Thank you for making the distributist case with clarity and with the facts to back it up.

One problem I see right now is that while 1 in 4 Americans may belong to a co-op of some kind, it has mostly been a rural/agrarian and apolitical phenomena. For instance there are many cooperative dairies, but few if any cooperative manufacturing plants. And few co-ops see it as even a part of their "mission" to spread the word.

The point about sweatshop wages is also quite important - not only sweatshop labor in the US, but around the world, and then, not only sweatshops, but good old fashioned slavery. Not wage-slavery, not "its so bad it looks like slavery", but real slavery. There are an estimated 27 million slaves in the world, and the super-profits extracted from their labor benefits consumers in the US and everywhere else.

Great article, Bill. I've been annoying others for years with my insistence that we should buy from locally owned businesses whenever possible, even if it costs more.

I'm always surprised how disinterested Christians are about where their money goes and how their products come to them, beginning with food. This knowledge is necessary if we desire to act justly and not simply be consumers but "co-producers" -- creating and participating in systems that befit our dignity and our communities.

I'd be interested in hearing the Catholic arguments against distributism, however. Friends I've discussed this with -- who are knowledgeable in economics and global business practices -- find distributism lovely in theory, but utterly unrealistic and impractical.

Just wanted to make the comment that a common type of urban cooperative is apartment/condo housing. Many large cities like New York and Washington, D.C. have cooperative housing. I lived in a cooperative building for six years. While it had its challenges (because humans were involved), it certainly helped to foster a sense of community among other things.

Also, cooperative banks are active in urban areas. At one point I was the communications director for the central office of Nova Scotia's credit unions -- and they had cooperative banks in the cities, towns, as well as in the rural areas. (And just to give a shout out to my home province -- Antigonish, Nova Scotia, was the birth place to the cooperative movement in North America, started by Catholic priests.)

Consumer, housing and banking co-ops are common.

I think the productive cooperative has to be the backbone of a cooperative economy though, and those are still relatively rare in US cities.

Interesting perspective, but I think there is a significant error, albeit one that is very common in our country. Corporatism (the control of the force of government by business) is not at all any part of captitalism. The bailout cited at the beginning of the article, immoral and unethical as it is, is a result of government action for and with corporate collusion. It is not at all part of capitalism in it's real sense. Power gathers in the hands of big business (and big labor) not because of capitalism but because the force represented by government is unethically "sold" to them by elected persons.

True capitalism (or free enterprise, or free markets, or whatever terminology one might use) requires one human being, or group of human beings called a business, to voluntarily serve the needs of others in order to provide the means to achieve their own ends. Government operating in a capitalist system has a very definite function, namely the protection of God-given rights to life, liberty, and property (property meaning the fruits of one's labors). Government certainly has grown well beyond this function, to our detriment.

My point is that capitalism is what we should strive for. To the extent that distributism is another means to facilitate the voluntary free exchange between one person and another, it would fit perfectly in a capitalist system.

What exists today in our country is primarily a mix of socialism and corporatism with capitalism, while battered and insulted, still providing the means to keep it all going.

Alarming... disheartening... and disappointing to read about this theory here, of all places. Free-market capitalism tempered by moral restraint is the economic model that has made this country, and many [read: many, not few] of its citizens great. Please do not look to Europe for economic models.

In our two party-contentious-political-hegemony times that we live in, dreaming of an actual existence of a Utopia may make us feel better---but reality is something else.

Just like the best explanation for Saint Thomas More’s Utopia had more to do with More wanting to escape the contentious social life of Europe then actually suggesting a possible perfect societal model. More borrowed heavily on monastic communalism.

First, I see the competition of cooperatives in this distributism idea easily leading us into another feudal system of the seventeenth century. Then what? Our government stepping in to socialize all the cooperatives? This is Madness, but I digress.

This -ism as explained by the author describes the same road map Communist uprisings used to argue for “just wages, Unions are an essential, focuses on who owns the tools that make wealth, and a company should be owned by its workers (promising a workers paradise).

The genius of our founders, separation of powers, representative democracy, and limited enumerated powers of government, individual and states rights, and free enterprise (a true model of subsidiary) has created the wealthiest nation ever known to man and why some would want to throw it away defies logic.

Finally, the social doctrine of the Church was developed in the nineteenth century when industrial barons many times did not treat workers justly. The Church “refused to accept, in the practice of “capitalism,” individualism and the absolute primacy of the law of the marketplace over human labor.” The Church is talking about a form of capitalism without charity and human dignity.

Where as the idea of communism and socialism are completely rejected in any form.

CCC 2421, 2422, 2423, 2424, 2425

The twentieth century “New Deal” and “Great Society” government subversions and brainwashing of the citizenry has us chasing this European-Utopian-socialist agenda. Just how many times does socialism/communism have to fail before men finally believe it doesn’t work?

God help and Bless America.

Who says "free market capitalism" is going to be tempered by "moral restraint"?

The problems of capitalism are built into the structure of capitalism as much as they are the sinful nature of man. There are many situations in which what is good for profits is bad for society, bad for humanity, and bad for our souls.

We are moving into a post-scarcity society in which advances in modern technology are rendering more and more of the essentials of life less expensive, almost worthless. Yet a system based upon production for profit must find a way to continue profiting. This will be the problem that faces the 21st century. How do we move from a system that is premised on the basic scarcity of goods to one in which at least some basic goods can be produced cheaply and abundantly enough to practically be given away?

It means some people are simply going to have to acquiesce to going out of business, for the good of society and for the good of the planet. That means the basic capitalist framework has to be transcended. And we can choose between the state taking over these basic economic functions, or the people themselves. It is a falsehood to assume that the state is the only agency that can replace the capitalist. Communities of people functioning as workers, consumers and citizens can do it as well, and I think, better. That is what distributism is about.

We also face the central problem of the global labor market, which places massive downward pressures on the wages of the world's workers. It will always be more profitable for transnationals to set up shop in places where the cost of living is low, where labor rights are weak, and where governments oppress their citizens and prevent them from fighting for their basic human rights. Rather than opposing these pressures with economic nationalism, distributism can oppose them by spreading its message and model internationally. When workers in India and Brazil stand up for their rights, it benefits workers in the United States.

A well written article on distributism and a much needed challenge to the lazy thinking that posits only two alternatives (capitalism or socialism). The trouble with those seeking to defend capitalism is that they end up defending consumerism - a Godless, amoral system of materialism starkly at odds with the Church's teaching. The notion of capitalism tempered by moral restraint is risible. Who ever heard of market forces acting morally? The point is that they ONLY concern themselves with supply, demand and price. The core of capitalism is not about what society, or families or individuals need, but what will reward stockholders' investments. Yes, there have been different forms of capitalism, but none of them helps the little guy, and ultimately that's what most of us are.

It has been on this website that I first heard of "distributism" (I know, I need to get out more). In each discussion, the person(s) advocating distributism contend that it is completely voluntary. In that aspect, it would seem that distributism is completely incompatible with socialism, but under the right cirmcumstances it could be workable in an otherwise capitalistic system. If central government power were limited, big business influence would be reduced and corporate welfare could be eliminated. It would seem that a capitalist-distributist coalition would have a lot to gain in advancing the fight against big government in all its forms. Is that a fair assessment, or are there parts of the distributist system that are not voluntary?

It is silly to blame capitalism for corporate bail-outs. If free-market believers are going to be saddled with responsibility for the exact opposite of what they are promoting, the discussion has taken a dishonest turn.

<a href="http://tinyurl.com/55esfa">Distributism is not the answer.</a>

"On a level playing field, family businesses would thrive."

Riiiight. Like in Harrison Bergeron? That kind of level playing field?

The papal encyclicals of the industrial revolutionary period were responses to the widespread poverty of the masses. Today the masses are fat and rich. The mature fruit of capitalism in America has been prosperity beyond what a person in the nineteenth century could have dreamed.

Saving money is a good idea. Widespread ownership of capital is a great idea. Its called the stock market. Look into it, distributists.

http://tinyurl.com/55esfa

"Widespread ownership of capital is a great idea. Its called the stock market. Look into it, distributists."

I have. The Stock Market has nose-dived. Your stocks are now worth...what? What do you actually, really own?

"If free-market believers are going to be saddled with responsibility for the exact opposite of what they are promoting, the discussion has taken a dishonest turn."
So who caused the financial meltdown, then? Wasn't it all those institutions who wanted minimal regulation? Listen, if you believe in a free market then that means it has to be free for companies to grow big, really big, so big that they can start to dominate. And if you say no, they can't do that, then where's your freedom?

Companies should simply be free to grow and free to fail. They're also free to ask for a bailout, but that doesn't mean we should give one to them!

And stocks, they will go up again. And down. Or stay the same. But in the long term they will go up.

If you want security, go start a small business like a good distributist. Soon a diverse portfolio of stocks will seem like warm milk and a blanky in comparison!

"Companies should simply be free to grow and free to fail. They're also free to ask for a bailout, but that doesn't mean we should give one to them!"
I agree, but your notion of "freedom" needs clarification. Freedom for whom? If a company grows so much that it uses its size and dominance to destroy competition (i.e. other businesses) and therefore one of the very prerequisites of a "free market", you end up with a very unfree situation.

We already have laws against predatory pricing and the like. That isn't Distributism.

I wish to respond, for the benefit of Catholics who are reading this, to the proposition that the moral scrutiny of the popes is strictly confined to particular epochs and cultural circumstances.

One may review the entire Social Doctrine of the Church to see that Leo XIII wasn't merely speaking to the age, any more than the condemnation of contraception is event specific. Rather, an examination of Catholic Social Doctrine reveals a consistent, traditional teaching, from Aristotle to Aquinas to Pope John Paul II.

The imposition of statutes of limitation on papal pronouncements is novel. This restriction to the "here and now" has never been claimed by the Church, but like a bad rumor has spread like wildfire amongst the Catholic corpus.

The readers of Inside Catholic would do well to review the social encyclicals for consistency. If worker-associations, wide distribution of property, Catholic action, and the reinsertion of justice in the marketplace were isolated to Leo XIII's time, why have Pius XI, St. Pius X, Pius XII, John XXIII, Paul VI, and John Paul II repeated them as solutions to societal woes, echoing these in their respective encyclicals?

In his documents, Pope Leo clearly covers topics from the proper role of government to the just contract, not simply as responses to fashionable errors amongst a small sector of society. When he writes about "Americanism," the great pontiff may direct his comments at the United States, but he doesn't restrict them to Americans, as if these errors can only predictably occur here. This would be akin to claiming the Ten Commandments were reserved only for the biblical Israelites, or St. Paul's Letter to the Romans is not compulsory reading for Australians. No, whether a pope addresses a nation or a convent, the diagnosis and solution of any and all error is prescribed to Catholics in any time and space.

We would be wise to open up our eyes. We need to define the State, the marketplace, wages, liberty, property, etc. from the finest source we have: the pillar and bulwark of the truth.

For distributists, we believe we offer an alternative and serious attempt to apply Catholic Social Doctrine in the world. Come join us.

Leo XIII said, essentially, that "all economic life" under capitalism at that time had "become tragically hard, inexorable, and cruel," and therefore certain particular economic reforms were needed.

It is not relativism or some other heresy to say that no such reforms are needed at a time and place when all economic life is a bed of roses compared to every other experience in human history.

Medicine doesn't benefit a healthy person, and would often harm him.

There is a serious misconception-seen here in a few comments-that Distributism borders on Socialism. Read the article again and follow-up by reading articles from the Distributist Review and the works of Chesterton and Belloc.

Each failure of Capitalism has seen the "adjustment" of more and more power to fewer and fewer people or institutions-and less and less freedom for the common man and more and more centralization-guaranteeing that problems, when they occur, are bigger than they would be if decentralized. If the cycle wasn't clear before, it stares us in the face today in a number of areas.

Just one example: If locally grown produce the norm, the nationwide ecoli and samonelli crises of recent years (spinach and tomatoes/peppers come to mind) would never have happened. Local problems are much more easily tracked and corrected.

The "economy of scale" we hear so much about really has a cost-it is just hidden from the direct purchase price-but it is there none-the-less.

It is hard to let go of an economic system that we grew up on-even when it isn't working-but in justice we must see there is a better way. Good to see this article at Inside Catholic.

Quote from H. Bunce: "True capitalism (or free enterprise, or free markets, or whatever terminology one might use) requires one human being, or group of human beings called a business, to voluntarily serve the needs of others in order to provide the means to achieve their own ends."

Well does not match any description of capitalism I've ever heard in theory or practice. Capitalism isn't about serving peoples needs but the production and acquisition of wealth. People don't need derivatives or stocks but capitalism provides them because they allegedly have "utility."

Given the history of Game Laws, the banning of Begging and the "War on Idleness" one can hardly say that the greatest supporters laissez faire were in any way adverse to using
force.

Quote from Kevin: "It is silly to blame capitalism for corporate bail-outs. If free-market believers are going to be saddled with responsibility for the exact opposite of what they are promoting, the discussion has taken a dishonest turn."

Why? Historically the Capitalist have always done this. Remember Savings and Loans Bailout? But if you well that isn'the real Capitalism then how is arguement different from the Stalinism wasn't real communism?

Quote from Joe H: "We are moving into a post-scarcity society in which advances in modern technology are rendering more and more of the essentials of life less expensive, almost worthless."

What are you talking? We are in a middle of global food crisis and the UN says global under production away from to produce cash crop. Per Capita Manufacturing has declined to levels not seen the 1860's. Take at look at per capita shipping volumes. Look at the collapsing bridges, the over crowded hospitals and roads, under development of the power grid, etc.. etc... We are falling apart in terms of real economy.

Quote from Kevin: "Today the masses are fat and rich."

Are you insane? The African and South Asians countries have in 14th century levels of poverty and 5 billion people live on less than 50 cents a day. These 5 billion produce most of the wealth and manufactured commodities in the world but rather than it being investing in food agriculture systems,hospitals, Water treatment plants, and mass transportation system it all waste in trillions of dollar of casino bets on Wall Street and the City of London and worthless trinkets and cultural trash in Hollywood. It a shameful and anti-human system.

Under global capitalism, hunger threatens over a billion people with starvation and food riots are a daily part of life despite the total silence of the Western Media.

Quote from Kevin: "Saving money is a good idea. Widespread ownership of capital is a great idea. Its called the stock market. Look into it, distributists."

You apparently don't know what capital its just like the brilliant guys like Hank Paulson and G.W. Bush's New Economy and told that War would pay for itself.

Stocks aren't capital. They are recepts for a Share in Equity. Capital are is physical tools of production or land. The 70% of World's land and capital is owned by not only than 1% of the total population but a mere 7000 individuals. That is essence of capitalism and only a fool cannot see the injustice of that.

The reason we are facing a economic crisis is because of folks like Kevin that embraced the lies of monetarism that teaches that money is value and not real physical goods and infrastructure. As result gambling and speculation on luxury condos became the heart of "new economy" creating "new wealth" while the manufacturing tools went to China and Machinists and Millwrights went to work retail in Strip Malls instead of teaching the next generation of factory workers.

Nothing and replaced the loss of technical and industrial know how and population without skilled engineers, mechanics, millwright, machinists, and scientists is the definition of a poor country indeed.

America was never founded on free trade and British style of unregulated market capitalism. It was American System economics of Franklin, Hamilton, Adams, Clay, Carey, List and others. I suggest you read about American/National system.

It was surprising Distributist especially Carey on the need for producers to close to the consumers in a kinda of proto- Distributism.

First, on the bail-outs. It is quite obvious that our economic regulation is the result of a lot of tug-of-war between a free-market ideology and a socialist or nanny-state ideology. The capitalist promotes a preference for freedom. The other side wants government to step in and fix every human problem, from the big ones down. A government bail-out represents a touchdown scored by the anti-capitalist side. If the best criticism of capitalism that you have is that sometimes its supporters don't prevail in politics, then your argument is in serious trouble. That's like blaming pro-lifers for abortion.

Second, on third world poverty: Isn't it curious that the country with the strongest history of economic freedom is the one that can afford to send billions of dollars of aid to these poor folks? America wasn't always rich. Its a shame that some people want to prevent other nations from following the same path to prosperity that we did.

Third, on stocks, etc: No, stocks are not capital per se. But the only reason capital is any use to anybody is the profit* it generates, and stocks give you a claim to that profit. What's not to like? You say, "The 70% of World's land and capital is owned by ... a mere 7000 individuals. That is essence of capitalism and only a fool cannot see the injustice of that." Well color me a fool, because I think the real test of justice is what affect it has on the other 6 billion of us. Economic activity creates wealth. It's not a zero-sum game. Capitalism in America has created enough wealth that even the poorest of us have plenty, regardless of how much more somebody else has. It has the potential to do this for the rest of the world as well. Its been a mere couple of decades since the fall of global communism, and countries that embrace capitalism and good government see remarkable growth rates in their GDP. Just give it time, my friend.

