Tuesday, October 28, 2008

Chesterton and Capitalism Part One

by D. Boland

Just as the other article “Chesterton's Mind and Method” was directed to defending Chesterton's general philosophy and method against the intellectual culture of his and our day so this is intended as a defence of his social philosophy, which he called Distributism. His social philosophy seems to have been inspired by the Church's social doctrine and in particular by Leo XIII's famous encyclical Rerum Novarum. As is the case with this doctrine, Chesterton's social thought, which owing to the particular condition of modern society focuses upon the politico-economic aspects of social life, is looked upon with disdain by the academic social scientists, and especially by professional economists.

The first thing to be noted about this is that such a focus is already a sign of possible abnormality in the consideration of the subject matter, which the Church has adverted to in more recent times. That is to say the object of investigation, namely social life and behaviour, needs to be looked at as a whole. A consideration of a partial aspect of society, such as the economic, though a legitimate abstraction, cannot be isolated from the consideration of the whole (which is ultimately a moral one, i.e. the consideration of individuals within society as persons). The very attempt to resolve social issues or address social injustices at the economic level alone is in a way to fall into a distorted vision of society. There is more to society than economics and politics, especially as studied in the modern scientific way.

It may be said, then, that the nature of the social problem that had arisen in early modern times gave rise to the kind of ideologies that came to dominate the field of social thinking, namely, individualistic liberalism followed by collectivist socialism. The most visible social effects that ensued after the Reformation, centred in the wholesale expropriation of the Church and people by the already rich and powerful, were and are in regard to the possession and control of the lands and wealth within society, i.e. of a material kind. The modern ideologies which attempted to give an explanation of the new economic order, whether to justify and laud it or to condemn and curse it, are by their basic materialism and utilitarianism locked into such a distorted vision.

It became necessary, however, in order to counter them, to focus on the economic ills of modern times. “Social justice” came to be particularly associated with the question of property and the injustice of systematic oppression of the propertyless, which in moral terms is specially a matter of theft upon a grand scale. But there are of course other and indeed more serious kinds of social injustice, which have come to the fore in our own times, as for instance the slaughter of innocent human life in the ever-increasing practice of abortion, the most heinous of social injustices, worthy to be classified in modern terminology as crimes against humanity.

Even divorce is a more serious social evil in principle than theft, not just because it attacks the more important natural social institution of marriage, but also because it involves a system of serious injustice against the abandoned spouses. Because the principal promoters of these injustices (consciously or in ignorance) are those in power,2 or if not directly in government at least in effective control (for the main part by virtue of previous acts of economic injustice) the cries of the victims of these crimes go unheard or unheeded.

All these modern social evils are interrelated forms of immorality and injustice. For the widespread breach of one commandment, when legally condoned, inevitably leads to disrespect for all morality. If this occurred first by reason of the greed of the rich and powerful elements of society, who were able to obtain political control by virtue of their excessive wealth and power (thus constituting the regimes oligarchies, if in more recent times they masquerade under the name of democracies), this disrespect and even contempt has, in the course of time, had a significant effect upon the culture and moral sensibilities of the society as a whole.

In Chesterton's time these flow-on effects of the first modern-style social injustice were just beginnning to become overt. But the immediate peril in his day was from the extremity of the economic perversity that divided society into two opposed classes. Not that such a divide is not to some extent inevitable. As Pope Leo pointed out the possession of wealth within society is not meant to be equal. There are all sorts of reasons for such inequality (not necessarily indicative of injustice), including individual differences in intelligence and talents, that means that some will have more and others less, and that only a few can have much more, whilst a great many will have the least. This disparity of wealth, if well used by its possessors, works to the overall good of all. As St. Thomas puts it, in words adopted by the popes, it is good and natural that the possession of goods (i.e. property) remain private or in the individual, but their use should in some way be made common.

