La Grande Illusion

The first rule in motion picture funding is “never use your own money.” Approach potential investors and get what you can from state and local grants. States pour millions into the movie industry each year. Why should Hollywood receive subsidies with worldwide box office receipts and home entertainment sales turning flops into moneymakers, and with 50 of the largest companies accounting for 80 percent of $55 billion in annual estimated returns? The film business is far from going under.

Don’t tell Hollywood. Armed with powerful lobby, top studios habitually complain before Congress about massive financial losses as a result of piracy, often using data from “independent” firms to support their claims. For example, in 2005 the Motion Picture Association of America commissioned a study reporting 44% decline in revenue due to college student piracy. Two years later, the same firm revealed the percentage was erroneous. Losses were closer to 15%. Other analysts say the actual figure is 3%.

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The Fall of the Wall

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.

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The Peasantry of the Future

In answer to the question, “What do the poor want?” Simone Weil replied “They want you to look at them.” I take Simone's answer to mean we must look at this poor person or that poor village, and see them in their actual situation. There are any number of people, of various political persuasions, willing to look at “the poor” and at “poverty.” They rarely look at actual poor people, which is just as well since they would not like what they see; what they would see are people with a very different set of values, values that are incompatible with the modern world. This is especially true of the poor peasant. Capitalist and communist alike are willing to do all in their power to ensure that the peasant shall not be poor, but only on the condition that he shall not be a peasant. They both promise to give him valuable things if only he will surrender his values.

This is certainly true of the Quechua-speaking people of the Peruvian highlands, descendents of the Inca empire but for centuries poor peasants living on the margins of the dominant Spanish culture. Having little to steal, Lima had little interest in them. And so they continued in their peasant ways on marginal lands in the mountains.

There were some willing to help. The Marxists, for example. They were more than willing to “improve” the lot of the peasant if only the peasant would become the new Marxist Man. This man had his roots not in the village, but in the National University of San Cristobal with a Maoist philosophy professor , Abimael Guzman, who founded the Sendero Luminoso, “The Shining Path.” The Senderistas unleashed a bloody civil war in Peru that ran from 1980 thru 1992, and brought Peru to the brink of collapse. Although there was some initial sympathy for the rebels, their antipathy to peasant values and their murderous violence against any who resisted, or were even suspected of resistance lost them any support. The villages were caught in between the rebels and the army, with each side abusing and murdering those whom they merely suspected of sympathy with the other side.

The capitalists of Peru were also willing to help, so long as the peasants know their place, that place generally being cheap labor and a marginal existence in the cities. More sophisticated capitalists, like the Peruvian economist Hernando de Soto proposed bringing the poor into the modern world by modernizing their property rights. In his popular book, The Mystery of Capital; Why Capitalism Works in the West and Fails Everywhere Else, DeSoto noted the vast amount of capital that the “poor” have in land, tools, and cash, an amount that exceeds the value of the Lima Stock Exchange. However, these values cannot be used as “capital” because the tenures are not formally recognized in law. DeSoto's solution is to speed up the process of land registration and convert all the titles into Lockean property which can then be used as capital.

The problem is that DeSoto does not recognize the complexity of village titles, which are a combination of communal and family plots. Even the family plots, however, are held through communal acknowledgment of the individual rights. The land is not so much held by the family as for the family. These complex community arrangements pose some problem for a purely individualistic notion of property. Adam Webb notes that the conversion of communal land into individualistic property

Opens up a fault line between those who want to get along and those who want to get ahead. Modern society is arranged to benefit the shrewd and competitive, those who can figure out how to manipulate the new rules of a larger society to their own advantage.

The result is likely to be what they have always been: a few large landowners and a mass of men without property, not to mention the complete destruction of community values.

Adam Webb has looked at the question of values. His first book, Beyond the Global Culture Wars was a masterful look at the clash of values that underlies our current conflicts with other cultures. In his new book, A Path of Our Own; An Andean Village and Tomorrow's Economy of Values, Webb, a Harvard-trained sociologist, takes the trouble to actually look at an actual village (Pomatambo in the Peruvian highlands) and actually bothered to get to know the people and find out what they want.

We cannot make the mistake of romanticizing the poverty of the villages. Their attachment to values does not preclude a desire for indoor plumbing and electricity. This requires development. But a development that destroys the values of the community is not likely to be real development at all. Indeed, economics cannot be divorced from values, nor efficiency from ethics. Those who sacrifice ethics for “efficiency” will discover that they have created an economy with neither, an economy destined to collapse, and that right soon. Indeed, that is what we are witnessing today. We are required by political correctness to simultaneously proclaim the efficiency of the market and avert our eyes from the massive bailouts and subsidies. But these are nothing new; they are part and parcel of the history of capitalism, as witnessed by the fact that in 1776, Adam Smith devoted 3/4ths of The Wealth of Nations to detailing the incestuous relationship between business and government. The situation has not noticeably improved since Smith's day. The bailout is a rather regular and recurring feature of capitalism, yet each time we are supposed to be shocked, shocked, and reaffirm our belief in the unaided market alone.

In formulating his solutions, Adam Webb draws on Western agrarians and distributists like Wendall Barry, Chesterton, Belloc, Schumacher, and the Mondragón experience, as well as Eastern distributists like Liang Shuming and Mohandas Ghandi. But Webb does fault these thinkers as being too devoted to place and particularity to the detriment of the universally held values that each of these particular places expresses. As he puts it:

The ethos of traditional peasant life is one of no-nonsense self-reliance, austere morality, self-command amid adversity, duty towards kin and neighbors, generosity, hospitality, participation, and the anchoring of one's livelihood in an atmosphere of decency and fairness. These virtues have been universally valued among peasant folk all over the world. The peasant community and its customs reflected such virtues and created the conditions for people to exercise them.