(*Ok, imprecise, because you can just produce goods and use them yourself, but that is massively inefficient.)

Unfortunately Kevin ignored most of what I said and instead of using simple logic, I believe he is busy practicing oversimplification.

If Leo's argument is relevant merely for his present time, then why has every pope since not only praised his essential work, but elaborated on it by describing further error in economic thinking and action?

By reading Kevin’s response, most would assume these pontiffs were just celebrating a wonderful read, like Chesterton writing of Chaucer or singing the praises of Dickens. It would seem one could almost accuse the Proverbs of being outdated and irrelevant, only pertaining to their time and place. Or perhaps we could accuse the Good Samaritan of being merely a characterization of B.C. ethnic charity.

On the contrary, our popes critiqued the morality of behavior and gave us a blueprint, or the building blocks if you will, of a society best capable of creating stability and enhancing our spiritual ends; a duty for all pontiffs, as exchange in every form is based on human action, and subject to a moral compass.

"What are you talking? We are in a middle of global food crisis and the UN says global under production away from to produce cash crop. Per Capita Manufacturing has declined to levels not seen the 1860's. Take at look at per capita shipping volumes. Look at the collapsing bridges, the over crowded hospitals and roads, under development of the power grid, etc.. etc... We are falling apart in terms of real economy."

I am talking about methods of production, though. I am saying the technique exists, but not the will, because of this chaotic and self-serving system we have now.

All of these problems you point to are in fact problems of capitalism. The global food "crisis" is artificial; the collapse of the housing market caused a worldwide shift of speculative buying in the food market and sent prices skyrocketing. Then there are the WTO/IMF policies which mandate poor countries focus on cash crop exports instead of food self-sufficiency.

Collapsing bridges, crowded hospitals - again, these aren't technical problems, they are are socio-economic problems. The means are there to fix the infrastructure and provide quality healthcare to every person in the country. A massive public works program could take care of infrastructure (something I do believe should be left to the government). As for healthcare, we have to simply take the profit out of it. Healthcare is and must be recognized as a right. That doesn't mean doctors shouldn't make what their several years of education is worth; it means that not a single person's health should ever be jeopardized by the forces of supply and demand.

For everyone else, please READ:

"In the present document, which has human work as its main theme, it is right to confirm all the effort with which the Church's teaching has striven and continues to strive always to ensure the priority of work and, thereby, man's character as a subject in social life and, especially, in the dynamic structure of the whole economic process. From this point of view the position of "rigid" capitalism continues to remain unacceptable, namely the position that defends the exclusive right to private ownership of the means of production as an untouchable "dogma" of economic life. The principle of respect for work demands that this right should undergo a constructive revision, both in theory and in practice."

JP II, Laborem Exercens, sec. 14

I take your basic idea quite seriously. I'm not being flippant about dissenting from the standard interpretation of the social encyclicals. I only have time to write a brief outline of an explanation. 2 distinctions follow:

One must separate Belloc's ideas from the papal teachings. The papal teaching always focuses on the dignity of the person, and the importance of the practical outcome of the economic system in the lives of the workers. Belloc, on the other hand, would rather see an overall increase in poverty if he is able to achieve his goal of widespread personal ownership and control of productive capital. Many distributists follow Belloc's lead, while I think the popes couldn't care less about the details of the economic system as long as there is prosperity and economic autonomy (including private property). If the workers thrive, the popes are happy, while Belloc is unhappy because they are still workers.

Second, free-market advocacy shouldn't be mistaken for a metaphysical or moral assertion. Its a practical observation that the free market tends to make everybody better off. Whether that is so can be debated. But a Catholic capitalist sees no contradiction between economic freedom and the ideas such as those of JPII as quoted by the comment above. Of course we must keep in mind the dignity of the person in his economic transactions. That is not controversial. What should be discussed is whether the demonization of large corporations is fair, whether government intervention in this or that area is needed, etc etc.

Not even close. The "housing crisis" is directly tied to government intervention directed at spurring home ownership in this country (nothing wrong with home ownership, but government fiat isn't the way to get there). The "food crisis" can at least in part be blamed on the push for corn and sugar based ethanol (among other government programs). WTO/IMF are government organizations and their failures can hardly be blamed on capitalism. As for infrastructure, how many private bridges and roads are there in this country? Last I checked nearly all of our infrastructure is government owned. Again, where is capitalism at fault here? As for healthcare, more than half of all healthcare spending comes from government. Prior to Medicare in the mid-1960's, private insurance covered 75 percent of the market. Now it is only 35%. We have an employer-paid insurance system thanks to wage controls during WWII. We have those glorious HMOs that everyone loves because of the HMO Act of 1974. Most, if not ALL, of the "problems" associated with our healthcare system are the DIRECT result of government intervention.

Look, capitalism isn't perfect. It won't provide heaven on earth. But come on, it is MUCH better than what government has done to us.

Rob, great synopsis!

Rob,

I contest all of the claims you made.

"The "housing crisis" is directly tied to government intervention directed at spurring home ownership in this country (nothing wrong with home ownership, but government fiat isn't the way to get there)."

This is one of the great myths circulating among conservatives but it simply isn't true. The banks regulated by the Community Reinvestment Act had a 20+ year record of conforming to safe and sound lending practices, and cities with high concentrations of CRA regulated banks had lower rates of foreclosure. Only 1 in 4 sub-prime loans were made by CRA banks; 3 in 4 by lending institutions only partially CRA regulated or not at all, such as the legions of independent mortgage brokers. CRA banks were far less likely to sell off bad loans for profit.

The housing crisis is directly tied to the deregulation of the banks and the tsunami of speculation that this deregulation encouraged. The government failed alright - it failed to regulate the banks and crack down on predatory lending practices, it hamstrung the ability of the individual states to aggressively fight this problem. Meanwhile this deregulation put massive competitive pressure on Fannie and Freddie to get involved in the risky sub prime market. For decades the institutions functioned without causing a crisis; it was deregulation that served as the catalyst.

The housing crisis is the direct result of the underlying philosophy of individualistic capitalism: private vices, through the invisible magic of the market, are transformed into public virtues. From Bernard Mandeville and Adam Smith to Gordon Gekko and Donald Trump, the idea has been that the unbridled pursuit of self-interest actually benefits the whole of society. This philosophy has been decisively repudiated by events. Those of us who understand this are ready to move on.

Next you say,

"WTO/IMF are government organizations and their failures can hardly be blamed on capitalism."

But they certainly result from the pursuit of profit. Maybe it's not "pure capitalism", but then you just sound like a hardcore communist who declares that the failures of the Soviet government can hardly be blamed on the ideals of communism. There is a bit of truth in both claims, but not much consolation to the people who suffer in reality.

"As for infrastructure, how many private bridges and roads are there in this country? Last I checked nearly all of our infrastructure is government owned. Again, where is capitalism at fault here?"

Here the problem is budget priorities and economic philosophy; politicians who think it is more important for rich people to have more money - supposedly in the interests of capitalism - than to rebuild the nation's infrastructure. Any increase in spending is instantly decried by conservatives as "tax and spend" liberalism or even worse, some sort of socialism. Unless of course it is spending on the military.

I'll grant you that it is a mutated, predatory form of capitalism, but I would also contend that it is the only kind of capitalism that is going to exist in practice.

On healthcare, I'm not an expert, but I know people are being denied coverage because of pre-existing conditions, that insurance companies have armies of "adjusters" that are encouraged to deny as many claims as possible. That means people's health is being subordinated to company profits. There is a conflict where there should be none, and it is because we believe in this country that just about everything should turn a profit.

The deeper problem of unaffordable healthcare is the decline of workers real wages coupled with the rising costs of everything. I am a distributist because I recognize that a human being should be able to rely on more than a wage, which is nothing but what he is worth on the impersonal market. He should be able to rely on the real fruits of his labor, the value he creates or makes possible as a worker. These are two different things. Capitalism usually denies the latter, and treats labor as nothing more than an exploitable resource, a mark in the "costs" column.

Finally,

"Look, capitalism isn't perfect. It won't provide heaven on earth. But come on, it is MUCH better than what government has done to us."

I'm not saying government should "give us" everything; I do think it has a responsibility to provide some things. For everything else, there's distributism.

I'm shocked?!?!



There isn't anything you say that disproves the "myth" that government intervention is responsible for the housing crisis. The housing crisis was caused by disruptions in the housing market. These disruptions prevented the market from efficiently allocating housing resources and credit/financial risks. All of the interventions accomplished exactly what they set out to do: they increased home ownership in the U.S. to levels unsupportable by the market. More people buying more houses with cheaper credit drove prices skyward. Since this was unsustainable, the adjustment had to occur (note that had the increased home ownership been sustainable, the government interventions would not have been necessary in the first place). With or without regulation, the market did not cause the crisis.

Regarding WTO/IMF...


Sorry, but the "pursuit of profit" doesn't equate to capitalism. Corporatism, mercantilism, etc. all try to exploit government force to make a profit. That is NOT capitalism as I understand it.

As for infrastructure, I still do not see the connection between crumbling roads and bridges and capitalism. IF we had a private system of roads and those roads were in shambles because of greedy road owners, then you might have a case. The indirect link between tax policy, budget priorites, etc. and capitalism is weak. Remember the converse is also true, only through capitalism can government collect the tax revenue it needs for upkeep of the roads and bridges.



Real wages and rising costs are the result of inflation. We can thank govnerment's manipulation of the money supply for that. More dollars chasing our goods and services drives up prices. Those that get the money first (banks, government contractors, etc.) benefit the most because they get to spend the money before prices rise. Those who get the new money last or not at all (wage earners, the poor, and people on fixed incomes) suffer because they're stuck with the higher prices. Inflation is a hidden tax that hurts the poor and benefits the rich and well connected. Again, capitalism is not to blame.

Would distributism be better? I don't understand it enough to make that call right now. I'm just saying that capitalism is not the cause of those specific problems you've identified.

Rob H,

The crux of the matter here is the difference between capitalism "as you understand it" and as "I understand it".

Your description of the housing crisis does not clear capitalism "as I understand it" of any responsibility. You talk about "disruptions in the housing market". What disruptions?

I know that the standard narrative right now is that the Community Reinvestment Act is at the root of the problem. If that isn't your position, so be it. If it is, then you're simply wrong, for the reasons I already stated.

Predatory lending is a problem that arises through lack of regulation, not excess regulation. It is profit-motivated behavior, and it is undertaken by free agents in the marketplace. The problem of capitalism "as I understand it" is that the pursuit of short-term gain by millions of individuals leads to long term health failure. If we can conceive of society as an organism, this economic behavior would be the equivalent of binging on ice cream and fried chicken. It tastes good now, but it will clog your arteries and lead to heart problems later.

CRA regulations actually prevented the crisis from being worse than it was. The epidemic of predatory lending and the trading of toxic loans would have been more widespread and more dangerous. There are responsible ways for government to regulate the economy. Republicans, and for that matter a good many "New Democrats", are not very good at it.

Now we come to this:

"Sorry, but the "pursuit of profit" doesn't equate to capitalism. Corporatism, mercantilism, etc. all try to exploit government force to make a profit. That is NOT capitalism as I understand it."

What is capitalism as you understand it? If it is simply the free exchange of goods and services, I say that doesn't meet the definition. If that it is all it is, then 90% of the time I am for it - the other 10% of the time there are market failures that governments and local communities must address through responsible policies.

I am somewhat perplexed by this statement:

"As for infrastructure, I still do not see the connection between crumbling roads and bridges and capitalism. IF we had a private system of roads and those roads were in shambles because of greedy road owners, then you might have a case. The indirect link between tax policy, budget priorites, etc. and capitalism is weak. Remember the converse is also true, only through capitalism can government collect the tax revenue it needs for upkeep of the roads and bridges."

This is only to say that you don't seem to understand the connection between capitalism and policy. I don't think it is a "weak" linkage at all. Infrastructure does not provide immediate, large returns on investment - that is why government has traditionally provided it.

When policy is guided by the assumption that more money should be in the hands of the wealthy - for whatever erroneous reasons - then that means less resources for infrastructure and other critical services. There is no doubt that the budget priorities and policies of the GOP, and the New Democrats to a lesser extent, are often touted as (because they are) "business friendly". You talk about rebuilding infrastructure and they shout about "tax and spend" and "big government". This is free market ideology run amuck. Mike Huckabee was denounced as a "tax and spender" during the primaries because Arkansas raised taxes slightly to repair crumbling roads and bridges.

This is an ideological problem to be sure, and not the direct result of a failure of capitalism. But it isn't a result of the failure of government either - it is a result of politicians who let ideology, a very pro-market ideology, blind them to what will best serve the common good. Of course government "doesn't work" when you don't fund it and undermine and denounce it every time it tries to do what it is supposed to do.

More to come

Finally on that last point, you don't need capitalism for government revenue, it should go without saying. Nationalized industries provide that too. So would industries owned collectively by communities and towns.

Next, on wages:

"Real wages and rising costs are the result of inflation."

This is another inaccuracy. Real wages are wages adjusted for inflation - that is what the term means. We are talking about a serious drop in purchasing power. When we say there is a decline in real wages, it means that even if we take inflation into account, the purchasing power of the average American worker has declined.

This is not because of inflation, but because of the dismantling of America's industrial-manufacturing base, decades of union-busting, and administrations both Republican and Democrat that have sided with big business over the interests of the workers.

It is also because of, in large part, to the pressures of global competition on the labor market. The low cost of living, coupled with the complete lack of labor and even basic human rights in other countries, has put tremendous downward pressure on the wages of workers in the developed countries. This is a structural problem built right into capitalism; it is more profitable to do business where conditions both "natural" and "political" drive down the price of labor to the bare physical minimum needed to sustain a human being capable of performing labor.

But this is not a humane system, it is far from the best humanity can do. The labor market, because it functions in this way, has been unambigiously denounced by Popes. This is what Pius XI wrote in Quadragesimo Anno:

"Labor... is not a mere commodity. On the contrary, the worker's human dignity in it must be recognized. It therefore cannot be bought and sold like a commodity."

Powerful words! And they are at the heart of distributism. Pius XI goes on to say:

"Nevertheless, as the situation now stands, hiring and offering for hire in the so-called labor market separate men into two divisions, as into battle lines, and the contest between these divisions turns the labor market itself almost into a battlefield where, face to face, the opposing lines struggle bitterly. Everyone understands that this grave evil which is plunging all human society to destruction must be remedied as soon as possible."

These words are as relevant today as they were when they were first written. I believe as Catholics, Americans, and members of the human species we are called to work for this solution "as soon as possible".

Yes, your understanding and my understanding of capitalism are indeed different.

Government interference in the market (Fannie/Freddie, CRA, artificially low interest rates, fractional reserve banking, etc.) all distort the market. By "distort" I mean they allocate resources in a less efficient manner than free market capitalism otherwise would do on its own. The result is unsustainable and will force a correction by the markets (artificially inflated housing prices will be brought back down because they are unsustainable). Capitalism did not cause this.

Predatory pricing is a myth. Can't be supported in a free market. Competition always brings supply and demand into balance (unless interrupted by the government or some other outside force).

I'd go along with the definition of capitalism as "the free exchange of goods and services" if you add protections for private property rights. In our society, government is supposed to handle this last part.

As for infrastructure (sorry for perplexing you): if it is all government controlled how can its deterioration be blamed on capitalism? I suggest trying private roads and bridges to see which system is better.



Sorry, but this was a typo. I meant to say that "the DECLINE in real wages and rising costs are the result of inflation." Obviously I didn't mean that real wages were the result of inflation. I meant that by inflating the money supply the Federal Reserve was benefiting banks and the government at the expense of the poor and those on fixed incomes. OF COURSE inflation causes a drop in purchasing power. But inflation isn't caused by capitalism, it is caused by the only institution that has a monopoly on the printing of money: government!

If distributism is the answer, fine. But your criticisms of capitalism are pretty hollow (as least in regards to the problems identified here).

Pius XI referred specifically to Capitalism – the “economic system wherein some provide capital while others provide labor for a joint economic activity” (n. 100) – as a non-condemnable system. He taught:

“With all energy Leo XIII sought to adjust this economic system according to the norms of the right order; hence it is evident that this system is not condemned in itself. And surely it is not of its own nature vicious. But it does violate right order when capital hires workers, that is, the non-owning working class, with a view to and under such terms that it directs business and even the whole economic system according to its own will and advantage, scorning the human dignity of the workers, the social character of economic activity and social justice itself, and the common good” (n. 101).

These texts prove that, according to Catholic doctrine, Capitalism is not bad in itself. It is a system that must be corrected of its frequent defects in order to be Catholic and help to establish a just social order.
Now some questions come to mind: Why is it that so many writers and followers of Distributism do not even mention the true and balanced position of the Church concerning Capitalism? Why do they pretend that the Church condemned Capitalism as intrinsically evil, when this is not true?

