by Joseph Zoric
In his “What is distributism?” article of January 28, Thomas Storck states that “The capitalistic system is dangerous and unwise, its fruits have been harmful for mankind, and supreme pontiffs have often called for changes which would, in effect, eliminate capitalism, or at least reduce its scope and power” (our italics). But, when John Paul II states in Centesimus Annus that “it would appear on the level of individual nations and of international relations the free market is the most efficient instrument for utilizing resources and effectively responding to needs”, he is not just whistling in the wind. In fact, it is our view that no truer words were ever spoken. Certainly capitalism isn’t a perfect system. Some people are poor in the capitalist economy; some are alcoholics and drug addicts, while others are alienated and unable to cope with the problems life presents. However, the benefit we receive from the growing market economy is that it provides the opportunity to seek solutions to those problems and to help those in need. No other socioeconomic system can do as well, and this is the point of the Holy Father’s statement.
A quick look back on the twentieth century in the U.S. reveals some of the accomplishments of our economic system. The fact is that there has been more progress in the 20th century under capitalism than there was in the entire previous history of mankind. As the research of Stephen Moore and Julian Simon has shown, life expectancy in this century has increased by 30 years during this time, infant mortality rates have decreased by 10 times, major diseases such as typhoid, whooping cough and tuberculosis no longer threaten the masses. Agriculture productivity has increased to the point that less than 3% of our population can produce enough food to feed our nation plus a good portion of the rest of the world. Also during this century, real per capita gross domestic product has risen form $4,800 to $31,500 while real wages have nearly quadrupled from $3.45 to $12.50 per hour.
As the census figures show, the average American of today has material possessions that only the super rich of a hundred years ago could have dreamed of. Today more than 98% of American homes have a telephone and electricity. Over 70% of Americans own a car, a VCR, a microwave, air conditioning, cable TV, and a washer and dryer. We also have twice as much leisure as our ancestors had at the turn of the century. All of these gains have been achieved through the dynamics of the free market system that Mr. Storck believes to be so “harmful for mankind.”
Mr. Storck also has a mistaken view of how the stock market works, when he suggests that the norm is that “shares changing hands thousands of times a day.” In fact, most stocks are held by individuals for long periods of time. In fact, The average stock investor buys shares of a company that he believes has a bright future (i.e., will be meeting the needs of consumers). He does research on the company, gets advice from his broker, reads the annual report, and gets upset if the company does something wrong. When he believes the future of the company is not bright, or he needs cash to send his son or daughter to college to study Belloc, he sells the stock. Companies go to great lengths to attract individuals like this as well as institutional investors to hold their stock for long periods of time. Do you want as many people as possible to be owners? Then privatize the Social Security System. This would make them not only owners but also millionaires in the process.
In his explanation of distributism, Mr. Storck explains that a distributist economy would put limits on the amassing of property, and that “If my business supports myself and my family, then what right do I have to expand that business so as to deprive others of the means of supporting themselves and their families?” But business expansion does not deprive others of the means of supporting themselves; rather, it offers additional opportunities for those seeking such means.
One could make the Distributist “limited capital” argument in the economically stagnant Middle Ages, before markets were fully developed, and when it was the job of the Church scholastics (among others) to determine what were a just price and a fair return on an investment. When growth is stagnant, it is unfair for one person to take more because others will necessarily have less. But what about a modern market economy that grows on the basis of technological innovation, investments in physical capital and education, and risk-taking? The U.S. economy grew in the fourth quarter at an annual rate of over 5%. This means 5% more goods and service for everybody! In a capitalist economy you can have more without anyone else having less. In the distributist economy this would not be allowed or even possible.
This brings us to our final point. Who does the limiting in the distributist economy? If I have a bakery and my business includes the baking of bread, doughnuts, and wedding cakes, would I be allowed to expand my bakery to include cherry tarts and apple turnovers? Or would this expansion be looked upon by the distributionist police as an unfair advantage over the bakery across town whose owners don’t have my vision of the growing market in tarts and turnovers? Would Michael Dell be limited to selling computers to his college dormmates at the University of Texas rather than to the entire nation (and the world)? It is nothing more or less than a thorough and ongoing socialist state that could limit my bakery’s search for more markets or Michael Dell’s quest to create the biggest computer company in the world. You may call it whatever name you want but the socialist state would most certainly be the result.
In essence, the classic distributist vision focuses on the expected benefits of a new social arrangement without considering the costs of transitioning to that arrangement or of maintaining that arrangement. In our view, a distributist social order would be a giant leap backwards in many respects—and who would be willing to pay the cost? Precisely nobody, which is why the whole vision falls apart when one considers its fatal yet hidden flaw: only one institution in society has the absolute power to make it happen, the government. In other words, if the Distributists are really correct, then the individual decision-makers (persons, firms, governments, etc.), after a lot of trial and error, would have or will seek out this “state of the world” on their own. We believe it will not happen except under the coercive power of the State.
Would Bill Gates be limited in the distributionist state to producing only DOS? The very computer used to write this article would not have been invented in the distributionist utopia. Excuse us while we rummage through the attic for the Underwood (that’s a typewriter, for those readers who have never heard of or seen one).
Mr. Zoric and Mr. Welker (co-author) are, respectively, Associate Professor and Assistant Professor of Economics at FUS.