It is this universality of values that Webb sees as the basis for forming a counterweight to the individualistic (and highly subsidized) globalization that tends to destroy these values. His proposals for capitalizing the resources of the village, both at the communal and individual level, provides for both community and individual enterprises to flourish in an atmosphere that preserves rather than destroys value. Every system of values must have its economic and political expression in order to survive as a living entity, rather than as a mere cultural curiosity. The importance of this task cannot be underestimated.

Half of the world's population are still peasants. We normally conceive of the task of development as one of rescuing that half of the world from its poverty. But we should stand this viewpoint on its head: the real task is one of rescuing that half of the population who are still capitalists—or trying to be—from their unworkable and unsustainable materialism. It is not the capitalist who will rescue the peasant, but the peasant who stands ready to rescue the world from its no-longer viable capitalism.

Adam Webb has fulfilled Simone Weil's requirement that one actually look at the poor. He has done extensive work in their villages, and actually listened to what they actually wanted. The result is a remarkable book and a remarkable plan, one that recognizes both the values of communities and the modern potential of building on those values. An economy without values has no future (a point which I feel confident that Benedict XVI will make next week in his new encyclical), and no bailout of whatever size can rescue it. Rather, it will have to be rescued by those who still hold the values upon which a viable economy can be built.

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Capitalism as an Unnatrual System

Ever since capitalism made its appearance in the late Middle Ages and came to dominate both production and politics in the late 18^th century, there has been a vigorous debate on just what the nature of capitalism is. Central to these debates has been the question of capitalism's relationship to the state, and particularly the question of whether capitalism was an enemy or a child of the state. There have been no shortage of great names in this debate: Smith, Marx, Mill, Mises and many other great minds weighed-in with weighty tomes on the topic. Yet I do believe that the honor of formulating the question in the most succinct and elegant terms possible must go to Sorin Cucerai in his brief but powerful essay, “The Fear of Capitalism and One of its Sources,” in the May issue of Idei in Dialog. Mr. Cucerai is a libertarian philosopher in Romania, and his article is important because it is the most candid look at capitalism I have ever seen from an Austrian libertarian. [Note: the article is in Romanian, but for anyone who wants to read an English translation, please email me.] In but a few pages, and in a few powerful phrases, Mr. Cucerai captures the essence of capitalism and its relationship with the state.

Sorin's arguments are directed primarily at the “anarcho-libertarians” who, like the Marxists, would have a “withering away of the state.” However, the historical reality is that under “conservative” regimes the state grows as fast—or even faster—then it does under liberal and social democratic regimes. Indeed, only the communists could grow the state faster than the conservatives, and they grew the state until it collapsed of its own weight, a feat which the conservatives in America are trying to duplicate, and may yet succeed Certainly something odd is going on here. An historical reality that pervasive and powerful cannot be overlooked or ignored I the name of ideology. However, it must be noted that in “defending” capitalism, Mr. Cucerai raises questions that challenge its very legitimacy. Indeed, Marx in his attacks on capitalism never said anything as negative about that system as Mr. Cucerai does in its “defense.”

It is important to understand Mr. Cucerai's argument in its elegant simplicity. I summarize it as follows:

1. Men naturally seek direct access to the means of subsistence, usually in the form of their own land or tools.

2. This access makes a man less dependent on his neighbors and therefore less dependent on the markets.

3. But capitalism is the condition of dependence on the market for one's very subsistence. Therefore, “the fundamental condition for the existence of a capitalist order is the absence of the individual autonomy in the sense of owing the source of your food,” and of forcing people to seek a monetary source of subsistence. This is not a natural condition, as is owning one's own land, because “People do not search instinctively for a source of monetary revenue.” They do so only because they are forced to do so.

4. “Capitalism is made possible only if this natural process is interrupted by an instrument that makes sure nobody could have access to food and shelter unless a monetary revenue is used as an intermediary.”

5. “Therefore, the capitalist order is not natural. Such an order can be maintained only if there is an institutional arrangement which prevents the individual from not engaging in commercial relations through the agency of money.”

6. That “institutional arrangement” is a government that requires people to pay taxes and fees only in the form of money. Only the state can perform this coercive function upon which capitalism depends. “The source of the revenue gets prominence over the source of food; the commercial relations are widespread because, basically, it is impossible to avoid them.”

7. The state is necessary for another reason, namely that “free competition is as unnatural as capitalism itself.” In absence of the state, commerce would be a matter of rent-seeking, a behavior only government regulation can prevent.

8. Paradoxically, the “freedom and prosperity of capitalism” are possible only “by denying people direct access to food and shelter.” In order to have this capitalist “freedom,” we must be alienated from our own nature. But if this is done, then “he breech created between us and our nature- and between us and nature in general - open a space previously unknown to human freedom and it is a form of civilization.”

9. Because of this fundamental alienation from nature, “ any individual that lives in the capitalist order is a fundamentally precarious being, of a radical frailty. It is the precariousness of the one who has no firm ground under his feet.”

What is remarkable about this chain of reasoning is that it can be read as either an attack or a defense of capitalism. Indeed, it is difficult to discern, from within the argument itself, which way it will turn out. Mr. Cucerai offers only an instrumental defense of capitalism, namely that it will result in more goods and higher wages. Aside from the fact that such “consequentialism” is morally suspicious, at best, there is a question of whether the basis of comparison here is valid; one would have to compare the subsistence and security of a wage-based economy with that of a property-based economy, that is, of Mr. Cucerai's “unnatural” economy with a more natural one. We know that in 16^th century England, before capitalism came to dominate social relations, a common laborer could provision his family by 15 weeks of work, and a skilled laborer by 10. A century latter, after the closing of the commons and the seizure of the monasteries, which instantly converted England into a capitalist country, those numbers became 40 weeks and 32 weeks, respectively.¹ Moreover, in a global economy, it is necessary, to weigh the wages of the workers in sweatshops before reaching a judgment on this question. Further, the plain fact of the matter is that nations which fed themselves comfortably for millennium before the coming of the capitalists find themselves starving under Mr. Cucerai's “freedom.” But laying that question aside, we can address the strength of Mr. Cucerai's arguments.

