Hayek and Keynes are dropping beats again – this time live! If you haven’t seen the original, check it out here.
Hayek and Keynes are dropping beats again – this time live! If you haven’t seen the original, check it out here.
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?
“Communism changed our mentality,” said Daniel Apostol, editor in chief of Romania’s Money Channel. “We are still fighting now to come back to what we were. We lost the culture of private property. We lost this sense of privacy and respecting each other’s time and respecting people as individuals, as human beings. That was the worst thing that happened to us. This is why we are struggling so much now to get back to the capitalist society, to the free market, which can run only if there is respect for private property…”
Totten details the continuing consequences of totalitarian rule in Romania, and the country’s struggle to rebuild itself. All in all, a fine reminder to all of us who experience the blessings of liberty to never take those blessings – or the systems that were built to protect and preserve them – for granted.
See also: The Architect as Totalitarian by Theodore Dalrymple
It’s not too late to order The Call of the Entrepreneur and The Birth of Freedom for stocking stuffers. An eye-opening report by Patrick Courrielche at Big Hollywood makes for a fine motivator. Some excerpts:
Enter Howard Zinn – an author, professor and American historian – who, with the help of Hollywood and the History Channel, intends to change the way our pre-K through high school children learn American history [beginning with "a new documentary, entitled The People Speak, to be aired December 13th at 8pm on the History Channel.”]. …
Zinn has spent a lifetime teaching college students about the evils of capitalism, the promise of Marxism, and his version of American history – a history that has, in his view, been kept from students. …
Perhaps due to their one-sided perspective of America’s past, Zinn’s history books have largely been limited to colleges and universities, until now. In the press release announcing the broadcast, HISTORY introduced a partnership with VOICES Of A People’s History Of The United States, a nonprofit led by Zinn that bares the same name as his companion book, to help get his special brand of history into classrooms. …
Brian Jones, a New York teacher and actor, is a board member of VOICES and has also played the lead in Zinn’s play Marx in SoHo. … he extols the benefits of this one man play as a tool to introduce people to Marx’s ideas….
Jones is also a regular contributor to Socialist Worker, International Socialist Review, and speaks regularly on the beneficial principles of Marxism, including this year at the 2009 Socialism Conference. He recently gave a speech on the failure of capitalism, proclaiming that “Marx is back.”
Sarah Knopp, a Los Angeles high school teacher, is also on Zinn’s Teacher Advisory Board. Like Jones, Knopp is also a regular contributor to International Socialist Review, Socialist Worker, is an active member in The International Socialist Organization, and was also a speaker at the 2009 Socialist Conference. …
Then there is Jesse Sharkey, a schoolteacher in Chicago. Sharkey is another of Zinn’s Teacher Advisory Board Members and … a contributor to— Socialist Worker.
This is the group that the History Channel is working with “to develop enhanced, co-branded curriculums for a countrywide educational initiative.” …
I am not advocating that we spare our kids the harsh truths of American history, but I am suggesting, given Zinn’s far-left political affiliation, this project is designed to breakdown our vulnerable children’s views of American principles so that they can be built back up in a socialist vision. …
It is not surprising to me that there are groups sympathetic to Marx’s ideas throughout our country. What is surprising is that the most powerful persuasion machine in the world (Hollywood) and the History Channel would provide Zinn such a prominent soapbox to stealthily build a case for a destructive ideology to our children, and as a result mainstream his ideas with the magic of cool music, graphics, and celebrity. Groups that push Marx’s philosophy are like a virtual organism that will not die off even when stung by the undeniable historical evidence showing human behavior makes such a system unsustainable. If we let this virtual organism into our grade schools, it will take decades for our kids to unlearn the ideology.
… When a reporter asked Zinn, “In writing A People’s History, what were you calling for? A quiet revolution?” Zinn responded: “A quiet revolution is a good way of putting it. From the bottom up. Not a revolution in the classical sense of a seizure of power, but rather from people beginning to take power from within the institutions. In the workplace, the workers would take power to control the conditions of their lives. It would be a democratic socialism.”
Counter bad documentaries with good ones. And if you want to do more at this gift-giving time of the year, consider helping the Acton Institute in its ongoing struggle to promote the free and virtuous society.
Got the socialism blues? Worried that a friend or maybe a teenage son or daughter may contract a nasty case of it? Marvin Olasky at World magazine recommends former Acton research fellow Jay Richards’ 2009 HarperOne book, Money Greed and God: Why Capitalism Is the Solution and not the Problem:
Among the myths Richards demolishes: The Nirvana Myth (contrasting capitalism with an unrealizable ideal rather than with its real alternatives), the Piety Myth (focusing on good intentions rather than results), and the Materialist and Zero-Sum Game Myths (believing that wealth is not created but simply transferred).
