Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
As a Catholic and a political conservative, I constantly find myself resolving tension between the guidance of American bishops (who lean to the Democratic Party on economic issues) and my political conservatism. To be sure, it is tension and not contradiction, but it is there nonetheless. That tension flares up when I encounter other conservatives who profess fondness for Ayn Rand, who, by my reading, is anti-conservative, militantly atheist, and anti-Christian.
A recent book by John C. Médaille, Toward a Truly Free Market, addresses this tension. In Catholic social thought, the ideas he presents have typically been labelled "distributism," a ideological trend that goes back to G. K. Chesterton and Hilaire Belloc. The thing that interested me about Médaille's approach is that he proceeds by accepting some of the goods of laissez faire capitalism, and asks why we seem unable to achieve them. Why was Ronald Reagan unable to roll back the modern welfare state? Why, instead, did it grow under him?
We always draw distinctions between "good capitalism" and "crony capitalism," but why do we seem to inevitably slide to crony capitalism, with its collusion between an ever-growing Big Government and rent-seeking Big Corporations? The most appealing economic tenets that Médaille espouses are that our policy should encourage entrepreneurship at the widest level (like Bush's "ownership society"), and that it should encourage both labor AND capital while penalizing rent.
I am as dubious as the next guy when I hear about "third way" approaches, but does Chesterton provide any insights lacked by both Keynes and Hayek? Has anyone else here encountered distributism and do you have any reflections to share on it, on whether it provides us any insights in our current plight?
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Jul '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
"Why was Ronald Reagan unable to roll back the modern welfare state?"
A democrat controlled House and Senate.
May '11
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Jimmy Carter: "Why was Ronald Reagan unable to roll back the modern welfare state?"
A democrat controlled House and Senate. · Jun 10 at 8:26am
And in '94, it was a Democrat controlled White House. And in '01, it was 9/11. Or Bush wasn't really a conservative. Or the GOP was greedy.
Eventually this comes to resemble the rationalizations that Communist sympathizers used to make, viz.: "Marxism hasn't failed! It's never really been tried."
Médaille asks the question, is there some change in our economic approach we should consider? How do we counter the trend toward gigantism? Is there a way economically to do this? The distributists say there is a way that still preserves freedom in the market (in fact, preserves it better than, say, Milton Friedman's approach).
Is anyone out there more familiar with this line of thought? It really roused me when I read it (both positively and negatively).
Aug '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
bagodonuts:
Has anyone else here encountered distributism and do you have any reflections to share on it, on whether it provides us any insights in our current plight?
I did some reading (not much) into it a few years back, and came away with the strong impression that, rather than discouraging crony capitalism, it would just encourage it with different cronies.
According to Wikipedia, distributism would encourage a return to the Medieval guild system, which was, in fact, a crony-capitalist arrangement that effectively discouraged outsiders and upstarts.
Moreover, distributism's emphasis on the superiority of owning to renting is simply not efficient. An ownership society sounds good, but when ownership is promoted beyond what is natural, bad things happen (like the housing bust).
Renting has downsides, but so does owning. Owning is less liquid. Owning real property ties you down -- which is great, if that's what you want, but bad in other situations (like mine right now). Owning requires more accumulated capital than renting. Owning can mean having to buy more than you need and having to forsake other opportunities...
Still, alternatives like distributism are worth exploring. Perhaps there are advantages to it I have not seen....
Jun '11
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Hi bagodonuts,
In a very real and concrete way, our system does strongly encourage entrepreneurship.
The Framers embedded the beginnings of the bankruptcy and reorganization system directly into the Constitution. This was a stroke of genius. The fact that you could take a risk in mercantile activity in America, fail at that activity and not be faced with debtor's prison or some form of indentured servitude allowed our economic system to flourish and prosper.
Further, the IRS tax code - while draconian and onerous in some ways - is still one that encourages ownership and business development for those who are willing to take risks. I doubt that there is a system in the world or in history that has been so geared to producing entrepreneurs and risk takers.