The first point is that this is very much an Aristotelian argument, even if it reaches conclusions opposite to Aristotle, in its division of economics into “natural” and “unnatural” exchanges. For Aristotle, natural exchange was that necessary to provision the household, while unnatural exchange had money alone for its object. The first sort of exchange was “natural” in the sense of having a natural limit. For example, a man buying bread for his family will buy what he needs and no more. But a man whose object is not bread but money might buy up every loaf of bread and every grain of wheat in order to corner the market and set the price to his own advantage. Since there is no limit to such exchanges, Aristotle regarded them are “unnatural.”

The second point we can note is how well the arguments accord with the actual history of capitalism. The plain historical fact is that capitalism and government grow hand in hand; the larger the business entities, the larger the government necessary to protect them. This fact had already been noted by Adam Smith in 1776, in The Wealth of Nations, three-fourths of which is devoted to documenting the incestuous relationship between big government and big business.

The third point is that Mr. Cucerai provides libertarianism with something it normally lacks, namely a theory of government. Hence the performance of government can be judged against that standard of its proper function. One may not agree with Mr. Cucerai's definition of the function of government, but at least the standard is explicit; the question now comes under human intentionality and can therefore be controlled, at least in principle. For the anarcho-libertarians especially, government is despised in and of itself and hence every question of government becomes an “all-or-nothing” question. But framing the question in this way always works to the advantage of the “all” of the state, since in times of crises there are simply not enough nihilists to vote for the “nothing.” Thus, the increase of state power is always and everywhere the unintended consequence of libertarianism.

The fourth point is that Mr. Cucerai has accurately described the rule-bound nature of competition and exchange, and the fact that rules must be external to the market. Indeed, competition, properly understood, only works in a larger framework of cooperation, and this cooperation is expressed in agreement to rules which are imposed by institutions of common consent. Think about a football game. It is certainly a competition, and a violent one at that. Yet, it cannot take place without the framework of cooperation, namely, that all players will be bound by the rules and judged by referees who are not themselves players in the game. Unless the game stops when the referee throws the yellow flag, the game cannot really start. Without the referee, there can be no game, but only warfare, which will continue until one side is utterly defeated or even killed, at which point both the game and competition end.

The fifth point is that Mr. Cucerai has correctly identified monetization as foundational to capitalism. One historical confirmation of this point comes from the “hut tax” that the English imposed on their African colonies. The point of this tax was not revenue; indeed, it probably cost more to collect then it raised in income. Rather, its point was to force the Africans to get something they had never needed before: a job. The climate supported the people in relative comfort with relatively low levels of work, and the Africans, left to their own devices, were happy with this arrangement. But a money tax forced them to take employment in the English mines, plantations, and factories. The point of the hut tax was not revenue, but labor.

Finally, we can note that Mr. Cucerai has certainly given us an accurate description of capitalism, and all discussions of any system must begin with an accurate description. However, it is a description that leaves out one crucial element, an element that flows from the description but which Mr. Cucerai does not address. I will return to this point a little later.

All that being said, we still cannot determine whether capitalism under this description is a good or a bad thing. Indeed, do we really want a system that alienates man from his own nature and results in a “radical frailty,” a social arrangement in which we have “no firm ground under our feet”? There is a bleak, Orwellian character to Mr. Cucerai's description in which “freedom is slavery,” in which man has to be a wage slave in order to be free; in which he has to be denied access to the ground of his freedom (that is, property) in order to participate in “free” markets. But is this a proper definition of freedom? Is it even a proper definition of economics? I believe that the author has made two fundamental mistakes: one, he has reduced all markets to monetary markets, and; two, he has confused the “free market” and “capitalism” as if they were the same, when in actual fact they are more often things opposed to each other.

A purely “monetary” exchange market is problematic in several ways. The first has to do with the nature of money, which should be merely the unit of account for all the circulating goods within a given economy. However, money can too easily be manipulated apart from the market for real goods and services. The Americans have proved, beyond a shadow of a doubt, that trillions of dollars in financial wealth can be created without having any relation whatsoever to real wealth. Men who contributed not so much as a grain of wheat to the commonwealth are paid billions from the common purse in reward for their failure. And this was done by men operating in largely unregulated markets. Money, as a unit of account, is an abstraction, and the more abstracted an economy becomes, that is, the more monetized, the more easily it may be manipulated by those “in the know” about the mechanics of abstraction, and a completely monetized economy is the easiest of all to manipulate.

The truth is that man operates in several markets simultaneously, most of which are not monetized, and all of which serve are checks on the other. When all markets are monetized, all markets fail, and fail decisively, without any hope of recovery. The first market in which we operate is the gift economy of family and the community. We are first called into being by the ready-made community of the family, and from this community we receive a variety of gifts. Our being, to be sure, but also the gift of our name, our family, our language, our first moral perceptions, our first experiences of love and belonging, and so forth. This economy of grace (gifts) is the primary economy, and all other economic and social activity must be judged from the standpoint of how will it serves the family. Without this check, there is really no way to know whether the economy “works” in any concrete sense. A fully monetized economy erodes the gift economy of the family upon which the whole social order depends. Beyond this family economy, there are economies of community service, economies of political activity (in which votes are the medium of exchange), religious economies, and so forth. All of these depend on the economy of production and exchange (note both terms), and hence are checked by that economy, even as they provide checks for the exchange and production economies.

