Saturday, August 17, 2013

What’s wrong with “What’s Wrong with Distributism”?—UPDATED

The nice thing is, David Deavel has some good things to say about distributism … in a previous post. However, Deavel’s understanding of distributism stops at about 1927.

Specifically, Deavel identifies four “areas of thought” where distributists’ critiques of the capitalist model strike tellingly: 1) the divorce of economics and ethics, 2) the collusion of large business and government and the resultant concentration of power, 3) the effect of the concentration of capital (Deavel says “wealth”, which is not the same thing) on entrepreneurship, and 4) the effect of the welfare state on the citizen’s relationship to the government. “Sadly,” Deavel moans, “distributist thinkers don’t stop at these solid insights. They offer concrete solutions to these social problems — solutions which betray grave misunderstandings of economics and even theology.”

From such a statement, you would expect at minimum a detailed economic critique illustrating distributist assumptions and contrasting them with How the Real World Works. On the theological side, Deavel, an associate editor of Logos: A Journal of Catholic Thought and Culture, might be expected to have an equally sound understanding of distributists’ reference to Catholic social theory.

What Deavel gives us, however, is a collection of straw men, attributing beliefs and statements (“Distributists like to say that …”) without pulling direct quotes to support his claims, and even stooping to smear tactics by implying admiration for fascism. The farthest Deavel goes toward naming names is to mention G. K. Chesterton, Hilaire Belloc and Arthur J. Penty, men long dead, while saying nothing of living distributists such as John C. Médaille, Thomas Storck and Race Matthews. It’s as if one were to critique modern psychiatry by analyzing only the works of Sigmund Freud, Carl Jung and B. F. Skinner.

First of all, what is distributism? Simply put, distributism is the position that the community and nation are best served when ownership of capital — that is, the means of production — is distributed widely among the population rather than concentrated in the hands of the government or a relative few. While this indicates a preference for smaller family-owned businesses and cooperatives, it also includes larger family- and employee-owned companies such as Johnson & Johnson and Mondragon. This allows a more equitable distribution of profit and a greater degree of economic freedom for workers, who are as responsible as management — if not more — for the success of an enterprise.

Deavel’s charges are several:

  1. Distributists are ignorant of economics; they “deny that economics is a real mode of knowledge in any sense.”
  2. Since distributists, who are mostly Catholic, are influenced by Catholic social doctrine, they “tend to treat papal encyclicals as if every word in them were infallible”; they “claim to find in papal statements a ready-made template for using government power to reform the entire economy, for Catholics and non-Catholics alike.”
  3. “Complain as they will of the evils of crony capitalism — as Adam Smith did, in The Wealth of Nations — distributist solutions in fact amount to crony capitalism on a massive, societal scale. … The corporatism favored by distributists involves massive intervention by the government in every consumer’s economic choices.”
  4. “Distributists’ core claim is that political freedom can only walk hand in hand with economic independence for nearly everyone. … [But] we have managed to raise living standards across the planet, and support a world population that would have simply starved to death 500 years ago, by increasing the division of labor — by freeing up economies so people can specialize in what they’re good at. Not everyone is good at running a business or managing a farm.”

Despite his constant attribution of sentiments and beliefs to all distributists, the main motor of his objections — the claim that distributists want to reintroduce guilds and establish wage and price controls — is found mostly in Belloc’s Essay on the Restoration of Property. Writers like Médaille and Storck are actually quite familiar not only with neoclassic economics but with the current “heterodox” criticisms of it. It’s as if you and your entire family must believe in a flat earth because your grandfather wrote once that he did. Without the wage/price controls and guild system, Deavel has no hook on which to hang the “economic ignorance” and “crony capitalism” arguments; they reduce to sneers, scare quotes and a well-poisoning reference to Mussolini.