But there is more. In Quadragesimo anno Pius XI also spoke of the right of the rich to increase their wealth, which is also the opposite of what has been often spread by the Distributists. The Pontiff taught:

“Those who are engaged in producing goods, therefore, are not forbidden to increase their fortune in a just and lawful manner; for it is only fair that he who renders service to the community and makes it richer should also, through the increased wealth of the community, be made richer himself according to his position, provided that all these things be sought with due respect for the laws of God and without impairing the rights of others and they be employed in accordance with faith and right reason” (n. 136).

And there are more questions that must be asked as I read the Distributists: Why is it that whoever approaches them is induced to hate the natural elites of society? Why does Distributism see the rich as a kind of thief of society, when traditional Catholic doctrine clearly teaches the opposite?

continued

After combating abuses of Capitalism, Pius XI stressed the role of the rich class for the common good of society. He affirmed:

“Therefore, with all our strength and effort we must strive that at least in the future the abundant fruits of production will accrue equitably to those who are rich and will be distributed in ample sufficiency among the workers – not that these may become remiss in work, for man is born to labor as the bird to fly – but that they may increase their property by thrift, that they may bear, by wise management of this increase in property, the burdens of family life with greater ease and security, and that, emerging from insecure lot in life in whose uncertainties non-owning workers are cast, they may be able not only to endure the vicissitudes of earthly existence but have also assurance that when their lives are ended they will provide in some measure for those they may leave after them” (n. 61).

The Catholic law of charity. Above, St. Elizabeth of Hungary distributing alms and bread to the poor.

www.sju.edu
Here Pius XI mentioned that the rich should “distribute” their wealth among the workers. How should this be done? Certainly, the first thing to do is to give each worker a just salary – “his great and principal duty is to give every one what is just” (Rerum novarum, n. 20). But then, there are still social needs. What criterion did Leo XIII present for the wealthy to follow in order to ease these necessities? He asked this question and then answered it:

“How must one’s possessions be used? The Church replies without hesitation in the words of the same holy Doctor [St. Thomas of Aquinas]: 'Man should not consider his material possessions as his own, but as common to all, so as to share them without hesitation when others are in need. Whence the Apostle with 'Command the rich of this world … to offer with no stint, to apportion largely'' (Summa theologiae, II-II, q. 66, art. 2, answer). True, no one is commanded to distribute to others that which is required for his own needs and those of his household; not even to give away what is reasonably required to keep up becomingly his condition in life, ‘for no one ought to than becomingly.’ But, when what necessity demands to be supplied, and one’s standing fairly taken thought for, it becomes a duty to give to the indigent out of what remains over. ‘Of that which remaineth, give alms.’ (Luke 11:41 ) It is a duty, not of justice – save in extreme cases – but of Christian charity, a duty not enforced by human law” (Rerum novarum, n. 22).

Therefore, the “distributism” that the Catholic Church teaches is quite different from the one being spread recently in the United States. Besides the precept of justice of giving the just wage to the worker, the Popes taught that the law that commands giving to the poor is the law of charity, and not human justice, as has often been spread by Socialists, Progressivists and Distributists. Except in the case of extreme necessity, no human law should oblige a person to give from his superfluous. It is a duty of charity which is, nonetheless, very serious because one will answer for it before God.

In opposition to the Distributist authors who spoke of the end of Capitalism and the coming of a new social reality, Pius XI sought a future of social harmony among the large proprietors and workers, the rich and the poor. Indeed, he said:

“For then the rich and others in positions of power will change their former indifference toward their poorer brothers into a solicitous and active love, listen with kindliness to their just demands, and freely forgive their possible mistakes and faults. And the workers, sincerely putting aside every feeling of hatred or envy which the promoters of social conflict so cunningly exploit, will not only accept without rancor the place in human society assigned them by Divine Providence, but rather will hold it in esteem, knowing well that everyone according to his function and duty is toiling usefully and honorably for the common good and is following closely in the footsteps of Him Who, being in the form of God, willed to be a carpenter among men and be known as the son of a carpenter” (n. 137).

So, the ideal toward which Leo XIII and Pius XI directed their social Encyclicals Rerum novarum and Quadragesimo anno was one that would renew and correct Capitalism. It is quite a different goal from that being presented by the leaders of Distributism.

continued..

Rob,

If you think my criticisms of capitalism are "hollow", I would like to know why. You didn't really address any of them.

To address your specific claims:

"Government interference in the market (Fannie/Freddie, CRA, artificially low interest rates, fractional reserve banking, etc.) all distort the market. By "distort" I mean they allocate resources in a less efficient manner than free market capitalism otherwise would do on its own."

The empirical data shows otherwise. I don't know about fractional reserve banking, but I do know that CRA, as well as Fannie and Freddie up until this decade, worked pretty much as they were intended to work. The timeline of events clearly shows that the deregulation of the banks was the catalyst that set the sub-prime crisis into motion.

This is the problem: ideology always seems to trump the facts. You take it as a given that any "distortion" of the market leads to a less efficient allocation of resources. The evidence shows that CRA regulated banks were expected to, and did, engage in safe and sound lending and did not get involved in risky financial activity. Government involvement did not have the effect your ideology predicted it would have; when are you going to own up to it? When are you going to say, "ok, maybe the government can play a role in the economy, if it does so in this particular way"?

That's the key to moving forward economically - letting go of ideological dogmas, as Popes have suggested, and addressing economic matters in both a practical and humane way, keeping the common good, the health of the community and the dignity of the laborer at the center of our considerations. Unfettered capitalism does not and cannot do this.

"Predatory pricing is a myth. Can't be supported in a free market. Competition always brings supply and demand into balance (unless interrupted by the government or some other outside force)."

This is yet another problem - attributing to "the market" powers it doesn't have. The market is made up of people who play by their own rules. They decide what is in their best immediate interests. They don't care about what is good or bad for this abstract entity, "the market", but for themselves.

In this case we are not talking about "predatory pricing", though price-fixing can and does exist among oligopolies, markets dominated by a handful of large firms - firms that got large through competition, I might add. Competition causes its own problems.

In this case we are talking about predatory lending, where loans are granted on the basis of the value of the assets that can be foreclosed upon, and not the ability of the borrow to repay the loan. Chairman Bernanke described the problem as well: the fees lenders collected by selling their loans upstream were based on loan volume, not loan quality.

The government had nothing to do with these practices, and in fact encouraged them and made them easier and more profitable by deregulating the banks. Rather, individuals seeking to maximize their personal profit duped and fooled working and middle class Americans with indecipherable loan contracts, sold bad loans, pocketed fees, and went home wealthy.

Finally, are you going to say capitalism has nothing to do with declining wages, union-busting, and pressures of the global labor market? And what do you have to say about the words of Pope Pius XII?

Here Pius XI mentioned that the rich should “distribute” their wealth among the workers. How should this be done? Certainly, the first thing to do is to give each worker a just salary – “his great and principal duty is to give every one what is just” (Rerum novarum, n. 20). But then, there are still social needs. What criterion did Leo XIII present for the wealthy to follow in order to ease these necessities? He asked this question and then answered it:

“How must one’s possessions be used? The Church replies without hesitation in the words of the same holy Doctor [St. Thomas of Aquinas]: 'Man should not consider his material possessions as his own, but as common to all, so as to share them without hesitation when others are in need. Whence the Apostle with 'Command the rich of this world … to offer with no stint, to apportion largely'' (Summa theologiae, II-II, q. 66, art. 2, answer). True, no one is commanded to distribute to others that which is required for his own needs and those of his household; not even to give away what is reasonably required to keep up becomingly his condition in life, ‘for no one ought to than becomingly.’ But, when what necessity demands to be supplied, and one’s standing fairly taken thought for, it becomes a duty to give to the indigent out of what remains over. ‘Of that which remaineth, give alms.’ (Luke 11:41 ) It is a duty, not of justice – save in extreme cases – but of Christian charity, a duty not enforced by human law” (Rerum novarum, n. 22).

Therefore, the “distributism” that the Catholic Church teaches is quite different from the one being spread recently in the United States. Besides the precept of justice of giving the just wage to the worker, the Popes taught that the law that commands giving to the poor is the law of charity, and not human justice, as has often been spread by Socialists, Progressivists and Distributists. Except in the case of extreme necessity, no human law should oblige a person to give from his superfluous. It is a duty of charity which is, nonetheless, very serious because one will answer for it before God.


Which Way for Society?

Toward which type of society should Catholics tend? Should they build a hierarchical society wherein capitalists and workers, rich and poor (and all classes) live in harmony? Or should they abolish Capitalism and aim towards a “Distributist” society consisting of small family-sized properties without elites?

In opposition to the Distributist authors who spoke of the end of Capitalism and the coming of a new social reality, Pius XI sought a future of social harmony among the large proprietors and workers, the rich and the poor. Indeed, he said:

“For then the rich and others in positions of power will change their former indifference toward their poorer brothers into a solicitous and active love, listen with kindliness to their just demands, and freely forgive their possible mistakes and faults. And the workers, sincerely putting aside every feeling of hatred or envy which the promoters of social conflict so cunningly exploit, will not only accept without rancor the place in human society assigned them by Divine Providence, but rather will hold it in esteem, knowing well that everyone according to his function and duty is toiling usefully and honorably for the common good and is following closely in the footsteps of Him Who, being in the form of God, willed to be a carpenter among men and be known as the son of a carpenter” (n. 137).

So, the ideal toward which Leo XIII and Pius XI directed their social Encyclicals Rerum novarum and Quadragesimo anno was one that would renew and correct Capitalism. It is quite a different goal from that being presented by the leaders of Distributism.

END

You ask,

"Why do they pretend that the Church condemned Capitalism as intrinsically evil, when this is not true?"

We don't. Who used the words "intrinsically evil"?

My point has been that they don't support the "untouchable dogmas" of capitalism, that there is no economic concept that cannot be subject to revision. Pope JP II challenged private ownership of the means of production, Pope Pius XII challenged the labor market.

There may be some question as to whether or to what extent these institutions can be modified, and still be "capitalist". I suggest that people get over their love affair with the word "capitalism" and realize that the Catholic perspective is that the economy is to serve man, and not vice-versa, and if that means challenging and revising core concepts of both capitalism and socialism, then that is what we ought to do.

It is absurd to say we are "misusing" the Popes - if you don't like what they have to say, your problem is with them, not with us. We didn't invent the passages we quote. Cognitive dissonance, I realize, is hard to deal with.

Here Pius XI mentioned that the rich should “distribute” their wealth among the workers. How should this be done? Certainly, the first thing to do is to give each worker a just salary – “his great and principal duty is to give every one what is just” (Rerum novarum, n. 20). But then, there are still social needs. What criterion did Leo XIII present for the wealthy to follow in order to ease these necessities? He asked this question and then answered it:

“How must one’s possessions be used? The Church replies without hesitation in the words of the same holy Doctor [St. Thomas of Aquinas]: 'Man should not consider his material possessions as his own, but as common to all, so as to share them without hesitation when others are in need. Whence the Apostle with 'Command the rich of this world … to offer with no stint, to apportion largely'' (Summa theologiae, II-II, q. 66, art. 2, answer). True, no one is commanded to distribute to others that which is required for his own needs and those of his household; not even to give away what is reasonably required to keep up becomingly his condition in life, ‘for no one ought to than becomingly.’ But, when what necessity demands to be supplied, and one’s standing fairly taken thought for, it becomes a duty to give to the indigent out of what remains over. ‘Of that which remaineth, give alms.’ (Luke 11:41 ) It is a duty, not of justice – save in extreme cases – but of Christian charity, a duty not enforced by human law” (Rerum novarum, n. 22).

Therefore, the “distributism” that the Catholic Church teaches is quite different from the one being spread recently in the United States. Besides the precept of justice of giving the just wage to the worker, the Popes taught that the law that commands giving to the poor is the law of charity, and not human justice, as has often been spread by Socialists, Progressivists and Distributists. Except in the case of extreme necessity, no human law should oblige a person to give from his superfluous. It is a duty of charity which is, nonetheless, very serious because one will answer for it before God.


Which Way for Society?

Toward which type of society should Catholics tend? Should they build a hierarchical society wherein capitalists and workers, rich and poor (and all classes) live in harmony? Or should they abolish Capitalism and aim towards a “Distributist” society consisting of small family-sized properties without elites?

In opposition to the Distributist authors who spoke of the end of Capitalism and the coming of a new social reality, Pius XI sought a future of social harmony among the large proprietors and workers, the rich and the poor. Indeed, he said:

“For then the rich and others in positions of power will change their former indifference toward their poorer brothers into a solicitous and active love, listen with kindliness to their just demands, and freely forgive their possible mistakes and faults. And the workers, sincerely putting aside every feeling of hatred or envy which the promoters of social conflict so cunningly exploit, will not only accept without rancor the place in human society assigned them by Divine Providence, but rather will hold it in esteem, knowing well that everyone according to his function and duty is toiling usefully and honorably for the common good and is following closely in the footsteps of Him Who, being in the form of God, willed to be a carpenter among men and be known as the son of a carpenter” (n. 137).

So, the ideal toward which Leo XIII and Pius XI directed their social Encyclicals Rerum novarum and Quadragesimo anno was one that would renew and correct Capitalism. It is quite a different goal from that being presented by the leaders of Distributism.

END

Please do check out the complete article - the link is in my first post. (and DO read the encyclicals)

Craig,

I'm going to respond to all your points in full, soon, and I hope you'll check it out. I think we can have a respectful disagreement here.

Couldn't have said it better myself.

FACT: government programs to increase home ownership resulted in... INCREASED HOME OWNERSHIP. As you say, the empirical data shows that the CRA and Freddie/Fannie "worked pretty much as they were intended to work". That is they increased home ownership above and beyond what the market would otherwise have provided. This caused the housing crisis! Thank you for making my point.

Next...



My mistake. I misread your previous post re: predatory lending. But please note that oligopolies are not created through competition. Oligopolies, cartels, monopolies, etc. only exist where there are non-market barriers to entry into an industry. These are examples of collusion, not competition. I'll refer you to the railroads of the late 19th centry as an example.

Next...


The artificially low interest rate set by the Fed added trillions in "extra" liquidity in the market. The costs of this liquidity was set by the government, not the capital markets. Interest rates serve as a measure of risk and by setting them below market rates it provided an incentive to the financial institutions to take on unnecessary risk and engage in the predatory lending you described. When risk is priced by the market, financial actors balance volume and quality more efficiently.



You might also say that "the government is made up of people who play by their own rules. They decide what is in their best immediate interest." Politicians decided it was in their best interest to expand home ownership in this country. They used government force to get people into homes they could not afford. Increased demand drove prices up to levels unsustainable by the market (the boom phase). The market, made up of people looking out for their own interests, could not support the higher prices/demand. Prices fell (the bust phase) and will continue to fall until equillibrium is reached. Not government forced equillibrium, real market-based equillibrium. Of course, government has to "do something" so they'll keep interferring with the process and prolong the correction. All the while people like you will continue to blame capitalism.

As for the predatory lenders, blame the Fed not capitalism. Since the Federal Reserve interferred in the financial market and caused risk to be mis-priced, many unscrupulous individuals profited in the housing boom through predatory lending. Then we get a correction and prices fall (maybe plummet is a better word). Now those engaged in predatroy lending are left holding assets of declining value. AND capital markets are dried up so they can't get any more of that added liquidity they've been enjoying. But instead of letting the market punish them (yes, this is a power the market does have), our government steps in and bails them out.



Ummm... they had everything to do with these practices. They caused the boom and prevented the correction.


No.


I agree....

Sound bites from the Popes with conjecture that they are coded messages that democracy and free enterprise should be replaced by socialism defies common sense.

One thing to remember when allegations surface that there's a secret code about anything in the Pope's writings: The Holy Spirit doesn't fly under the radar.

All this hysteria reminds me of an experience once where an orthodox but misguided priest once sent a dozen or so books to me "documenting" how the Sacraments of the Catholic Church after Vatican II are invalid during a time when I was confused by the numerous radical pro abortion and pro gay marriage clergy in my diocese.

I read through the books and materials in earnest. The resources were put together to craft a convincing argument about the validity of post V2 Sacraments.

The only problem was that it

a. defied common sense that Christ would bury the ticket to our Salvation under a heap of high intellectual level theology.

b. breaks His promise that we will always have the Catholic Church and the Sacraments - making a mockery of his Passion.

If a group of people come forth with an interpretation of the Pope's writings that you have never heard before in the public square, it is bogus.

You'll forgive me Joe, if I take a pass and I advise others to do the same under the common sense principles I've mentioned above: The Holy Spirit doesn't fly under the radar.

If people are decoding messages from the Pope that you've never heard them say in the public square, it's bogus.

Rob,

I'm afraid you misread/misunderstood my point about CRA and F&F. Your claim that they increased home ownership "beyond what the market would have provided" is just not true. I already made this point before: what the evidence shows is that CRA regulated banks did not make risky loans and did not sell toxic loans.

