Yesterday we opened with our take on the 1928 debate between
G.K. Chesterton and G.B. Shaw on whether there was any fundamental agreement
between the two systems each one espoused, distributism and Fabian socialism,
respectively. Despite some snarky yet
humorous comments by immoderate moderator Hilaire Belloc on the failure of the
disputants to address anything substantive in the discussion, Chesterton and
Shaw not only failed to address what Belloc regarded as the real issue — how to
save civilization in a manner befitting the demands of human dignity — they
couldn’t agree on whether or not they could agree.
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| Edward Bellamy, author of the socialist classic, Looking Backward |
We closed our brief analysis of the issue Belloc raised by
noting that, because distributism could neither move forward nor stay where it
was, it began moving backwards. What do
we mean by that?
As we noted, distributism as conceived by Chesterton and
Belloc embodies three flaws. Ironically,
none of the flaws is inherent to distributism, yet today’s neo-distributists
have taken them as virtual Holy Writ and pretty much mandated by God.
For example, the preference for small, family owned farms
and businesses was, as Chesterton clearly explained, a preference only. When businesses must be large (and he
admitted, while having a personal emotional prejudice in favor of smallness,
that economies of scale are often necessary), the workers (and, we would add,
all “stakeholders”) should own equity shares in the companies.
As for the act of social justice, it needs merely to be
recognized and understood properly to be integrated into any system. To get technical, social justice is the particular virtue directed to the common
good. Legal justice, on the other hand,
is the general virtue directed to the
common good.
The difference between legal justice and social justice is
that under legal justice, you do the right thing individually with a good intention for the common good. In social justice you do the right thing socially (i.e., organized with others) with a good intention for the
individual good of those others and everybody else. That’s a brief and
probably confusing summary. Again, for a
more in-depth treatment of legal justice versus social justice, see “Pope
Francis and the Just Third Way.”
Obviously both of these flaws in distributism as originally
conceived are easily correctible. It’s
the third one that has caused the problems: the slavery of past savings. By “slavery of past savings” we mean the
fixed assumption that the only way to finance new capital formation is to
produce more than is consumed, accumulate (“save”) the excess in the form of
“money,” and only then finance new capital.
What’s wrong with that?
Well . . . everything. Given the
fundamental principle of economics that “Consumption is the sole end and
purpose of all production” (Adam Smith, The
Wealth of Nations, III.viii), production
that is “saved” instead of consumed is being diverted from its proper use. Worse, goods that are produced specifically
to be “saved” (i.e., not consumed) —
as Keynes recommends in his General
Theory (III.vi) are, to some degree, the economic moral equivalent of
artificial contraception.
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| Keynesian economics assumes pointless work is essential. |
Yes, it is important
for people to engage in productive work.
Work is noble, fulfilling, and a key aspect of human dignity. Work, however, need not be understood
exclusively as economic work. The
Aristotelian concept of “leisure work,” the work of civilization, is fully as
legitimate as economic work — more so, in fact, if the economic work involves labor
merely to gain income by producing unnecessary or harmful goods and services. Economic work performed for any other purpose
than to produce goods and services for legitimate consumption is an offense
against human dignity.
The problem is that,
if past savings — the excess of production over consumption — are the sole source
of financing for new capital, then the oxymoron of necessary-unnecessary,
degrading work solely for the purpose of distributing income is built into the
system. As we’ve seen in many postings
on this blog, however, past savings are not the sole, nor even the best source
of financing for new capital formation.
Past savings are best used to finance consumption of existing
inventories.
Future savings — the
present value of future increases in production embodied in a negotiable
contract (what Louis Kelso called "pure credit" because it doesn't require past savings) — are the best source of financing for new capital formation. We won’t get into that here, however. We’ll simply refer you to two key works that
explain the concept of pure credit so we can get to the point of this posting. The first is Dr. Harold G. Moulton’s The
Formation of Capital
(1935). The second is Louis Kelso and
Mortimer Adler’s The New Capitalists (1961).
And don’t attach any particular significance to the use of the term
“capitalist.” What Kelso and Adler
described wasn’t capitalism.
The point here is
that if you assume as a given that only past savings can be used to finance new
capital formation, distributism as envisioned by Chesterton and Belloc is
impossible. Past savings locks an
economy into capitalism, socialism, or the unjust “third way” of the Welfare or
Servile State.
Reliance on past
savings means that you end up with one of two alternatives, both seemingly
mutually exclusive, but both actually merely different aspects of the same
thing. The first alternative is a
relatively small class of capitalists who have the ability to save the enormous
amounts today’s advanced capital instruments require. This is capitalism.
The second
alternative is a State with the power to redistribute wealth by redefining
basic terms such as private property, money, credit, banking, finance, and
anything else that gets in the way of increasing State power and control, such
as life and liberty. Typically, the
State redistributes directly through the tax system, indirectly by manipulating
the currency, or both. This is
socialism.
Ironically, the
blend of capitalism and socialism found in the Welfare or Servile State is not
actually a third way at all. It is,
rather, an uneasy compromise between a private sector financial élite and a
public sector bureaucratic élite that ends up with one of them taking over the
other. That is why Pope St. John Paul II
cautioned against a “third way” between
capitalism and socialism, and why we stress that CESJ’s Just Third Way is above and beyond capitalism and socialism, made possible by accessing future savings through pure credit.
As a result of this slavery of past savings, many people who
considered themselves distributists followed Chesterton and Belloc in rejecting
capitalism. That was good.
They then made the fatal error of attempting to circumvent the shackles of the slavery of past savings by turning distributism into just another variety of socialism by redefining basic terms and principles — the very thing that Chesterton and Belloc refused to do, and which seemed to lock distributism into inaction. Tomorrow’s posting will cover how this was done.
They then made the fatal error of attempting to circumvent the shackles of the slavery of past savings by turning distributism into just another variety of socialism by redefining basic terms and principles — the very thing that Chesterton and Belloc refused to do, and which seemed to lock distributism into inaction. Tomorrow’s posting will cover how this was done.
