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Distributism is not Free-Market

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Forgive the blunt title of this blog post, but the point needs to be made in no uncertain terms.

The Zenit News Agency has interviewed John Medaille, author of Toward a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More, which calls for a direct if brief (more later, perhaps – I have yet to read the book) response from this Catholic defender of the market economy.

Whether or not Pope Benedict’s Caritas in Veritate is a boon to “alternative economics” as the Zenit interviewer claims, the market economy has come under attack from just about every corner since the global financial crisis of 2008. It’s easy enough to kick a system when it’s down, even when there’s plenty of blame to go around. Some critics, however, have been suffering through many decades of capitalist triumphalism to get their revenge. Among these are the distributists.

As I’ve noted in some recent blog posts, distributism has its origin in the writings of G.K. Chesterton and Hilaire Belloc who, for the brilliant Catholic apologists they were, seem to have known very little about economics. As the Zenit interviewer remarks, “many are skeptical, and believe distributism is simply romantic agrarianism, or worse, just an aesthetic sensibility, without any real practical solutions.”

Identified as a “neo-distributist,” Medaille wants to make up for the deficiencies of his fathers. He takes economics more seriously and argues that distributism is the “truly” free-market system compared to capitalism or socialism, though it should be remembered that Chesterton and Belloc also supported distributism in the name of economic liberty, private property and less interference from the state. Be that as it may. The question is ultimately whether distributism, neo- or paleo-, lives up to its claims as an “alternative” or “third-way.”

Medaille starts by critiquing the related notions that economics is a physical, rather than a human, science and that economics has nothing to do with ethics, especially justice. I don’t know who he is debating here. When I studied economics as an undergrad at a large secular university and worked as an international economist for the U.S. government, I may have come across such types, though no one was so brash to say that ethics didn’t matter. But it definitely does not describe those of us who appreciate Austrian economics and promote a Catholic understanding of the market economy.

More to the point, the question is how economics as a human science is to “practice” justice. How exactly can an economic system ensure justice between a buyer and a seller who come to a common agreement? Doesn’t the virtue of justice require just persons? And isn’t legal justice the purview of the state that legislates against force, fraud, theft, etc.?

For an example, Medaille says that, in matters of trade, foreign financing of domestic consumption is impoverishing to both parties and presumably unjust. While I could be convinced of its imprudence or undesirability in certain situations, I fail to see why or how such financing is always and everywhere unjust and therefore deserving of a blanket condemnation.

Medaille then states his case for distributism as the truly free-market system compared to capitalism and socialism. He makes the obvious point that any system that concentrates power is bound to leave individuals worse off and less free. Socialism is clearly guilty as charged but does capitalism necessarily lead to greater concentrations of economic power? The problem of concentrated power mainly occurs when corporations and the state work together – a.k.a. corporatism – which hardly describes a market economy worth defending and may even resemble the distributist model.

A truly free-market economy must allow free competition; it is only when capitalists collude to restrict competition that power is concentrated and freedom restricted. Yet this is precisely what guilds seek to do. Or have the neo-distributists distanced themselves from Chesterton and Belloc’s defense of guilds and critique of competition and advertising? I cannot tell.

Medaille is on firmer ground when he reminds us that the government should be doing less and that government interference often leads to the concentration of power. But he then ruins his case by looking to the state and trade associations to collude, which seems to be acceptable so long as it all happens at a local level.

Medaille explicitly proposes using tax policy, property law, licensing authorities and other political means to the advantage of some over others. But how is local government somehow exempt from draconian or overly restrictive interference? In fact, the history of republican government is full of such examples, especially in cases where an obstinate minority asserts its rights against the majority. The concentration of power often begins “small”, “locally” or “popularly” and grows from there; see Hayek’s The Road to Serfdom for a well-known demonstration of the phenomenon.

In the end, I am left wondering just what the distributists think is so good about economic freedom. As far as I can tell, it is not about using our God-given skills and talents through the division of labor for the benefit of all, and I see absolutely no mention of poverty reduction, longer life expectancies, medical and technological advances, the social virtues encouraged by commerce, and other goods brought about by economic freedom. The distributist vision of economic liberty and private property seems to feed a misguided notion of self-sufficiency and pride that is as antithetical to Catholic social teaching as materialism and consumerism.

Furthermore, the neo-distributist case for free markets is riddled with the same contradictions and problems that plagued its predecessor. Making the case against socialism and a mythical laissez-faire state of affairs is simply not good enough these days. Instead of urging serious Catholics and others who take ethics seriously to seek new economic models or “lifestyles,” why not encourage them to understand how markets work and what moral freedom and responsibility require from us as citizens and in the marketplace?

Kishore Jayabalan Kishore Jayabalan is director of Istituto Acton, the Acton Institute's Rome office. Formerly, he worked for the Vatican's Pontifical Council for Justice and Peace as the lead policy analyst on sustainable development and arms control. Kishore Jayabalan earned a B.A. in political science and economics from the University of Michigan, Ann Arbor. In college, he was executive editor of The Michigan Review and an economic policy intern for the U.S. Chamber of Commerce. He worked as an international economist for the Bureau of Labor Statistics in Washington, D.C. and then graduated with an M.A. in political science from the University of Toronto. While in Toronto, Kishore interned in the university's Newman Centre, which led to his appointment to the Permanent Observer Mission of the Holy See to the United Nations in New York. Two years later, he returned to Rome to work for the Pontifical Council for Justice and Peace as the Holy See's lead policy analyst on sustainable development and arms control. As director of Istituto Acton, Kishore organizes the institute's educational and outreach efforts in Rome and throughout Europe.


  • Dan

    This is what I’ve been waiting to hear. Great job.

  • Roger McKinney

    Good analysis! Thanks! Socialists are always looking for ways to deceive people and sneak socialism in under cover of a new identity.

    “How exactly can an economic system ensure justice between a buyer and a seller who come to a common agreement?”

    The Scholars of Salamanca settled that by defining free exchange as automatically just and the only justice possible in markets.

  • Nancy Marie

    As a convert to the Catholic Church, and after reading some Chesterton on distributionism, I came away wondering why it seemed so socialistic to me. I see now I haven’t lost my mind after all.

