Economic Security

Common-Good Values, Part 5

We hear a lot about the economy these days, in particular how it’s not doing well. Both sides of the political spectrum acknowledge the economic challenges people face these days, and both offer very different solutions to this problem. Generally speaking, Democrats seek to aid impoverished and disadvantaged individuals through welfare spending and government wealth redistribution, while Republicans emphasize growing large businesses and increasing free trade in order to bring down costs and bring up wages and salaries. While both of these approaches are well-intentioned, they both inadvertently contribute to the core economic problems faced by the common worker.

Socialism and Capitalism Defined

The two economic philosophies which guide the Left and the Right are often defined as Socialism and Capitalism. While there is nothing inherently wrong with these terms, they often are misdefined or vaguely defined, leading to general confusion as to the precise nature of these economic philosophies. More often than not, “Socialism” is an empty label thrown out by Republicans as an insult or accusation, while “Capitalism” gets defined as synonymous with “free trade” or “big business.” Such definitions are misleading at best and dishonest at worst, so defining these two terms clearly is a very important first step towards thinking clearly about economics.

Socialism is an economic system driven by government ownership of the means of production (i.e. the means of producing physical wealth, such as factories, businesses, and farms). It is not synonymous with Communism, which is defined as communal ownership of the means of production without any state involvement. However, the two economic philosophies are frequently linked, as Communists often view Socialism as a vital step towards implementing their ideology. All so-called “Communist” nations in the world today are actually Socialist.

Americans are frequently familiar with the many problems of Socialism. Government-owned businesses are frequently very inefficient compared to private companies, and are generally slow and wasteful. They usually destroy incentives to work, resulting in bloated welfare states in which many individuals “work the system” instead of working an honest job. Since private goals rarely overlap with those of the government, the state is prone to use legal or physical force to accomplish its aims. It is thus no coincidence that the majority of mass murders committed in the 20th century were perpetrated by Socialist states.

In contrast with Socialism, Capitalism encourages private ownership of the means of production. However, it is not merely a system of private ownership and free trade, as proponents of Capitalism often suggest. Specifically, Capitalism is an economic system in which the vast majority of people are employees who work the means of production owned by others. In a Capitalist society, very few people have ownership of businesses or other means of making a living. Rather, most people are wage-laborers or salaried employees working for someone else. While most Americans have a generally positive view of Capitalism, the truth is that Capitalism comes with a cost that few Americans recognize.

The Key Problem

Although they are bitter ideological enemies in the public square, Capitalism and Socialism both suffer from the same key problem: they concentrate massive quantities of economic power into the hands of a few individuals, whether those individuals be government bureaucrats or private investors in LLCs. Although their policies are vastly different, both ideologies lead to the same basic result: the average worker has no ownership of their means of making a living, and is subject to the whims and aims of the powerholders. Ironically, the war between Capitalism and Socialism is a sibling rivalry, not one between sworn enemies. It is no coincidence that in America the grown of big business goes hand in hand with the grown of big government, or that Socialist nations such as China tend to appear more Capitalist over time. Economic centralization and political centralization are two sides of the same coin.

This centralization of power leads to a number of social problems which are commonplace in America today. Perhaps the most obvious example is the destruction of family and community. Families are destroyed or never started in the first place because it takes two full-time incomes to support a household. Marriage is avoided in order to pursue careers and obtain economic benefits. Communities are disrupted and become ever-more impersonal as out-of-town businesses dominate the economic scene and make private business ownership increasingly difficult.

The destruction of the family and community in turn leads to increased economic instability. Employees must live in continual uncertainty, as they never know when a change in economic fortune might lead to a layoff or reduction of staff. Without ownership of the means of production, hard-working, responsible individuals have no guarantee that they will be able to make an honest living. This uncertainty in turn leads to the development of a massive welfare state to act as a safety net to prevent changing economic fortunes from leaving individuals destitute. Once again, Capitalism and Socialism each tends to lead towards the other.

Finally, hyper-centralization of economic power leads to the dehumanizing of the common worker. In both Capitalism and Socialism, the common worker is reduced to a mere cog in a machine, valuable only because of the labor and service he can offer. The economy ceases to be primarily about providing for the material needs of individuals and families, and takes on a new role as a massive behemoth that is an end unto itself.

If Americans are going to have constructive conversations about the economy, they need to recognize the hard truth: while everyone wants economic security and human dignity, the two most common solutions to this problem are dead-end roads.

The Solution: Distributism

While Democrats and Republicans debate the relative worth and value of government welfare versus corporate interests, Solidarians offer a third-way solution that avoids the key flaws of both Capitalism and Socialism—the economic philosophy of Distributism.

Distributism was defined by early 20th-century economic theorist Hilaire Belloc as an economic system in which a majority of people have ownership of their own means of production. In other words, a distributist economy is one in which the average person possesses their own means of making a living. It doesn’t refer to government redistribution of wealth, nor does it imply that all businesses and corporations must be worker-owned. Some goods and services are best provided by the government (such as roads), while others are best provided by capitalist ventures (such as space travel). But aside from some public goods and complicated pieces of technology, the vast majority of goods and services can be best provided by worker-owned businesses, whether in the form of small family businesses or in larger worker-owned cooperatives, such as the famous Mondragon Corporation of Spain.

A Distributist society has a number of distinct advantages. The first (and perhaps most evident) benefit is that of increased responsibility. As a general rule, humans tend to care most about something when they can truly call it their own. An economy driven by hirelings is not a recipe for long-term success. In a Distributist society, the determinative factor in an individual’s economic success and failure (outside the inevitable changes of fortune beyond human control) is their own hard work. Such cannot be said of either Capitalist or Socialist societies, in which human lives are controlled by the whims and purposes of people who do not have any personal interest in the individual worker. This control and sense of responsibility which Distributism grants to individual workers thus leads also to greater economic security, as workers cannot be simply “let go” for the convenience of the company.

The increased sense of responsibility and greater economic security lead to another advantage of Distributism: the promotion of flourishing families and communities. Being able to possess your own means of making a living is one of the most important keys to being able to support your own family and maintain strong community bonds. Likewise, only by giving workers the dignity of ownership will the economy become humanized once more, rather than reducing workers to mere cogs in a machine.

In sum, Distributism offers a third way alternative to Capitalism and Socialism that overcomes the disadvantages of each—hyper-centralization, destruction of family and community, and dehumanizing of the worker. In future articles, we will discuss common misconceptions of and objections to Distributism, as well as what a Distributist society could look like.

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As both Left and Right continue to fight over economics, Solidarians offer a solution which neither side offers—an ownership economy in which common individuals possess their own means of making a living. The solution to the economic woes of our time is not found in concentrating power into the hands of a few individuals, but rather in enabling as many people as possible to become responsible, self-reliant owners of productive capital. Only then will the economy once again work for us and not us for the economy.