Mr. Cucerai states that capitalism “opens a space previously unknown to human freedom.” But what he does not mention is that this must be a very small space, one occupied by the possessor's of land and capital alone. That is why we call it “capitalism.” Indeed, the very fact of denying access to the means of subsistence to most men means that a few will end up in possession of the vast bulk of these means. This point flows naturally from Mr. Cucerai's own description of capitalism, but it is the crucial point which he has left out, and without which his description cannot be considered complete.

Not only is this concentration of capital bad morals, it is bad economics and bad social theory. It is bad economics because all market theory is based on the “vast number of firms” hypothesis, which states that production is spread over such a vast number of firms so that no firm, or no possible combination of firms, can have any influence on market prices; that is to say, they are all price-takers rather than price-makers. When you have consolidation in any industry, the whole basis of the free market collapses, and monopoly and oligopoly are the result.

But that is just a part of the problem. I will skip over Mr. Cucerai's preposterous claim that you can have, simultaneously, a rise in production prices and a fall in consumer prices, as if the later were not dependent on the former, to note that rising wages are not the norm in capitalism. Indeed, in the United States since 1973 the median wage has remained flat, even though productivity for all classes of labor has increased dramatically in the same period. This means that the workers are producing more goods, but must purchase them with the same rewards. Since this is not possible, the economy has resorted to three stopgaps to maintain consumption. The first is to put more family members to work, and to work longer hours. The second is to increase the role and size of government to absorb more of the output. And the third is simple usury (consumer credit); have the class that is over-compensated—that is, the possessor's of capital—simply lend the excess to consumers to soak up the excess goods. But all three methods have reached their logical limits. The family is working as hard as it can (to the detriment of that family life which the economy ought to serve), the government cannot expand much further without discovering those limits on expansion that the soviets discovered, and the credit system has collapsed. There is no further that we can go without changing the system.

Mr. Cucerai assumes rising wages in a free market. Capitalist defenders assume that “free contract” is sufficient to ensure such rising wages. But Adam Smith noted the problems with this theory:

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 more easily...A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year 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.²⁠

Thus Smith identifies actual wages as the result of a power relationship between masters and workers and not a result of purely “economic” forces; it is power, not productivity, that is arbitrated in a wage contract. An American CEO gets 500 times what the line worker makes not because he is 500 times more productive but because he is 500 times more powerful. The seamstress in a sweatshop gets a pittance not because her productivity is low but because her power is pitiful.

The power to negotiate a wage comes only with the power to say “no” to the terms offered, and this power comes only from the possession of an alternative to the wage. And only property confers this power. Where workers have their own property and can make their own way in the world, any wage contract they accept is likely to be a fair one, one that fairly rewards their productivity. But in absence of a real alternative, there is no real negotiation; you cannot negotiate if you cannot say “no.”

What a free market really requires is free men, and what men require to be free is access to their own means of subsistence, which is precisely what capitalism denies them. The proper ground of freedom is one's own proper ground, the very ground which Mr. Cucerai would cut out from under the worker. What is denied to the mass of men must fall to a minority of men, men who will then be the masters of society and the effective rulers of government, co-opting it to their own ends. This is what has happened. The higher the piles of capital gathered in a few hands, the thicker the walls of government necessary to protect that capital, and capital and government combine to limit freedom, to restrict property. Capitalism is therefore not to be confused with the free market, but to be identified as its mortal enemy, and to confuse the one with the other is to totally misunderstand the reality of modern economic, social, and political life.

Mr. Cucerai is to be praised for his almost unflinching look at capitalism, but he is to be critiqued because, at the last minute, he flinched, he looked away from the logical consequences of his own description to skip the crucial point upon which the whole discussion must turn. He went to the edge and turned back just a hair's-breadth from the truth. But we cannot turn back, for only if we have the courage to look at things as they are can we expect to have the strength to make them what they ought to be.

1J.E.T. Rogers, Six Centuries of Work and Wages: The History of English Labour (New York: G. P. Putnam's Sons, 1884), 239.

2Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Amherst, New York: Prometheus Books, 1991), 70

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The Midas Touch

A friend of mine sent this to me. It is a modern morality play, if the term “modern morals” is not itself a contradiction in terms.

PBS - Gold Futures - Rosia Montana from Lee Wilkins on Vimeo.

It is 54 minutes long. But if you haven't time to watch the film, let me summarize it for you.

Very simply, there is a gold mine in Rosia Montana, a village in Romania. This is not news; there has always been a gold mine Rosia Montana, and one can still explore the tunnels dug by the Romans, from whom Romania is named. Gold is not Rosia Monana's only form of wealth. The mountain also gives silver and copper, but even that is not the end of it. It is a place of stunning beauty, as you may see in the film, but it also has fertile fields, verdant pastures, and rivers brimming with fish. There is no end of the natural wealth and there ought to be no end of natural prosperity and happiness.

But there is not. There is, in fact, poverty. None of this is news. What is new is that a Canadian company wants to mine in Rosia Montana. But “mine” is perhaps not the right word. Rather, they want to destroy the mountain, and in destroying the mountain they must destroy the village. They want to replace the village with a lake of cyanide to reduce a ton of rock to a grain of gold. In only 17 years, it is their plan to reduce the mountain of gold to a heap of slag. This is not to say that the Canadians are being unfair; they are more than willing to pay the villagers. Some have accepted, others are resisting. And they promise to turn the slag into a garden.

