Friday, October 13, 2006

Hello, Blogodidact!

The excellent Blogodidact and I have been discussing Distributionism back and forth for a little while, a process I hope we can continue. So far Van (as I call him in my head) has revealed to me that I did a lousy job at explaining where I was pointing my suggestions, how I expect Distributionism to work, and whom I expect to take the lead. Learning how badly I explained all of that was rather humbling. So let me take Van’s points from his blog entry here and respond to them. We’ll start with his analysis of my suggestions on promoting Distributionism.

Tax credits & Gov sponsored job training. For a State to have enough largess in their tax base to spare on social engineering (tax breaks) implies Income Tax, which to my mind is one of the big three (Income Tax, Federal Reserve System, Welfare & regulatory systems) physical realities behind all that has fallen in our nation today.”

I agree with Van; I have serious issues with the income tax, I think the welfare system is a self-perpetuating bureaucracy of dependence, and most regulatory agencies no longer exist for legitimate purposes but rather to expand their own power. Unfortunately, such a world is the one we live in. We have excessive taxes to the point that the government can do such things as, say, the Civilian Marksmanship Program, or 50 different homeless assistance programs that often all fund the same groups – only multiplying the overhead, not the results. Or, as an earlier article of mine showed, even welfare programs that are highly praised by the MSM and both sides of the aisle in Congress like Head Start are so inefficient that their administrative overhead is about 70%, making them criminally wasteful. This shows that the America government, a nation with very low taxes by Western standards, is wasting a tremendous amount of tax money.

Unfortunately, unless there is a massive change that comes as a total surprise to me, we will not be able to change this overnight. Instead, we will need to chip away at the existing structure until it is more just (read: we get to keep our own money) and efficient (read: they don’t waste our money). Therefore, I think that supporters of Distributionism (as well as our allies in the realms of Libertarians, Objectivists, and fiscal Conservatives) should push for serious tax breaks for small business owners, even to make small businesses tax-free. I feel the same way about job training; federal job training has been around for a long time and will not vanish overnight. I say we use this training (which is, after all, our own money) to become self-sufficient.

I have been told by others that ‘working the system’ this way is a capitulation, a tacit acceptance of the current system. I disagree (of course!). My goal is to transform the system by working within it. I want to encourage more entrepreneurs; we live in a society with progressive income taxes; I think a strong political case can be made to reduce or even eliminate taxes on small businesses. I think this is a win-win situation; taxes go down and more entrepreneurs are born.

“ “Microloans to such organizations could be subsidized by government agencies” is just a cloaked method of socialist redistributionism.”

OK, I admit it. This is obviously an encouragement of Socialism…. Well, out of context. What I said was “Microloans to such organizations could be subsidized by government agencies for a strictly limited time to encourage transition”, meaning that for a period of, say, 5 years microloans would be guaranteed in a manner similar to VA home loans or student loans; no tax money spent, just a government payment to private creditors in the case of default, then the debtors owes the government. I ws really unclear about the details of this, so I apologize. I am not talking about the federal government giving people cash, I am suggesting federal guarantee of small loans for a period not to exceed 5 years in lieu of collateral for some types of small business.

This is still egregious to Objectivists and most Libertarians, but again – let’s game the system. I am paying too much in taxes. The government is braying that ‘small businesses are the motors of growth’. OK, let’s see you actually support that while I wear down the taxes you keep collecting.

The next one is larger, so I will break it up a bit.

““I was surprised when Fr. Neuhaus, whom I normally find to have a very informed opinion, dismisses Distributionism as not having anything to which to attach policies or platforms in the political arena. America has; a Small Business Administration that promotes small business; farm co-ops, credit unions, consumer co-ops, and business co-ops like ACE hardware on almost every corner; a history where the Grange movement held strong, if brief, political influence over national politics; a growing concern over the impact of large enterprises like Wal-Mart and Microsoft of the well-being of the average person; and a rather large (and growing) government job training program.” Which I take to mean that having a Small Business Administration, government sponsored jobs training and a growing concern over a growing Wal-Mart, are signs of optimism and hopeful solutions in the making; but I emphatically believe that these are not part of a solution, they are instead part of the problem! Anytime that Government steps out of its role of ensuring that rights are not infringed, upholding law and order, and defending the interests of the Nation, moral and physical disaster is in the making.”

Well, my point was to refute Fr. Neuhaus, not support anything in particular. I was pointing to these various things as proof that topics like small business, large corporation, cooperative business, etc. are proven political topics. I didn’t mean this section to support any particular government program or refute it – just show the political impact of some ideas.