  • David Wendell

    I’m still on the fence. I will have to study more I suppose. I love Chesterton and Belloc and belong to the local Chesterton group here in Salem, Oregon. I thought the main plank of Distributism was SMALL business is better along with small and local government. Like patronizing the local “mom and pop” is better than going to the “Big Box” stores. Perhaps it’s more complicated than that. I don’t think that guilds are the same as unions. Even if Chesterton is wrong on economics I still think he’s a great read.

  • David Brown

    A pickpocket is obviously a champion of private enterprise. But he is not a champion of private property. The point about capitalism is that it preaches the extension of business, but not the preservation of belongings; it also tries to disguise the pickpocket with some of the virtues of the pirate. The point about communism is that it tries to reform the pickpocket by forbidding pockets.

  • Roger McKinney

    David: “Like patronizing the local “mom and pop” is better than going to the “Big Box” stores.”

    I’m sure there is more to distributism, but that seems to be a major theme. There are a group of socialists who define capitalism as multinational corporations in bed with the government. Small business is not part of capitalism.

    However, as Mises often pointed out, capitalism is mass production, that is, production for the masses. Capitalism strives to reduce the costs of producing goods so that the poor and middle class can afford them. Before capitalism, all production was 1) home production for immediate use (not for sale) or 2) craft production for the wealthy. Reducing costs of production so that the middle class can afford your products requires intensive use of capital equipment, the commonly used definition of mass production. There is no other way to reduce the costs of production than through great use of equipment and less direct labor.

    But capital equipment requires size and scale and volume in order to achieve those cost reductions. As Henry Ford discovered, you can reduce prices only if you have enough volume of business to spread the massive costs of plants and equipment over large numbers of people. The auto industry before Ford was small business and hand crafted cars, and they were so expensive only the most wealthy could afford them. That is pre-capitalistic production.

    So the love of small business is a direct attack on capitalism and our standard of living. If we went back to the pre-capitalist methods of production with small businesses the costs of everything would sky rocket. I know they’re not pretty or quaint, but low prices require large businesses because of economies of scale. Small businesses equal high prices.

  • Noah Moerbeek

    Instead of attacking distributism why doesn’t the author suggest the model of economics that the pope and his predecessors would have?

  • Interesting discussion. It would clarify matters greatly if people said whether they disagreed with the ends of distributism or just the means. If it is just the means, then the debate is simply about the best way to broaden the number of producers and widen business ownership. If it is about the ends themselves, then that is a different matter. I disagree strongly with Roger, but he gets to the heart of the matter.

    Distributism takes inspiration from the passage in Rerum Novarum that ‘the law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners’. It takes the view that the size and structure of business ownership is not morally neutral; size equals power over other people and vast power over others, in a small number of hands, is wrong.

    Now at least some opponents of distributism respond that ownership is morally neutral. Others take a more ‘Whiggish’ view of predestined progress, i.e. the ascent of big business is somehow natural, inevitable and irresistible and that the person who disagrees is ever so slightly ridiculous – Don Quixote lingering into the 21st Century.

    However, distributists and honest libertarians can respond that the ostensibly ‘free market’ is actually dominated by the creature of the state, the shareholder corporation. I am sorry to repeat myself but this can hardly be stressed too highly – there is nothing natural or organic about the sharedholder corporation. It is the child of the state entirely – it is founded on the privileges that the state doles out: limited liability that shields shareholders from the responsiblities of ownership, perpetual life and the right to issue stocks, bonds and other debt instruments.

    In sum total, this represents an enormous intervention by government in the market place. The fact that it is so commonplace and well-established in the West should not blind people to the reality of it (even though it almost always does).The irony is that so many libertarians so ferociously denounce anybody who points this out.

  • Roger McKinney

    Rerum Novarum: “‘the law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners’.

    That’s poor policy. Few people have the skills, talent and intelligence to be business owners. That attitude shows a low regard for skills needed to succeed in business. There is a reason few people own businesses: only a few have the ability.

    Luke: “size equals power over other people and vast power over others, in a small number of hands, is wrong.”

    That is simply false! If the state is doing its job of protecting property and ensuring justice, then a small business has just as much power as a large corporation because neither can force customers to do business with them. The failure of many corporations over the years is proof. Corporations can succeed only by pleasing consumers, just as small businesses succeed.

    Luke: “there is nothing natural or organic about the sharedholder corporation.”

    Actually it is completely natural. The fact that the state agrees with it doesn’t make it unnatural. Corporations would have developed through common law had the state not embraced them. Shareholders are protected from liability because they give up control. It’s a quid pro quo. Shareholders give up control in exchange for limited liability. And that’s perfectly natural. Common law has never held people responsible for the actions of others over which they had no control. Would you want to be held liable for the actions of a waiter in a restaurant you ate at? Had the state not adopted corporate law, common law judges would have seen the shareholder agreement as a contract between management and shareholders in which shareholders give up control of operations. Without that control, no judge in his right mind would hold shareholders responsible for the actions of management. The corporation makes stock ownership much like debt. No judge would hold the lender responsible for the actions of the borrower. That would be insane. The lender has no control over the actions of the borrower. The only difference with owning stock is that the “lender” gets a share of profits and not a guaranteed interest payment. In fact, since ownership requires control of the thing owned, shareholders cannot be owners of the business in the true sense.

    Another example might be rent. The land lord is rarely held responsible for the actions of the renter, even though the land lord owns the property and earns a profit from it.

  • My own issues with distributism are in the Microcapitalist Manifesto (full text here :

    I agree that even the neo-distributists are overly agrarian, among other things, and have left the basic principles not only of Chesterton and Belloc, but also of Cobbett who preceded them. For instance, the idea of buying local vs buying closer to the producer in the retail chain.

    While microcapitalism is drawn from similar arguments as distributism, it is more of a “small capitalism” theory.

  • Pingback: G.K. Chesterton Sightings, Week Ending 9/3/2010 « Eternal Revolution()

  • CDNowak

    Rerum Novarum: “‘the law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners’.