Now, it is not my place to tell the villagers what they should do. It is neither my village nor my country, and these are decisions which only the people of Rosia Montana and the government of Romania can make. But whether the villagers decide to stay or go, the decision they make is a sign and symbol of something much wider, and part of something much greater. To be specific, it is part of a great joke about capitalism. But it is a joke that no one seems to get. So here is the punchline: Rosia Montana is a place of great natural wealth, BUT THERE IS NO INCOME (as one of the villagers in the film put it). Now, here is a place that has received every gift that a loving God could bestow on any piece of ground: mountains full of minerals, valleys full of farms, pastures full of animals, rivers full of fish. It is a place that could—and has—supported tens of thousands in peace and prosperity, but under capitalism, it cannot provide work for a thousand. An area that should be prosperous and happy becomes an area of forced idleness. There is wealth, real wealth, but there are no jobs, and people, young people especially—that is, the future—feel they must leave. And if they leave with a few Euros provided by the Canadians, who can blame them?

But still there is the joke. The joke is that while the villagers have real wealth, the Canadians have financial wealth, and under capitalism, the latter is more important than the former. The bits of paper with the € printed on them are heavier than gold; the sterile bankers notes more fecund than fertile fields. We may laugh at the joke; we may even laugh at the Romanians, but we are caught in the same joke. In this country, no less than in Romania, men who make naught but bits of paper (called “financial derivatives”) have brought a great country to its knees. These men contributed not so much as a grain of wheat to the commonwealth, but from our common wealth we have paid them 100's of billions of dollars, and will pay them more still as a reward for their failures. At least the Canadians will pay something for their destruction of the village; we must pay for the rope they will use to hang us, and pay a monopoly price at that.

Under capitalism, the natural order of things is reversed. The money that should serve as a convenience for the trade of real things becomes the master of real things—and real people. The natural connection between wealth and work is broken, and those who hold real wealth got with real work become the servants of those with financial wealth who do no work.

The situation is Rosia Montana is repeated all over the world, wherever there is wealth that can be exploited. The obvious example is oil. Oil also holds the promise of easy money, of wealth without work, but the usual result for a nation rich in oil is neither wealth nor work. Or rather, the wealth is confined to a few, usually foreigners and their local political servants, while the rest have no work and hence no wealth. A bit of a dole is all they can expect. It may be a generous dole, as it used to be in Saudi Arabia; sometimes it is a pittance; more often it is nothing. Only a few places, such as Norway, have treated such wealth as the common property of the nation and attempted to use it to expand the real wealth of the nation, as token against the day when the oil runs out.

Gold comes out of the ground very slowly. That is as it should be. It is a resource for the ages, and not just for one generation, and certainly not for a generation of foreigners. To each generation, the mountain gives a few flakes, so that they might make merry at the end of the day, or bring the wife and children some small gifts. And the children will grow up to bring a gift to their wives. But the Canadians want to compress 2,000 years of mining into 17 years, to take all the wealth of the red mountains in one fell swoop, and leave behind a desert. True, they say they will leave behind a garden, and they may actually mean that. But once all the battles are over, once the gold is gone, there will be little reason to fulfill the promises. Soon after the mine is opened and the mountain begins to shrink, the Canadian director will call the Romanian manager and tell him, “We made €100 million, last year; we need to make €120 this year. Cut the budget.” And the next year they will say 140, and then 200. What budget do you think they will cut?

They made the same promises in Baia Mare, in the North of Romania. But in the year 2000, the cyanide lake broke, and wound its way into the valley and the river Tisza and the Danube, rendering the valley sterile and dangerous and the fish poisoned. It was the biggest environmental disaster in Europe since Chernobyl. They cannot farm or fish the area for 20 years. Some garden. “Ah, but here it will be different. Our lake will never break; we will break the mountain, but it will not break our lake; we are stronger than nature.” Maybe, but the cyanide must go somewhere, some day.

This whole process is called “investment,” which means that nations like Romania with real wealth must go hat in hand to countries with financial wealth. They must beg in Bruxelles for permission to eat their own bread, for the bits of paper without which (apparently) wheat will not grow and fish will not bite. As it is, the farmers and factories cannot compete with the system of organized subsidies and exploitation known as “globalization,” a system meant to suck the life out of poor countries for the benefit of (financially) rich ones. If things proceed as the usually do in these cases, it will be impossible for the government of Romania to resist the pressure to sell the real wealth of Romania for the “investment” wealth of the Canadians. Yet there is something else that may stop the project: the death of a system that demands such projects.

There are people in Romania who are old enough to have witnessed the death of empires; they have see the passing of the kingdom, of the fascists, of the communists, and soon, I am convinced, the passing of the capitalists; that system, like the others, cannot survive its own “success”; the bits of paper aren't real wealth, and the people who have real wealth got with real work will tire of working for others and demand to work for themselves.

It should be a trivial matter to organize the wealth of Romania into a real economic system. It should not be much of problem to make fertile fields prosperous, to make good and useful things for their neighbors, to trade with the other cities of Romania and with the neighboring countries, all of whom need some of what Romania has, just as Romania can use something of their surplus. If bits of paper are all that stand in the way, then such paper can be printed in Bucharest, backed by the real wealth of the nation. It takes only the will to do so. If small nations can realize their own wealth, no one can stop them; if not, they must work for Canadians, for such work as can be found, and there won't be much of it. For the rest, they must go to Spain or Germany; they must enrich another country and forget their own language.

The other joke about such projects is that they are not good investments. They are too capital intensive, and depend on gold staying at or above a certain price. But ten years ago, the price was only $250/oz., and if the current troubles pass without incident, it may be that again, in which case the mine would be unprofitable. But if this really is the passing of an era, the fall of an empire, then the price might go to $5,000/oz. In that case, Romania will need its gold, and whoever rules Romania will will not let it out, whatever promises they have made to the Canadians. The Canadians have no army to enforce their claims, and the rest of Europe will have concerns of its own. The Canadians will lose their investment, just as the people of Rosia Montana lost their village.