Richards, one of that rare breed with a theology doctorate but an understanding of economics, also points out the errors of the Greed Myth (believing that the essence of capitalism is greed), the Usury Myth (that charging interest on money is immoral), and the Freeze-Frame Myth (that what’s happening now regarding population, income, natural resources, or so on, will always happen).
Want to administer some of the immunizations in delicious DVD form? Try a high-quality, narrative-driven Acton documentary that was irenic enough to air on scores of PBS stations around the country but with enough red meat to also air on Fox Business: The Call of the Entrepreneur shows why entrepreneurs and capitalism are part of the solution, and why socialism delivers the opposite of what it promises. The story of Jimmy Lai–the boy who escaped Communist China, founded a media empire, and confronted the Chinese leaders behind the Tiananmen Square Massacre–is alone worth the price of admission.
How do we restore confidence in free markets? Formulate a robust explanation of their moral value. Read Economic Liberalism and its Discontents on Public Discourse.
In his recent book The Creation and Destruction of Value, Princeton University’s Harold James observes that the 2008 financial crisis resulted in more than the devastation of economic value. It also facilitated a collapse of values in the sense of people’s faith in particular ideas, institutions, and practices. Among these, few would question that economic Liberalism’s credibility was significantly undermined.
As time passes, more people may recognize that the financial crisis owed much to factors that had little to do with markets as such. As several scholars illustrated in the 2009 monograph Verdict on the Crash, the causes included regulations that encouraged irresponsible behavior by banks, imprudent central bank policies, not to mention outright collusion between politicians and government-sponsored enterprises such as Fannie Mae and Freddie Mac.
Unfortunately for promoters of free markets, knowledge of these facts will take time to counter the widespread perception that economic liberalism—manifested in financial liberalization, privatization, deregulation, and increased competition—contributed significantly to the 2008 crisis.
In the meantime, those committed to economic liberalism have a chance to rethink and reformulate the case for markets. Certainly the efficiency arguments for economic freedom will be revisited, refined, and rearticulated. But it’s also an opportunity for economic liberals to reexamine what is often a weakness in their position—the principled case for markets.
Kishore Jayabalan, director of Istituto Acton (the Acton Institute’s Rome office), was interviewed by Vatican Radio concerning the authentic human development concerns of the whole person, which is a topic discussed in Caritas in Veritate. Jayabalan discussed how development schemes throughout the world should look at the aspirations of each individual person. Furthermore, in Caritas in Veritate there is a mention of a “breathing space” used a few times in the encyclical. This breathing space aspect means developing a vibrant and diverse society and not allowing central planning to decide every aspect of a person’s life; it is also important to place the individual at the center of the development.
Samuel Gregg, Director of Research at the Acton Institute, was interviewed on Ave Maria Radio. Gregg discusses Caritas in Veritate while addressing many issues that have risen from the encyclical. Gregg explains that the encyclical is not a conservative or liberal document, but rather it is simply Catholic. People should not read it through the eyes of secular political categories; importantly, when reading Caritas in Veritate, we must not think in secular terms on issues such as the free market and redistribution of wealth. Gregg also makes a point to mention Caritas in Veritate does not say markets are evil. Markets are good, but we must make sure they are grounded in morals — this is what makes a market good and successful.
Many people do blame capitalism for bringing us to this low moment in the economy. Do they have a point?
They do if capitalism, as they define it, is devoid of any underlying morality. True enough, it is hard to see any underlying morality when one surveys the present carnage caused by liar loans, shady banks, duplicitous politicians, Ponzi schemers and regulators angling for Wall Street jobs.
Kaarlgard concludes by noting the importance of returning to a free enterprise system with a moral framework, saying, “Every alternative you can imagine is much worse.” He also offers a video version of the post.
Shaped by the conservative movement since childhood, publisher Alfred S. Regnery offers an insider’s take on the influence of conservatives in Upstream: The Ascendance of American Conservatism (2008). Regnery’s father Henry started the company in 1947 and published conservative classics such as God and Man at Yale by William F. Buckley Jr., and The Conservative Mind by Russel Kirk.
Regnery covers just about everything including think tanks, publishers, candidates, religious conservatives, financial donors, the courts, the Constitution, and free markets. He does an excellent job at explaining the merger of traditionalists, anti-communists, and libertarians in to one political force due in large part to the writings of William F. Buckley, Jr. and other intellectuals,
grassroots activists, and the emergence of Barry Goldwater. Regnery also traces how conservative leaders were able to separate themselves from some of the more radical conspiracy minded leaders like Robert Welch of the John Birch Society. Russel Kirk responded to Welch’s charge that President Dwight D. Eisenhower was an agent of a world communist conspiracy by quipping “Ike isn’t a communist. He is a golfer.”