Van goes on:

“I also have my doubts about a wider scope being attributed to an economic policy, than is proper to its function. The Goal of Economics is not happiness, but production; it is philosophy and ethics that point towards happiness. Economics should of course be compatible with, even complimentary to the goals of philosophy - which as Aristotle says, is happiness – but Happiness is not the goal of Economics, producing, distributing and managing wealth, is the goal of Economics. “Their goal is to create a community where the members avoid the excesses of materialism”, but I think that the only defense against materialism is an education which better teaches what is truly valuable in life, and that again is the job of philosophy, not of economics.”

Bingo! Proof that I was opaque. The core concept of Pope Leo, Belloc, Chesterton, Schumacher, Penty, and other Distributivist thinkers is that the separation of economics from ethics and philosophy is a critical error that leads to a decline in ethics, a divorcement of philosophy from practical concerns and, ultimately, economic disruption, all of which will culminate in an unethical, unjust society of poor people ruled by a corrupt oligarchy. Saying that economics is about production only is like saying that the law is about winning court cases, not about justice. Or that politics is about power, not leadership. Yes, stripped of context, economics is about nothing but production, law is about winning and losing decisions, and politics is about power. But this divorcement of ethics and philosophy from the basics of life is exactly what the underlying problem is.

Communism, Socialism, etc. did not spring from a vacuum. They sprang from an understanding, conscious or not, that economics cannot be divorced from ethics and philosophy. Likewise, Capitalism and Democracy are usually mentioned together because people recognize that the freedoms and justice that are part of the best democracies allow Capitalism to exist – and vice versa. The 20th Century was a century of warfare between different concepts of economics/ethics/justice competing one with another. Classical Fascism, Communism, Socialism, and Democracy/Capitalism are all defined not solely by their ethics, nor their philosophy, nor their economics, but by all three as a whole. This is because these things are a whole within a society.

Chesterton, Belloc and the other early leaders of Distributionism rejected Communism and Socialism as inherently unjust. Indeed, they felt that the injustice of such systems was self-evident. Their insight was into why such inherently unjust systems not only had adherents but were actually competing with Capitalism and Democracy. This insight is, like many deep insights, both simple and profound. It is this – laissez-faire/’pure market’ Capitalism rejects ethics and philosophy; this rejection leads to injustice; therefore, laissez-faire Capitalism must be rejected.

Their answer was not abolishment of ownership (Communism), nor state ownership of capital (Socialism), nor strict governmental regulations that supported and controlled Capitalism (Fascism, at least as it was defined by them). Their answer was the engagement of the most important element of economics – the individual. The goal of Distributionism is moderation of Capitalism by many individual Capitalists.

Van again, in the same vein:

““Their goal is to create a community where the members avoid the excesses of materialism”, but I think that the only defense against materialism is an education which better teaches what is truly valuable in life, and that again is the job of philosophy, not of economics.”

But the goal of a society, any society, must be achieved within the realms of economics, and ethics, and philosophy, showing that they cannot be separated.

Van then jumps around a bit (just like I tend to do!), so I will break it up a bit more:

““Deal as directly as possible with the producer/end user” … is of course a wise policy when it saves time and effort to do so, but there are many middlemen that do give significant savings in time and effort, and so are worthwhile. Super markets are an excellent example of middlemen being valuable services provided to consumers. Most Mom & Pop stores are not. Wal-Mart is a time saver, visiting all the mom & Pop stores you would need to in order to quickly pickup the products that can be found at a single Wal-Mart, would be a massive time waster, and the expense would more than likely be higher. I n fairness, Deep Thought does say that if middlemen are adding value, then use them – my reaction may be more to an overall tone I perceive (especially concerning expanding corporations and Wal-Mart) which makes me rise to imaginary bait, than a direct quote by Deep Thought on this. I see Corporate consolidation as usually being a good thing; the reason it is done is to increase productive efficiency and profits; and if it is done poorly, it too will collapse or be broken up, so that eventually the frozen productivity that had been locked up in inefficiency and waste, can be thawed & released from its parts once again, back into the wider economy.”

