Sunday, January 22, 2017

Capitalism vs. Socialism vs. Distributism

Capitalism vs. Socialism vs. Distributism
by Bryan J. Neva, Sr.

Since ancient times, people have bought, sold, and traded land, labor, goods, and services; so Capitalism has existed incipiently, in one form or another, even before recorded history. One of the first recorded transactions was in Genesis chapter 23 (circa 1600 b.c.) when Abraham purchased a parcel of land from the local inhabitants for a burial site for his wife Sarah. 

Capitalism per sé is as natural as human nature which includes human virtues and vices. When capitalism is conducted in a virtuous manner then all the parties involved in a transaction are satisfied; however, when Capitalism is conducted in a vicelike manner then the opposite occurs. Historical examples abound of virtuous and vicelike Capitalism; unfortunately, there are far more vicelike than virtuous examples due to the strong human vice of greed!

Beginning in the 18th century, a major change in Capitalism occurred in Europe as the more developed economies transitioned from agrarian and mercantilist economies into industrialized economies. Historians have called this The Industrial Revolution, and it led to new factories and mines, the restructuring of labor, and a radical redistribution of wealth. 

People who once worked in rural agriculture migrated to the new factories and mines. Skilled craftsmen found themselves out of work as the factories could produce goods more cheaply than they once did. And the aristocracy found themselves land rich but cash poor.

But working in a factory or mine encompassed extremely low pay, very long, back-breaking hours, and brutal, dehumanizing working conditions. People accepted these working conditions because they were poor and desperate; the factory owners took advantage of their desperation due to the surplus of labor which included not only men but women and children as well (not to mention slaves).

And the living conditions in the new cities and towns surrounding these new factories and mines were crowded, deplorable and inhumane to say the least, and disease and death were rampant. The rural families who abandoned their agrarian way of life found themselves in a catch-22: they couldn't survive for long in their new hellish working and living conditions, but they could no longer return to their former way of life; their other options were limited at best. 

The famous English author and social critic, Charles Dickens, wrote extensively about life during these difficult times in the 19th century in several of his books, but most notably in his book Hard Times. 

Some who could afford it migrated to America, but many of these found that living and working conditions in the big cities in America weren't much better than what they left in Europe. Fortunately many were able to return to their former agrarian lifestyle as the land was quite cheap in America during the 18th and 19th centuries, and America lagged behind Europe in economic and industrial development. In fact, by the end of the 19th century, about half of the population of 76 million people in America were working in agriculture. 

There were many economist and social thinkers during the 18th and 19th centuries who tried to make sense of all this. The most influential of these were: 

  • Adam Smith - The Wealth of Nations, 1776
  • David Ricardo - On the Principles of Political Economy and Taxation, 1817
  • Herbert Spenser - 1820 to 1903 various philosophies on social Darwinism and eugenics
  • Friedrich Engles - The Condition of the Working Class in England, 1845
  • Karl Marx and Friedrich Engles - The Communist Manifesto, 1848
  • Karl Marx - Capital Vol I, 1867, Vol II, 1885, and Vol III, 1895   (note: Vol II and III were published posthumously by Engles based on Marx' notes)
Social class warfare, social Darwinism and eugenics, the Industrial Revolution, and the deplorable working conditions of the masses resulted in political upheaval around the world from the 18th through the 20th centuries with the Laissez-faire/free market Capitalists and social Darwinist/eugenics (viz the socioeconomic philosophies of Smith, Ricardo, Spenser on the one side, and the Socialist/Communists (viz the socioeconomic philosophies of Marx and Engles) on the other side. That is the right and left ideologies respectively.

But ultimately, most historians believe it was the abuse of Capitalism and its exploitation of the working class from the 18th through the 20th centuries that led to the rise of the disastrous ideologies of Socialism, Communism, and Fascism. But surprisingly, it was in the underdeveloped, more agrarian economies that Communism took a foothold throughout the 20th century most notably in Russia, China, Korea, and Vietnam. These, in turn, led to one of the bloodiest periods in world history: the 20th century accounted for more war casualties and democidal deaths than in any other century! 