The CRA regulations, which you can find online, clearly state that banks were under no obligation to make unprofitable loans, only that they had to make an effort to serve low and middle income areas to the best of their ability while remaining responsible and profitable. What they did not do is precisely what the non-regulated lending institutions engaged in! THAT is my point.

You say,

"Oligopolies, cartels, monopolies, etc. only exist where there are non-market barriers to entry into an industry. These are examples of collusion, not competition. I'll refer you to the railroads of the late 19th centry as an example."

Oligopolies are not to be confused with either cartels or monopolies. These are different things. Oligopolies are common in markets all over the world. It is simply a situation where a few firms have managed, through competition, to capture a large share of the market.

What is the point of competition if not to compete, to grow larger than your rival and put them out of business? Oligopolies can become monopolies, cartels, trusts, etc. But is it always through "non market" means? Microsoft faced an anti-trust suit because it bundled Windows with Internet Explorer; that was a decision made by the Microsoft corporation, not the government. It was the government that challenged their monopolistic practices.

Regarding the Fed and interest rates, you have a point, but it is really a separate point from the practice of predatory lending. I can agree that government intervention in these areas is problematic, and you might agree that predatory lending is undertaken by free agents seeking to maximize personal gain.

Again with this discredited narrative:

"Politicians decided it was in their best interest to expand home ownership in this country. They used government force to get people into homes they could not afford."

They did no such thing. Where is the evidence? There isn't a single shred of evidence that the government engaged in this activity, and every bit of evidence to demonstrate that CRA regulated banks were mandated to practice safe and sound lending practices and never discouraged from making a profit.

"Increased demand drove prices up to levels unsustainable by the market (the boom phase)."

Increased demand, yes! But that demand was satisfied by deregulated lending institutions that were not held accountable, were not subject to government oversight, and consequently able to rope millions of people into predatory loans.

The problem is that you and others just can't come to terms with the fact that this crisis was caused by people operating exactly in the way classical capitalism assumes people can and should act in the market. Looking after their own interests, indulging in their own private vices, it has been said that this will lead to public benefits. In this case and in cases in the past we see instead that indulgence leads to over indulgence and that leads to the economic equivalent of a massive coronary. Bad loans were like the plaque that builds up in the arteries.

Good policies, heck, even the enforcement of the policies on the books before the Clinton and later Bush deregulation, could have prevented this crisis. What you are criticizing with regard to the Fed, are simply bad policies. But there is a precedent of good policies actually working - the Depression-era Glass Stegall Act prevented the banks from engaging in this risky behavior on a widescale, the CRA mandated that banks practice safe and sound lending practices, and these regulations worked before they were thrown out the window by Republicans and a significant section of Democrats.

I think its unfortunate that, while you can quote the Popes all you want and render your own interpretations, you dismiss and belittle those of us who want to do the same.

You don't want to debate this, fine. It's clear that you have some inability to deal directly with what the Popes have said about private property and the labor market. I don't need to interpret what they've said - you just need to read it.

Meanwhile we will continue to make our arguments and I believe, especially in this economic environment, they will appear far more steeped in common sense and rationality than unconditional adulation of the collection of principles and ideas you call "capitalism".

ONE more time: I said the housing crisis (you know, the collapse of the housing market... falling prices... etc.) was caused by too much demand. If FF/CRA didn't increase home ownership beyond what the market could, why were these programs implemented? I never mentioned a word about unprofitable loans from FF or CRA. These programs were designed to get more people into more homes. They worked, but unfortunately it was not sustainable because the market could not support the increase. I've made THIS point before. Oh, Joe, please explain what is not true about this?

You say,



Ummm... never said they were the same. In a free market it doesn't matter how big an individual company becomes, if others are free to enter (or exit) then competition will prevent abnormal profits. You can't price things low to kill competitors and then raise prices when they're gone because someone else will come in and undercut you. In a free and open market, that is.



Without the Fed interest rates would be set in the capital market so that risk is priced appropriately. Free agents would select other means of maximizing personal gain because the risk of lending on volume rather than quality would be eliminated.

Again with this discredited narrative:



The evidence is in the collapse of the housing market. Did home ownership increase because of these programs? Yes. Did prices rise because of increased demand and easy credit? Yes. Had people been able to afford the homes the government programs wouldn't have been necessary and the boom would not have occurred.

OF COURSE "this crisis was caused by people operating exactly in the way classical capitalism assumes people can and should act in the market." People did exactly what was to be expected when government offers cheap and easy credit as well as other incentives to increase home ownership. Capitalism doesn't cause this behavior, but it certainly predicted it. But when the market tries to correct the disruption, government intervenes (again) and makes things worse. Hoover (and then FDR) turned the 1929 crash into the Great Depression. Let's just see what the bailout and other interventions do this time around.

Please don't use the tactic that I am "belittling" you to shut down logical and common sense fisking of conjectures being raised as secret messages inside of the encyclicals.

I could with more precision isolate the errors in the conjecture. For instance:



We don't have "rigid" capitalism in USA. Anyone and everyone who has 40 or so dollars can march up to the Secretary of State's Office and become a business person on a small scale. There are farmer's markets and small DBA's galore.

The Pope's writings are reinforcing that greed holds no place in society, that workers should be given fair wages, that society should be compassionate, kind and generous to the poor. That men and women of good will should be free to compete - which of course, we are.

There is no getting around the below:

“For then the rich and others in positions of power will change their former indifference toward their poorer brothers into a solicitous and active love, listen with kindliness to their just demands, and freely forgive their possible mistakes and faults. And the workers, sincerely putting aside every feeling of hatred or envy which the promoters of social conflict so cunningly exploit, will not only accept without rancor the place in human society assigned them by Divine Providence, but rather will hold it in esteem, knowing well that everyone according to his function and duty is toiling usefully and honorably for the common good and is following closely in the footsteps of Him Who, being in the form of God, willed to be a carpenter among men and be known as the son of a carpenter”

Even the social justice Woodstockers at the USCCB have not alleged that the Popes have suggested what you say they have.

It suffices to remind people that the Popes and the Holy Spirit do not fly under the radar.

For those of you interested in Rob's points, please visit the website I've posted in the weblink and enjoy the very common sense video.

Rob,

You are employing specious reasoning without providing facts.

You've asserted that it was "more than the market could bear" without demonstrating how or why this is so. And in response to my question, "where is the evidence" that the government forced anyone to make bad loans, you simply say, "the collapse of the housing market" - as if NOTHING else could have possibly been the cause. By your own subjective process of elimination, based on your ideological assumptions and independent of any actual evidence, you come to this conclusion. This is precisely the problem.

You ask:

"ONE more time: I said the housing crisis (you know, the collapse of the housing market... falling prices... etc.) was caused by too much demand. If FF/CRA didn't increase home ownership beyond what the market could, why were these programs implemented?"

Because of the perception, grounded largely in the stark reality, that there was racial redlining going on with the banks. Talk about your market distortions - racist assumptions on the part of lenders, taking one look at a black person and assuming they won't be able to make good on a loan, so why bother?

What the CRA did - once again - was set benchmarks for banks to meet in serving the credit needs of low income and middle income areas, and especially minority areas. But the loans they made were NOT bad. When you make safe loans that are likely to be repaid, that isn't going to cause the market to collapse.

Contrary to popular opinion in some parts, black people and poor people do work from time to time. Those that were granted loans by CRA banks had to pay them back. Those that were granted loans by unregulated, predatory lenders were expected to default, so that the lender could foreclose and make a bundle, or sell the bad loan and pocket a fee. So yes, a lot of poor people and minorities foreclosed; but as the evidence shows, evidence I will be happy to share with you, the foreclosure rates were lower in areas with a higher concentration of CRA banks.

For over 20 years the CRA regulated banks sought to meet these standards and there was no sub-prime crisis in the works. That is because the banks, by and large, took on good loans, did not sell bad or toxic loans, and stayed within the regulatory framework of the CRA. The evidence shows that the CRA banks were responsible lenders, and not responsible for the sub-prime mess. Once again.

Deregulation is what threw everything out of whack, for reasons I clearly explained already.

Once again, I suppose, it is a matter of interpretation.

We may not have rigid capitalism in practice - it certainly isn't illegal for us to start cooperatives and practice distributism.

We do have ideological rigidity, which I sense coming from you and others. That isn't good either. Because even what we could legally, that is, start firms that are based on worker ownership and control, you would still denounce ideologically as evil "socialism". That's the rigidity that is the problem, unless you're willing to say that these simple goals are just fine.

You are belittling; you are saying we are only providing "soundbites". Do you honestly believe I couldn't find a mountain of quotes to support my position? I was going to make a thorough case based on quotations from several encyclicals to make the argument for distributism, until you informed me that you weren't interested.

So, what do you want to do Craig? Are you going to say "don't bother" again and then fire another volley? It doesn't matter, because I'm going to make the argument anyway. Look for it soon.

For now I will address this:

"“For then the rich and others in positions of power will change their former indifference toward their poorer brothers into a solicitous and active love, listen with kindliness to their just demands, and freely forgive their possible mistakes and faults. And the workers, sincerely putting aside every feeling of hatred or envy which the promoters of social conflict so cunningly exploit, will not only accept without rancor the place in human society assigned them by Divine Providence, but rather will hold it in esteem, knowing well that everyone according to his function and duty is toiling usefully and honorably for the common good and is following closely in the footsteps of Him Who, being in the form of God, willed to be a carpenter among men and be known as the son of a carpenter”

You are seriously mistaken if you think that distributists are promoters of class warfare. In fact we hope to convince at least some rich people that this is a worthy cause, worthy of their investment.

Distribuists take as a given that we are free beings, and within the framework of the law, we are free to organize economically as we see fit. Our aim is not to violently expropriate anyone or overthrow the government, but to simply show people that a better way of working and exchanging is possible, desirable, and necessary for the good of society and the planet.

That this idea should be so threatening to you or anyone else is simply beyond me. If you don't like distributism, don't participate in it. But there is no reason for you to stand in the way or undermine us, since we have no designs on you or your property. The minimum we seek is to go about our business free of interference from the state, big business or its ideological hangers-on; the maximum we ask is for, following Aristotle, the state to assist us in assisting ourselves by helping us build cooperative, distributist communities.

We have no quarrel unless you make one.

What I find interesting about the debate is the use of the double standard. On the one hand, we are to believe that the "successes" of the economy, are due purely to capitalism. But when we point to the failures, we are told, "This isn't capitalism!" Well, which is it? Do we have a capitalist system or not?

The truth is, we have the only capitalist system that there has ever been. Capitalism has always been an unstable system relying on gov't handouts, bailouts and privileges. Even by 1776, Adam Smith devotes 3/4ths of The Wealth of Nations to documenting the extensive subsidies from gov't to the capitalists. When the Liberal took control of England in 1832, they attempted to establish a pure laissez-faire system, one whose major accomplishment was the work house and the destabilization of England. England abandoned this system in the long depression of the 1870's.

In the United States in the period from 1853-1953, the economy was in recession or depression fully 40% of the time. Since then, that is, since Keynesian management of the economy, it has been in recession only 15% of the time. And the pre-war recessions were deeper and longer than anything since the war. Our great grand-parents really knew how to suffer!

Administrations of both the right and left used Keynesian techniques to manage the economy, because the alternative was unthinkable. In fact, right-wing administrations, beginning with Nixon but even more with Reagan, relied on Keynesianism (despite their rhetoric) even more than left-wing administrations. They did so because they had no other choice. Their free-market ideologies had destabilized the economy to the point were even more massive interventions were necessary to re-establish a semblance of economic order. But Keynesianism has run its course; each successive rescue is bigger than the last, and the cycle cannot be maintained.

The "bailout" is nothing new to capitalism; it is part and parcel of its history. These is the third major bailout of my lifetime, among a dozen of minor ones.

But contrast the chronic failure of capitalism with the constant success of Distributism. For example, the vast wealth created by the land-to-the-tiller programs of Taiwan, which lifted that nation from a feudal backwater to an industrial powerhouse in only one generation. Or the success of the Mondragon Cooperative Corporation of Spain, with its 50-year history and its 80,000 worker-owners. Or the cooperative economy of Emila-Romagna, where 40% of the GDP is from worker cooperatives and which has one of the highest living standards in Europe. And the list goes on and on.

The plain historical truth is that Distributism goes from success to success, while capitalism goes from bailout to bailout.

"The Christian ideal has not been tried and found wanting; it has been found difficult and left untried." GK Chesterton

A just free market has not been tried and found wanting; it has been found difficult and left untried. nobody

We've been sold a bill of goods implementing the "New Deal" and "Great Society" socialism by leftists.

"Too much capitalism does not mean too many capitalists, but too few capitalists." - The Uses of Diversity, 1921 GK Chesterton

A just free market has not been tried and found wanting; it has been found difficult and left untried. nobody

The problem with this is that Marxists give the same defense of the failures of communism; if you accept the capitalist defense, you must also accept the communist excuse. The attempts to implement both capitalism and communism have been long-running and sincere. If a system always works in the same way, the suspicion arises that this is the only way it can work.

The libertarians find solace in myths, either a mythical past or a mythical future. We had a much more "libertarian" system before Roosevelt, and it was an absolute disaster. But if you look to some future, then you must concede that the system has no past, no actual history by which it can be judged.

I am a distributist because there are Distributist Systems on the ground and working, and I can judge the results. I am suspicious of those with abstract systems that either have no history, or whose history must be denied. As the Sage has said, "Philosophy is easy; plumbing is hard." I can come up with six perfect systems in an afternoon's work. But I doubt that I could make any of them work.

Look in the mirror, Joe.

Peace.

Those who've been 'round these parts awhile will recall my conversations with Joe H on economic matters.

(Hi, Joe! I was surprised to see that you weren't the author of this piece; I thought you'd had some article in the works on this topic, some months back?)

Anyhow, I'm a free-market lover, a small business, low taxes guy, sometimes nearly libertarian with respect to such matters...but I'm willing to propose regulations or allow tax advantages to give a market a shove in a healthier direction if they're the right ones.

I think I'd like living in a Distributivist economy. And I'm willing, with a feather-weight touch, to enact whatever structural/regulatory changes would move us in that direction.

But...

I've yet to see, from Joe or from this author (Bill Powell) any examples of the legislative changes which would have that effect.

The article reads to me like a brochure: "This is how great it would be if our economy (a.) achieved this state of affairs, and (b.) achieved a metastability at or around that point, so that this desirable state of affairs would continue without requiring constant external tweaking."

Fine, but how do we get there, and keep it there?

It appears that the author's only suggestion along these lines is to "buy distributivist." Fine, I will, and I'll feel good about it. But I doubt it'll have much more impact than my attempted boycott of goods made in China did (because of persecution of Christians), or of Disney products did (back when they were among the first few firms to offer spousal benefits to gay partners).

My concern is that either:

(a.) Distributivist apologists don't have any notion which policies would generate a gradual shift to a more distributivist economy, and are hoping it'll just happen because we "buy distributivist," or,

(b.) Distributivist apologists have specific tax, regulatory, and legal policies in mind, but would rather not go public with them, because the policies in question don't differ substantively from those of, say, the Great Society programs, which are justly looked back upon as calamities we're well rid-of.

I think, then, that Distributivists, now that their brochure has caught our attention, owe it to us to fill in these practical details. Sure, the beach looks sunny and I'd like to imagine the sunbathing woman in the two-piece swimsuit will turn out to be the woman sunning herself right beside me when I get there.

But what's the flight plan?

(And how rickety is the plane?)

Mr. Médaille,

The American free market experiment has worked. Too many want to cheat or subvert the system.

To compare what works in our ecomony to the tiny market systems that you compare them to is laughable. Many single states of these United States have better economies than most foriegn countries you suggest and otherwise.

Zoe, you said,



That sounds likely to me, also: But we'll see, once (a.) concrete policy changes are proffered, and (b.) possible consequences are examined.

One possibility is that small organizations (whether single-owner, or cooperative in nature) simply can't proliferate because large organizations can drive them out of the market through economies of scale.

A possible distributivist solution to this problem would be to tax the income of large organizations at rates proportional to their size. (Kind of like taxing Wal-Mart more to balance out their competitive advantage with that of the Ma-and-Pa retailer whom they'd otherwise have driven out of business.)

The problem with that would be competition from large firms, and cooperatives of firms, from outside our borders. In the U.S. we could prevent Starbucks from targeting Mystic Monk Coffee for elimination-by-dumping. But could we protect the monks from a Japanese keiretsu intending to do the same thing, without causing a trade war?

So, again, I'm with Zoe on this one.

One can't say one knows anything until one has heard the best arguments for and against...and until one has heard all the associated details of the thing.

With Distributism, I think we've thus far only heard the benefits, but not the drawbacks, counter-arguments, or the methods of achieving it.

That's a gap that really must be filled.

I am perplexed by the remarks that "capitalism works" when, one, the system we have is Keynesian rather than capitalist, and two, when we had a more capitalist system the system was in chronic depression about 40% of the time. How is "works" defined here?