    McKinney: “That’s poor policy. Few people have the skills, talent and intelligence to be business owners. That attitude shows a low regard for skills needed to succeed in business. There is a reason few people own businesses: only a few have the ability.”

    So the means of production, and thus power, ought to be concentrated in the hands of the few with the “skills, talent and intelligence to be business owners”? Would not Lord Acton say that this concentration of power corrupts?

    I second Mr Moerbeek’s call for the author’s interpretation of the ethical capitalism mentioned by the popes.

  • Little Platoons
  • Part of the problem with the distributist school of thought is that it assumes the pope and his predecessors suggest a particular model of economics (not surprisingly, the distributist one), when many of the particulars, but not the unchanging principles, of Catholic social teaching are historically conditioned and matters of prudential judgment.

    So while popes have always seen themselves as guardians of the moral order and thus able to judge the current situation in light of eternal principles, IN NO WAY do they propose an alternative system.

    I quote Centesimus Annus, n. 43:

    “The Church has no models to present; models that are real and truly effective can only arise within the framework of different historical situations, through the efforts of all those who responsibly confront concrete problems in all their social, economic, political and cultural aspects, as these interact with one another. For such a task the Church offers her social teaching as an indispensable and ideal orientation, a teaching which, as already mentioned, recognizes the positive value of the market and of enterprise, but which at the same time points out that these need to be oriented towards the common good. This teaching also recognizes the legitimacy of workers’ efforts to obtain full respect for their dignity and to gain broader areas of participation in the life of industrial enterprises so that, while cooperating with others and under the direction of others, they can in a certain sense ‘work for themselves’ through the exercise of their intelligence and freedom.”

  • Responding to a number of points raised. Roger, you say “if the state is doing its job of protecting property and ensuring justice, then a small business has just as much power as a large corporation because neither can force customers to do business with them”. I am sorry, but that strikes me as unrealistic. The state is not a machine that can be programmed to function along fixed lines. It is a collection of people – favouritism and collusion are as much a part of the state as every other part of life. When the state is involved in conveying privileges to corporations, you can be sure human error and partiality are involved. These being the inherent dangers, it is better for the state simply not to be involved in doling out such favours.

    Also I dispute that the one and only difference between corporations and small business is consumer preference. Legal privilege allows the corporation access to a far greater degree of capital – limited liability artificially makes them a more attractive investment for those who want profit without responsibility. There are plenty of other factors that come into play once a firm has been inflated: its access to the law, lobbying power, the indoctrinating effects of mass advertising etc.

    Also, I second CDNowak’s comment. The thrust of your argument seems to me to be that the law should favour the gifted few who have been blessed with ability to run a business. But how do you know that only a few people have this skill? How can you make such a sweeping statement? It isn’t as if running your own business features in education – quite the contrary. Life in corporate employment is drummed into most people from birth, as if it is some kind of brute fact of the universe.

  • Catholic social teaching may not recommend a specific economic system, right down to the small details. However, it does have certain principles in mind, an ethos, if you like. It gives an idea of the destination, if not the path to get there. Distributism is an attempt to find path. One may not agree with all the measures Belloc and Chesterton advocated – I never thought one must – but one can agree with their ultimate goals, their vision of what a just economic order resembles. I take this to be the position of Wilhelm Roepke among others. The debate then becomes one about the best means rather than ends.

    Now obviously, times change and so do economic structures, but the issues that give rise to distributism really don’t change that much because they are about humanity itself – namely the dignity of the individual person, the balance of power in human relationships and the dehumanising implications of concentrated ‘mass’. The question of how we deal with these is always being asked, so the vision and ethos behind distributism remain absolutely relevant.

  • Fair enough.

    But you surely can’t call the current system “free” in any meaningful sense, can you?

  • Roger McKinney

    CDNovak: “So the means of production, and thus power, ought to be concentrated in the hands of the few with
    the “skills, talent and intelligence to be business owners”?

    That’s a loaded question that needs to be unpacked. What power do corporations have that other don’t? They still must please
    consumers in order to survive. In that sense they have no power. Because they have more money, they can bribe politicians
    with more, but that is a political problem with corrupt politicians, not an economic one. And private businesses can
    grow large enough to bribe politicians, too, so it’s not an issue of corporations vs private business.

    Ownership of business has nothing to do with concentrating power, but it has a lot to do with God-given abilities. And what is
    the alternative? Should we force people who can’t run a business to do what they can’t in order to salve a misguided
    sense of fairness?

    Luke: “When the state is involved in conveying privileges to corporations, you can be sure human error and partiality are involved.

    As I wrote before, the state does not convey any privileges on corporations. Limited liability is nothing but the
    common law principle of holding liable only people with control.

    Luke: “Legal privilege allows the corporation access to a far greater degree of capital – limited liability
    artificially makes them a more attractive investment for those who want profit without responsibility. There are
    plenty of other factors that come into play once a firm has been inflated: its access to the law, lobbying power, the
    indoctrinating effects of mass advertising etc.”

    Limited liability is no more artificial than are bonds. If you eliminated the corporation, nothing much would change.
    Businesses could raise as much money via bonds and become just as large. Your argument against corporations relies
    mostly on a dislike of bigness, which is nonsense. Yes, big firms have more money for lobbying, lawyers and advertising.
    But so does any rich person. Are they evil because they are rich?

    Luke: “The thrust of your argument seems to me to be that the law should favour the gifted few who have been blessed with ability to run a business.”

    You have twisted what I wrote into the opposite of what I meant. The law should favor no one and it does just that
    when recognizing the common law principle of liability belonging to those who exercise control.

    Luke: “But how do you know that only a few people have this skill? ”

    Common sense tells me that, first. But studying economics and business for decades has shown me that it’s much harder
    than socialists want to admit.

  • Roger McKinney

    PS, Luke, you should examine the volume of corporate bonds vs stock issues. Corporations issue far more in bonds than stocks. Stocks are a tiny part of corporate financing. Do you think bonds are evil too?

  • Hello Roger. Regarding limited liability and the common law, I can only speak from an English perspective, but the common law began here, and its development in the early United States was framed with reference to precedents and ongoing developments in Britain. Certainly, many of the principal changes in corporate law began in Britain.