I have called capitalism a great joke, but it is also a grand myth, namely the Myth of Midas, he whose touch turned everything to gold. Capitalism also turns all it touches into gold, but a strange gold that, as for the King, can not feed itself, and which turns every beloved thing, everything of real value, into something cold and heartless and still. Nobody knows what will happen, but it would be dangerous to think that what worked yesterday will work in the future. But it is a myth that these things ever worked for places like Romania, and a greater myth to think that Romania needs them to work. She has both the gold and the food to feed herself, and feed on a grand scale.

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Breaking the Oligararchs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Thomas Storck Podcasts

I recently uploaded a three-part interview with Mr. Thomas Storck. They are podcasts. While the quality may not be the best, this is something we are working on. We will also be working on podcasting the interview with Dale Ahlquist. Hopefully I am not naive to say "all in due time."

The links to the podcast archive section will direct you to them. 

NOTE: There were certain difficulties. I found that if one clicks on the title of the particular podcast rather than the generic podcast image, it worked fine. If this still doesn't resolve the problem, I'll have to work on figuring it out.

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Distributism in the Populist Moment

Life is full of pleasant things, regularly coming at times when they are least expected. Today just so happened to be one of those days. As I went out to check the mail, I noticed that my edition of The Week magazine had arrived. And there, on the cover, was a splendid picture of people rioting around the idol (i.e. the statue of the bull) in front of the New York Stock Exchange. The people with their fists in the air, shouting at the symbol of swinishness, pulling it down from its pedestal in a way reminiscent of the famous topple of Saddam’s statue, and the words “Populist Uprising” gracing the bottom of the page. The image beautifully captured the sentiment, and the words accurately reflected the image. It was spectacular in the truest sense of the word

Unfortunately, as with many articles of this nature, my joy was quickly and significantly diminished. The story was on page 18 in the Talking Points section and it only consumed the larger part of the upper-half of the page. That aside, the article was concerning to the $500,000 salary cap Obama has issued for all bank CEOs to receive per-annum. While I should have paid more attention to the cover of the magazine (which has the words “the new, $500,000 limit on CEO salaries” as the tag line), I figured that the story would deal with… well, the overall uprising of populism.

It was the earlier portion of January, 2008, when I began speaking more about populism, and in particular what I saw as the rise of populism in America. The populism I predicted was relatively moderate. I insisted that it would be a hodgepodge of ideas derived from what is typically referred to as the “right” and the “left.” People would be generally conservative on abortion, homosexual marriage, and a host of other “culture war” issues. On the other hand, people would still support public schooling. Very few would want to rid the system of Medicaid. Unemployment and welfare benefits would remain. They’d stand by the notion of Social Security. If trends continue to go in the direction they appear to be going, people maybe even endorse some form of universal health care. Furthermore, I believed that we would see an outcry against Wall Street, CEO salaries, and mega-monsters like Wal-Mart.

I still stand by my predictions, and I believe most of the indicators are pointing in that direction. Sadly, I don’t see this rising tide lasting too long before it breaches.

People are angry, this much is sure. But they either don’t really know why they are angry or they are taking it out on the wrong things. A casual conversation with Johnny Q. Public will get you an earful of emotionally charged tirades concerning the salaries of CEOs, how Scooter’s Hardware is going out of business because they can’t compete with Wal-Mart, and how the average Joe just can’t make the kind of living he used to with a hard day’s work. In all likelihood, you’ll even hear them talk about the hucksters and swindlers in Washington and Wall Street.

None of this is necessarily problematic. What is problematic is how this tirade is followed up with the same old song and dance that got us here in the first place. The very same person will go to the grave defending state capitalism, quoting “the ole Gipper” by saying “Government is the problem.” This person may be on their way in (or even out!) of Wal-Mart, while Scooter’s is just one mile up the road. He’ll stand by the wage-slave concept, decrying a Living, Family, Just Wage or vocational organizations as socialism. And he’ll probably tell you (depending on how the next few years go) that all we need to do is get more “conservative” Republicans like Sarah Palin in office to begin “taking care of business.”

If you haven’t been formally introduced to this person, or the mass of individuals he happens to represent, you haven’t been in the US very long. Or maybe you just haven’t been paying attention. At any rate, intellectual schizophrenia is the way of the day, and apathy runs thick through Main Street.

This isn’t to deny the ray of light peaking through the clouds. Not at all! It is simply admitting that, as of yet, it is little more than a sunbeam piercing through the clouds of convention tomfoolery. It’s a mere acknowledgment that the masses aren’t as angry with the socio-political apparatus as they are with who may be in control at the time. It’s a blame game, with all their bets being on top-down measures to make all the difference.

Yet even here it is not entirely doom and gloom. This underlying sentiment is real, it is emotional, and it is angry. What is required is good old distributist education. While a large portion of the populace may be experiencing frustration with the status quo, they need to realize that the answer is not found in merely tweaking the status quo, or even crossing their fingers in hope that those on Capitol Hill who just so happened to micromanage the status quo will make all the difference.

Distributists, then, are living in a time of great opportunity. People are dissatisfied, and they are willing to listen to “new” ideas. Better yet, most do not realizing that those “new” ideas are far from being “new.” Capitalists have had their chance. Socialists have had their chance. Now it is time for distributists to have their day in the sunbeam.

How long this uprising lasts is unknown. But it would be foolish not to take advantage of a brilliant opportunity to direct this populist moment towards a more humane political economy.

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Distributism is Dying...

... or so I've been told.

It wasn't but four years ago that I stumbled upon Distributist Perspectives Vol. 1. It was a Christmas gift from my parents. Along with it came two other books. The first was "I'll Take My Stand" by the Twelve Southerners. The second was "Who Owns America?" edited by Agar and Tate. Unbeknownst to me, the writers and content of both "I'll Take My Stand" and "Who Owns America" were in some way or another linked to those persons and ideas contained in Distributist Perspectives Vol. 1. Chalk it up as a strike of providence. 