Whew. OK, I will admit it – I don’t like large corporations. But the reasons aren’t aesthetic, they are ethical and economic. In many markets once a corporation hits a certain threshold of market share it can use its strength within the market to affect the barriers of entry to a market upward, increase the sunk costs of potential competitors, and use predatory pricing to drive out existing competitors. Additionally, high levels of market penetration allow firms to impose artificial switching costs, even artificial transactions costs, to shelter themselves from the ‘free’ in free market. If am opposed to Socialism, I must also oppose such corporate-driven market controls, too. And if a corporation is large enough, it can enter new markets and use its economic resources to do the same to more and more fields of transaction. Think this is loopy? Look at Standard Oil; in the 1880’s began a decades-long practice of coercing shippers to give them discounts and to increase shipping prices for competitors. Soon their control of transportation allowed them to literally dictate oil prices to oil producers in America, demand further discounts on their own shipping costs and ‘rebates’ (i.e., kickbacks) from the artificially-high shipping costs they demanded for their competitors, and other such actions. Using this clout, they also gained very effective control of steel production and, eventually, railroads. This was an especially good idea – by controlling the steel industry, Standard controlled the cost of railroad tracks and cars. By controlling oil, they controlled the cost of fuel and lubricants of the railroads. When they moved into the railroad business it was a foregone conclusion that they would dominate it shortly.

Analysis by economists then and now agree; Standard Oil began as more efficient than its competitors, which allowed it its initial rapid gains. Once it reached its height, however, its efficiency began to drop. In the end it was less efficient than its (few remaining) competitors (or, in some ways, no more efficient than the others). But it retained its dominance for some time because of its power over entry costs, sunk costs, transition costs, etc. and its continued ability to artificially set prices within a number of markets. After the retirement of some of the leaders of the Standard Oil trusts many of these practices were abandoned. By the time laws had been passed and litigation begun the effects of actual competition were seen – Standard Oil’s share of most of its markets had tumbled very badly within 30 years of its founding.

But if its directors had continued the practices of its founders there is little evidence that Standard Oil’s coercive control of at least 3 major markets would not have continued without government interference.

So, I have no problems with a monopoly of efficiency – after all, a more efficient competitor will eventually come along. But I have issues with coercive monopolies. I have yet to meet a Conservative who likes coercive monopolies, but I also rarely find a Conservative who will admit that large firms can establish a coercive monopoly almost as easily as a government can. The result? I prefer small firms to large ones.

I have no problem with Wal-Mart as Wal-Mart. I sop there, I see nothing wrong with them in general. I also have no problem with communities that try to bar them with zoning laws (their own loss, after all. If they want to drive out jobs and low prices, that is their choice). I also think that Wal-Mart has provided more monetary benefit to low-income Americans with low prices than welfare programs have with grants, etc.

But Wal-Mart is not a silver bullet that ‘proves’ that massive consolidation is ‘the answer’. Wal-mart’s size and efficiency has proven amazing in the US and many markets, but it has also failed. Wal-mart’s entry into Germany was a shock to some since they failed to succeed there as was expected. This is because Germany already had a number of players in its robust discount retail market. Some argue that this indicates that Wal-Mart’s success in the US has more to do with barriers to entry and Wal-Mart-imposed transition costs than with real efficiency, but I think we don’t have enough data about that yet. Much more interesting to me are Wal-Mart’s failure in China and South Korea. In both cases Wal-Mart failed due to a number of factors including poor marketing, but also because of their inability to compete with small businesses in the same space. Indeed, as one commentator pointed out - on a global scale, Wal-Mart is a regional business. I would add that the market has shown that Wal-Mart can’t compete with smaller competitors outside of the shelter of American barriers to entry into its market.

And just to carry this side-trip a bit further, Wal-Mart is starting to face real competition in the US, too. Dollar store chains are really eating into Wal-Mart’s market share not just by meeting or beating the pricing but because many consumers are showing a preference for smaller stores closer to where they live instead of very large stores further away. Add in the suspicion of some economists that some of Wal-Mart’s efficiencies of price may be an ‘artifact’ of the transition of manufacturing to the Third World and I suspect that Wal-Mart is much more of a fad than many believe. Not because it is ‘evil’, but because it will lose to smaller, more agile companies relatively soon.

Let’s go on with Van:

““All men have a right to private property, just compensation for their goods and labor, and to enter into business agreements of their own free will” Unfortunately I do not see that this will protect property rights and ensure fairness, but instead only serve as a mandate for those people in power, to demand that their constituency have property, then some property, then some minimum amount of property, then an increased amount of property - and agitate to get government programs established to distribute it. Property Rights are not to be violated, but they aren’t to be awarded either, they flow from the nature of being human, they are not bestowed or granted.”

Wow. I was misunderstood. This is not meant to mean ‘everyone gets 40 acres and a mule’, but rather ‘confiscation of land by the government is a violation of a person’s rights’. This is not for land redistribution schemes, but against Socialism and Communism. This was taken from Rerum Novarum, a response to the Communist Manifesto and related work in addition to being a statement of rights and principles.

