Sunday, March 22, 2009

Distributism and the American School of Trade

Distributism, to put it in summary terms, is an economic point of view cautioning us that the type of capitalism we have favors an uneven accumulation of wealth and purchasing power to those few who own, in mass, the means of production; that this imbalance tends to need socialistic state intervention, which gives inordinate power to bureaucrats; and that the only way to approach economic equilibrium (a truly free market) and attain the decentralization of political power is to favor an ownership society where the means of production are widely distributed. The Distributist approach simply recognizes that if the majority of individuals receive an income from both labor and ownership, then wealth will be more evenly distributed, people will be consuming what they produce (clearing the market), and we will have, as a consequence, enduring economic stability.

A fair acquaintance with Distributism will show, I believe, that it is naturally akin to the thought of our Founding Fathers. Like the Declaration of Independence, it is rooted in a philosophy of natural law, justice, and the existence of God; like the founders view of a limited federal government, it favors bottom up control; and, similar to the trade theory of Washington, Hamilton, Lincoln, and Teddy Roosevelt (wiki the “American School”), Distributism favors high tariffs, when necessary, to protect our manufacturing base. That last point, I think, is especially relevant today.

Presently, the standard line of bi-partisan “free traders” is that free trade lowers the cost of goods and raises the standard of living. It kind of half remembers the fact that wealth does not consist in money, which is purely a means, but in consumable goods. If, therefore, goods are cheaper and a nation is able to have more, then, it follows, that nation will be wealthier. But that rather puts the cart before the horse, as Alexander Hamilton, in opposition to British free trade policy, well knew: for it is originally in production that consumable goods are created, an income is earned, and the purchasing power to consume those goods is derived. Now couple that fact with the Distributist insight that labor inevitably looses power to clear the market due to a disproportionate amount of income favorably accruing to ownership, and the conclusion inescapably follows that free trade can only serve to accelerate the divide between labor and ownership, and thereby force wages down and decrease the standard of living at an even quicker pace.

The bottomward spiral that results from this whole process increasingly boils economic relations down to bare survival instinct. Whether it’s corporations moving manufacturing to poorer countries in order to compete, or banks, lacking investment in a productive economy, needing to stay alive by making speculative loans; such entities will do what they must to survive. But the same goes in politics. Perhaps -- recalling that a certain party will have to adapt, severely, in order to overcome the latest tidal wave of rejection -- we might speak directly to our politician’s survival instincts, reminding them that we are American constituents, and that a fair trade policy exists, which, contrary to our current one, was dubbed the “American System” – and for good reason.

4 comments:

  1. Jesse, I'm studying and considering the claims of distributism but I'm at a loss to make some of the connections I see distributist advocates making (like this one).

    The idea that free trade drives wages down is hard for me to see when universally, wages have been going up (not only for Americans but for the rest of the world).

    It seems right that factory X moves overseas and we lose high paying jobs to China but overall 1. I think American wages are still going up (setting aside the current crisis) 2. Our wages are ridiculously high and theirs still ridiculously low.

    I have lots of relatives that would disagree with your opinions here and not on economic theory basis but on the basis of the fact that they bought dinner for their family today and used about 80% of that day's wage to do so (thanks to free-trade). They would find it hard to feel sympathy for an American who has to use 5% of his day's wage to buy dinner instead of 4% like it used to be (if that's even the case).

    ReplyDelete
  2. ::Jesse, I'm studying and considering the claims of distributism but I'm at a loss to make some of the connections I see distributist advocates making (like this one).
    ::The idea that free trade drives wages down is hard for me to see when universally, wages have been going up (not only for Americans but for the rest of the world).

    Tim, thanks for your comments. I don't claim to be an expert, but here's my comments in reply -- take them for what they're worth :-)

    It is my understanding that in those wealthy countries which impose high tariffs, like Japan and China, wages have been going up (though as export countries, our success and failure is, respectively, also theirs). In developing countries it's a different story.

    For instance, in developing Mexico, after NAFTA, wages may have gone up in the short term, but what happened was that “infant industries”, which before the time of NAFTA were in the painful and lengthy stage of cultivation and growth, were crushed into oblivion; thus, in the long term, we’ve secured the poverty and destitution (and all that goes with it) of Mexico, and have incentivized its citizens to cross our borders.

    With perhaps a rare exception, it’s a matter of historical fact that every country which has become a wealthy country does so by growing (investment, R&D) and protecting (tariffs, patents) its manufacturing base . In so doing, countries becomes self-sufficient, and do not need to offer the "scarce resource" of cheap, no-strings-attached labor.

    ::It seems right that factory X moves overseas and we lose high paying jobs to China but overall 1. I think American wages are still going up (setting aside the current crisis) 2. Our wages are ridiculously high and theirs still ridiculously low.

    As for American wages, it’s my understanding that they’ve been steadily declining for 40 years now, since the advent of free trade, and that we consume more than we produce and spend more than we earn.

    Our “current crisis,” as you say, is really more than a side note and is kinda the point of Distributism and of the American school of trade. Even if we accept the argument that American wages are going up (and dismiss the fact that it’s virtually impossible for both parents of a family not to be working, a damaging sacrifice, which, as I understand, was not the case 50 years ago), what has brought us to this point?

    High tariffs, till 40 years ago, gave us self-sufficiency, and steadily grew our economy (that is, holding to the American school of trade has brought us national wealth). That, however, came at a price, which is the point of Distributism: economic equilibrium could not be achieved by unbridled capitalism, and so we’ve had a marriage, a constant mix, of socialism and capitalism. Yet this mixed capitalism, as Kelso and Adler call it, does not address the root of the problem so we still have crises; each crisis, moreover, means bigger government, which means a more intrusive State and a less self-sufficient citizenry.

    ::I have lots of relatives that would disagree with your opinions here and not on economic theory basis but on the basis of the fact that they bought dinner for their family today and used about 80% of that day's wage to do so (thanks to free-trade). They would find it hard to feel sympathy for an American who has to use 5% of his day's wage to buy dinner instead of 4% like it used to be (if that's even the case).

    I think that our current trade deficits, national debt, expanding government, shrinking economy, loss of higher paying manufacturing jobs to lower paying service jobs, growing income gap between the capitalist/managerial class and labor, scope of our recession, and passing the buck to future generations in various ways, among other things, all point to the fact that we’re a precarious nation that’s a teetering house of cards.

    It may be true that the beneficiaries of free trade (who will not pay your relatives what a human being deserves - while they no doubt glut themselves on an inordinate amount of wealth) have benefited people in the short term by allowing them, perhaps, not to starve; but then again, slave owners had a vested interest in feeding their slaves, in which case certain cynics might make the argument they were better off than certain poor people are now.

    The fact is, wealthy countries, driven by an untamed profit motive, want cheap labor and, throwing their weight around, strong-arm developing countries, preventing them from becoming wealthy in the manner that they, themselves, became wealthy.

    ReplyDelete
  3. I don't think Teddy Roosevelt fits in this list. He was a progressive who was not in favor of Private Property. He wanted and made huge public lands(National Parks) that were confiscated lands of private citizens. This policy continues and instead of giving land back to citizens, which would really make a difference, more is confiscated (protected) for future generations. We are the future generations used to justify this policy and how is it helping us? It is not, in fact we can't even hardly log it, sometimes we can't even put out the Forest Fires on it.

    ReplyDelete
  4. Hey dh. I mentioned Roosevelt only in relation to the American School of trade. I did not mean to imply his views were otherwise in line with distributism.

    Peace,

    Jesse

    ReplyDelete