Also, crony capitalism and rent seeking Big Corporations are labels used by the Left to dissuade us from believing in the most prosperous system in the world. Are there abuses in the free market? Yes but stop and dwell on the amazing corporate entities America has produced and you will conclude that our corporate successes are myriad.
Aug '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Oh, I can't help myself -- I'll make one more comment:
According to Wikipedia, "Distributism appears to have one of its greatest influences in anti-trust legislation in America and Europe... Embodying the philosophy explained by Chesterton, above, that too much capitalism means too few capitalists, not too many, America's extensive system of anti-trust legislation seeks to prevent the concentration of market power in a given industry into too-few hands. Requiring that no company gain too great a share of any market is an example of how distributism has found its way into US government policy."
However, anti-trust legislation has had effects quite different from its intentions. Most firms "busted" by such legislation are not the giants, but smaller firms vulnerable to attack by other firms using "anti-trust" as an excuse. It is not uncommon for small businesses (like grocery stores) to be destroyed by anti-trust allegations, while large firms with extensive legal teams escape unscathed.
Thus, paradoxically, anti-trust laws may disproportionately damage smaller firms, and so may encourage, rather than discourage, the concentration of market power.
Aug '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
michael kelley:
Also, crony capitalism and rent seeking Big Corporations are labels used by the Left to dissuade us from believing in the most prosperous system in the world.
I'm not so sure about that, since many free-market economists use the labels "crony capitalism" and "rent seeking" themselves. (For example, I believe the problem of rent seeking is extensively studied in Public Choice theory, an area many free-market economists are involved in.)
Crony capitalism is different from regular capitalism, since it relies on political capital (making the most of political connections and the calculus of power) rather than ordinary capital (which, in a free market, anyone may acquire regardless of political connections).
It's true that leftists like to sling these words about indiscriminately, but that doesn't make the words themselves totally useless ;-)
Edited on Jun 10, 2011 at 9:26amJun '11
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Midget Faded Rattlesnake
michael kelley:
Also, crony capitalism and rent seeking Big Corporations are labels used by the Left to dissuade us from believing in the most prosperous system in the world.
I'm not so sure about that, since many free-market economists use the labels "crony capitalism" and "rent seeking" themselves. (For example, I believe the problem of rent seeking is extensively studied in Public Choice theory, an area many free-market economists are involved in.)
Crony capitalism is different from regular capitalism, since it relies on political capital (making the most of political connections and the calculus of power) rather than ordinary capital (which, in a free market, anyone may acquire regardless of political connections).
It's true that leftists like to sling these words about indiscriminately, but that doesn't make the words themselves totally useless ;-) · Jun 10 at 9:25am
Edited on Jun 10 at 09:26 am
Excellent point. Thanks for the clarification.
It has become so passe to cast our system in a negative light that I am afraid I do get touchy about those who would seemingly paint all of corporate America with a negative brush.
Aug '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
michael kelley
Thanks for the clarification.
Thank you for your graciousness.
Jun '11
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Midget Faded Rattlesnake
michael kelley
Thanks for the clarification.
Thank you for your graciousness. · Jun 10 at 10:00am
Well, my mother always said to me, "Boy, you're not that bright and Lord knows you're not much to look at so you better learn how to be polite."
Nov '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
I'm as big a Chesterton fan as anyone, but distributism has always struck me as crazy talk.
Jul '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
What is it with this "I'm a Catholic and a conservative" or "I'm an evangelical and a conservative"? or "I'm a Mormon and a conservative"?
How about "I'm an American and a conservative?"
Conservatives are supposed to eschew identity politics, no?
Nov '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Kenneth: What is it with this "I'm a Catholic and a conservative" [....]
Conservatives are supposed to eschew identity politics, no?
In this case it seems to be an acknowledgement of the perceived tension between the teachings of Christ and the laissez-faire aspect of capitalism. It's only identity politics to the extent that one's identity informs their system of beliefs.
Aug '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Kenneth: What is it with this "I'm a Catholic and a conservative" or "I'm an evangelical and a conservative"? or "I'm a Mormon and a conservative"?
How about "I'm an American and a conservative?"