As a result of all this political and social turmoil in the 19th century, Pope Leo XIII proposed a common sense, third alternative to these two opposing socioeconomic ideologies when he published his encyclical Rerum Novarum (or The Rights and Duties of Labor and Capital) in 1891. This third alternative was called Distributism.

Distributism is a socioeconomic theory and system that advocates widespread ownership of private property and the means of production. (As opposed to a small number of Capitalist corporations or a single Communist government owning all the means of production.) With Distributism, smaller is better than bigger; more competition is better than less; spreading the wealth among many is better than hoarding the wealth by a few; it advocates paying a livable wage than just a minimum or market-driven wage. It advocates spreading the wealth among all the stakeholders in an organization: the owners, managers, workers, etc. according to their respective inputs into the organization. But each stakeholder would be fairly compensated or considered according to their contribution to the success of the organization. 

Distributism would be akin to a "mom & pop" small business or farm, a cooperative corporation, an employee-owned corporation, a not-for-profit corporation, modern-day profit sharing, a benevolently run corporation or modern-day Benefit corporation (B-corp), a privately held corporation which doesn't answer to the short-term greed of Wall Street, or a more common-sense, virtuous form of regulated Capitalism. 

Distributism would ultimately result in treating everyone in a company or organization honestly, ethically, virtuously, fairly, and humanely; not avoiding paying taxes to the government, and treating our society and environment with the respect they deserve. Of course, a few stakeholders namely stockholders/owners, managers etcetera would have to forego some of their profits in order to spread the wealth around to the other stakeholders of a company especially the employees. By the owners and managers of a company forgoing some of their profits, they need to ask themselves this questions: "How much money do we really need?" and "What good comes from hoarding all our wealth?" After all, you can't take it with you when you die! By spreading the wealth among all your stakeholders now, it'll improve their lives substantially and your business with be more prosperous in the long-run. Distributism is the very antithesis of the free-market Capitalism espoused by the late economist Milton Friedman and the Chicago School of Business who believed that only the owners or shareholders of a company are the stakeholders that matter. If you think about it, it's the same very selfish form of Capitalism which led to the disastrous ideologies of Socialism, Communism, and Fascism! 

In the long-run, a company which espoused the principles of Distributism could survive even longer, be even more profitable, and society and the environment could substantially improve. Essentially with Distributism, the pie gets bigger and everyone prospers even more, rather than just a few stakeholders (owners/shareholders) prospering at the expense of the other stakeholders (especially the workers). And all the stakeholders have a vested interest in seeing that the company or organizations thrive and survive! Whereas in the cases of unregulated Capitalism, Socialism, or Communism, no one but the people at the top care if the company or organizations thrives or survives. 

Pope Leo XIII criticized both the socioeconomic ideologies of the right and left. On the right, for example, he criticized the unbridled greed and abuse of Capitalism and its exploitation of workers. While not rejecting Capitalism outright, he argued it should be conducted more virtuously than it was; governments have the right and the obligation to regulate Capitalism for the good of all their citizens. On the left he rejected the socio-economic philosophy of Socialism/Communism for its denial of individuals to own private property, it's top-down, centrally controlled economy, as well as its atheistic belief system. He asserted that people, or the working class, should always come before profit (viz Capitalism) or power (viz Socialism). Workers should have the right to join unions and collectively bargain in order to improve their working conditions. Decisions should be made from the bottom-up rather than from the top-down, as the people at the lowest levels can make better decisions on solving problems than the people at the top. This is called the principle of Subsidiarity. Socialism and Communism are the very opposite of this principle. Furthermore, in a Democratic-Republic, a powerful central government would not follow the principle of Subsidiarity either. Stronger local and state governments would be preferred.

The famous English author G.K. Chesterton wrote that Laissez-faire Capitalism and Socialism/Communism were just different sides of the same coin. By definition, Socialism/Communism is a socioeconomic system whereby the government owns everything and distributes the goods and services to its citizens as they see fit (top-down management). Conversely, Capitalism is a socioeconomic system based the private ownership of property, free markets, and social Darwinism. (What most countries have today is a more regulated form of Capitalism to prevent people or corporations from overstepping their bounds and abusing workers.) And what do both of these socioeconomic systems have in common? The oppression and mistreatment of the masses. On one side of the coin, the government owns everything and the masses are oppressed and mistreated; on the other side of the coin corporations own everything and the masses are oppressed and mistreated. The end result is the same. 

