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Is Distributism the Answer to The Crisis?

G.K. ChestertonReal democracy is about more than voting. It comes from direct, localized ownership of property. Centralized ownership and control of property places entire societies at risk of sudden collapse.

Has Capitalism Failed?

Whatever the root cause of the current “economic crisis” may be, it is clear that what is at threat goes deeper than pension funds, jobs and livelihoods. Every aspect of Western society is being put into question, and rightly so. The way of life in the First World is almost unrecognizable when compared with life before the Industrial Revolution, a way of life which was more natural, spontaneous and time-tested. The Brave New World of Aldous Huxley, as futuristic and alien as it may have seemed in 1931, was nothing in comparison to the changes which had occurred over the fifty or so years before. The tragic effects of Marx’ and Engels’ supposedly scientific philosophies were manifesting themselves with ever greater magnitude. Credit based Capitalism was beginning to take its first generation of victims with the Great Depression unfolding. It was clear to many, even then, that the social and economic models of Capitalism and Communism were both flawed. Each had already fallen under the control of a self appointed oligarchy, although this would not have been apparent to the average man in the street.

Everything about the past becomes clearer, decades later. Hindsight shows how these philosophies were promoted and sold to the people using lies and deception. Had the people at large been aware of the heinous crimes which Lenin and his circle of friends (including Stalin) were involved in prior to their ascent to power, Communism would never have taken hold in Russia. It is likely that, to this day, Russia would have continued down the path of representative, parliamentary democracy under a titular, Christian monarch. Had people known and understood back then about the role of central banks in funding wars, extremist parties in various parts of the world, market manipulation and interference with public policy, it could be said that the fallout from the Great Depression would have been the imprisonment of bankers and politicians instead of the prolonged suffering of the masses, followed by world war.

History is what it is, and has led to the present world economic “crisis” which exists because flawed philosophies and controlling interests, established a century ago (and beyond), continue unchecked. When it comes to history, people are educated about numbers of deaths, types of execution and the names of national leaders. Much more meaningful and important, yet not generally taught, is the history of manipulation and trickery against the public which the various conspiratorial groups used in their day.

Claims like “Capitalism has failed” and “Socialism (Marxism / Communism) is the only alternative” are things which are repeated time and time again, especially now. The only use for these kinds of statements is to show the ignorance of those who utter them. When asked, a person is likely to call himself either a Capitalist or a Socialist (since Communist is a bit of a dirty word nowadays), but he is unlikely to be aware of any alternatives.

Further questioning of most people will yield interesting observations. For example, people might say of Capitalism “I want to be rewarded if I work hard and if I am clever, but I still think some people have unfairly amassed all the money, and I still think we should help out the poor”. Of Communism it is said, “We’re all equal, we should all share and I don’t think anyone is higher or lower than me as a person, but why should a doctor be paid the same wage as a cleaner, and why can’t I complain if I don’t like my living conditions, and why can’t I practice my religion?”. In practice, both ideologies are unworkable if taken to their logical extremes. That’s why neither exists in its entirety.

Socialist Capitalism

What exists in Australia resembles a mixture of Socialist and Capitalist ideals. There are relatively free markets and competition, yet Government is large and the welfare system quite extensive. Universal health and education are, by and large, realities in Australia.

What has made life in Australia particularly attractive in the past has been its championing of “Small Business”. The family-run corner store, the friendly local tradesman, the quality butcher are all examples of businesses where the worker owns his means of production. There is a generally positive feeling about these kinds of businesses. They are more highly regarded, generally, than supermarkets, “megastores” and the like. People find that by and large these kinds of retail businesses take more pride in their work and have a greater sense of social responsibility. By this measure and others, it can be argued that the productivity is better in a business where those working in it feel a sense of ownership (especially when this ownership is real). If the quality of the work you do in a day affects your annual paycheck directly (and not because your boss likes you), then you will work harder and do your best more often.

The great strength of Capitalism has been that the individual is able to build his future himself, on the basis of a good idea, hard work and a bit of luck. The liberal approach to economics that has existed in the West has given people the freedom to rise materially through entrepreneurial endeavors.

The great weakness of Capitalism and Socialism (from the point of view of the average man-in-the-street) is that both have ultimately been used to centralize power. Socialism is overtly centralist, advocating a single party political system, communal ownership of everything, but governed centrally, and so forth. Free market (laissez-faire) Capitalism is indirectly centralist in that it promotes monopolies, cartels, business clubs and various other types of corruption which effectively result in centralized government, even when formal Government is “small”. The desire to take over and control society is what has made both ideologies attractive to the already wealthy, as both Capitalism and Socialism can be make this possible. As G.K. Chesterton put it, “Thieves respect property. They merely wish the property to become their property that they may more perfectly respect it.”