The so-called "economies of scale" for the corporate collectives are an illusion, and more than balanced by the diseconomies of scale. Places like Wal-Mart could not survive without huge gov't subsidies. Wal-mart depends on the "free"way system, which is a transfer of wealth from urban to rural and suburban folks. Nor could it survive without keeping the dollar artificially high and the yuan artificially low. The do not have a "free market" advantage, but a gov't subsidy advantage. And as Adam Smith pointed out, this is true of all the major merchant conglomerates.

This is the third major bailout of the capitalist system in my lifetime, interspersed with a half-dozen smaller bailouts. That's how capitalism works. That's how capitalism has always worked. There are no exceptions; there are no counter-examples.

Hilarie Belloc pointed out that the instabilities of capitalism would always require gov't interventions that made it less and less capitalistic until we end in the Servile State, with the gov't involved in everything to ensure some minimal level for the workers on one hand, and the security of capital on the other. His prediction seems to be accurate. Or almost. While the corporate state did somewhat safeguard the worker up until the 80's, that trend reversed itself and has practically disappeared.

I am at a loss to understand how anybody could tell me that capitalism works at a moment like this, a moment which is similar to so many moments in the history of capitalism.

Great point.



I am at a loss as to why "a moment like this" reflects poorly on capitalism if in fact the system we have is Keynesian rather than capitalist.



Dollar artificially high???? It has lost 97 percent of its value since the Federal Reserve came along to "stabilize" our money.



Once again, if our system isn't capitalistic (as you pointed out above), how can the bailouts you cite be the result of the failures of capitalism?

Rob, this is an excellent question. But I think I addressed it by pointing out that the capitalist economy itself is impossible; it always requires some "Keynesian" element to work at all. That's the reason it is Keynesian; nothing else seemed to work. No matter what the question, no matter how nominally liberal or conservative the administration, Keynes was always the answer; even those who rejected him in theory accepted him in practice. Not that I care for Keynes; I think the system has run its course and is no longer sustainable. But gov't subsidy and bailout is the only thing that can keep capitalism functioning; this is simply historically true and allows of no exceptions. If you know of one, share it with us and my theory is defeated by one counter-example.

The dollar is still too high. The sign of this is that our products still suffer from currency arbitrage. If the international system is right, countries like ours, that consume more than they produce, should see constant losses in the value of their currency relative to other currencies. Countries that export more should see their currencies constantly on the rise. These changes act as a sort of automatic export subsidy making our goods cheaper on foreign markets, and import tariff making foregin more expensive. The system should balance itself without any legislative action at all. However, the trend is offset by inflows of currency to buy our bonds, which keeps the currency artificially high and hence short-circuits the whole system. see http://distributism.blogspot.com/2007/10/subsidizing-wal-mart.html

My only point is that to blame free market capitalism for the current crisis misses the point that we don't really have free market capitalism. Politicians loved Keynes' theory because it put all the power in the hands of the government (hence both Republicans and Democrats embraced the theory in practice). Since Keynes advocated government management of the economy, it did not permit the free market to make its own corrections. I think that is why we get government bailouts and subsidies, not because a capitalist system NEEDS them, but because politicians love to wield their power.

Belloc was right. The coming Servile State isn't the fault of capitalism, but it is the fault of capitalists who seek out government protection. During his day, instead of opposing socialism, big business embraced it and cozied up to Big Brother in order to reap the benefits. We are well down that path today.

As for history, the U.S. economy from 1853-1953 could hardly be used as the standard bearer of free market capitalism. Weren't there a few non-market related events in that time frame that could skew the data and account for much of the 40% of the time spent in severe recession/depression ? For example: the Civil War (inflation, devastation of entire cities, etc.), Interstate Commerce Act 1887 (railroad lobbying for political protection from competition), Federal Reserve 1913(caused the easy money boom of the 1920's that led to the bust, ie Great Depression), Hoover (high tariffs, high taxes, argriculture subsidies, wage controls, public works projects), and FDR (New Deal, WWII). Did I miss anything?

As for specific examples of how capitalism really works, see Thomas J. DiLorenzo "How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present".

Rob,

I'm sorry if my characterization of your approach was somehow offensive or off-putting.

What I would like to know is, a) where are your facts, b) where do you get them from and c) how do they prove the point you want to make.

I gave you facts about the CRA that I got from an independent, scientific study. So I certainly don't see you when I look in the mirror. What did you give me but ideology and assumptions?

Theory is good and necessary, but it must continually be tested against the facts. As John Medaille argued here, distributism has a history of practical achievement in addition to being theoretically and morally sound.

Quote: "It is quite obvious that our economic regulation is the result of a lot of tug-of-war between a free-market ideology and a socialist or nanny-state ideology."

Wrong. It was JP Morgan, a capitalist, who promoted the Private Central Banking cartel. It it capitalist Big Chemical companies who promote safety regulation to drive out competition.etc.. etc. The FDA is corrupt and dominated by the Big Pharma/Agra in a revolving door system of pseudo-regulation. As for bailout, take a look at who's pushing it. Folks like Larry Kudlow who's a rapid "let the market rule" neocon and also Mr. "Chigago Boy" Obama who can't vote for heating oil for the poor because of "moral hazard" but has no problem with "moral hazard" for the Big Banks. I can't tell how many libertarians like Larry Elder where all for the bailout.

Quote: "Isn't it curious that the country with the strongest history of economic freedom is the one that can afford to send billions of dollars of aid to these poor folks?"

Wrong. The American System was not "free market" but Public Credit highly regulated, Internal Improvements, and High Tariffs. I suggest you read some real American history about the American war against the British Laissez-faire system.

Start with the writings of Ben Franklin, who according you, was an "Evil Socialist Nanny-state person" because he supported public education, fire services, libraries, and more.

You don't know anything about the history of capitalism which is system of "political economy" i.e. government involvement but the promoters of the Liberal British system deny access to political power by the working classes under the guise of "Free Markets" while getting all the handouts the they could get away with.

There hasn't been a pure "free market" since the neolithic period and I for one prefer civilization which means a system "political economy" meaning government will be involved as it always has and will always be. The only question is which principles will the government use when involving itself with the economy.

Quote: "But the only reason capital is any use to anybody is the profit* it generates, and stocks give you a claim to that profit."

Sigh.... I suggest you read the first chapter of Carey's "Science of Political Economy" where Henry C Carey the greatest American economist tell us the purpose of capital is increase the powers of labor. Even Mises says the key to economic growth is per worker capital investment for physical production. True Austrians know that stock market is something that wouldn't likely exist without the State. . None of the American economists said the goal of the American system of physical economics was about "profit." That is British East India Company propaganda.

You seem to think capitalism is one kind of thing Milton Friedman created. There are as many kinds of capitalism as there are capitalist countries.

Yes, Joe, you've spent a good deal of time refuting a position I never made regarding the CRA. And you have a study to back up your excellent rebuttal to a claim I never made about the CRA and the subprime crisis. Good job.

Rob, I don't get it. You seem to be agreeing that it hasn't worked since 1853, but offer the defense that it wasn't really capitalism. Then you endorse DiLorenzo's conclusion that it "saved" America (from what?) How can what we didn't have save us from anything?

The history unfolded exactly as the Distributists said it would.

History is the only test of social ideas that I know of. If there is not a single successful implementation of capitalism, I am free to assume that this is because such an implementation is not possible. You are free to continue in the ahistorical belief that if only people were better, it would work. Maybe, how would I know? How would anybody know? I can't reason from make-believe history; until someone can present me with a working example of capitalism, I will continue to believe that it is not possible, and always leads to the instability that it has always produced.

I was wondering when you would throw your hat in the ring.

You raise a lot of good points and practical challenges.

But in our last discussion of these issues, I pointed out to you then, as I will now, that there are already hundreds, perhaps thousands of co-ops in the US alone. The basic model "works", because it is just the collectivity of workers acting as a capitalist. I mean, to say this "can't work" is a little like saying only monarchy can work, but not democracy. Cooperatives do work. In many places they work well.

The problems we face are of a political and cultural nature.

Political in that yes, we need more favorable policies, and neither major party talks about this major aspect of our economy. Perhaps a good project would be to find members of Congress that will introduce legislation to provide support to cooperatives in various ways.

Cultural in that, at least in the US, we do not have a cooperative but an individualistic culture. Even when Americans belong to co-ops it seems to me they still mostly see it in terms of how it personally benefits them. Which is fine, but I would like to see cooperatives that set aside time and money to promoting their model. I also think that, as they do in Europe, we need entire communities based on this model, not just isolated businesses. So it is a matter of integration with the wider community as well.

Now, Zoe's friends and you think that there are parts of this that are impractical, unworkable. We are in the midst of a massive financial meltdown. If anything is unworkable, it is business as we have conducted in this country for the last several decades. My guess is that businesses will always face challenges, whether they are run autocratically by one person, oligarchically by major shareholders, or democratically by all of the workers. The differences between these forms will manifest in how those challenges are met and managed.

Our ancestors waged violent revolutions to overthrow systems of government based on the idea that we could and should be ruled without our consent. I might point out that none of these revolutions, or the fruits we enjoy today and call our "God given rights", were ever sanctioned or condoned by the Church. What we distributists propose is not even violent revolution, but simply a quiet "revolution" from below, against that very same principle in our economy.

And as an added bonus, the Church not only opposes such efforts, but has in fact encouraged and embraced them. If you can embrace ideas that were never even sanctioned by the Church to begin with, surely you can lower your defenses for those which it has explicitly and repeatedly commended time and again.

Septeus7, you have hit the nail on the head. The impetus for regulation has always come from capitalists, not populists. No one fears a pure capitalism as much as does the pure capitalism. As Belloc pointed out, pure capitalism puts capital at risk as much as it does the worker. In an atmosphere of pure capitalism, capital would be hard to raise; no one wants to buy into an unregulated market, and when they do (as in the current derivatives debacle), they risk trillions.

As have a Keynesian economy (or what remains of one) because the capitalists needed it to stabilize their own investments. This is the history of capitalism; Keynesianism is a lot older than Keynes, and is well documented by Adam Smith. Alas, no one really reads him. He is the most often cited, but least actually read of the modern philosophers.

Rob,

Your claim was that CRA, and the idea of spreading homeownership in general, was responsible for the sub-prime crisis.

I provided evidence which refutes those claims, evidence which shows that government attempts to expand home ownership were neither irresponsible or unprofitable.

This is what you said:

"Government interference in the market (Fannie/Freddie, CRA, artificially low interest rates, fractional reserve banking, etc.) all distort the market."

"If FF/CRA didn't increase home ownership beyond what the market could, why were these programs implemented?"

And I showed you why, at least in the case of the CRA, it isn't true. So don't try to tell me now that what I refuted wasn't what you've been arguing all along. The market can handle safe and sound lending; CRA banks engaged in safe and sound lending; non-regulated lenders didn't.

My aim here isn't to defend government "intervention" in general, since I can see your point about the Fed and the money supply. But its clear that you ideologically blame every government intervention irrespective of the evidence. That's why I don't see you when I look in the mirror.

You are quite right. You should look to God. The US (which I assume you are from) is hardly an example to the world, and a Catholic should be appalled at the dichotomy of vast wealth amongst such misery - especially spiritual hopelessness, which many of those at the bottom face.

Whilst the US, in the 19th century, had a great deal of 'empty space' (apart from the natives of course) the Free Market system could dump it's failures somewhere else - the vast plains for example out in the West.
Today, the US faces the same problem that Europe faced 400 years ago - everything - every nook and cranny - of the US is 'owned' by someone.

Americans are going to have to learn to distribute things a bit before the Liberal-Fascists in your Congress just take it at the barrel of a gun.Don't forget you live in a mobocracy - and the liberal elites will whip the mob via television to scream for socialism when it suits their plans. It's the lesson that Europe learned after 2 disastrous internecine civil wars in the twentieth century.

Just because Eurpoe is in a mess now - far less of one that you Yankees are going to be in soon, as the Dollar hyperinflates as it is dumped as the world trade unit for oil etc - doesn't mean that there are no lessons to be learned.

Today - 22/Oct - Willie Nelson was on the Alex Jones Show (GCNlive.com) and made a very 'distributist' arguement for a billion dollars from the 700 Billion voted by your Congress to directly help keep and encourage new farmers on the land because farmers are the bedrock of a healthy economy (to paraphrase Willie N.)

Webster Tarpley - on the same network - argues that the 'free market' that passes in the US for capitalism is an Austrian invention, from the hands of Von Mises and Von Hayek, and the Austrian School of Economics is the creation of rent-racking landlords in Vienna in the hungry '30's, to defend high rents.

He says that American capitalism has more to do with the likes of Henry Clay, Jefferson, Abraham Lincoln - and he has a point. When was the US at the peak of it's power and economic power - before or after 1920?

I'm not agreeing capitalism hasn't worked, I'm showing that it hasn't been allowed to work. As for DiLorenzo's book, I didn't say I agreed with the conclusion, only that there are examples in there of where capitalism has worked in the past (yes, even before 1853). As you say, "history is the only test of social ideas" and this book points to specific examples in history where capitalism worked ("working examples of capitalism"). You can continue to believe it is impossible, I was only trying to show you where it has worked in the past (per your request).

Rob says I'm not agreeing capitalism hasn't worked, I'm showing that it hasn't been allowed to work. That would seem to be a distinction without a difference. You still lack an historical example. You say DiLorenzo provides them. Very well. you have read his book, I presume. Give us one of these mythical free market examples.

It must have been before--long before--1776, because by that time, Adam Smith is already showing the depth of the gov't involvement in supporting big business.

Actually, no.

Interpreting the teachings of the Church involve examining Canon Law, Scripture, Encyclicals which all intertwine regarding the subject matter and consistently teach the same precept.

Taking sentences out of context and interpreting those sentences as a coded message about a teaching of the Church - which has never been expounded upon publicly, leaving out the other sentences which unravel the conclusion you draw, this is misleading conjecture.

Craig what is the link you have noted but I cannot find.

Craig,

You say,

"Taking sentences out of context and interpreting those sentences as a coded message about a teaching of the Church - which has never been expounded upon publicly, leaving out the other sentences which unravel the conclusion you draw, this is misleading conjecture."

I have not done this, and if you are going to insist I or anyone else has, I think you need to show where this has happened.

The quotes I have provided are clear. They appeared in encyclicals written by Catholic Popes, for public consumption. They were not hidden documents buried away in the Vatican archives, but statements directed to an international audience. Your claim is completely without merit.

The conclusion I draw is that the Popes encourage distributism as we have presented it here. You have yet to take a single proposition we have made and demonstrate how it contradicts in the slightest the teaching of the Church.

I never said that the CRA was responsible for the sub-prime crisis. Never said that the CRA engaged in unsafe or unsound lending. Not once. Please re-read every entry and if you can find a SINGLE instance where I made these claims I’ll pay you $1,000. The fact is, YOU brought up the CRA (multiple times), not me:

and then again,

So at that point, the CRA and sub-prime crisis were a non-issue (at least to me because that clearly wasn’t my position).

Now, I did say that government intervention, including the CRA, did distort the market. I explained that by spurring demand for housing it drove prices up to unsustainable levels. The reason I know they were unsustainable was the collapse of the housing market (unsustainable means they could not be sustained; do you know a different definition that explains how sustainable prices can collapse?). I tried to make this distinction (between the housing crisis and the sub-prime crisis) multiple times. All you could do was wave the CRA report exonerating them from unsafe lending practices.

So we both agree that the government attempted to expand home ownership. Now we're getting somewhere.

So enlighten me, Joe. What evidence is there that the increased demand caused by “government attempts to expand home ownership” (your words) did not result in a boom in housing prices followed by the bust we’re experiencing today? Where is my ideology inconsistent with all this evidence you have? Show me so that I may renounce my “ideology” right here and now.

Um, what you "refuted" (CRA and unsound loans) wasn't what I've been arguing all along.

(Sorry about the "hollow argument" crack several posts ago.)

And it makes people better off in China, Africa, Mexico or Central Asia how? The idea that the market has created universal prosperity is highly narrow minded and Amero-centric. Our military and political prowess has allowed us to create unfavorable situations for other countries through deals with their leaders, to allow our companies to pay a dollar a day to workers displaced from a normal self-sustaining environment to work 18 hours in factories.