Rerum Novarum became the foundation for all Catholic socioeconomic or social justice teaching to this day. And every succeeding Pope since Leo XIII has added to the Church's body of teaching on socioeconomic or social justice issues. The most influential of these encyclicals include
  • Quadragesimo Anno (or In the 40th Year) by Pope Pius XI in 1931 
  • Mater et Magistra (or Christianity and Social Progress) by Pope John XXIII in 1961 
  • Gaudium et Spes (or the Pastoral Constitution on the Church in the Modern World) by the Second Vatican Council in 1965 
  • Populorum Progressio (or The Development of People's) by Pope Paul VI in 1967 
  • Laborem Exercens (or Through Work) by Pope John Paul II in 1981 
  • Centesimus Annus (or The Hundredth Year) by Pope John Paul II in 1991 
  • Evangelii Gaudium (or The Joy of the Gospel) by Pope Francis in 2013
The basic principles of the Catholic Church's socioeconomic or social justice teachings include:

  • Human dignity
  • Solidarity and the common good
  • Charity
  • Subsidiarity
  • Distributism and social justice
  • The sanctity of human life and the dignity of the human person
  • A call to family, community, and the participation and pursuit of the common good
  • The rights and responsibilities of social justice
  • The preferential option for the poor and vulnerable
  • The dignity of work
  • Solidarity and the universal destiny of the goods of the earth
  • Care for God's creation
In November 1996, the U.S. Conference of Catholic Bishops met in Washington D.C. and published a statement called, "Economic Justice For All: A Catholic Framework for Economic Life." They wrote the following:
1. The economy exists for the person, not the person for the economy.
2. All economic life should be shaped by moral principles. Economic choices and institutions must be judged by how they protect or undermine the life and dignity of the human person, support the family and serve the common good. 
3. A fundamental moral measure of any economy is how the poor and vulnerable are faring. 
4. All people have a right to life and to secure the basic necessities of life (e.g., food, clothing, shelter, education, health care, safe environment, economic security.) 
5. All people have the right to economic initiative, to productive work, to just wages and benefits, to decent working conditions as well as to organize and join unions or other associations. 
6. All people, to the extent they are able, have a corresponding duty to work, a responsibility to provide the needs of their families and an obligation to contribute to the broader society. 
7. In economic life, free markets have both clear advantages and limits; government has essential responsibilities and limitations; voluntary groups have irreplaceable roles, but cannot substitute for the proper working of the market and the just policies of the state. 
8. Society has a moral obligation, including governmental action where necessary, to assure opportunity, meet basic human needs, and pursue justice in economic life. 
9. Workers, owners, managers, stockholders and consumers are moral agents in economic life. By our choices, initiative, creativity and investment, we enhance or diminish economic opportunity, community life and social justice. 
10. The global economy has moral dimensions and human consequences. Decisions on investment, trade, aid and development should protect human life and promote human rights, especially for those most in need wherever they might live on this globe. 
According to Pope John Paul II, the Catholic tradition calls for a “society of work, enterprise and participation” which “is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the state to assure that the basic needs of the whole society are satisfied.” (Centesimus Annus, 35).  All of economic life should recognize the fact that we all are God’s children and members of one human family, called to exercise a clear priority for “the least among us.” 
Unfortunately, the Catholic socioeconomic ideology of Distributism and social justice will probably never take hold in our world during our lifetimes. The vices of greed and selfishness seem to overwhelm the virtues of charity for our fellow man. Changing our society for the better will take a very, very long time. But if we all build on previous efforts and advances in our working conditions, someday maybe our great, great grandchildren will reap the fruits of our efforts.  

Featured Post

Capitalism vs. Socialism vs. Distributism

Capitalism vs. Socialism  vs. Distributism by Bryan J. Neva, Sr. Since ancient times, people have bought, sold, and traded land,...