None should forget that his or her superior talents, and consequent greater wealth, are God-given. So they should be used in the way intended by God – that is for the common good. It is of course in the interests of those possessing inordinate wealth to argue for the right of private property as if it justified their absolute claim to the free and exclusive use of what they have (unjustly) obtained. Chesterton tried valiantly to bring home the necessary distinction between the right of private property always supposing a right distribution within society and the spurious right to property ignoring that question of due proportion. The socialist's mistake is to accept the same spurious definition of property as the capitalist and then argue for an egalitarianism and against the right of property itself. This confusion has been the bane of the whole discussion.

Moreover, by reason of original sin there has been, and will continue to be, those of inordinate great wealth, “the rich”, and those undeservedly of little, the “poor” (the poor will always be with us), But what characterised the time which spanned the lives of Leo XIII and G.K. Chesterton was the enormity of the extent to which one relatively small section of society had, and had been allowed by law (since they had usurped the legal power in the process), to dispossess the rest. These dispossessed then became obliged to obtain their living by their labour alone. Hence the divide that was traditionally recognised as that between the rich and poor, came to be identified with that between those who possessed practically all wealth or capital (the propertied or “capitalists”) and those who possessed virtually no wealth (the propertyless or “workers”). This rendered the great mass of citizens virtual slaves (under “a yoke little better than slavery” Leo XIII), a condition that in some ways was much worse than the ancient (pagan) slavery 3 (cf. Chesterton's essay entitled “Sex and Property”).

So we can come to the precise question that Chesterton faced in his day. It is fundamentally the same today but there are many features of it that are different, the most significant being the moderation of the poverty of the poor or the improvement in working conditions because of State intervention (prompted in large part by the Church's speaking out). This intervention brought its own problems. At present we are witnessing a worrying push to return to the earlier conditions of pure liberalism or “unbridled capitalism”. A further complication is the extension of this flawed economic system to the whole world (“globalisation”) making the divide of extreme riches and desperate poverty a feature to be found not only within nations but between nations.

This too it seems has allowed the poor of the more developed nations to enjoy to some extent a higher standard of living at the expense of the poor of the underdeveloped, leading to a general problem of “consumerism” within those “developed” nations. Hence, the sense of injustice in the “rich” nations is not so acute as it otherwise might be. The language employed in this regard is significant. The poorer nations are referred to as “underdeveloped”. No one thinks of referring to the richer nations as “overdeveloped”. For that would identify a defect in them (but in such eyes no one can be too rich).

More poignantly, within nations, the poor are referred to as “underprivileged” as if the normal condition is to be “privileged”. Part of the reason for this may be that Capitalism and the modern economic science that is designed to defend it promote a concept of wealth as money where it is considered normal to desire to be wealthy without limit. This will be examined further below – as it is a distinctive feature of modern capitalism that is not brought out fully even in Chesterton and the social encyclicals (though it is hinted at in both) despite being to the forefront in both Aristotle's and St. Thomas's analysis of commerce.

However, as noted above, this economic form of social injustice has been overtaken by much more serious social issues. Nonetheless, that is not to say that the question of economic injustice belongs only to the past. It is very much a live question today. When we turn to examine the question of social justice (or injustice) in the sense of economic justice we will find that Chesterton's insights are as valid as ever.

But, the understanding of the issues depends greatly upon keeping in mind Chestertons's definition of Capitalism. It is a good definition and enables what is wrong with Capitalism to be easily identified. But it has the disadvantage of defining what is a condition of something (and a bad condition at that) rather than the thing itself. We might compare it to a medical definition of abnormally high blood pressure. This can only be understood in relation to what is normal blood pressure. So it supposes some knowledge of the norm. For Chesterton, “distributism” is simply the name for this normal social economy, expressed in terms of the distribution of property.