But Deavel’s own grasp of economics is painfully naïve, almost as if it were absorbed from a pamphlet written in 1884 by J. Pierpont Morgan for fourth-graders. It comes out very early, in his second paragraph: in the middle of misrepresenting distributists’ views on wages, he puts scare quotes around the word unjust, as if the idea that employers could deliberately underpay employees were ridiculous. And it’s hard to find a statement more divorced from most people’s reality than: “Except for the food you grow to eat yourself, every good or service a person obtains is the outcome of bargaining with others, to meet their respective needs.”

Deavel admonishes us that “if there are such predictive laws [of economics], then it behooves us understand them.” However, economic theory is indifferently predictive at best; at worst, as Dante Urbina says, it tends to treat the real world as a special case of the theory. Too often, the indicators are equivocal, which is why Harry Truman demanded a one-armed economist: “All my other economists say, ‘On the one hand … but on the other hand …!’”

Let’s take Deavel’s own case of minimum wage hikes: According to neoclassical theory, the increased labor costs get passed along to the consumer in the form of price hikes, which consequently push demand down and result in loss of labor. Sounds neat and tidy, and it sure plays well with many Republicans; but in the real world this almost never happens. Deavel’s explanation suffers precisely because it’s a Daisyworld model: there are too many simplifying assumptions.

The two biggest drivers of inflation today are energy and consumer debt, which exert pressure on consumers to seek higher wages; in turn, employers increase wages in order to attract and retain the best people. Minimum wage raises affect mostly sectors such as light manufacturing, retail and food service, where the increased labor cost per unit of goods produced is usually so negligible that its effect can’t be distinguished from the normal demand cycle, and is often not worth even a modest price increase. Since minimum wage levels aren’t indexed to any official measure of inflation, wage increases in those sectors actually lag behind the increase of wages and salaries in other segments of the economy; in years when Congress fails to adjust the minimum wage, its real purchasing power gradually diminishes. The myth of the inflationary minimum wage is almost a photo negative of reality.

This leaves us with the “borrowed infallibility” charge. Again, Deavel’s assertions of distributist belief are unsupported by any citation, not even of the Chesterbelloc.

First, he’s quite right in pointing out that none of the social justice encyclicals commonly referred to contain any prescriptions or templates for a just economic system; at best, they offer moral criteria and norms by which a society’s socioeconomic system can be analyzed and judged. It’s still possible for Catholics of equal intelligence, education and good intentions to disagree on the best methods for bringing forth a more just and equitable economic system.

But while we can cheerfully grant that none of the popes asserted infallibility for their encyclicals, we’re not given a dilemma of either “infallible dogma or personal opinion”. In fact, in 2004 the social justice teachings of these popes were incorporated into an official Church document, The Compendium of the Social Doctrine of the Church, effectively bringing them out of the attic and placing them in the parlor with the doctrines in the Catechism of the Catholic Church. Infallible or not, they’re officially part of the Church’s doctrine, and by that fact can’t be waved away as mere obiter dicta.

In sum, David Deavel’s “What’s Wrong with Distributism?” is a full-scale frontal assault against a castle no one is defending, while armored in cardboard and wielding a wooden sword. The distributism he damns effectively died with Belloc in 1957; of 21st-century distributism he gives us nothing attributable — no sources, no names, not even a quote from a relatively easy target such as Mark Shea or Dale Ahlquist.

In rebuttal, Deavel gives us the kind of cartoon sketch of neoclassic economics that passes for gospel at C-PAC … simplistic, unreal and incognizant of fallibility. It’s not the free market he’s defending, but rather the capitalist myth of the free market — a Whig economic history devoid of price-gougers, sweatshops, robber barons, capricious employers and unscrupulous lenders.

There is a reason why Leo XIII wrote, in Rerum Novarum, of “the hardheartedness of employers and the greed of unchecked competition”: the free market, like free will itself, has no inherent barriers against evil use.

UPDATE: August 30, 2013

Thomas Storck, one of the distributists I mentioned above, has a much fuller, much better critique of Deavel's post than I've given here. Do yourself a favor and check him out.