While Eisenhower was a disappointment for conservatives, Barry Goldwater’s presidential candidacy unified and excited the conservative movement on a national scale. Regnery notes:
Not only did people donate their time to Goldwater in record numbers, but they donated their money, too. Until the 1964 campaign presidential elections were financed exclusively by large contributions from wealthy contributors, corporations, lobbyists, and other special interest groups. In 1960, twenty-two thousand people had contributed $9.7 million to Kennedy’s campaign and forty-four thousand people had contributed a total of $10.1 million to Nixon’s. LBJ’s money largely came from labor unions and fat cats. But over one million middle-income people contributed to Goldwater’s campaign. When the campaign was over, Goldwater had the names, addresses, and history of over five thousand donors. He showed that candidates could actually raise more money in small amounts from large numbers of people, and thereby gain financial independence from the GOP establishment.
The Goldwater candidacy failed at electing a conservative to the highest office, but it allowed for its leaders and activists to learn valuable lessons for the future. The emergence of Ronald Reagan and “The Speech” was undoubtedly the greatest triumph of Goldwater’s unsuccessful presidential bid.
Regnery also incorporates succinct and effective arguments on why conservatives opposed Great Society programs, wage and price controls, and new government agencies. He also identifies Richard Nixon’s vast expansion of government power through regulation as another key building block for statist policies.
Another intriguing study by the author is an analysis of neoconservatives, the new right (religious conservatives), and Phyllis Schlafly and the rise of the grassroots.
Regnery demolishes the myth that the conservative movement was largely funded by Texas oil tycoons with briefcases of money or big corporations. In fact, he points out that many big businesses and corporations opposed conservatism because of corporate desire for regulation and less competition in the marketplace. “The right has never had the sort of money available to the left. During the early years of the movement, from 1945 into the mid-1970′s, no more than about a dozen foundations were willing to give money to conservative causes, and most of those were small, family charitable organizations,” says Regnery. The author discloses fascinating stories of notable donors who gave out of concern over the rising decay of free market principles. One example being William Volker, who purchased an academic chair for Frederick Hayek at the University of Chicago. (more…)
In the latest edition of an otherwise scholarly theological journal, a writer, who only ever writes about one subject, attacked the free market as usual. He wrote: “Neither can economics be satisfied with leaving human beings to the mercy of markets with their supposed ‘laws.’. . .” While there is certainly no space to take on his whole article, this part might just be the most serious error in it.
This particular writer, and those trained in his school, which he denies is the German Historical School, but it is, operate from a nominalistic approach. Nominalism, a school of thought begun in the Middle Ages by the Franciscan, William of Ockham, denies that there is any human nature. Therefore, human beings have no necessary consistency in them. In ethics, each person makes up his own code, and the codes can be very much at odds. To a nominalist, everything is will alone, not reason. This is why the writer in question asserts that people are at the “mercy of markets.” To those who think like this, everything is power. Even in moral theology, the reason one obeys the Ten Commandments is that it’s God’s will only, and there is no connection with those commandments and the nature of things. God could have commanded ten other things we were to avoid, and we would be required to obey them, because they are His will, even if they were the opposite of those actually listed. (I am sure many people would not have any trouble with the commandments were that the case) Thus, to those who think in this manner, markets are power, and that’s why there are no laws of economics. That’s why corporations are evil; because money gives them power, which they use to take advantage of others.
The truth of it is that human beings do participate in a common nature, created by God, and this common nature leads people to think and act alike generally speaking. The laws of economics come from this consistency of human nature. Markets do have laws because people make free choices as to what is best for them. The market exists for the sake of the consumer, which includes everybody. If I go to the store and want to buy bananas, and the bananas are rotten, why should I buy them; to support the farmer or the store? If we all did that, people would be encouraged to make junk and I would be encouraged to continue to buy it even if it did not fulfill my needs. Why would I do that?
Let’s take the example to a higher level. I know that there is a demand for office space in my city, so I want to build a tall office building. The office building has to be tall because land in a city is very scarce and therefore very expensive, so I have to build “up.” To do so I need strong steel. If company X has crummy steel, it will not hold up and the building will come crashing down at the first sign of stress. So I must go to company Y that sells steel that will be appropriate to the height of my proposed building. Should I buy the company X steel because I feel sorry for the workers who will not get my business? You tell me; rather you go tell that to the families of the victims of my collapsed building.
Will the steel from company X be cheaper? Perhaps. If I buy it and the building comes tumbling down, am I evil? Well, we cannot judge the soul of another, nor can we read his mind. One thing we do know is that this builder did ignore the laws of economics (and probably those of engineering as well).
Think about the decisions in your life, and see if there are no laws governing your decisions. If gasoline is $.10 per gallon cheaper in the next town, which is 45 minutes away, would you think it is worth it to drive there to get that particular gas, given not only the price but the time involved, and whether it is raining or snowing, and other things that you have to do? Well, you just did a cost-benefit analysis, which every sane human being does in their head many times a day whether they realize it or not. How can anyone say that there are no laws of economics.
Read more from Dr. Luckey at “Catholic Truths on Economics.”