Confusingly, the word “Capitalism” is used both for an economic system that has an abnormal condition in regard to the distribution of wealth or property, and one where the distribution of wealth is not an issue. Both are systems that are based upon the institution of private property, in the one case in a condition that is normal, in the other abnormal.4

The distinction between the two meanings of Capitalism is in fact made in the social encyclical (1991) Centesimus Annus (para. 42). And the difference made there comes down to that between the normal and the abnormal. The encyclical is considering whether we can say that Capitalism is good or bad. “If by "capitalism" is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a "business economy," "market economy" or simply "free economy."

But if by "capitalism" is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.”

The former sense plainly refers to the notion of an economy based upon private property and free exchange of goods and is concerned to oppose these characteristics to their socialist denial. It is thus defending Capitalism in so far as it is opposed to Socialism. But it is to be noted that the word Capitalism is not perhaps the most appropriate name for this economic system. What is evidently intended is simply a social exchange system that is functioning normally which ultimately means justly or morally.

The encyclical itself suggests that the second usage of the word “Capitalism”, which clearly refers to an abnormal condition from the point of view of justice is the one more appropriate. It is in fact the one used in earlier encyclicals where Capitalism is severely criticised. This is also clearly brought out in other parts of the 1991 encyclical. “In this sense, it is right to speak of a struggle against an economic system, if the latter is understood as a method of upholding the absolute predominance of capital, the possession of the means of production and of the land, in contrast to the free and personal nature of human work. In the struggle against such a system, what is being proposed as an alternative is not the socialist system, which in fact turns out to be state capitalism, but rather a society of free work of enterprise and of participation. Such a society is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied.” (CA 35)

And speaking of the conflict between Capital and Labour in another place the encyclical refers to “a conflict which sets man against man, almost as if they were "wolves," a conflict between the extremes of mere physical survival on the one side [subsistence-wage labour] and opulence on the other [concentration of capital], the Pope [Leo XIII] did not hesitate to intervene by virtue of his "apostolic office." (CA 5 Insertions in square brackets mine)

Chesterton's Distributism comes within the description used by Pope John Paul II: “what is being proposed as an alternative is not the socialist system, which in fact turns out to be state capitalism, but rather a society of free work of enterprise and of participation”. And the Church speaking of socialism and capitalism in the same terms (socialism as “state capitalism”) is fully in line with Chesterton's point that Socialism is simply the monopoly system of Capitalism adopted by the State itself. Both are regimes 5 based upon a monopoly over the processes of the production and exchange and an effective denial of property rights to the majority of the population. Their basic affinity can be seen, moreover, in the fact that the advocates of both hypocritically present such a monopolistic take-over of the economy as being the best way of ensuring the prosperity and freedom of all. Both claim to be ardent supporters of “democracy”.

Chesterton was aware of the ambiguity in the use of the word “Capitalism”. So he says "The word...is used by other people to mean quite other things. Some people seem to mean merely private property. Others suppose that capitalism must mean anything involving the use of capital.” These other uses generally denote the exchange economy operating in a just way without the huge disparity in wealth which puts one of the parties at the mercy of the other not just in regard to employment but also in regard to all types of exchange.

Chesterton's definition of Capitalism then falls fair and square within the second meaning given in the encyclical. “When I say 'Capitalism,' I commonly mean something that may be stated thus: 'That economic condition in which there is a class of capitalists roughly recognizable and relatively small, in whose possession so much of the capital is concentrated as to necessitate a very large majority of the citizens serving those capitalists for a wage.'" (from “Outline of Sanity”)

This in fact is an accurate description of the economic system existing in the nineteenth century (“early capitalism” from the perspective of the late twentieth century) and has application even today despite the alleviation of the extremity of the condition of workers for various reasons, including initially by the united action of the workers themselves, then by legislative regulations imposed to restrain the more blatant exploitations within capitalism and by a general social welfare program to supplement the income of the poor and “disadvantaged” or “underprivileged”. It is only in the social encyclicals that such re-distribution of wealth is described openly in terms of distributive justice, or treated as a matter of right.