    In this respect, you are wrong to suggest that the common law recognised limited liability as a natural attribute of business. Quite the opposite – unlimited liability was the default regime for the great majority of English businesses well into the 19th Century. It was statute, the hand of the state, that changed this, namely the Limited Liability Act of 1855 and the Joint Stock Companies Act of 1856. These were highly controversial and fiercely criticised by a great many businessmen among others, as they knew the decisive changes these would make to the ethical foundation of the economy. It was also pointed out very explicitly at the time that these interventions by the state would fix the balance unfairly against traders operating under unlimited liability.

    You say it is ‘nonsense’ to have an aversion to big business. This an an aversion a good many have shared. Schumpeter believed the growth of giant enterprises was one of the forces that would consume capitalism from within. Some of the most effective defenders of the market economy in the last century – Luigi Einaudi, Alexander Rustow, Wilhelm Roepke, Walter Eucken, Alfred Muller-Armack, and Ludwig Erhard were opponents of bigness, and in business as much as anywhere else. Indeed, you yourself tacitly admit its dangers when you say that private business can swell as large as shareholder corporations, giving them the means to bribe politicans as a consequence of their size.

    Lastly, I have to contest your statement that “ownership of business has nothing to do with concentrating power, but it has a lot to do with God-given abilities”. Do I take you to mean that the balance of ownership represents the will of God? I don’t mean sound to sound flippant, but that seems to me to be what you are suggesting. Furthermore I find it hard to believe you see no link between concentration of ownership and concentration of power. Do you believe that property ownership is purely a matter of abillity and has no relationship in the least with the wider political and legal order? I am not trying to hector – I’m genuinely curious.

    As for the ability of corporations to spend more on lobbying, the law et – well, they are able to do so because of the size they have attained. Where you and I differ is that you credit this entirely to consumer preference and the abilities of those at the top of these corporations, whereas I think there are a great many other factors at play that lead to artificial inflation.

  • Roger McKinney

    Luke, I didn’t mean that the idea of limited liability came from British common law. I meant that it would have developed under common law had the state not embraced it. And common law goes back much farther than England. In fact, I was thinking of the common law of the Dutch Republic. Common law always recognized limited liability for holders of debt. It would have been a simple process to extend that to holders of shares of stock and for the same reasons.

    You appeal to authority in your argument against large business. I appeal to other authorities. Bigness and wealth is not the danger. The danger lies in corrupt politicians who have too much power of the economy.

    “Do I take you to mean that the balance of ownership represents the will of God?”

    For the most part, if you believe that talents are God-given. And until the enlightenment, most theologians believed all wealth was distributed by God for a purpose, Calvin especially. Of course there are those who have gained their wealth through immoral means. But that is just like the Bible. Some people were wealthy because God blessed them, some because they were evil. The amount of wealth is not the issue as much as how you got it. That seems to me to be the clear Biblical attitude toward wealth.

    “As for the ability of corporations to spend more on lobbying, the law et – well, they are able to do so because of the size they have attained.”

    No, they do so because we have corrupt politicians who are easily bribed, and we have an electorate that has rebelled against God and his principles. If the American people cared about God’s principles for organizing society, they would have kept the government from having any power of the economy and thereby favoring the rich and powerful at the expense of others. Just as God allowed Israel to have a king as punishment for their rebellion against him, the corruption in politics is our judgment for abandoning him.

    Yes, I oppose big business or anyone gaining wealth through bribing politicians. That was Adam Smith’s complaint. And his answer was to get the state out of the market. Without corrupt politicians, corporations have no more power than a small business.

    You seem to think that corporations are the only problem. But I can guarantee you that if you outlawed corporations, nothing would change. As I wrote before, large businesses would simply finance everything through bonds. Look at private equity capital today. It is able to buy whole corporations and take them private without hurting them in any way. And as I wrote before, most financing of businesses is done through bonds, not stock. Why don’t you address any of these issues instead of just repeating yourself?

  • TCK

    Mass production is accomplished mainly through cooperatives in the ideal distributist models, however, there is still a place for large scale private business in mass production through distributism. This is accomplished through regional and local franchise. As long as property is “distributed” so that ownership can take place on the local level.

  • The simple answer to that, Roger, is that businesses would not take on vast amounts of debt in bonds if liabiity for these were unlimited. It is one thing to borrow sums if you know that you, personally, don’t have to answer for them. It is a different thing altogether if you do have to answer for every pound, dollar or euro. Debt fuelled expansion is easily done if the IOU never lands on one’s own doorstep. It gives a veneer of success and vigour to behavior made possible by the avoidance of personal responsibility.

    Now I know what your answer will be – that common law would inevitably have recognised limited liability for shareholders in time – you have been quite clear on that point. I simply disagree with your reasoning. It is a counterfactual assertion that this would ‘inevitably’ have happened; you can not know this. It is easy to impose retropsective inevitability on the past, but that overlooks the vital role of circumstance. Demand for limited liability arose from specific changes in attitudes to business ethics in the mid 19th Century. These changes were not foreordained in human history, they most certainly weren’t unanimous and they did not have to be successful. It is no conincidence that their advocates wanted to use the state to impose them. I doubt whether common law in the English-speaking world, based on tradition and precedent, could have accomodated the dramatic reversal in legal understanding you suggest it would have: that shares are just debt, much like any other, and that shareholding does not really mean ownership. Even if such reinterpretrations did occur, I doubt limited liability corporations would have become the norm as completely as they have if the state had not decided to make this the default form of business organisation.

    As for the example of Holland, well I am not challenging you on that. But I think it will only take you so far; in the anglophone legal world, decisions, theories and precedents in the Low Countries have never been an particularly influential point of reference. The common law is most firmly rooted in English-speaking states precisely because it is in Britain that the common law put down deepest roots, and went on inspire the laws of states created by emigrant Britons.