Upon reading these books, it didn't take me long to see the similarities. All three were traditionalist, skeptical of all things big, and agrarian to the core. Furthermore, the writers all appeared to see a connection between the political economy and culture. They talked of art, literature, and architecture. In brief, there was a consensus amongst the contributors that the debates surrounding the political economy were not merely academic. Rather, these debates hit to the very center of who we are as individuals, as a city, and as a nation.

Some may insist that the ideas advanced within these books fall within the losing column of history. I would beg to differ, though only with the luxury of hindsight. While one should readily admit that there was relatively little progress made during the lifetimes of these particular men, it would be foolish to confine the win and lose columns of history to the lifespan of a group of writers. 

At any rate, there are those who point to the burgeoning of Big Business, Wall Street, and the service economy as proof that the American people have no interest in the ideas typically associated with distributism. Some may even note the fact that a large portion of Americans claim to love Capitalism, while very few have ever heard the word distributism, and even less of its substance. These facts, at least for the anti-distributist, serve as evidence that distributism is on its deathbed waiting to be put out of its misery. Or, if they are generous enough to grant that there will always be a remnant of those willing to identify themselves as distributists, they will ridicule the school of thought as a fringe movement made up of discontents and those overly infatuated with all things nostalgic. 

But are these so-called evidences proof, as the antagonist would insist, that distributism is dying? As I said earlier, I would answer this in the negative. For these so-called evidences can be seen and interpreted in many other ways. 

Take for instance Big Business. It certainly appears to be thriving. On the other hand, even giants like Wal-Mart are having to rally the troops in hope of figuring out ways to bypass what has recently become a storm of opposition.  One need only watch the documentary "Wal-Mart: The High Cost of Low Price" to see just how strong, and coordinated, the opposition has become. 

But this, in and of itself, does not answer the question as to why so many people continue to frequent these behemoths. Truth be told, the answers are as simple as they are complex. We know that there many shoppers that have been pigeonholed into believing that they cannot afford to shop anywhere else. There are others who could shop elsewhere, and who decry the loss of small business, but who would prefer watching the local hardware dealer go out of business than to pay what could only be described as a reasonable price for goods  and services of better quality. Sadly, there are also those who simply don't care what happens to their neighbor, so long as they save a few pennies here and there. Of course, they shun from their conscience all guilt for having fed companies that rely for their existence on what amounts to nothing less than slave labor in foreign countries. For these particular shoppers, it is a matter of "out of sight, out of mind." To make matters worse is that the vast majority of these people don't realize that their low prices are also tied to government subsibies. These come from local, state, and federal dollars, and they come in frequency and figures that would be the envy of any local business owner. So while the answer to this question may seem easy to the antagonist, the truth of the matter is that the issue is much more complicated than it may first appear.

Wall Street is an entirely different story. The average Johnny Q and Sally Sue have little care for what goes on there. As The Nation pointed out so accurately in 2002, people don't typically go to work in order to purchase stocks. Where the common folk of yesteryear may have been somewhat indifferent to Wall Street, this can no longer be said. Instead, indifference has turned into outrage. Faulty prices, rabid speculation, credit swaps, and the stock market's subtle, but now apparent, interconnectivity with even those who know little about the numbers and letters flashing across the bottom of the television screen, has resulted in a collective man-hunt, with Wall Street as its target. Add to the flames the "revelation" concerning the government's obvious preference for the well-being of Wall Street insiders over against the common good, and you have a sure recipe for populist outcry. 

People are outraged. This much is certain. But what is more telling than their outrage is their not wishing to better familiarize themselves with the beast. Rather, many prefer to see it go the way of the dinosaur, or at least to be treated like a plague that needs isolation and strict supervision. Regardless of how the hucksters on Wall Street and Pennsylvania Avenue wish to spin this, the American people have quickly grown a healthy distaste (and distrust) for Capitalism's casino and the gamblers who frequent its halls.

As for capitalism, while the word is commonplace amongst the citizenry, very few know what it really entails. Most tend to boil it down to a free market where people can compete with others and earn money along the way. This is typically dovetailed with the notion that less government intervention is good. 

While all this sounds well and good, it fails to take into account the fact that, as Chesterton put it, one of capitalism's greatest inadequacies is that it creates too few capitalists.  To add insult to injury, the average citizens knows as little about little of the current status of wealth in the United States as they do about the meaning of capitalism. I'm willing to bet the farm that were the citizenry to be fully aware of the figures concerning the distribution of wealth and land in this so-called capitalist society, they would, unlike Chesterton, be astounded. 

Let's take the 2006 Federal Reserve, Department of Treasury survey as a practical example. We begin with $100. Then we add 100 people. Now,  a perfectly equal distribution of wealth (which is not the goal of distributism) would be $1 per person. As it stands right now, the 50 individuals at the bottom of the stack have $0.05. Collectively, they make up $2.50, leaving $97.50 to be divided between the remaining 50. The next 40 have $0.70 of wealth, or $28 collectively. The next nine have $4 of wealth, or $36 collectively. Now this leaves one person remaining. This single individual would, per $100 mentioned earlier, have in his or her sole possession $33.50. 

To say that this is horrifying would be to trivialize the meaning of horror.

One may rest assured that when these figures come to light, as they are with the passing of every day, people will begin to see the forest for the trees. They'll begin to connect the dots, finding a line between Big Business, Wall Street, and what parades around as capitalism. It is here, at this moment and at this time that distributists can smile and wink at the antagonist, knowing full well that the confidence of the naysayer was built on what was little more than a phantasm waiting for the right moment to disappear.

Distributism isn't dead. It isn't even dying. No, distributism is coming to light. It is, as John Medaille would say, "the wave of the future."