There are many aspects to a normally functioning social economy but the widespread distribution of property is the most fundamental requirement. For it operates at the most basic level of justice, distributive justice, and it is here that social injustice in regard to property begins. For the lands and other common goods (natural resources) of any society belong to no one in particular in the beginning (or as they are discovered) and have to be allocated by the community through its leaders. It is not hard to imagine the temptation of those with the responsibilty of dispensing the common goods to favour themselves and their friends in this regard.

It is noteworthy that Leo XIII was prepared to speak of distributive justice in the context of this question of social justice. He even applied it to the question of the just wage, which ordinarily is a matter for commutative justice. But what he noted is that the demands of justice are not to be confined to a contractual or mutual relationship between individuals. They presuppose, as do all relationships of exchange within society, a freedom and equality which it is the society's duty to ensure for all, to which every individual has a natural right.

In his time the disparity between the bargaining power of employers (capitalists) and employees (workers) had reached such a level that not only did the workers have no 6 property to fall back on (having missed out altogether generally) but their parlous position enabled their employers to drive such a hard “bargain” that the wages they were virtually forced to accept were less than enough to support themselves and their families. The unnatural injustice of this, whether from the point of commutative or distributive justice, was plainly criminal. But not only the direct employer had a responsibility in this regard; it was a matter of social responsibilty, of “social justice”.

Part of freedom and equality depends upon each individual having his or her just share or proportion of the social wealth or common goods of a particular society. Any disproportion in this regard must affect the equality and freedom of the individual members of such a society in their dealings with one another. It is the duty of those who have the care of the community to ensure that there is no original disproportion and that the necessary laws and institutions are in place to prevent such a disproportion occurring as a society develops. Sadly, these responsibilities have been more honoured in breach than in performance.

As for how this distributive justice or proportionate equality is to be achieved, it is not a matter of mathematics but of practical measures. Such a spirit of distribution is not opposed to the institution of property but in fact is a matter of converting common “property”, or common goods, into private property. The land for instance of any society originally belongs to no one in particular. But it can only be properly utilised by individuals. It is necessary, therefore, even before any form of production from the land, that there be some kind of institution of “property” in land. But all should be able somehow to share in this common property. There should be no favoritism or system of privilege in the distribution, as is sadly too often the case historically (with the blessing of “law”). The object of distributive justice is to ensure that no one misses out in the distribution of such social benefits. It does not mean that everyone gets an equal amount. It is a question of proportion considering the common good of all.

A just distribution of common goods, however, is not to be thought of only in material terms, as is the case with land and natural resources. As pointed out in Centesimus Annus, there is now much social “capital” in things of the mind (such as “know-how”) enjoyed by the members of the community that can be considered community generated, through improved education, systems of communication and so on. These kinds of common goods can also be monopolised by the already “advantaged”, whether within nations or between nations. They should not be able to be appropriated by the few at the expense of the many.

The proponents of Capitalism, as defined by Chesterton, see nothing wrong with such (mis)appropriation provided the mechanisms of the market are left “free”, in an open exchange process. This is what is called “free competition” and “free trade”. That is to say, in their eyes there should be no control over the prices of things - apart that is from that control which already belongs to the (long) established monopolistic structures.

A significant social good is the society's recognition of an individual's contribution to society (honouring its citizens). This should not be thought of simply as something going to a privileged few. But it gives a good idea of the notion of proportion in distributive justice. Some may be given more on account of their greater ability to use things (such as land) or on account of some other special civic quality. The distributor,7 however, should be always looking towards the common good and not to the private enrichment of the individuals. And with the distribution comes the obligation to apply it to common use as much as possible (this does not exclude one's own use within reason).

As noted above the notion of distributive justice can be applied in the case of wages. Ordinarily it is a matter only of commutative justice, but a worker reduced to a condition of extreme poverty and consequent economic impotence (lack of bargaining power) may be deprived not only of what he is entitled to according to commutative justice (a fair return to his labour) but even according to distributive justice (when what the underpayment takes from him is his natural right to a livelihood). This latter does not so much apply to the employer as an employer but as a member of the exploiting part of society (as a capitalist).