    You take me to task for being fixated with corporations, but that is only because the great majority of big businesses assume the form of the limited liability share holder firm. Privately owned businesses are hardly dissimilar – they may not trade shares publicly, but they too fuel their expansion by taking on debt that individuals don’t have to answer for. You also suggest that my solution to big business is authority. Please point out where I said that. My response is exactly the opposite – it is the centralising tendencies of the state that are likely to beget bigness everywhere else. If the state had not redefined the rules of the game, I doubt things would have worked out as they have.

  • I read the book from the viewpoint of seeing what it might contribute to fixing the US government. Despite some of the limitations related to guilds, and the term distributism itself, this book goes beyond prevailing theories and paves new ground in creating a more truly free market. The principle of subsidiarity is a primary principle our founders implicitly held, even if a Pope is responsible for using the term a century later. The author clearly takes economic theory beyond simple transactions and the supply-demand curve and addresses much-needed theory of externalities–land, labor, and money. This is a book that helps show the way away from corporatism and special interest government by taxing what is bad (economic rent) and encouraging what is good–enjoying the fruits of your labor.

  • Roger McKinney

    Luke, I don’t understand what you wrote about bonds. Do you think the limited liability with debt is as evil as it is with shares of stock?

    Because the state endorses something doesn’t make it evil. The state prohibits murder, but that doesn’t make murder a good thing. No, I can’t prove that common law would have endorsed limited liability for shares of stock, but it’s not too difficult to see the similarity between bonds, which common law gave limited liability, and stock ownership. They are far more alike than different. So it’s not a logical leap at all to suggest that common law would some day notice that similarity.

    The “Glorious Revolution” of 1688 dramatically changed English law. William of Orange set about to re-align many institutions in England with those of the Dutch. But even before that the exchange of trade and ideas between the two was significant. A lot of Dutch merchants set up business in England after the Dutch gained independence from Spain, and England helped the Dutch a great deal in that.

    “If the state had not redefined the rules of the game, I doubt things would have worked out as they have.”

    Above, you criticize me for making counter-factual arguments. But now you’re absolutely certain that your’s is the correct one?

    I completely agree with you that any effort to advance a business through political favors should be eliminated. But getting rid of corporations will have no effect at all on stopping that because the act of incorporating has nothing to do with it. Businesses can grow just as large on debt, and most business financing is through debt. I think debt is about 10 times as large as stocks. If bigness is evil, you will have to outlaw debt as well.

  • Unprivileged

    There’s nothing wrong with distributism. In fact if you are a consistent Austrian, you will see that the distributist vision such as worker cooperatives would be more likely to happen in a truly free market society. I don’t know which strain of Austrianism you are in, but its what left-libertarian would call “Vulgar Libertarian”, which is defending the Capitalist model of business, where ownership and control is concentrated in the hands of investor, which historically has always relied on government intervention since the very beginning.

    Capitalism and Free Market is not the same, historically it has been oppossed to each other. Capitalism is where Capital owners get their privilege and superiority over labour through the means of the State. It was used pejoratively not only by the communist Marx, but in fact by one of the earliest radical free marketer Thomas Hodgskin, mentor of Herbert Spencer. He wrote in around 1820s, “Labour defended against the claim of Capital”, and that even predates Marxism.

    Capitalism would not be able to maintain its privilege and superiority over labour, and it would be destroyed in the free market by worker cooperatives, as the freeer the market is from State enforced monopolies, the more people would be self-employed and co-operate. The more society is concious about freedom, the more it would lead to co-operation, instead of bossing people around. People would see the benefit of working co-operatively rather than working under a boss.

  • Unprivileged

    Capitalism HAS ALWAYS relied on Corporatism for it to be even possible in the first place and for it to maintain its status quo. Prove me wrong.

  • Unprivileged

    You should read this analysis by Kevin Carson,

    Labour Struggle : A Free Market Model

    Vulgar libertarians tend to defend the existing form of business (Capitalist firms) as if it is a result of a free market. Of course historically this is not true. Besides saying that “Oh but we don’t have Capitalism” its like saying “Oh but Stalin was not a true Communist”.

  • Unprivileged

    A wonderful video of Sheldon Richman’s (Austro-libertarian) lecture, “Capitalism vs. the Free Market”

  • Unprivileged

    // I completely agree with you that any effort to advance a business through political favors should be eliminated. But getting rid of corporations will have no effect at all on stopping that because the act of incorporating has nothing to do with it. Businesses can grow just as large on debt, and most business financing is through debt. I think debt is about 10 times as large as stocks. If bigness is evil, you will have to outlaw debt as well. //
    The current form of Corporations, were born through the State. It has always relied on subsidies and protection privilege in order to maintain itself. Free competition would destroy Corporations to form. Defending Corporations is like defending voluntary slavery. Slavery can exist without the State, doesn’t mean it’s an moral or ideal relationship.

  • Unprivileged

    A lot of undesirable things would exist without the State. But it doesn’t make it desirable or likely does it? Murders are desirable for murderers, Corporations are desirable for investors, not workers, nor consumers.

  • Kishore Jayabalan

    Capitalism is not the best term to describe the free-market economy for a number of reasons, one of which is that it implies some sort of permanent conflict between capital and labor, or capitalists and workers, that need not exist and is anti-Christian in its origins and consequences.

    For this reason, John Paul II wrote in Centesimus Annus n. 42 that terms such as “business economy”, “market economy” and “free economy” are preferable to “capitalism” so long as the reality described includes a strong moral and ethical culture and the rule of law. This seems to me what JPII meant by ethical capitalism, though there is much more than can be said about the types of laws and culture that define it. Once again, the Church does not propose, let alone impose, a single model as best.