Failed Democracy

Representative democracy fails when the representatives collude with the opposition to act against the interests of their constituents. The fundamental problem is that of deception through abstraction. That is, the representatives will promote a policy by some kind of popular banner that is agreeable to the people, but do not care to mention the catches and pitfalls. The public relies on the opposing representatives to expose any fraud, but as an identical policy is able to be worded so as to sound “capitalist” or “socialist”, the opposing group frequently and unwittingly allows a bad law to come into being.

An example of a deceptive and counter-productive law passed by both sides of parliament in Australia is the “First Home Buyer’s Grant”. This is a cash injection aimed at young individuals seeking to buy their first home, typically resulting in an apparent 5% to 10% discount on the price of a house. It has resulted in the premature entry of individuals into the housing market (instead of waiting and saving enough cash for a deposit), producing increased demand and house price inflation. Had there been no such “grant”, house prices today would be at least 5% to 10% lower, obviating the need for any such cash injection. The real beneficiaries of the “First Home Buyer’s Grant” are banks who sell mortgages and the Government which benefits from collecting stamp duty, sales taxes and appearing compassionate and generous to its constituents. It is a particularly deceptive policy, yet there are dozens of others which ultimately help banks more than people, such as mandatory superannuation payments and negative gearing tax-breaks.

Distributionist Model

Distributionism advocates the ownership of the means of one’s productivity. This places tangible power into the hands of those people who do the work and discourages the formation of a wealthy class which does no work. However, in contrast to Socialism, it does not destroy private ownership and free enterprise. Distributionism also promotes the ideal that no larger organization should perform a task which a smaller one can perform equally well. Distributionism, then, would generally be in opposition of large banks and multinational corporations.

Currently, land is the only tangible thing that most people can purchase and have some sort of control over. Every other kind of investment, especially in the stock market, requires an unreasonable amount of faith and trust in organizations which escape adequate scrutiny. Apart from those people who own their own business, the vast majority of people who work have absolutely no chance of sharing in the ownership or control of their means of production. If every employee of a business was entitled to buy into the business, and after a time, be entitled to a share of the business, some very interesting things would result:

  • After buying their home, employees would most likely want to invest in the business they work for because they can see where the money is going, and in doing so, they promote the stability and prosperity of their employer
  • Employees would see that working harder and more effectively would not only benefit the business, but help to grow their own investment.
  • Businesses would be forced to be responsible towards employees without the need for specific dismissal laws, as the cost of sacking an employee would be proportional to the amount of money the employee put back into the business and the amount of time he spent working for the business.

The Distributionist model would see a greatly reduced role of stock markets, investment houses and financial institutions, as individual wealth would be decentralized. That is, rather than putting one’s money into some fund that in turn sends it to far away places, most people would be investing in their own workplace. Individual businesses would be in the position of supporting their employees with loans and credit, setting their own rates and conditions.

The need for unions would not exist as, being part owners, employees as a group would be in the position of relative power with regards to determining pay and work conditions.

The thinking on this can go a lot further, and I intend to expand on this idea in subsequent posts, but the most important achievement of this alternative social and economic model is that it is truly democratic, insofar as power resides in ownership. Had General Motors, for example, been owned and financed by its own employees, then there would have been no need for a tax-payer funded bail out, as its employees would not have foreclosed on their own employer but would have negotiated a period of modified working conditions to get their own company through difficult times.

Had the Distributionist model been in place, there would have been no financial crisis of the type we are seeing, as there would be no central banks to restrict credit and sink otherwise well run businesses. Instead, companies needing credit would have firstly drawn on their own employee base for funds. Employees, being part owners, would have prevented many of the excesses which led businesses to over-expand or move off-shore.

Conclusion

Socialism and Capitalism are both failed ideologies because each promotes the ultimate confiscation of wealth from the population, placing it into the hands of a few. Representative Democracy has also failed because alternatives to Socialism and Capitalism are suppressed. There is no third option on the table. It is no surprise, then, that in both Socialist and Capitalist societies we find large, centralized financial institutions which, together, have criminally mismanaged the world’s economies. It should not be their role to “fix” the Crisis which they themselves caused. The Distributionist model offers a viable alternative to current systems in that it can be implemented without need for revolution or “creative destruction”. Instead, it would place the responsibility of rebuilding the economy directly into the hands of the people who, always preferring to act out of self interest, could be trusted to act creatively and adaptively. It would not result in an economic boom, but the re-establishment of real, sustainable economic and social development.