More importantly even than the situation of the third world, is how do we define prosperity? Cheap manufactured goods from Walmart? Easy access to fast food? Lots of alcohol? Tv? movies? Look at the interior sickness of the American soul, or worse still, the interior sickness of the whole country with the type of losers we put in office, and the lack of attention and care we have for the rest of the world. The free market does not increase anyone's prosperity, it rather increases the material holdings of a few. It does nothing for their soul but clutter up their lives with things of the world. Capitalism has always been opposed to the mind of the Church, because it makes as its end worldly greed. This is why John Paul II, continuing the tradition of the whole Church up to his time (as he rarely did) decreed:

Another kind of response, practical in nature, is represented by the affluent society or the consumer society. It seeks to defeat Marxism on the level of pure materialism by showing how a free-market society can achieve a greater satisfaction of material human needs than Communism, while equally excluding spiritual values. In reality, while on the one hand it is true that this social model shows the failure of Marxism to contribute to a humane and better society, on the other hand, insofar as it denies an autonomous existence and value to morality, law, culture and religion, it agrees with Marxism, in the sense that it totally reduces man to the sphere of economics and the satisfaction of material needs.(Encyclical Centesimus Annus, no. 19)

John Paul II is hardly a man who could not see the material wealth in the west, he traveled all through it. He is not stuck in the 19th century. He saw not only the misery which capitalism creates all over the world for the benefit of a small segment of the population, but the very real spiritual misery it creates amongst those it supposedly benefits.

Well, I guess since you didn't clarify what exactly you meant by CRA "distorting the market", I assumed you were on the bandwagon with everyone else. I'll admit I ran ahead of you. Care to tell me now exactly what it is your think the CRA contributed to the crisis?

The skyrocketing of housing prices was caused by speculation. It isn't an inflation of demand "beyond what the market can bear" when people borrow from the banks to buy homes. What the market can't bear is rampant speculation and predatory lending practices.

“Didn’t clarify”???? I tried at least 4 times to explain. First I stated my position:

Here are 4 attempts at clarification:




Then in summary I added:

I’m really not trying to be cryptic. This isn’t a trick. If what I’ve said above isn’t clear then I really don’t know what else to say. This was the best I could do and I apologize for my lack of clarity. In my defense, I am the product of public education so maybe the government is to blame (KIDDING!).

To clear up my comment about you looking in the mirror...

Remember, you had said:

Here's why I feel the mirror comment is valid:

First, you made clear your underlying ideological assumption:

I disagreed and stated my case regarding the housing crisis (and other issues like public infrastructure, WTO/IMF, etc.).

Then you went about picking apart an argument I never made (see previous posts).

Finally you reached a conclusion:


So where is YOUR evidence that (a) increased demand did not cause prices to rise, and/or (b) that speculation caused prices to skyrocket? Surely you haven’t reached your conclusion based solely on your anti-capitalist ideology. Have you?

By the way, if you can prove (a), then a lot of Economics textbooks will have to be rewritten.

Rob,

I fear we're engaged in this tit-fot-tat where all we care about is making the other person feel small and wrong.

I freely admit I jumped way ahead of you. I did that already. Would a formal written apology be enough for you to get over it? I suppose if it makes you feel better to bring it up another 12 times or so, you can do that. I'm beyond it now.

The fact remains that you invoked CRA twice - clearly you think it is responsible for something, and yet you still haven't explained what that is.

I made a pretty clear distinction in my last post between a) people lending to buy homes and b) speculation and predatory lending. Because of these distortions, how do we really know if the real demand for houses was more than the market could bear? I never said that increased demand didn't cause prices to rise; the word was "skyrocket", that is, to rise extremely quickly and rapidly.

CRA was in place since 1977. There was no skyrocketing of home prices for over 20 years since its implementation. Of course the CRA made it easier to get homes and increased demand - for 20 years society was able to meet the demand because, gasp, the poor and brown people who got loans from CRA banks had to be able to pay them back.

The wave of speculation and predatory lending encouraged by the deregulation of the banking industry which Clinton signed into law, and later policies of the Bush administration, is what caused housing prices to begin their rapid ascent. Now we are talking about people buying homes and flipping them as part or full-time careers, dozens of professional and semi-professional hucksters teaching audiences how to get rich quick by getting in on the action, millions of people duped into accepting predatory loans and then left with mortgages they couldn't afford. We reached a point where one medical crisis could be the final nail in the coffin of a family trying to stay in their home.

I am not of the mind that you can simply take all demand and lump it together, as if there is no difference between a person who is demanding a house because they need a place to live, and a person who is buying a house to later flip it. That completely misunderstands the situation and doesn't advance our knowledge of it or our ability to prevent it one bit. And it makes it all too easy to sneak in ideologies and racial prejudices and blame poor people and minorities. We need to be real and truthful about the causes of this crisis.

I just realized now that you posted twice, and I didn't see your first post where you string all of the quotations together.

Ok, so I fully understand that you think, somehow, CRA and other interventions increased demand, but the critical thing you said was "beyond what the market would otherwise provide". I bring up the safe lending practices because those do NOT go beyond what the market can provide. Can we at least be clear on that?

To every single one of your paragraphs you reproduced above I provided a pretty direct response.

You asked,

""ONE more time: I said the housing crisis (you know, the collapse of the housing market... falling prices... etc.) was caused by too much demand. If FF/CRA didn't increase home ownership beyond what the market could, why were these programs implemented?"

And I answered:

"Because of the perception, grounded largely in the stark reality, that there was racial redlining going on with the banks. Talk about your market distortions - racist assumptions on the part of lenders, taking one look at a black person and assuming they won't be able to make good on a loan, so why bother?

What the CRA did - once again - was set benchmarks for banks to meet in serving the credit needs of low income and middle income areas, and especially minority areas. But the loans they made were NOT bad. When you make safe loans that are likely to be repaid, that isn't going to cause the market to collapse."

I don't recall you ever addressing my responses to these points. I guess what I'm waiting for is for your to explain how lending people money to buy homes caused the housing crisis, when this had been done for decades without problems, and why the rapid rise in housing prices coincides with the deregulation of the banks, rampant speculation and predatory lending.

Hi all,

Bill Powell here. First, I'd like to thank y'all
for such a lively and (generally) courteous
discussion, and next I'd like to apologize for
taking so long to contribute. Soon after I
submitted this article, I went off on a road trip
for my brother's wedding, and it's taken me longer
to get back online than I expected.

My fellow distributists have addressed many of
these questions better than I would, so I just
want to comment on a few things.



I absolutely agree. This article is indeed a
brochure; I can only do so much with 1,100 words.
We distributists do owe it to you to elaborate on
our flight plan. I hope to make good on this debt
in future articles.

(More coming ...)

(Continuing my last comment ...)

Meanwhile, some of the posters here have excellent
blogs. (I removed the periods to evade the comment blocker.)

http distributist blogspot com

http distributism blogspot com

However, if you check these sites, you may be
overwhelmed by the sheer quantity of content. ;)
And in that content, it's vital to distinguish
between Catholic social teaching (let's call it
CST) and distributism. CST includes both moral
principles (wide distribution of property) and
specific policies, (the state should legally
guarantee a just wage). Distributists (usually)
claim to hold to all of CST, and then also to
offer our own ideas on policies.

As a distributist, I can't say that because I tend
to mention CST more often than Thomas Sowell, you
have to listen to my quirky economic plans. But as
a Catholic, I can say to other Catholics that CST
(not my quirky plans) is just as binding as
any other church teaching.

The problem is that many ideas (such as the just
wage) which have a reputation for being socialist
or (in select circles) distributist, are in fact
right there in ecclesiastical Latin in numerous
papal encyclicals. Until there's a more widespread
knowledge and acceptance of CST among Catholics,
Catholic distributists have the highly unpleasant
task of handing many co-religionists a sheaf of
papal paper and telling them to go read for a
week. We're not the only ones doing this, but we
do have to do it.

Church teaching on abortion is important to know.
But even the most rabid pro-abortionists generally
don't get an abortion as often as they shop. We
vote for our president once every four years, but
we vote for our economy with every dollar we
spend, and every hour we choose to work for a
particular company.

In conversation, we distributists aren't always
careful to distinguish between our own ideas and
CST. If CST were more well-known, we wouldn't have
to worry, but as it is, we do.

For instance, I have talked to Catholics who think
that any wage is just as long as the employee
agrees to it freely. Of course, they expect a
distributist to disagree. But have they checked
the Catechism of the Catholic Church?



This is a conversation that shouldn't even happen
between Catholics. It's a waste of time.

In this kind of environment, it's inevitable that
we'll talk more about principles than policies.
But once we've established the CST principles,
(which I don't think I've quite managed in
this piece), then yes, we must clearly state what
we want to do with them.

Other quick responses:



Actually, this isn't quite true. Mondragon, for
instance, does lots of manufacturing, and
if you follow the ICA link in the article, you
should find information on other industrial
co-ops. Any business can have a just structure.

(More...)

(continued...)



I'm afraid that's not what the popes have written.
Belloc's "goal of widespread personal ownership,"
sad to say, is flagrant plagiarism. :)



Note that word law. Distributists don't
confine themselves to exhortations to voluntary
citizen action (crucial as this action is). Unless
you're an anarchist, you think that a free market
isn't free without rules. Distributists and
capitalists simply disagree on some of these
rules.

And rules are important. Here's Belloc on why. (I
don't have the original book by me, and it's not
online, so I apologize if this snippet from my
files is edited without ellipses.)



I don't see how even the most enthusiastic
capitalist can argue with the historical reality
that capitalism breeds the concentration of
economic power. Whatever capitalism saved us
from, it wasn't that. And multiple popes have
expressly advised us that this is a bad thing.

One of the first comments:



There's an important difference. What if every
time a pro-lifer became really really
really pro-life, she started getting
abortions? And still did photo-ops with Phyllis
Schlafly? That is precisely the problem.

We distributists have no rancour for the
intellectual capitalist, the kind and
long-suffering fellow who strives for theoretical
consistency, who is almost certainly a person of
just and moderate means, and who takes time to
talk to irritating distributists.

Our irritation tends to center on the "successful"
capitalists, on what they actually do with
all that power. If the most "successful"
capitalists almost invariably start buying
government favors, perhaps it's not inconsistent
to keep calling them capitalists. Henry Paulson
made over $700 million on Wall Street before he
became Treasury Secretary and brokered the
bailout. The distributist argument is that when
capitalists get rich enough they act like
anti-capitalists. Please see my link to
"corporate welfare" above.

(more...)

(continued...)

We can disagree in our assessment of how
well our current global economy serves the world's
poor, but I'm going with John Paul II:



(more...)

(continued...)



It depends on whether traditional Catholic doctrine goes back far enough to include the parable of Lazarus and that bit about the needle. :)

A less flippant answer: it depends on how you define "rich". Both popes and distributists expressly repudiate radical egalitarianism; some of us will always be richer than others, because God does not endow us all equally. No distributist will criticize the rich who are wealthier than their neighbors because of their own hard work done in justice. In fact, we want more people to be this kind of rich. The "rich" we do castigate are those you will find mentioned in the CCC:



You see I'm still quoting popes, not outlining tax plans. But among Catholics, CST has to come first. There's no point getting into our plans until we first establish the principles that would
guide them. And if you're Catholic and you cannot, right now, silently summarize the CST to yourself, why not go to that link above:

tinyurl.com/ccc-stealing

It's the article on the Seventh Commandment, from the Catechism of the Catholic Church. The whole page is a reasonable length and worth your time, but there's a specific section on the Catholic social doctrine. True, distributism must demonstrate its soundness on economic principles alone to succeed in the real economy -- as it has, on many occasions. But among Catholics, I think we should examine CST more carefully, to be sure we understand where we already ought to agree.

Thanks again to all for this great discussion.

The only time I mentioned CRA was in grouping it with other government programs that EXPAND HOME OWNERSHIP. On several occasions I explained that government programs that expand home ownership cause prices to rise because of increased demand (please don’t make me go back through all the posts and quote every time I’ve said this AGAIN). Now, you seem to be the expert on the CRA so I’ll defer to your expertise. You’ve made multiple statements suggesting that the CRA does expand home ownership. If so, then that is the “something” that I think the CRA is responsible for. If you contend the CRA does nothing to expand home ownership, then please simply delete CRA from my argument and move on.

Let’s move on to the REAL question (and main point of this response): How many times did I invoke “the poor and brown people” as part of the problem? Not once. EVER. In fact my only mention of the poor was to defend them while talking about the evils of monetary inflation. Your insinuation is offensive and insulting.

As if this wasn’t good enough for you, you conclude by saying:

Joe, you crossed the line my friend. I want you to calm down and think very carefully about what the Church teaches about bearing false witness.

The CCC says:
2478 To avoid rash judgment, everyone should be careful to interpret insofar as possible his neighbor's thoughts, words, and deeds in a favorable way:
Every good Christian ought to be more ready to give a favorable interpretation to another's statement than to condemn it. But if he cannot do so, let him ask how the other understands it. And if the latter understands it badly, let the former correct him with love. If that does not suffice, let the Christian try all suitable ways to bring the other to a correct interpretation so that he may be saved.[279]

2479 Detraction and calumny destroy the reputation and honor of one's neighbor. Honor is the social witness given to human dignity, and everyone enjoys a natural right to the honor of his name and reputation and to respect. Thus, detraction and calumny offend against the virtues of justice and charity.

I made none, zero, nada statements that could IN ANY WAY be interpreted as racist or derogatory of the poor. If you feel that I did, share those statements with me and I’ll explain or renounce them point by point. I can, and do, admit when I’m wrong. You are the one who’s a slave to his ideology, not me.

It sounds like veiled communism to me. Humans are not designed for the hive.

I didn't mean to accuse you of racism, Rob. I should have said it explicitly, and I didn't, and I apologize for that.

But I do think that there are OTHERS who HAVE sought to scapegoat poor people and minorities, taking arguments such as the one you are using as their premise. That is why it is all the more important to accurately understand the root causes of this cirsis.

Now I'm afraid you're letting your anger erase your memory; your claim was not merely that CRA increased home ownership, but did so BEYOND WHAT THE MARKET COULD BEAR. That is what you claimed, and that is what I contested.

I never contested rising prices - I contested the claim that SKYROCKETING HOUSING PRICES had anything to do with the CRA, since it had been in effect for over 20 years without causing a bubble.

Why are you having such a hard time with your own argument?

Even Alan Greenspan admitted today that his ideology of deregulation, of minimal government intervention, was mistaken and helped contribute to the crisis. This is from an article on Greenspans testimony given today before the House:

"In testimony to the House Government Oversight Committee, Mr Greenspan acknowledged that the crisis "has turned out to be much broader than anything I could have imagined. It has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount."

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity (myself especially) are in a state of shocked disbelief," according to Mr Greenspan.

The panel chairman, Henry Waxman, criticised Mr Greenspan's approach to mortgage regulation while he was Fed chairman. The Fed "had the authority to stop the irresponsible lending practices that fuelled the sub-prime mortgage market," Mr Waxman said, but Mr Greenspan "rejected pleas that he intervene".

For a funnier take, google "Tough to believe Greenspan's disbelief"

Joe:

Thanks for the warm welcome. I think whichever of the two of us is second to arrive at an economic discussion, inevitably smiles to see the other there, and the other smiles to see the latecome arriving. It's getting to be like walking into Cheers and having everyone say "Norm!"

Regarding the workability of "hundreds, perhaps thousands of co-ops": I agree with you when you say: "Cooperatives do work. In many places they work well." That's under the current quasi-Keynesian quasi-capitalist mixed-market system.

But how close are they to being economically superior to traditional business control models, once all forms of "corporate welfare" are removed from the picture? (For of course a laissez faire guy hates corporate welfare as much or more than other kinds of welfare. It does not support, but rather distorts, the market.)

Under pure-market forces, would co-ops in fact defeat other businesses in the marketplace? Gain higher profit margins per unit, and/or higher market share?

If so, then all we need do is remove the corporate welfare and let market forces do their work; in a decade, we'll most of us be working in or with or near co-ops. Right?

In short, isn't what we need is a purer capitalism to achieve Distributivism?

Or is it your view that co-ops can't defeat traditional business models on a level playing field?

If that's the case, then, once again, you must be proposing some tax policy or regulation intended to tip the playing-field just slightly in favor of co-ops, right? (Tho' I assume you, as I, would still be glad to be rid of corporate welfare.)

I want to know what the regulation is. Or the policy. Or whatever.

It doesn't have to be perfect. Propose something. Just a straw-man. Something crude.

I mean, how about this: Let business income taxes (which are just passed on to consumers anyway) be equal to 1/10th of the percentile of your business' ratio of Profit to Market Cap., plus 1/10th of the percentile of the number of non-board-represented persons you employ (measured in labor hours).

So, if your ratio of Profit to Market Cap is higher than 99% of all other businesses, and you employ more workers than 99% of other businesses (none of them represented on your Board of Directors), then your Business Income Tax Rate is 9.9% + 9.9%, for a total of 19.8%.

But if your Profits are lower despite owners' investment in the business than all but 10% of other businesses, and if you only employ 10 people and they are your Board of Directors giving you an "unrepresented workers percentile" of 1%, then your Business Income Tax Rate is 1% + 0.1%, or 1.1%.

Sounds like it would tilt the playing field, to me. Pretty firmly, actually.

Is that what you have in mind? If not, what?

You argue that Distributivism isn't merely a pipe-dream or utopia, on the basis that some co-ops are successful today. Fine. But apparently that, by itself, isn't sufficient to satisfy you. There's something else you want, which isn't naturally happening on its own. That something else, then, is the promised land of Distributivism: Not the co-ops here and there we see currently.