Conservatives are supposed to eschew identity politics, no? · Jun 10 at 4:24pm
Eh, Kenneth, I'd say it ain't about identity politics, but about how we understand the world. I mean, it's not exactly a secret that different conservatives can have differing styles of moral reasoning, depending on where they're coming from.
Plus -- and this is something you may not know, not being a churchgoer yourself -- you can be really attached to your church despite church authorities who advocate what you think is pretty shady economic policy. I think that's what Bag o' D meant when he said
He's not playing any card here, but describing a tension he naturally feels in being a conservative member of his church.
Sep '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Hello bagodonuts I don't know about distributism, I will have to learn about it. But, I very much appreciate your thoughtful post. Keep it up.
Oct '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Actually it boils down to Milton Friedman vs Keynes, in my opinion (because of the math).
I totally do not understand why a person would look to religion for economic views/philosophies? As a good Christmas Catholic, I could care less what some pointy-hat wearing religous person of any faith says about economics--just as I don't ask Peyton Manning who is going to win the baseball World Series. FYI--the Dalai Lama just came out as a marxist--that just means he doesn't live in the real world.
Render unto Ceasar that which is Ceasar's, and unto God...
Nov '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
I believe that crony capitalism is better described as neomercantilism. It is very similar to the true mercantilism of royal charter companies of the 17th and 18th centuries such as the Hudson's Bay Company and the East Indian Company. There was a tight linkage between these companies and the crown (government) well into the early 20th century hence what we would describe as "cronyism". Everyone in government had a direct vested interest in the success of these companies so laws and regulations were optimized for them.
True capitalism, as defined by Adam Smith in The Wealth of Nations and expanded by David Ricardo repudiated mercantilism pointing out its flaws.
Capitalism also is not the libertarianism of Ayn Rand et al. Adam Smith's Theory of Moral Sentiments, which preceded Wealth of Nations, is very Christian. Adam Smith's invisible hand is really the hand of Providence. Smith had no doubt that capitalism, as he understood, was morally Christian.
Aug '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Ken Sweeney:
I totally do not understand why a person would look to religion for economic views/philosophies? As a good Christmas Catholic, I could care less what some pointy-hat wearing religous person of any faith says about economics...
Many feel -- either instinctively or because they were so taught -- that wealth has a moral dimension, so I'm not surprised that they look to religious leaders for economic guidance.
If I were to think only of whether my economic beliefs are right or wrong, I could care less what my religious leaders say. But if I think of their leadership role, and the influence they have over my fellow believers -- and sometimes even policy -- then what they say starts mattering.
There is, in my experience, intense moral pain in believing your religious leaders are agitating for bad economic policy, since we are called to serve the poor, and so far the only real cure for poverty is wealth.
Jan '11
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
Capitalism is a theory of ratcheting responses. Make a good product, and others will enter the market to make the product either better or cheaper. The incentives drive the competition.
A competition, though, can't be a single instance. It needs to allow a winner to emerge, but then it must allow the loser to improve or become more efficient. Then it must allow the winner to respond to the response. Each iteration of the game sets up the following game. In fact, when you study the game theory logic of it, it's tremendously important that the series of iterations be open-ended. For the competition to really work, there can't be a final winner. The competition must continue indefinitely.
Human nature, however, wants to revel in the spoils of victory. Once you win the competition, you don't want to have to keep playing. Once you climb the ladder to a higher level, you want to kick out the ladder beneath you, so that no one else can climb it also.
That's what makes distributism a moral theory. It wants humans to avoid the laziness of victory, and encourage "losers" to improve.
Dec '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
bagodonuts - a suggestion that might help you resolve the "tension" you've been struggling with ... "Human Action" by Ludwig Von Mises ... provides an exhaustive analysis of why the policies promoted by the Democrats and Bishops are bad for everyone - especially bad for those the Bishops and Democrats claim to be the most concerned about.
Edited on Jun 10, 2011 at 6:20pmNov '10
Re: Distributism, or Does Economics Really Boil Down to Keynes vs. Hayek?
You'll need some coffee...