  • CSN

    If one wants to know the mind of the “True Catholic Church” before the advent of the disastrous second Vatican Council, which was a robber council, I would recommend to read the “Rerum Novarum” of Pope Leo XIII which touches on this subject very well and very clearly denounces Government takeover of private property and redistribution of wealth. He recommends trade unions, etc. to work with employers. You might say Unions were a Catholic ideal, but since the reign of Leo XIII have become corrupted. There is really no Utopia in any of this, but first we must consider that the word “Distributism” or “Redistribution” are one in the same, but semantically differently. You can paint it any way you wish, but an “Ace” is an “Ace” is an “Ace”. Communism is centrally dependent on such ignorance by the Masses who claim people like G.K. Chesterton are infallible, when, in fact, they are not. G.K. Chesterton was a man of good background, a convert to Catholicism, and a scholar, but as the author here so professionally pointed out, knew nothing about economics. We need employers to realize they must pay a fair wage to employees, not cheat them of a fair wage, etc. This is where Trade Unions came into being. Keep out the word “Distributism”, and keep on the track of Free Trade and Capitalism, not “Corporatism”, which eeks out the little guy who has a small business and wants to succeed. Big Pharma, Big Agra, Big EPA, etc. are all out to hurt small business. This is the evil we need to break up and out, not the destruction of Capitalism as a Free Market practice.

    • Stevan Bolton

      1) several papal encyclicals after Rerum Novarum specifically recommended nationalization, price controls, progressive taxation and other policies that capitalists typically despise. 2) as Chesterton pointed out, capitalism is designed to destroy the free market, not preserve it; what capitalists want is a Captive Market, where oligopolies dictate prices and wages; 3) as I’ve brought up throughout this thread, all of the individual tenets of capitalism have been condemned by the Catholic Church, including speculation, usury, price gouging, paying unjust wages, market cornering, class prejudice, etc. It is not even possible to get rich and still get into Heaven, according to many saints, such as Chrysostom and Aquinas. All of these policies and beliefs are indispensable, intrinsic elements of capitalist dogma, which originated with Protestant heretics like Calvin, Luther, Adam Smith and the Social Darwinists. Capitalism is an idea of Protestant origin which Catholics are not free to believe in and still be Catholic. Distributism is just a name recently slapped onto to the opposite economic principles that began under Moses, received a lot of attention throughout the Middle Ages, are still evident in the Catechism of the Council of Trent and which were simply reiterated in documents like Rerum Novarum. It is not a recent idea; it is an ancient one. Throughout this whole long tradition, God and his vicars has consistently demanded government interference to create an even marketplace, characterized mainly by small independent operators and consumers. Adam Smith was clearly wrong when he said that an “invisible hand” would produce an evenly distributed marketplace; it takes a conscious effort, backed by governmental authority.

  • Stevan Bolton

    The papal encyclicals on distributism specifically rejected this logic, saying that a “free” contract between unequal parties is not in fact free. Furthermore, that opinion is also heretical, for it flies in the face of mandatory Catholic dogmas against price gouging and market cornering which date back to Moses and were enforced rigorously throughout the Middle Ages (to the chagrin to businessmen).

  • Stevan Bolton

    This argument is historically false; Adam Smith was wrong on this point, as usual. Large businesses first lower prices to drive small business out. Then when they no longer have to contend with as much competition, they jack them up as high as they want. The recent price gouging scandals in Big Pharma are just a dramatic reminder of what has gone on throughout the entire history of capitalism – and which has been forbidden under Catholic moral dogmas as far back as Moses. Charging unjust prices and market cornering are both expressly forbidden and always have been, quite consistently from the Old Testament straight up through the Catechism of the Council of Trent and beyond.

  • Stevan Bolton

    They DO in fact propose an alternative system, one that was put into practice as far back as the OT (see the Jubilee,, etc.) and during the Middle Ages, when distrbutism was put into practice more often. It is a matter of prudential judgment only within the confines of Catholic moral theology, which has expressly forbidden every single tenet of capitalism. One cannot commit usury, engage in speculation, drive down wages as far as they can get away with, raise prices or corner markets without committing mortal sin. The class prejudice inherent in capitalism has likewise always been forbidden. The saints have also consistently taught that one cannot get rich and still get into Heaven; Chrysostom and Aquinas were among many who said this. All of these are hallmarks of Protestant heresies, not of Catholic practice and teaching. We cannot model our economies based on false Protestant teachings, or even believe in them, without committing heresy ourselves; one cannot be a capitalist and still take Eucharist, anymore than one can use contraception or applaud divorce and gay marriage. Catholics cannot be capitalists any more than they can be Communists.

    • Jubiliee had nothing to do with distributism. It was more like a mortgage burning. People only sold their land to pay off debts. The “buyer” would recoup his loan through profits on the produce. Once paid off, the land returned to the original owner. Jubilee limited the amount of money a farmer could borrow to the prorated income the property could earn until Jubilee. So sales were more like long to leases to pay off debt.

      “All of these are hallmarks of Protestant heresies, not of Catholic practice and teaching.”

      Actually, they’re not. The anti-business attitude of the Church came from pagan Romans and Greeks. By the 16th century, Catholic theologians had realized how wrong the Church had been. The principles of capitalism came from the Church’s greatest theologians of the 16th and 17th centuries at the University of Salamanca. They became identified with Protestants only because the Dutch Republic was the first to implement them while Catholic countries refused.

      • Stevan Bolton

        That’s completely false; everything you just said is simply a dishonest distortion, perhaps not on your part, but definitely of the part of whatever sources you’re cherry-picking all this from. Catholic theologians got their objections from the OT, which gave us clear examples of distributist principles. The fact that the land EVER returned to the original owner or that ANY debt was ever cancelled was unheard of in human history. There is no other historical precedent for such limitations on the business activities of the upper class. Secondly, a handful of the 16th Century theologians cannot have said that the Church was previously outright wrong in its teachings, otherwise that on its face would make them heretics, no matter what the topic was. This is precisely why subsequent papal documents overruled the tiny handful of scholars who backed such ideas, which only became popular after Calvin and Co. made a lot of money from legalizing usury (the history you’re giving is an Orwellian rewrite). For example, see Vix Pervenit, which overruled Suarez on usury several centuries later. One can always find individual theologians scattered throughout Church history to support any heretical position one wants to take, but their opinions do not matter one whit in comparison to those of the popes and church councils, who definitively and dogmatically said that the Salamanca School and others who took their teachings even further were simply wrong. In fact, these ideas are outright sinful. No one can take such positions and still remain Catholic; we cannot be capitalists, engaging usury, speculation and all that, nor enabling others to do so with cheap excuses of the kind on display throughout this thread. You might as well be quoting some of the modern “Catholic” theologians who’ve come up with equally heretical objections to Catholic doctrine on things like contraception, divorce and abortion. The same tactics and bad logic were also applied long ago to make sins like usury etc. appear legitimate.