So, that means we need a policy-change apart from ditching corporate welfare. A policy-change intended to artificially enhance the competitiveness of co-ops. (The theory being that the wealth-reduction that comes from reduced market efficiency is more than outweighed by the positive impact of more widespread co-ops.)

So: What policy? What are that policy's other benefits, apart from encouraging co-ops? What are its drawbacks?

And...are the other benefits, added to the benefits of having more co-ops, enough to out-weigh the drawbacks?

Until such questions are answered, I think the "utopian" label, or at least the suspicion, is just.

Distributism, unlike capitalism, is not an abstract system with no actual implementations. It is successful in both large and small-scale operations, and even at the national level.

Someone mentioned fractional reserve banking as something counter to the "free market." Actually, FRB has always been part and parcel of that market, at least since 1694.

And the CRA had nothing to do with the housing crises. Low interest rates did, but even low interest rates did not force even one single banker to make even one bad loan; that was completely voluntary. Furthermore, the sub-prime loans are not the cause of the meltdown. These loans have failed at the predictable rate, the rate that was compensated by their higher interest rates. When the authorities saw the problems in the subprime market, they were not that concerned, since the entire market isn't large enough to bring down the economy. So what went wrong.

What failed is the derivatives market, a completely unregulated market, as free as any free-market advocate could wish. Using derivatives, the subprime market was leveraged 20, 30, 40, 50 times, so that relatively minor loses became a global crises. Indeed, that was the burden of Greenspan's remarks; this market was left to self-regulation. This market was unregulated capitalism in action. And unregulated capitalism did what unregulated capitalism always does: fail, and demand a gov't bailout. This is the history of capitalism. This is the third major bailout of my lifetime, amongst a dozen minor bailouts. This is the recurring theme of capitalism, yet every time it happens, everybody gets this shocked look on their face, as if this is something new and different.

It isn't. It is the history of capitalism, and always has been, since the very beginning. Capitalism has never found a way to achieve stability apart from government intervention. It is no accident that government power and corporate capitalism grow hand in hand; they are co-dependent.

Catholic Social Teaching -- I judge both from reading the relevant encyclicals and the link you just gave -- does not appear to contradict free-market laissez-faire capitalism, especially as practiced by an obedient Christian, in any way.

Admittedly, there is one phrase in the Catechism page to which you linked, which skates very close to contradicting capitalism; which is to say, very close to economic (not faith or morals) error. That phrase is: "forcing up prices by taking advantage of the...hardship of another."

One thinks of higher gas prices or hotel prices in the wake of a hurricane. The Christian duty is to let the price be what it is, recognize the hardship of the other, and give of one's own to help the needy pay the higher price, without disguising that that is what is happening. By distinguishing between economic reality -- which is "just business" (in both senses of the word "just") -- and duty to neighbor (including the "destination of goods") one can fulfill Catholic Social Teaching without being dishonest. Conflating the two to hide charity within an artifically low price is a lie which, besides violating the eighth commandment, denies the recipient of largesse the opportunity of gratitude toward his benefactor.

I say the Church there skates close to economic (not faith or morals) error: I can't assert error, because I don't know what they mean by the word "forcing." It may be that the scenario I envisioned is not at all what they had in mind, and that they instead had artificial price manipulation in mind. In which case, not only do I have no problem with the whole phrase, but neither does capitalism.

Anyhow, apart from that, it's good that the Catechism puts the term "capitalism," where intended to represent a doctrine she opposes, in scare quotes; what she opposes would I think not be recognized by proponents of the free-market as being the same thing they propose. And yet those proponents are the most logical authorities on the definition of the term, just as the Church is the logical authority on the definition of Catholicism, not, say, Messrs. Dawkins or Hitchens. So there is "capitalism," and there is capitalism.

It would be impolitic, tho' no less true, to discuss in the Catechism how the people United States, with their predisposition toward charity, come a bit closer to exemplifying this teaching than any of the peoples of any of the nations of Europe. For while all fall short of the glory of the Catholic Social Teaching, in Europe private charity is practically unheard of, while in the U.S. even leftists give some (1-2% mean) of their pre-tax income for charitable causes, and conservatives give more significantly (2-4% mean; source Who Really Cares? by Arthur C. Brooks).

Now when we're all obediently tithing (10% to church, plus an amount above that to charities which is proportional to our income percentile) we'll see the Catholic Social Teaching in full force. And truly needy people will be so scarce that Saint Anthony of Padua won't be able to find one with fifteen bloodhounds and a radio telescope.

But until then: Keep passing the plate and preaching the CST. And we shouldn't be too disappointed if that day doesn't come before Our Lord does. After all, He promised that the poor "you will always have with you."

John,

Just as libertarianism is not anarchism, so capitalism is not anarcho-capitalism.

Capitalism advocates have never, ever stated that there should be no legislation affecting markets. That's anarcho-capitalism. There's no amendment saying, "Congress shall make no law respecting buying or selling."

Free-marketers advocate specific types of regulations, and reject others.

Particularly, free-marketers advocate market efficiency, through regulations which:
(a.) Enable the buyer to know what he is buying;
(b.) Do not artificially force the seller to sell at any price other than what he normally would; and,
(c.) Enforce contracts reliably.

In short: Contract enforcement, anti-fraud enforcement, and no force (by government or others). Arbitrage by ignorance should be impossible (fair advertising) even with regards to debt risks.

The particular regulatory climate of the credit crunch you decry violates all three: How then is it capitalist, when it fulfills none of the minimum requirements which all capitalists agree are necessary for their system to exist?

Which is to say: Various investors aren't getting paid (lack of contract enforcement). Those investors bought what were marked as Triple-A securities when, because they were over-leveraged, they should never have been so highly valued (fraud/misinformation to the buyer). The insurers didn't pay (lack of contract enforcement). And, yes, under CRA and the Fair Housing regulators of the Clinton-era HUD, and, more spectacularly, the mismanagement of Fannie Mae and Freddie Mac, government force encouraged the adoption of bad debt. (It's slight-of-hand to say that much of the bad debt doesn't come from banks under HUD investigation or CRA direct involvement. There's such a thing as making an example! ...everyone else falls into line before the government's eyes turn in their direction.) Eliminate the collapse of Fannie and Freddie alone, and the whole crunch becomes later and lesser and more gradual.

If, as you say, this is what "capitalism" always does, it is because "capitalism" has not ever had the benefit of the regulations which make informed trades possible. Which most capitalists will agree with, here in our quasi-Keyesian bastardization of a mixed-market system.

And yet, even after all that, the U.S. is better off economically than the whole of Europe, nearly all the time. This is because the U.S. more closely, more often, approaches the efficient market ideal.

I'm all for Distributivism, if such a thing exists. (See my earlier posts with Joe for relevant questions.) I'm even willing to adulterate economic honesty (a.k.a. free-market capitalism) somewhat to achieve it.

But until its benefits and drawbacks can be precisely enumerated, and a specific set of policies intended to effect a transition to it described, my inclination is to stick with what is, after all, the worst economic system in the history of mankind -- except for all the other ones.

RC,

You raise a number of important questions. I suppose the reason I have not gotten into as much specifics as some others is that, like I sought to explain in my last post to you, I believe the problems we face are political and cultural.

You ask,

"But how close are they to being economically superior to traditional business control models, once all forms of "corporate welfare" are removed from the picture? (For of course a laissez faire guy hates corporate welfare as much or more than other kinds of welfare. It does not support, but rather distorts, the market.)"

But here we are back to the problem raised so succinctly by Mr. Medaille in this discussion; how do we know how "traditional business control models" will perform in these circumstances, when they have yet to really exist? Is there some period in history where laissez faire actually existed? John's point has been that no such period has existed and I agree with him; to speak of capitalism is to speak of regulation and state involvement to some degree or another.

What we distributists have done is simply compared two models which have existed in markets as they actually exist; there seems to be little need to compare either to a model that has yet to exist or may never exist.

"Under pure-market forces, would co-ops in fact defeat other businesses in the marketplace? Gain higher profit margins per unit, and/or higher market share?"

That depends on a number of things.

First, there is an ugly history of traditional capitalist firms going out of their way to undersell cooperatives. This may be done for purely ideological reasons.

Secondly, and perhaps more importantly, it depends upon the conditions of global competition; cooperatives may be hard-pressed to compete with businesses that exploit the cheap labor of the third world, in some cases, the slavery of the third world.

In much the same way proponents of industrial capitalism knew that their system could never truly mature and succeed alongside slavery, distributists recognize - or should recognize - that our more just and humane model is going to have difficulties competing with businesses that are eager to exploit the low cost of living, political repression and slavery of the third world.

Our success therefore may depend upon promoting fair trade legislation that stipulates that the movement of capital across boarders become contingent upon certain human rights, labor and environmental standards being met. Certainly this is in accordance with everything the Church has written about the proper role and place of the economy in human affairs; it is to serve man, and not vice versa.

Otherwise I believe cooperatives can compete in most industries. If the rights of labor are secured and respected by the laws of the land, then we will succeed and thrive. As Catholics I think we have an obligation to support these efforts, or at least not attempt to derail them.

"If so, then all we need do is remove the corporate welfare and let market forces do their work; in a decade, we'll most of us be working in or with or near co-ops. Right?"

I wish it were that simple, but as I said, there are political and cultural barriers. I'd refer you to my last post for those. In a decade we may finally be at the point where our ideas are no longer strange and foreign to the average American.

Regarding your specific tax proposals, I have to say, I'm not a business major, but a political theorist, so you'll have to translate that proposal into English for me :) These are details that I expect the trained economists we employ will be able to work out. I believe some of the postings at The Chesterbelloc Mandate have similar proposals, so you may want to browse there.

Now, you say,

"There's something else you want, which isn't naturally happening on its own."

Yes - a culture of distributism. For while we have many co-ops in America, productive, housing, credit and otherwise, we do not yet have too many communities that are modeled on it. Meaning these co-ops exist as more or less separate entities, and they are entered into for individual benefit. Which is fine, we are all self-interested, but what we have yet to see is a true integration of cooperative entities. In short, what we do not really have is a true cooperative economy, but rather the basic elements of cooperatism functioning within the framework of the "traditional" capitalist economy.

So to me it is a matter of promoting a culture and a way of life as much as it is an economic model. As for utopianism, I have to say, your post to John about the possibilities of charity strikes me as a bit utopian.

Hmmm.

One cannot, I think, say that Fractional Reserve Banking is intrinsic to capitalism because it's been around for several decades in the U.S. One could thereby also make the argument that the Community Reinvestment Act and Rock 'n' Roll are intrinsic to capitalism.

There are two schools of thought among free-marketers, here, and then there are the fence-sitters 'twixt the two schools, of which I am a card-carrying member.

One school says that FRB is intrinsically dishonest in so far as it represents a promise to pay in all events what one possibly cannot. It therefore violates the free-market tenet of prohibiting fraud (or "false advertising"). And furthermore, the money multiplier effect is pernicious: it gives bankers an incentive to support loose monetary policy, because they're the first to receive "newly invented" dollars and spend them before the economy can adjust to the additional money in circulation by raising prices: A sort of inflationary arbitrage.

The other school says that FDIC insurance makes the promise not a fraud, and anyway the fractional reserve allows credit to get to those who need it at low rates, thereby reducing the time-delay on liquidity which would reduce market efficiency.

Me? I see both sides, so I could live with raising reserve requirements (to something higher than current values, but less than 100%). And not just for banks, but for the assets-on-hand required for all sellers of promises-to-pay. (Insurers, for example.) And of course, raise gradually. Take the Goldilocks approach; try to get them "just right."

But in each case, these are tools intended for the practical application of capitalism, rather than capitalism per se. If one of them isn't working, one can move away from it toward a better tool, without thereby no longer being a capitalist. (Analogy: If Masses in Latin aren't reaching the masses, then try using the language of the masses as the language of the Masses for a while. It doesn't mean that one is Catholicism, and the other not. For extra credit, try saying this analogy 50 times in 5 decades while contemplating the mysteries of Newton's Second Law of Motion.)

Joe:

Tithing as I described is (look, I'm saying this because you characterized it as utopian, only) what I do, what my mother does, and what a solid majority of my Protestant churchgoing friends do, so far as I know (that is, they say or hint that they do, but I don't have access to their taxes as I do to my own or my mother's). So in that sense, it's practiced here and there, like co-ops are today.

But I agree it's utopian in a sense of getting everybody to do their duty reliably. (What's with you long-time Catholics, anyway? Your statistics on this topic are worse -- significantly -- than us Evangelical-raised newcomers!)

And of course there are the throngs outside the Church who won't do it at all. But what better way for the Church -- or Christianity in general, to include the separated brethren of my upbringing -- to distinguish itself than to be the source of all the most reliable and generous succor for the poor! What a travesty that the role of the benefactor is usurped by the vote-selling politician, and the role of the grateful supplicant by the broken man who sacrifices his dignity unwillingly to leeching forcibly off his fellows or the presumptuous mau-mauer who threatens his fellows with civic unrest if his demands go unmet!

But I digress. My point was to say, yes, we'll always have the poor with us, and yes, it's for lack of Christians doing their first duty to the poor (tithing, alms, and equal justice) and looking instead to some more indirect and systemic way to pawn that duty off on the state. And, yes, despite the fallen state of men, a not inconsiderable number of Christians do their duty. And yes, a heckuvalot of the serious "y'know, Christian with a capital C, not with a lower-case c" Evangelical Protestants do it better and more reliably than the Catholics, which is bass-ackward, and whassup with that?

Gee, lets see... I presented an argument. You made an assertion that misrepresented what I meant to say, so I restated my argument. (lather, rinse, repeat) After multiple times of doing this dance, you asked me to defend an argument I didn't even make. When I pointed this out to you, you called me a liar. So I had to refute that assertion by rehashing the entire discussion to prove I didn't say (or imply) what you said I did. I finally summarized the argument again and apologized for not being able to state it more clearly. After all that you call me a racist who hates poor people. No wait, you didn't call ME a racist, you called other people who have used similar arguments in the past racists. So not only do you expect me to defend my own argument, but I also have to defend an argument I never made, and now I also have to defend arguments made by racists and people who hate the poor whom I've never met nor know anything about their economic philosophies.

To answer your question, I guess I'm just not that smart. Man, but if I were...

I have a proposal: how about a clean slate. Tomorrow (had to work way too late tonite so it'll have to wait) I will submit a new argument with a detailed analysis of how I get to my conclusion (well, it won't be a NEW argument, but I'll use different words, ok?). You can then take a look at that analysis, and only that analysis, and use your dazzling wit and charming personality to rip it to shreds. Deal?

Rob,

You argued that CRA and F&F played a role in increasing housing prices beyond what the market could handle. That was your claim. That is what I disputed, by showing that CRA banks engaged in safe and sound lending practices for 20 years, and hence, did not cause prices to skyrocket beyond what the market could bear.

To quote one of the many times you made the argument you say you didn't make:

"As you say, the empirical data shows that the CRA and Freddie/Fannie "worked pretty much as they were intended to work". That is they increased home ownership above and beyond what the market would otherwise have provided. This caused the housing crisis!"

Everything after "that is" is YOUR argument, sir, not mine. You may not have initially brought up CRA or F&F, but once it was brought up you incorporated it into your explanation for the housing crisis, repeatedly. This is the claim I responded to. It would appear that my assumption that you do blame the CRA at least in part was correct, since once it was introduced, you wasted no time in adding it to the litany of government failures.

You seem to lack the ability to distinguish between prices increasing over time, and prices skyrocketing over night. My entire challenge to you is that the connection you seek to draw between CRA and, again, not rising, but SKYROCKETING, destabilizing housing prices is specious; that there is something else that is responsible for this rapid rise. This is a very simple argument.

I don't mind repeating myself 1000 times until you admit that you made the argument. When you do I will be happy to move on, and I won't make it contingent upon your personality, your wit, charm, grace, or lack thereof.

I just found out my computer is infested with viruses, and I'm not sure when I'll be able to post again anyway.

Hopefully I can have it all fixed by tomorrow. If you don't hear from me, this is why.

Forget it Joe. It is like talking to a brick wall. I offered to gloss over misunderstandings (from both of us) and start fresh and you refuse. I make this offer even after you have the audacity to accuse me of racism and hating the poor. Fine. You win.

I'm sorry I said the CRA practiced unsound lending. I renounce all mention of the CRA and unsound lending and unsafe lending practice. The CRA did not cause the subprime crisis. It did not cause cancer or World War I either. In your defense of the CRA you forgot to mention how the CRA put a man on the moon and cured cancer. The CRA is great and wonderful. All hail the CRA!!!

You have issues, Joe. I don't know if maybe some critic of the CRA ran over your dog when you were a child or something, but clearly your judgement is distorted beyond all comprehension. This has been a complete waste of time. Thanks a lot.