The road is destined to be hard, as money and power never fail to put up a good fight. But those rumbling underfoot, fueled by ideas penned by those of old, may be too much for even the giants of today to withstand. In the end, being perceived as finding a home in history's losing column may have turned out to be a boon rather than a bust. 

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Distributism, The Wave of The Future

Karl Marx was found of saying that communism was the “wave of the future.” It seemed in the 60's that he might have been right, as socialism seemed to be marching across Asia, Africa, and South America, coming to within 90 miles of our own shores. Now the claim is ridiculed on the pedantic grounds that openly communist states have either collapsed, are collapsing, or have re-invented themselves as state-managed capitalist countries. However, while the the “pure” form of communism was certainly a failure, the “state capitalist” form has been the norm throughout the world at least since 1933, if not sooner. And while the “dictatorship of the proletariat” has failed to materialize, the dictatorship of the corporatariat has become the ruling reality of government and economics. Indeed, this corporatariat has always been able to claim billions—and now trillions—from the public purse on the grounds that they are “too big to fail.”

The Distributist, however, know instinctively that they are too big to succeed, or at least succeed without massive government support. We knew instinctively that the claimed “economies of scale” were in fact dis-economies covered up by power, privilege, and subsidy. There has been, for 100 years, a vast body of literature on why this is so, but is a literature normally absent from the curriculum of most schools of economics and unavailable to most of the public. However, while the economics profession and the corporate culture have been able to refuse the questions up until now, it now appears that we are entering a crises that cannot be cured by the old rules. It is time to re-examine, and indeed rewrite, the old rules. A big contribution to this effort has been made by Kevin Carson, the “free-market anti-capitalist,” with an essay titled “Industrial Policy: New Wine in Old Bottles.”

The current industrial system, as Kevin demonstrates, is based on control of highly expensive and limited use, product-specific machinery. This machinery was so expensive that it required mass markets, low wages, and planned obsolescence. This is called “supply-push” distribution: make the stuff whether or not there are orders and find a way to sell it later. It is an industrial model especially associated with Alfred Sloan, the legendary President of General Motors. But the system never really worked. It became critically dependent on government support and regulation to prevent competition. The model worked, more or less, in cooperation with government support up until the 70's. But since then, “neoliberalism, globalization, the creation of the tech sector, the housing bubble and intensified suburbanization, and the expansion of the FIRE economy (finance, insurance and real estate) have served as successive expedients to soak up surplus capital,” and keep the economy on a sort of artificial life support.

The most disappointing thing about the new president is that he seems ready to try and work the old Keynesian magic on the economy. His economic team, though highly competent, are all drawn from the financial sector—that is, from the FIRE economy—and seem ready to try the old expedients on the economy. That is, they are trying to solve the problem by the kind of thinking that caused it in the first place. For example, we try to solve a problem caused by financial speculation by bailing out the speculators so they can do it all again. It is, as Ivan Illich put it, “trying to solve a crises by escalating it.” But the problem is structural, and the burning structure is exactly what the FIRE-men cannot address. Indeed:

any solution that directly addresses the structural causes of the problem will, by definition, be "extremist." Sociologist C. Wright Mills' memorable term for that mindset was "crackpot realism." The crackpot realists have been busy lately, feverishly promoting bailouts to preserve the "industrial infrastructure." Their vision of how to restore "the economy," naturally, amounts to a return to an economic "normalcy" defined by giant corporations and mass consumer society.

The real reason these old models won't work is that they barely worked in the past. As Kevin points out:

The problem is, there was barely enough demand to keep the wheels running and absorb the full product of overbuilt Sloanist industry even when everyone maxed out their credit cards and tapped into their home equity to replace everything they owned every five years. And we'll never see that kind of demand again. So there's no getting around the fact that a major portion of existing plant and equipment will be rust in a few years.

But if the old models won't work, are there any new ones that we can use? Kevin finds at least one successful model in Italy:

The closest existing model for sustainable manufacturing is Emilia-Romagna. In that region of 4.2 million people, the most prosperous in Italy, manufacturing centers on "flexible manufacturing networks" of small-scale firms, rather than enormous factories or vertically integrated corporations. Small-scale, general-purpose machinery is integrated into craft production, and frequently switches between different product lines. It follows a lean production model geared to demand, with production taking place only to fill orders, so there's no significant inventory cost. Supply chains are mostly local, as is the market. The local economy is not prone to the same boom-bust cycle which results from overproduction to keep unit costs down, without regard to demand. Although a significant share of Emilia-Romagna's output goes to the export market, its industry would suffer far less dislocation from a collapse of the global economy than its counterparts in the United States; given the small scale of production and the short local supply chains, a shift to production primarily for local needs would be relatively uncomplicated. The region's average wage is about double that of Italy for a whole, and some 45% of its GDP comes from cooperatively owned enterprises.

In other words, the way forward is precisely the model familiar to distributists (see Emilia-Romagna Cooperatives.) Kevin details not only why the old model is not working, but how the new model is already working, especially in fields connected with the new technologies and the breakdown of government-protected monopolies of patents and copyrights. The truth is, the new system is already beginning. In fact, the industrialists themselves have inadvertently contributed to it. They realized some time ago the dangers of actually owning equipment and machinery, and have outsourced their work to subsistence wage factories in Third-World countries. But this dispersal of capital in fact destroys the reason for having a capitalist system in the first place. Now, as the distribution system breaks down, any reason for the system fails with it.

The questions up to this point in time could safely be relegated to the realms of unorthodox theories. But with the breakdown of orthodox economics and systems, the time to act is now. The moment has come. The old system will not be re-created; it is too far gone, and gone globally. There is no one left to exploit. Those interested in the work of rebuilding the system, of being part of the wave of the future, can profitably read Kevin's important contribution to the industrial question.

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