And more:

““, a man who produces goods or commodities must be paid a just amount for those items.” No, he must be paid what someone is willing to spend and which he is willing to accept – nothing more. More means waste, regulations, and agencies and bureaucratic regulatory law.”

This is a statement of ethics, not regulation. This is against the concept of ‘from each according to his ability, to each according to his need’. It is also a moral and ethical guideline for employers and workmen. As with ‘the right to freely enter into contracts’ it means there cannot be any coercion in the setting or payment of wages or in the pricing of goods.

Here Van gets into some interesting territory:

“Deep Thought makes a reference to “Wage Slavery”, and that is a term that just gets my hackles up. It has its most common origins as a Marxist concept, intended to obscure the fact that the employer/employee relationship is freely kept and for mutual benefit. A so called “living Wage” cannot be the goal of a business. A desirable product at the most appropriate cost is all that can be expected. If the people working at such jobs need more, they must find other sources of income, or put another way, if they are only able to produce ¾ of what they need as income from their job, then they need to seek the remaining ¼ elsewhere and probably should be looking for ways – new skills, education, to make possible a change of their main productive skill.”

My definition of ‘wage slavery’ is less like Marx and more like Belloc. Let me quote Robert Nisbit and his comments on this;

“Hilaire Belloc defines the servile state as "that arrangement of society in which so considerable a number of families and individuals are constrained by positive law to labor for the advantage of other families and individuals as to stamp the whole community with the mark of such labor." "Given the debasement of the language of politics in our time, there are of course many who describe this condition as progress, or as a higher freedom and democracy or as humanitarianism. But the harsh fact remains: a steadily enlarging number of families and individuals in the United States, and other Western countries, are in the position of being constrained by law, beginning with the progressive income tax but extending to numerous other areas of legal requirement, to labor, not for themselves, but, in Belloc's words, 'for the advantage of other families and individuals,' those who do not work and who enjoy what is called welfare in one or other of its by now diverse forms."”

That is one way to describe part of what I mean by wage slavery. Here is a more personal one.

“Through a combination of governmental regulations/laws and predatory practices we have a resulting group of people who do not have the skills or education to be employed in a self-sufficient manner, resulting in them being constrained to labor for an amount too small to support themselves and lacking the time, resources, or opportunity to avail themselves of the means to exit this condition.”

Face it – public schools suck. They are more and more divorced from providing a practical education while they continue to tighten their focus on indoctrination. The result is a populace less and less able to actually become entrepreneurs, forcing them into a spiral of jobs that pay too little for them to live one, resulting in debt resulting in…. Well, you get the idea. The end result is an entire class of people who cannot do that most basic of things – be self-sufficient. Communists recognized this, called those people the Proletariat, and said the answer was to destroy the government and share everything equally. Somehow. The Socialists say the answer is to take things from those who have it and give it to those who don’t. Fascists said the answer was to use government regulations to prevent it from happening. Objectivists say that, well, that’s what happens to the non-demi-gods. Libertarians say get rid of all those regulations and things will sort themselves out, eventually.

Distributivists say work together, voluntarily, to get people out of that trap while also getting rid of the lousy laws that started the whole mess. This is just a piece of the puzzle, of course. I’ll talk about more of it as we go and in the near future.

But I must say, Van is a bit, uh, blithe about the whole idea of ‘if your job only earns you ¾ of what you need to live, get another job for the additional ¼ and look for the skills to get you out of it’. Ya’ think? Of course, where they are to find the time for further education while working at least 1 ½ jobs can be a bit of a puzzler, I suspect.

Another topic from Van:

“Deep Thought supports the creation of Guilds, he raises most of the objections I would raise at such organizations, but I don’t see that they are as easily solved and dismissed as he thinks possible. One key concern of mine, is that If the workers of Guilds are allowed to set prices, that means that prices will be artificially high, such as Detroit's automakers were in the 70’s, and then soon some one, such as Japan, will come along and see that costs are indeed too high, and they will take that opportunity to do better work for less cost, and once that happens those workers and Guilds are going to be seen as Fat fast, and then cut off ASAP.”

The key to Guilds are that they directly involve workers AND supervisors AND owners. Indeed, the ‘classic’ guild is really a consortium of tradesmen/owners that are self-employed. Larger shops also include representatives for employees, all of whom usually are independent contractors, capable of being independent, or are in training to be independent. Even when it is comprised of large shops with many employees and few owners, remember – the owners and managers are part of it, too.