So it was that, in the extreme conditions applying in his time to the “workers”, Pope Leo XIII used the language of distributive justice in the very context of the just wage. If necessary, as a matter of distributive justice, the State must set a minimum wage which the employer is obliged to pay. “The Pope attributed to the "public authority" the "strict duty" of providing properly for the welfare of the workers, because a failure to do so violates justice; indeed, he did not hesitate to speak of "distributive justice." (CA 8) Because this goes beyond contractual or commutative justice, this aspect of justice came to be given the name simply of “social justice”.

This necessity for fair distribution of common goods extends into the sphere of exchange. Indeed, generally speaking,the market should not be the property of any one (not even of the State – as public property). There may be occasion, however, in exceptional circumstances, for the setting up of a monopoly (state or otherwise) if required for the common good, but only to the extent that it is necessary for the common good (in the case where a certain kind of necessity would otherwise not be effectively provided for). Apart from this exception free entry of all to a line of production or market is a common good and no one should be given property in such by way of privilege or legal protection.

Any control over the market or the prices of things is in effect a form of privileged property (hence it has a monetary value, and an inordinately high one at that). One cannot exchange goods according to commutative justice if the other party has such a monopoly of the means and materials of production that he is able to dictate the terms. The test of a free exchange or free market is that both parties have no control over the price: they have to take it; they cannot make it. But the very definition of a monopolist is one who is able to make the price.

The capitalist wishes to define monopoly only in terms of state monopoly socialism); price fixing is seen only in terms of the state regulation of prices. But that is taking the meaning of monopoly at its extreme (sole seller). There need not be total control by one. There need not even be collusion between a few so as to act as one. The very advantage that attaches to being one of a few where there ought to be many (especially in regard to necessities, in which work itself may be included) gives those few a power over the “market” (meaning the consumers).

The very difficulty of obtaining otherwise the goods desired expresses itself in a price elevated above the norm (the true market price). Indeed, up to a point the 8 (oligopolistic) supplier can withhold its goods until it gets the price it wants. For it has control over such a large part of the supply that other suppliers cannot fully meet the “demand”. Other oligolopistic suppliers (its major “competitors”), having a common interest in keeping up prices, will be inclined to keep close to the highest price possible given the overall ”demand” even without express agreement or collusion. That is to say they will watch the “competition” and keep prices generally at an artificially elevated level, all the time devising all sorts of ploys (including a temporary drop in “their” prices) to steal some part of the ”market” from the “competition”. One may perhaps appreciate how the very language of exchange is perverted.

Without any concept of distributive justice the ownership of goods and their exchange is discussed entirely in the context of contract and an artificially abstract notion of commutative justice, as if all exchanges were necessarily between equals. In such a mind set there is little or no acknowledgement of anything systematically wrong in the social economy. But the encyclicals make no bones about this. “The crisis of Marxism does not rid the world of the situations of injustice and oppression which Marxism itself exploited and on which it fed.” (Centesimus Annus 26)

Moreover, the encyclicals explicitly speak of injustice in the distribution of wealth (cf. Centesimus Annus 12: "To remedy these wrongs [the unjust distribution of wealth and the poverty of the workers] ...”) and the remedy must include a restoration of justice in the distribution of wealth. This is precisely where Chesterton's Distributism is rightly to be regarded as a major part of the answer to “the social question”.

This working for the restoration of distributive justice is an obligation resting on all, i.e. the community as a whole, and primarily upon the government. It is not so much a matter of passing new legislation as dismantling old legal privileges and bad institutions so that they do not continue to support social injustice. “The State, however, has the task of determining the juridical framework within which economic affairs are to be conducted, and thus of safeguarding the prerequisites of a free economy, which presumes a certain equality between the parties, such that one party would not be so powerful as practically to reduce the other to subservience.” (CA 15)

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