R.C. says "One cannot, I think, say that Fractional Reserve Banking is intrinsic to capitalism because it's been around for several decades in the U.S. One could thereby also make the argument that the Community Reinvestment Act and Rock 'n' Roll are intrinsic to capitalism."

FRB has been the rule since 1694; that's more than just a few decades. FRB privatizes money-creation. Banks lend money they create and collect interest on nothing. The effect is that all money is debt, which creates "the impossible contract." The banks create the principle, but the interest has to be created by another loan. But the interest on that loan has to be created by another loan, etc. Eventually, credit crunches are inevitable.

Is it intrinsic to capitalism? Who knows? We can only say that it is intrinsic to every capitalist system that actually exists.

(& likely my final comment here)

Part 1 of 2



The foolishness of this response should be obvious. Why should I have to point this out?

Just because somebody runs a company, or makes a lot of money, or even publicly subscribes to a free-market ideology on one occasion or another, doesn't mean that free-market ideas themselves are somehow responsible for the person's actions. Obviously this is most true when the person's actions directly violate those ideas! You are engaging in the exact same SOPHISTRY of somebody blaming the doctrines of Catholicism for the actions of a pedophile priest.

I SHOULD NOT HAVE TO POINT THIS OUT. Come on.



Details. Fact is, we have a free market, and a strong culture of entrepreneurship. Fact is, this has resulted in great wealth. We are the richest nation on earth, and our country is only 200 years old.

To say we are a capitalist country is merely a generalization, but it is a true one, despite whatever exceptions you want to point to. They only prove the rule.

Do you remember where this tangent came from? I said that capitalism has made us rich. You said, No it hasn't, and pointed to the Third World, where NO SUCH history of free markets exist.

Give me a break! If you are going to label us capitalist when you are criticising, you have to label us capitalist when the discussion turns to the good things too. You just called JP Morgan a capitalist, despite his obvious deviations from strict laissez-faire ideologies. Where were your careful distinctions then? You expand the label of capitalism to the global economy when it suits you, and you think you can deny at the same time that America is capitalist, by splitting hairs? You are throwing honesty out of the window in an effort to appear erudite and score cheap points in a debate. On the internet.

Now to contextualize the next part of your comment, I will provide the thread of remarks you are responding to:


This one from me:


Now here is your latest:



Oh, you are just so PUT-UPON, aren't you, having to teach the ignorant rubes on the internet! Wistful sigh...reading suggestion... non-sensical distinction...

Of course it would flow better if the distinction you were making was at all relevant.

Answer this: Why should we care about capital increasing the powers of labor if it doesn't generate a profit? What good is more productive labor if added productivity simply goes to paying for the capital that is responsible for it? If it falls short, you are worse off than when you started, despite the added productivity. If, on the other hand, the added productivity pays for the capital and then some, that extra amount is defined as PROFIT, which is the only point of owning capital.

And if the only point of capital is the profit it produces, then obviously having a claim to the profit is the important thing. If you owned the capital but somebody else got the profit, I doubt you would think you were better off than he, regardless of what formal legal ownership you had.

Stock ownership is at least as good as small business ownership. In fact it is better, because of the great benefit of diversification. Instead of owning 100% of one business, you own tiny shares in many businesses. Many of them could go bankrupt and you would be fine. The same can't be said for somebody who has all their eggs in one basket.



Without the state??? A straw man. I never promoted anarchy. There are lots of government regulations that assist and promote economic freedom. For instance, the enforcement of contracts.

As for the rest, of course it is all about profit. Like I said, profit is what is left over after the inputs to production are paid for. If there isn't any profit, the whole operation is not worth doing. I can't even begin to imagine what kinds of special distinctions you are imagining when you say "physical" economy. I'd like to know what the American economists you have in mind did say was the goal of the American system.

But don't bother responding unless you can set aside the sophistry.

The post of mine above this one is part 2 or 2. I tried to post the first one twice, and it still has not appeared after a half hour.

Hi Kevin,

It's up now. For some reason, your first post got caught in our filter (don't know why), so we had to approve it.

Everything should be good to go. Sorry for the wait.

Kevin makes a mistake about economics that is specifically denied by Catholic Social Teaching. Namely, he places capital prior to labor as the efficient cause of production. But this is simply empirically incorrect. Capital is always the result of prior labor. Labor is the efficient cause of production, and capital a mere instrument, as John Paul II points out.

This mistake is endemic to capitalism; indeed, it is the reason we call it "capitalism". Besides being moral mistake, it is a grave economic mistake. It elevates things over persons, which distorts the whole economic process. It also corrupts the very notion of ownership.

Ownership, in the form of shares, has been attenuated to a claim on some portion of the profit, and stripped of its responsibilities and powers. The result has always been the same: the rise of a managerial class that is neither capital nor labor, but exercises power over both. And as bad as this is for labor, it is equally bad for capital; both sides get stripped of their just rewards.

Shares are not a substitute for personal property, for owning your own land and tools. Shares merely put your property at the disposal of another; you are not able to make a living from your capital unless you have a great deal of it. If you define a capitalist as one who makes his living primarily from owning capital, then there are no more than 5% of Americans who are capitalists. As Chesterton pointed out, the problem with capitalism is not that it has too many capitalists, but too few.

Further, the scheme is so risky that most people lose money. The pre-war high of the Dow-Jones occurred in July of 1929, when the index was at $334. It would not achieve that level again until 1958 in inflation adjusted dollars. Further, $334 in 2008 dollars would be about $4,300, using current CPI numbers, and over $11,000 using the pre-Reagan methods of calculating the CPI. That means, at best, that 70 years of investing would hardly have doubled your money, and at worst, would have lost money. Bear markets, in fact, then to last 10-20 years.

Distributism might be said to be more capitalistic than capitalism for the simple fact that it creates more capitalists, that is, more people having functional and financial control of capital. Capitalism cannot do this, and never has. In fact (as I keep pointing out) there is not one example of a successful capitalism in all of human history.

[quote name=John]Kevin makes a mistake about economics that is specifically denied by Catholic Social Teaching. Namely, he places capital prior to labor as the efficient cause of production.[/quote]

Is he deliberately distorting what I said, or is he just unable to understand? Inquiring minds want to know!

Nevertheless, I will not respond to John. I've done plenty of arguing with him, and I know where it always leads.

http://tinyurl.com/6pqdkj

I'll let you draw your own conclusions.

If you paste this link in your browser,

http://tinyurl.com/5t56n9

It will bring you to Hilaire Belloc's collection of essays called "On Nothing and Kindred Subjects". Scroll down to the one titled "On Ignorance". I never tire of reading it, it is funny and so true of human beings of the intellectual bent. We all need to remember not to take ourselves very seriously.

Hi R.C.! Thanks for your comments.



Hmm. Since this is the major disagreement between Catholic capitalists and distributists, it's fair to ask that we delve more deeply into details.

My first question, though, is how do you distinguish between:

- free-market laissez-faire capitalism (or LFC, I suppose)

- LFC as practiced by an obedient Christian

Could you summarize the differences?

The usual perception of LFC seems to be that it allows more economic freedom than distributism (and, I'll add, CST, since I disagree with your assessment). A distributist would say that in certain areas it allows too much "freedom" (defined in the conventional, not the Christian sense).

Similarly, our current laws allow too much "freedom" on the question of abortion. But not for the obedient Christian. For the obedient Christian, our current abortion laws are no problem. The obedient Christian simply doesn't get abortions.

However, she is apt to notice that not everyone else happens to be an obedient Christian. So for us Catholics, this "as practiced by an obedient Christian" proviso basically makes the discussion pointless. A society of consistently obedient Christians would, let's face it, need no government at all. So it doesn't seem helpful for talking about laws governing real economies of real people in the real world. And obedient Christians are the first to call for laws against their own potential disobedience.

I see many divergences between LFC and CST. To get the ball rolling, I'll refer again to my comment above about agreement on a just wage. My understanding of LFC is that any wage is considered just as long as the two parties "freely" consent. But CCC 2434, quoted and linked to above, expressly denies this. And legal protection for a just wage is one of the most contentious debates between Catholic capitalists and distributists.

Thanks again.

This is like a train wreck. I can’t seem to look away.

Joe, you said:

To support this claim you then pointed to what I said:

My first question is, can we both agree that I never used the word “skyrocketing” to describe the increase in housing prices?

You seem to lack the ability to distinguish between what I say and what you want me to have said in order to make your argument valid. I never said that "the program I dare not name" led to skyrocketing prices. Your “entire challenge” then seems to be based on a premise I do not believe and have not suggested.

My second question is: can we both agree that IF I can show how even a gradual increase in prices can lead to housing prices that are “above and beyond what the market would otherwise have provided” that I have satisfactorily addressed your “very simple argument”? I’m not saying this PROVES my argument. I’m just simply trying to establish what I meant by the part of my argument concerning how we got to the point where prices were “above and beyond what the market would otherwise have provided”.

Please let me know if any additional clarification is necessary. If we’re clear, please answer both questions and then I’ll move on to try to explain how even a gradual increase can be unsustainable, and why I believe all of this is related to the housing crisis. Thank you.

Bill:

Thanks for your gracious reply. You ask how I distinguish between:
...and you justly note...
The reason I put in the proviso is that I regard practicing capitalism (LFC, at three letters, is shorter, so, thanks, I'll use that) to be much like practicing science and engineering. One can do immoral things with science and engineering, and be thereby condemned by the Church. But science and engineering are not thereby condemned.

I contend that the same thing is true of LFC: It says, "To practice LFC, enact regulations and laws sufficient to ensure that contracts are enforced, that the buyer always knows what he's getting, and that the seller isn't forced to sell at a price level other than he'd normally choose. Otherwise keep clear." Note the last phrase, "otherwise keep clear": If you interpret that last phrase in the most extremely literal way, it still wouldn't be "anarcho"-capitalism, because it assumes, indeed calls for, minimum regulatory requirements.

But 9 out of 10 self-described capitalists do not interpret that last phrase in the most extremely literal way. Just as "thou shalt not kill" is understood (by all but third-graders and dunces) to mean "thou shalt not kill except in defense of innocent parties in the gravest extreme, e.g. criminal attack or just war," so too "otherwise keep clear" contains an understood "except, of course, for regulations prohibiting sale of humans as chattel, or similarly ghastly or suicidal transactions."

(To say otherwise would be to argue, for example, that Jewish LFC advocate Milton Friedman supported the unregulated sale of nuclear weapons to Hezbollah, or that F.A.Hayek, author of The Road To Serfdom, was a proponent of slavery, which is nonsense on stilts.)

The argument as it stands is thus:
1. LFC ought to be defined by its proponents, not its detractors, just as Catholicism ought to be defined by the Church, not by Dawkins, Hitchens, et alia;
2. LFC proponents are neither anarchists nor unwilling to prohibit certain ghastly or suicidal transactions;
3. But they do advocate, outside of the transactions which it would be suicidal or ghastly not to prohibit, a certain humility of the government when it comes to tinkering with the market;
4. That "humble" regulatory environment should be limited to ensuring contract enforcement, buyer foreknowledge of what he's buying, and the freedom of the transaction from force, but within those parameters, it should be strong and effective because these parameters are requirements for the market;
5. The regulatory environment for which LFC calls allows a wide latitude for voluntary transactions, even after the suicidal or ghastly ones are deducted;

So to demonstrate that Catholic Social Teaching is incompatible with LFC, you must:
(a.) Start from the set of ALL potential voluntary transactions permitted by LFC's regulatory scope (Set A);
(b.) Find within Set A a subset of potential transactions which are immoral under Christian morality (Subset I);
(c.) Divide Subset I into two further subsets: Subset O, the set of transactions which the Catholic Church infallibly teaches governments ought to outlaw (for example, procurement of an abortion), and Subset D, those transactions which government may either merely discourage, or ignore, without thereby falling afoul of Catholic Social Teaching.
(d.) Find one transaction which is in Subset O (the set of transactions the Catholic Church infallibly teaches governments ought to outlaw) but about which most/all proponents of LFC would say, "Gee, any system which prohibits that really can't be called an LFC system."

Now I contend that there is no such transaction.

...continued...

...continuing...

Of the transactions which Catholic Social Teaching strongly opposes, I think they all fall into one of two categories:

(1.) They're in the ghastly/suicidal category, and most LFC advocates would be equally willing to prohibit them on those grounds; or,

(2.) They're in the category of items which the Church wishes to lessen or eliminate, but which she does not infallibly rule must be criminalized. LFC advocates are then free to agree with the Church that such things should be discouraged through disincentives.

Example: "living wage" bits in the Catechism. The pertinent sentences are: "In determining fair pay both the needs and the contributions of each person must be taken into account...Agreement between the parties is not sufficient to justify morally the amount to be received in wages."

Now, no advocate of LFC (alone) would disagree. (Those who also advocate philosophical materialism, and, for lack of any other moral guide, use the price system as a moral value system will disagree: But it's that philosophical add-on which causes the contradiction.)

Now we know that contract violations, and agreements achieved under force or fraud, are equally despised by both the Church and LFC advocates. The question is, does the Church, by this statement, advocate a criminal law to prosecute those who enter a wage agreement "without due consideration of the needs and the contributions of each person", even when it's not an instance of force or fraud or contract violation?

If so, then Catholic Social Teaching likely is incompatible with LFC.

But if the Church allows governments the latitude to use any lesser method?

Then the two (CST and LFC) remain compatible, and it's only a question of which incentives, and of what strength, should exist in the regulatory system.

Make sense?

Rob,

I guess I'm just trying to look at your arguments in the context of the actual timeline of events. Maybe there is some alternative timeline that I don't know of, that would be surprising. What I know is that the reason for the instability and ultimate collapse of the housing market is the rapid rise of housing prices - I have yet to hear a single major economic authority blame prices gradually rising over time.

So yes, when you talk about prices rising beyond what the market could bear, I thought you meant what actually happened - the skyrocketing of home prices that actually lead to the collapse. I thought that's what we were talking about. This is the first I've heard of a "gradual increase".

What I am pretty sure of is that the policies of the CRA were economically sustainable, that it was a GOOD government program that did not, as you DID assert, contribute to the cause of the housing crisis and in fact prevented it from being worse than it was, and that it was the deregulation of the banks that encouraged speculation and predatory lending.

What this all came down to was this: not all government intervention is bad, not all deregulation is good.

I'm sure you are as tired as I am of going around in this circle. What now?

The LFC you speak of has never actually existed. Therefore, it belongs to the realm of pure ideology, not actual history. However, there was a time when men attempted such an ideology. When the Liberal Party took control of England in 1832, they did so with precisely that LFC ideology. The results were ghastly and horrible. Those who express a nostalgia for the charms of the work house, the crowded tenement, starvation wages, premature death as commonplace among the working class, social chaos and the "satanic mills" of Victorian England may long to return us to that hell. But we leave such antiquarians to their own world, and work for the establishment of a just order.

One cannot confuse the just order with the law of the jungle. We have been there; we have done that. We will not willingly go back.

"One cannot confuse the just order with the law of the jungle. We have been there; we have done that. We will not willingly go back."

Quoted for truth.

I have thoroughly enjoyed this discussion, in fact I printed the entire blog so I could read it during the day when I am not working. This is the kind of thing I was looking for. I found great arguments on both sides. I will be using some of this for reference materials.

A question I have been having was asked by someone earlier and basically it was, “practically how do we do this?” I believe Chesterton would say “nothing could be so simple and yet nothing could be so hard” or something like that. Also from what I understand he felt Distributism was not something that could be done to people, but had to be done by people. We need to do it, by starting small by purchasing things local and of quality.

Like another poster, I'll have to print out this discussion, but I am delighted to have found this site and want to invite your visit to my own, where I am struggling to discuss similar issues. For one thing, in Holy Mass and the Stock Market, I've been evaluating existing parties or movements for what Pius XI seems to have set up as a litmus test of two parts, for those who would set out to find the Catholic Third Way: one, economic programs that might be indistinguishable from those of 'moderate socialism' (as defined by Pius according to one common usage, unshakable respect for private property, broadened distribution of private property,government's right and duty to oversee the exercise of private property to insure the common good); and two, strong moral values.

In Holy Mass and the Stock Market, you will see an analysis of a group called the American Revolutionary Party, which offers Capital Homesteading by Norm Kurtland, and a party platform. I would really like your comments. There's also Please Send Catholics to Outer Space, which is about the possibility of applying distributism to that new realm of economic development, and What's a Girl to Do?

You will see I'm no economist but also maybe that I am extending this question into surprising areas, and that's because there's simply no discussion more important to the future of mankind and the future of the Church.

I would also like to invite anyone to form a little club to begin to read all the economic encyclicals together. I find it so difficult to understand them without someone else to discuss the ideas with.I've only read Res Rerum and Quadragessimo Anno and so electrified I couldn't read any more.

Oh, take the Alpha Centauri poll, please do, you'll laugh! Under polls on the left sidebar.

Jan Baker
http://thewhitelilyblog.wordpress.com