        • Well one of us is clearly wrong. The difference is I know both sides of the history and you know only one. Don’t you think you ought to at least read something from the other side, at least to be informed? You can start with “Faith and Liberty: The Economic Thought of the Late Scholastics.” BTW, the theologians at the University of Salamanca were considered by the Vatican to be the best scholars in Europe at the time. The Pope protected several of them from execution by the king when they criticized him.

          There was no debt forgiveness with Jubilee. To think there was is just to fall victim to a superficial reading of the passages. Selling the land paid off debt and after it was paid people got their land back.

          Church fathers did not get their ideas about business from the Bible. They embraced pagan ideas and then used faulty interpretation methods to make the Bible agree with them.

          BTW, the Vatican has a bank that loans out money at interest and violates many of the ancient ideas about speculation, usury, etc.

  • Stevan Bolton

    Bonds are in fact evil, since they depend on lending at interest, which was long ago forbidden by Catholic dogma. It still is. No modern pope has ever overruled the church councils or encyclicals like Vix Pervenit on this – nor can they. All we have is a bunch of low-level issuing bureaucrats to the contrary to legitimate travesties like the Vatican Bank. If anyone charges interest on anything, that’s a mortal sin which must be confessed; in fact, the church councils demanded that such a person be denied Catholic burial. So no, bond trading is out of the question. Anyone who does it is automatically excommunicated and can’t take Eucharist without committing sacrilege – same anyone who uses contraception or commits divorce. Is that popular? No. True? Yes.

    • Philosophical Actuary

      “Bonds are in fact evil, since they depend on lending at interest, which was long ago forbidden by Catholic dogma.”
      What is condemned in Vix Pervenit is charging of interest on mutuum contracts. The pope states that usury is in the nature of the contract. A corporate bond is essentially different from a mutuum contract. A mutuum contract is an exchange of property for a personal guarantee of its return in kind. Since there is no property claim that the lender has, there is nothing to charge for beyond the amount given. This seems to be why usury is thought to be a form of slavery as it is a charge and property claim against the borrower himself as a piece of property.
      A corporate bond on the other hand is an exchange for a property claim against the corporation itself, that is a collection of property, with certain rights to return by liquidation of that property if the bond defaults, etc. Here there is a real asset or property against which interest or rent is charged.
      Catholic teaching distinguishes between various contracts such as a mutuum and a census. From what I understand a census is something like a corporate bond and it is licit to charge interest on it, because it terminates in actual property whereas a mutuum terminates in a person, who cannot be property. This was upheld by Pius V in Cum Onus.
      Zippy Catholic does a much job then me, so here is his FAQ on usury:

      • Stevan Bolton

        Benedict XIV made *no* such distinction in Vix Pervenit. I’ve read all of the conciliar and papal pronouncements on usury and there isn’t any language in any of them that would remotely suggest that interest of any kind has ever been tolerated. Lateran II in 1139, Lateran III in 1179, the 26th and 27th Canons of the Second Council of Lyons in 1274, the Council of Vienne in 1311, various decrees by popes like Alexander III (1159-1181) have never included any provision for governments or corporations to charge interest on these or any other grounds.
        In the decretal you mentioned, Pius V speaks of conditions when rent and annuities can be charged, NOT interest; even then, he further limits the scenarios when they can be collected, rather than expanding them. Bonds and other interest-bearing financial instruments were never construed as fitting under the definition of “census.” Zippy Catholic did some deep research at the site you linked to, but contaminated it with this artificial distinction between mutuum and non-mutuum contracts. For example, he says that the latter is defined as lending to institutions rather than persons, but the truth is that those institutions are composed of persons, who are ultimately personally liable in various ways. Corporations are not only owned by persons, who lose their assets when they pay interest on usurious loans, but thanks to limited liability, are treated as legal “persons” in their own right (note the dehumanizing, pro-capitalist bias by which SCOTUS today recognizes corporations as “persons” but denies the humanity of unborn children). Even in the case of governments, we’re ultimately talking about personal ownership. In personal, corporate and governmental loans alike, eventually some tangible, material asset will be turned over to pay interest charges. Furthermore, non-mutuum contracts involve rent and annuities, etc., not interest on loans. This false distinction was a tactic that arose late in history, between the 19th Century and the founding of the Vatican Bank, and originated not with the popes or church councils, but with business lobbies with a vested interest in changing church doctrine on the subject. Men just like them badgered the church for some 800 years to change its adamant position against usury and they still haven’t succeeded, because the councils and popes haven’t overturned any of these consistent prohibitions. We still commit heresy by legitimating interest, as the Council of Vienne said; bankers must still be forbidden Eucharist and Christian burial, as Canon 25 of Lateran II demanded. What capitalists *have* succeeded in doing is spreading false impressions of this kind – same as heretics of other kinds have more recently tried to make divorce, contraception and the like appear acceptable, using similar sneaky tactics. It’s sad to see so many otherwise good and learned Catholics take this obvious bait.

        • Philosophical Actuary

          The term that Pope Benedict XIV uses that is translated as “loan” is “mutuum.” This comes from Roman law and is often called a “loan of consumption.” What this means is that the property lent is consumed in some way meaning that the lender only has recourse to borrower for return and not some real property. Benedict notes that it is in the nature of this “mutuum” that usury finds is origin and sin. He also notes that it is a matter of justice that the term of exchange be equal. In a mutuum, the lender has no property claim to demand more than what was given, because as Aquinas teach he gave both use and ownership, thus charging more would be an inequality in justice and a charging for what does not exist.
          A corporate bond that had recourse to the personal promise of the people that own the corporation would be at least in part a mutuum and would constitute usury. However, in general, corporate bonds have recourse to only the assets of the company itself and so they not mutuum contracts. A corporate bond is an exchange for a property claim against the company, whereas a mutuum is an exchange for a promise of equal return in kind. The contracts differ in nature and consequently the corporate bond is not usurious in general. The fact that bond payments decrease the value of the company is irrelevant to the question of usury as Benedict notes that it is in the nature of the contract wherein usury lies and not the consequences of the payments.