Usually Distributivists admit that Guild are not a universal solution (I am one of them), but are primarily for the trades and professions. However, I have less general objection to unions than Blogodidact. My specific complaint is with mandatory unions. If the UAW, Teamsters, etc. were not mandatory unions, they would have A) never had the power that they had and B) ceased to exist when they began abusing their powers. I’ve worked in mandatory union shops and I can testify – they are hellish. I have also worked in voluntary union shops and they were much, much better. When you can join any union, no union, or drop out of a union when you wish it means that the unions are forced to do what they are designed to do – help workers. If they do a lousy job, people leave them. If they try to wring concessions from management that makes the business less competitive, they are going to go away pretty quickly when the other unions and the independents oppose them.

Therefore, I see Guilds as also being voluntary out of necessity. I stated the historic results of mandatory Guilds – they were worse than unions in the long term. Where they do work, Guilds work like a combination consortium and brand; they allow many small businesses to pool resources to gain the economies of scale and provide a familiar guarantee of quality to consumers. Mutual agreements on pricing and quality within the Guilds will therefore be aimed at being competitive out of sheer necessity.

Van then hits two points quickly, which I will combine:

A lender may charge reasonable fees for a loan or for exchanging money. A lender may charge a reasonable penalty for a late payment.”


“…argue that interest rates should be extremely low (on the order of 1-2% at most) and, especially for home loans, others argue that no interest is acceptable at all, only fees.”

And then comments:

“…Deep Thought promotes Distributionism as more of an ethical practice, which if emulated (aside from the concerns above) would be for the most part a positive step, certainly an improvement over the state of our current mixed economy.”

Exactly. The comments on things like interest rates, types of loans, cooperatives, etc. are guidelines for Distributionists to follow voluntarily. This is about Distributionists working with each other to build a better way of life by remembering that economics and ethics and philosophy can’t be separated.

Van then goes on and, well, confuses me a little bit. He writes this:

““Laissez-faire Capitalism is an argument that “Selfish, unjust actions lead to altruistic, just results… eventually.” This is typical of conservative views, which I think undermines us in so many ways. Being able to do what you see fit because it is right to be able to – that will produce the most wealth and value in the end, but that is a non-essential side effect, and ignores the fact that it will inevitably bring disappointment and ruin to many people as well. It is that ignored last part, which those demagogues lurking out there, looking for an in, will inevitably use in an attempt to cast the first part as 'an unmet promise', a tool, to put governmental power into their hands to “do good’.”

Which is dead on, and the main focus of Distributivist thinkers. But he follows it immediately with this:

““…It goes on to point to the continued failings of unfettered Capitalism and the need to always remember the inherent worth of the individual and the need for solidarity.” What failures are they? When?”

Uh…. The ones you just mentioned. Van just wrote that laissez-faire Capitalism “…ignores the fact that it will inevitably bring disappointment and ruin to many people, as well” and that this empowers demagogues to take advantage of that to undermine the rights and freedoms of people. That is what Belloc was discussing in the Servile State, Chesterton in What’s Wrong with the World, etc.

Van then concludes:

“There is, admittedly, a harshness associated with capitalism, a harshness which I am in the process of experiencing a taste of it myself at the moment – our CIO has been sacked, our projects restructured, and I’ve got to learn and become proficient in a new programming language lickety-split, or I’ll be out the door as well.It is harsh, life is harsh – Black & White is harsh and it is only through the painfully slow process of earning and saving your wealth that we are able to soften the edges a bit and provide some cushion and comfort for ourselves. As I see it, any attempt at artificially creating that cushioning through the power of governments ability to rob Peter to pay for collective Paul, or even worse, to force Peter or Paul to act against what their own judgment tells them they should do - will be doing no one any favors in the end. If we want our Ends to be Just, our means must be Just, anything else is necessarily using the Ends to justify the Means, and that will most certainly be a bitter end for all.” [emphasis mine –DT]

This is great stuff. Great stuff. This is the point of Distributionism. Capitalism is the best economic system we have figured out so far, but when its ends are divorced from its means, when its processes of production are isolated from ethics and philosophy, then you have laissez-faire Capitalism. Laissez-faire Capitalism has long term good results that have short-term victims. The goal of Distributionism is to use the voluntary actions of individuals to ameliorate these negative effects in a manner that not only remains Capitalist, but has competitive advantages.

Van and I seem to share a problem – we can’t be brief! But I hope that now he and I will do a bit less talking past each other and more actual discussion on this topic.

I’ll add more detail next time to exactly how I propose to make Distributionism work and why.

note: fixed a bad link

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