Interest Rate Tsunami

February 6, 2009 Leave a comment

tsunamiThe interest rate on loans as charged by the Bank of England has fallen to 1%. This represents a fall of 80% from October 2008.

It takes about 12 months for the effects of an interest rate change to translate into realities in the public arena. So one can expect that, come October 2009, we will be seeing the devastating effects of newly printed money flooding the world economy.

Have a think about that for a second…

Okay, time is up.

If we think back to the great Tsunami which took the lives of tens of thousands of individuals in the Asia-Pacific, we might recall videos of bathers looking perplexed at the sea. The tide went out so suddenly. There were numerous different reactions:

  1. Some stood there, stunned, glaring at the wet sand and the receding water.
  2. Some walked towards the sea in order to get back into the water and go for a swim.
  3. Some realized there was a problem and ran as fast as they could towards the shore. Most of them were too slow.
  4. A small minority looked out from the safety of their hotel rooms, filming the whole spectacle.
  5. Various animals, such as elephants, had made a run for higher ground, at the bemusement of human onlookers.

If we liken the current financial changes to the aforementioned natural disaster, we can identify some interesting parallels. The swimmers are like those living in debt, enjoying the good life. They take some risks, such as being eaten by sharks, drowning or being washed away, but none of them would think for a minute this could happen to him personally. Feew of the swimmers can imagine a tsunami. Falling interest rates and receding credit might resemble an unusually low tide. Animals and people of wisdom can recognize this as an event that precedes a disaster, and some will do a runner. Many of course never go swimming and are thereby not at risk.

Most people, however, fall into the ignorant groups (1 and 2) mentioned above. They are so stupid and so trusting that they welcome the falling interest rates with open arms, going forth and getting deeper into debt since they believe they can afford to do so. Others stand there, reading the amazing headline, perplexed. But already the rumblings of the next phase can be heard by those with open ears and broad reading habits. But even fewer than these remember the words of the ancients on monetary matters:

They have taken gifts in thee to shed blood: thou hast taken usury and increase, and hast covetously oppressed thy neighbours: and then hast forgotten me, saith the Lord God.

Had they remembered not to consort with usurers, our financial swimmers would have contented themselves with the humble and wholesome practice of living in a hut on a hill, rather than visit expensive tourist resorts and wade, semi-naked, into the sea of peril. At this point I think the analogy has stretched to its limit, except to say that the rumbling sound of the shaking earth was audible by some, but not others, well before the tsunami struck.

It is, even now, difficult to discern just what has been making these rumbling noises. Is it God? The commonly accepted story of the Tsunami was that it was a freak natural event. Some of course will see the event in a religious context and attribute it in some way to divine retribution. Other, more cynical characters have considered human malice behind the Tsunami itself. Unlikely as it is, one must admit, that is an interesting idea.

As for the present financial situation around the world, it is not impossible to work out what is coming. Banks are attempting to preserve their assets (people in debt) by not screwing them over with excessive interest rates. Governments are, to some extent, forcing banks to adopt this approach, but for a different reason. Governments want banks to lend anew, yet now people are spooked and generally don’t want to borrow. Banks are also spooked and don’t want to take risks. It all looks upside down and rather messy.

But none of that matters, because in the end, it’s the big things that matter. If there is one thing that can be said about all of this is that it is bigger than any individual. This crisis has been designed to be so big that any independent, organized movement would be unable to stop it.

An ocean of new money has been issued. We might not be seeing it yet, but it’s there, just beyond the horizon, coming like a great flood, ready to “stimulate” the economy. But in fact it will dilute the value of any existing cash into meaninglessness. In fact it already has, but, like the swimmers suddenly dry from the falling levels of water before the wave hits, there is an overwhelming perception that the opposite has occurred.

The advantage of suddenly finding that the sand beneath your feet is dry is that it’s easier and faster to run over dry land than it is to wade through waist-deep water. It is therefore in our interests to get off the beach, get out of debt as soon as possible, before the water (debt) returns. It’s too late already for the majority, and the fools out there who are going out and buying anything on debt are no different to the now deceased who walked towards the Tsunami. It wasn’t a pretty sight.

The most striking similarity this financial crisis has to the Tsunami is the distinct possibility that large numbers of those caught up in the sea of debt may well end up paying for this with their lives.

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