          • Stevan Bolton

            This is just a restatement of what you said before. As I already said: 1) Benedict XIV, nor any other council or pope, has ever legitimated usury in non-mutuum contracts. They instead regulated rents, which are an entirely different matter. 2) Corporate bonds never qualify as non-mutuum contracts because ultimately in both cases there is a property claim involved. There is no difference in nature. The distinction you’re trying to make does not in fact exist, nor has it ever been recognized by the popes and councils. In both cases, real goods are being taken from real people, over and above the principal. This is usury. Claimants may “have recourse to only the assets of the company itself” but this does not disqualify them as mutuum contracts (and if it did, interest would STILL be disallowed). Creditors seek recourse to more assets of the company than the loan originally claimed, which is usury. 3) This disingenuous argument originated in the 19th Century not with the popes and church councils, but with the businesses lobbies that had been hounding the church for 800+ years to legitimate usury through any means possible. You have no right to act on it or repeat it to others as if it were true.

          • Philosophical Actuary

            I have made a defense of the nature of a mutuum from whence the sin of usury arises according to Benedict XIV and right reason. The property claim is different between a corporate bond and a mutuum. A bond claims actual property really existing as the company from whence interest or if you prefer rent is charged. This claim is a real justiciation for charging for the use of the the property. In a mutuum there is no really existing property that interest or if your will rent can be charged, that is there is no property the use of which is being charged for.
            The fact that a bond requires payments that are taken from the pool of assets is no different (in this respect) then assets being taken from a pool to pay rent on office space. To claim this as the reason for usury is to contradict Benedict XIV in claiming that the origin and sin of usury lies in taking assets rather than the nature of the contract. The bond holder has a just claim to more than the principle in virtue of his property claim of the company which is being used.

          • Philosophical Actuary

            I should also note that part of the problem with the forgetfulness of usury was that the mutuum contract was forgotten in its essence. In the Scholastic Michael Cronin’s “The Science of Ethics,” he states that the medieval argument against usury are correct and valid, but the nature of money has changed, i.e. money is now capital. The defense is often predicated on a time value of money basis. However, as Benedict XIV teaches it is not the nature of money wherein usury lies, but rather the nature of the mutuum contract, which still exist today, such as credit cards, student loans, most car and home loans, etc.

          • Stevan Bolton

            I assume from the “Actuary” in your name that you are also a financial advisor, just like Roger McKinney. Therefore your word cannot be trusted in this matter, because like him, you both have a direct pecuniary interest in spreading this false, flimsy, trumped up, heretical viewpoint. You’re making money off of this. End of story.

          • Philosophical Actuary

            I am a faithful child of the Church. If I err it is because of my sins. However, if I were corrected, I would submit to Holy Mother Church. If being an actuary were intrinsically disordered, I would leave the profession with the hope God would provide for me and my family in some other way. For now, I continue in fear and trembling before the thought of the Judgement that awaits me. I hope you will do the same.

          • Philosophical Actuary

            You may wish to read this:
            Particularly: “As stated above (Article 3, Reply to Objection 2), things from the very fact that a man thinks ill of another without sufficient cause, he injures and despises him. Now no man ought to despise or in any way injure another man without urgent cause: and, consequently, unless we have evident indications of a person’s wickedness, we ought to deem him good, by interpreting for the best whatever is doubtful about him.”

          • I’m not a financial adviser. I’m an analyst for an insurance company. But you’re guilty of the ad hominem fallacy.

  • “questioning a person’s motives does not qualify as a fallacy if the purpose is to establish the veracity of the arguments they’re introducing.”

    That’s funny! Because that’s exactly why it’s a fallacy! I could be a demon possessed pagan who roasts and eats babies for breakfast and it would have no bearing on the veracity of my arguments. Evil people can still make accurate statements. Besides, the Bible makes it clear that no one but God understands human motives. Claiming that you can do it is the same as claiming one of the chief attributes of God that no human can have.

    “The time-value theory of money was never recognized by the Church councils and popes; ”

    That doesn’t mean it’s not true. It’s one of the fundamental principles of the science of economics in which the popes and councils have no expertise or authority at all. And the time value of money is nothing but renting of money in the same way that someone rents land or a house or a car. It’s perfectly moral. That’s why the Catholic Church has a banks that loans money at interest.

    ” that would also constitute the sin of speculation.”

    Everyone is a speculator of some kind, even you and the Pope, because the future is unknowable. Anyone who makes plans for the future speculates. See the book of James in the Bible.

    “Money is ultimately backed by material property, otherwise it is sheer speculation.”

    That’s just plain silly. Gold and silver were money for millenia and not backed by any “property.” They are property.

    “Usury has brought the human race nothing but misery since it resurfaced under Calvin and the Dutch,”

    You can’t be serious! Read some economic history, please. Calvin had nothing to do with it, but when the Dutch Republic implemented the principles of capitalism distilled by the theologians at the University of Salamanca (and approved by the Popes at the time) they saved millions from lives of starvation from famine and lifted the people to standards of living never seen before. The West is 100 times wealthier than anyone in the 16th century due to capitalism, which included the removal of “usury” as a sin. Claiming that usury has caused misery advertises shocking ignorance of history.

  • Philosophical Actuary

    Auf Wiedersehen.

  • JimmyD

    “A truly free-market economy must allow free competition; it is only when capitalists collude to restrict competition that power is concentrated and freedom restricted.”

    I am a distributist… in your above quote, do you mean to tell me that power is not concentrated in the hands of the big banks right now? Freedom of a small bank to exist or do as they please is restricted by the big banks, no?

    Come man, repent. Sadly you’ve been bewitched. Read distributist Thomas Storck’s article: “The Three Assaults of Liberalism” to see what I mean. Capitalism is nothing more than the first great assault on man by Satan since the Reformation. The political assault (French Rev, etc.), was second, and the Sexual rev was 3rd.

    If nothing else, please admit this: when you speak of “freedom”, you speak of “freedom from God”.