advantages of Distributism is it "scalability." It works on both the small scale and the large.

The final proof of this is actual, large-scale firms built on Distributist principles, which are far more common than is generally known. But the grand-daddy of them all is the Mondragon Cooperative Corporation of Spain, an industrial complex of worker-owners inspired by the Basque priest, Fr. Jose Arrizmendiarieta. Rich Aleman brought this film to my attention, a film which gives an overview of the Mondragon operations. Here it is, in two parts:

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PHILIPPINES CONTINUES TO LEAD THE WAY

One of the hallmarks of a Distributist economy and state is the fostering and strengthening of the cooperative sector. The poor and middle classes pool their resources and talent together to life themselves out of economic misery. And it is done without big government micro-management, which is one of the black marks of a Socialist, Communist or Fascist state.

It is among the nations of the Third World that the promise of a Distributist Earth shines brightly. And among them, the Philippines seems to be making rapid progress. According to a October 19th press release from the Philippine government’s Information Agency, President Gloria Macapagal-Arroyo praised the nation’s cooperatives for strengthening the national economy. In her speech to a cooperative summit in the city of Alabel, the President noted that the coop sector injected - in American currency - about $226 million in capital investments. She also said that the Asian nation would need "a vibrant middle class if we are to reach the verge of the First World in 20 years."

If such great vitality can spring from the cooperative sector for a growing economy like the Philippines, what more can it do for the American economy? Or Russia’s? Or Britain’s? And this is only a part of what Distributism - and the insights of Belloc, Chesterton and their legitimate successors - can do for the world’s nations.

Congratulations to the Philippines’ cooperative sector! May you all learn about Distributism and promote it to your countrymen - and to all of Asia!

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Fire the Boss!

In my last post, I discussed the Acton Institute film, The Call of the Entrepreneur. This compelling but intellectually shallow film converted entrepreneurship from a call to a cult, in my opinion; it treated the entrepreneur as a rarefied and special class of individuals crucial for the success of any economy. In this post, I review a film that takes the opposite tack, that bosses are not really necessary, and the ordinary workers possess the entrepreneurial skills necessary to run the most complex operations. Of course, this is not a new theme. The success of such enterprises as the Mondragón Cooperative Corporation in Spain, or the entire economy of Emila-Romagna, have long proven the success of the worker-manager to produce and manage complex products at a rate of return higher than the so-called “free market” enterprises, and to do so with fair wages and high social services.

The film is called The Take and is shot in Argentina, where, in the 90's, the United States and the IMF forced a program of economic “liberalization” on the country. Government enterprises were sold off, budgets reduced, social spending cut to bone, taxes on wealth reduced or eliminated, etc. The results, in Argentina as in so many other places, was a disaster. After some initial successes, the economy collapsed, which idled thousands of factories and businesses. The rich were allowed to ship all of their money out of the country, while bank accounts for ordinary Argentinians were frozen, so that people could not get at their own funds.

As the factories were being idled, and the workers laid off, usually with millions of pesos in unpaid wages, one group of workers at a suit factory refused to leave. They took over the factory and kept on producing and marketing their products. They made the bankrupt company a successful enterprise. Of course, there was one little problem: they didn't own the place legally. But they got so much support from the public, that the politicians deemed in inadvisable to evict them, at first, and later attempts to do so resulted in riots. Laws were then written to which could make expropriation possible under certain circumstances.

What is crucial here is that the workers here are not the vanguard of some ideology; they are not socialists, or communists, or libertarians, or even distributists. Rather, they are just workers, whose desperation forced them into desperate measures. But their actions did found a movement, and 180 closed factories and businesses have been taken over by the workers. Many of these enterprises exist in legal limbo and face a hostile government and court system. Nevertheless, they have made a success of it, and made it without bosses. The workers manage the companies democratically and set their own wages, policies, and decisions. They seem to be doing just fine without either bosses or government subsidies.

Many socialists have backed the movement, but in fact this seems to be the opposite of socialism, or at least of state-socialism (Marxism); it is not the government taking over the means of production, but the workers themselves. In fact, it seems to be a return to the libertarian and distributist ideal of self-organizing communities, able to manage their own affairs without help from either government or corporate bureaucracies.

But does that still leave a moral problem? Is expropriation just a fancy word for stealing? In the particular cases involved here, likely not. In the first place, the old owners left millions owed to the workers, as well as to the government, and on these grounds alone the workers have a valid claim on the properties. Further, the special treatment given to the rich by the Menem government, treatment that was nothing less than the transfer of funds from the public purse to private fortunes gives the public in general and the workers in particular another claim on these factories. But in the more general case, we must consider the purpose of property. Private property is meant to serve the common good by making the productive capacity of the earth more plentiful and more available to all. The words of John Paul II in Laborem Exercans are useful here:

The above principle, as it was then stated and as it is still taught by the Church, diverges radically from the programme of collectivism as proclaimed by Marxism and put into pratice in various countries in the decades following the time of Leo XIII's Encyclical. At the same time it differs from the programme of capitalism practiced by liberalism and by the political systems inspired by it. In the latter case, the difference consists in the way the right to ownership or property is understood. Christian tradition has never upheld this right as absolute and untouchable. On the contrary, it has always understood this right within the broader context of the right common to all to use the goods of the whole of creation: the right to private property is subordinated to the right to common use, to the fact that goods are meant for everyone.

They cannot be possessed against labour, they cannot even be possessed for possession's sake, because the only legitimate title to their possession- whether in the form of private ownership or in the form of public or collective ownership-is that they should serve labour, and thus, by serving labour, that they should make possible the achievement of the first principle of this order, namely, the universal destination of goods and the right to common use of them. From this point of view, therefore, in consideration of human labour and of common access to the goods meant for man, one cannot exclude the socialization, in suitable conditions, of certain means of production. In the course of the decades since the publication of the Encyclical Rerum Novarum, the Church's teaching has always recalled all these principles, going back to the arguments formulated in a much older tradition, for example, the well-known arguments of the Summa Theologiae of Saint Thomas Aquinas (Summa Th., II-II, q. 66, arts. 2 and 6; De Regimine Principum, book 1, chapters 15 and 17. On the social function of property see Summa Th., II-II, q. 134, art. 1, ad 3.).

In the light of the above, the many proposals put forward by experts in Catholic social teaching and by the highest Magisterium of the Church take on special significance: proposals for joint ownership of the means of work, sharing by the workers in the management and/or profits of businesses, so-called shareholding by labour, etc.

And his words from Centesimus Annus would seem to provide a clear warrant for the actions of the workers:

Ownership of the means of production, whether in industry or agriculture, is just and legitimate if it serves useful work. It becomes illegitimate, however, when it is not utilized or when it serves to impede the work of others, in an effort to gain a profit which is not the result of the overall expansion of work and the wealth of society, but rather is the result of curbing them or of illicit exploitation, speculation or the breaking of solidarity among working people. Ownership of this kind has no justification, and represents an abuse in the sight of God and man.

In any case, the film raises the question of whether we really need bosses as much as we have been led to believe. Contrary to the cultic view of the Acton Institute, all men seem to have the spark of the entrepreneur within them, and it does not take the cut-throat world of competition to bring it out. Rather the opposite seems to be true: in a spirit of cooperation, companies flourish even when the “bosses” drive them to bankruptcy. As on of the workers in the film says, “We don't know why accounting was such a problem for the bosses; we are able to do it easily enough.”

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