Tuesday, September 13, 2011

A Plea for Peasant Proprietors, Part II: The Principle of Binary Growth

In yesterday's posting we saw that Ireland in the late 1840s was what could only be described as a disaster area. Whatever the cause, the fact remains that the country was hit with a catastrophe that could easily have been avoided, and even after it happened, could have been solved almost with ease. The baffling thing about the Famine, however, was that nothing was done except to make a bad situation worse. This was justified on the grounds that nothing should be done to interfere with the free market, and that the Great Hunger — "An Gorta Mór" — was a graphic proof of the Reverend Thomas Malthus's theories. These were first published in Malthus's 1798 Essay on Population, and discredited many times since, as Joseph Schumpeter reported in his History of Economic Analysis:

"The teaching of Malthus' Essay became firmly entrenched in the system of the economic orthodoxy of the time in spite of the fact that it should have been, and in a sense was, recognized as fundamentally untenable or worthless by 1803 and that further reasons for so considering it were speedily forthcoming. It became the 'right' view on population, just as free trade had become the 'right' policy, which only ignorance or obliquity could possibly fail to accept — part and parcel of the set of eternal truth that had been observed once for all. Objectors might be lectured, if they were worthy of the effort, but they could not be taken seriously. No wonder that some people, utterly disgusted at this intolerable presumption which had so little to back it began to loathe this 'science of economics' quite independently of class or party considerations — a feeling that has been an important factor in that science's fate ever after." (Joseph A. Schumpeter, History of Economic Analysis. New York: Oxford University Press, 1954, 581-582.)

We might compare the today's slavish reliance on similarly discredited Keynesian theory with the unquestioning acceptance of Malthusian fantasies as economic orthodoxy, but we have better things to do — for now, anyway. (Although, if you're interested, Harold Moulton's dissection of Keynesian "Multiplier Theory" in The Formation of Capital pulls the rug out from under Keynesian monetary and fiscal policy.) What we need to look at today is the validity of William Thornton's claim that capital of which the ownership is well-divided is inherently more productive than capital of which the ownership is concentrated, and that the rate of growth and development is much faster when direct ownership of capital is broadly distributed throughout an economy.

We have, of course, seen this argument before. Dr. Robert H. A. Ashford, professor of law at Syracuse University, in Binary Economics claimed that in binary theory, the concept of "binary growth" holds that economies grow steadily larger as private capital acquisition is distributed more broadly among the population on market principles. This concept also focuses on the importance of unleashing the unutilized or underutilized capacity of all economic systems to produce in greater abundance. (Robert H. A. Ashford and Rodney Shakespeare, Binary Economics: The New Paradigm. Lanham, Maryland: University Press of America, 1999, 37-41, 273-306, 320-325.)

This is substantially the same claim made by Thornton in the 1848 edition of A Plea for Peasant Proprietors, and strengthened in the second edition, published in 1874. Although Thornton's examples were limited to landed capital, the same principle applies to all other forms of capital. Thornton noted that, in areas where people owned the land they tilled, they never ceased to improve the productiveness of their capital. The same or even larger size plots of better land in other areas, when farmed by tenants or hirelings, even with better technology, invariably produced at a lower level. As Thornton reported, noting that most manufacturing in Switzerland was carried out in the 1840s by peasants who worked their land in the summer, and spent the winter producing other goods,

"Switzerland, however, notwithstanding the general happiness of her people, is not absolutely free from pauperism a disease which would almost seem to be inherent in the constitution of manufacturing communities. But even the pauperism of Switzerland furnishes additional proof of the excellence of peasant proprietorship, for paupers are most rare where landed property is most divided, and are found in the greatest number in those districts which contain the largest estates. In the whole of the Engadine, the land belongs to the peasantry, and 'in no country in Europe,' says Mr. Inglis, 'will be found so few poor as in the Engadine.' In the Valais, the land belongs to a few great proprietors, and, according to Mr. Bakewell, the peasantry are among the poorest in Switzerland. Inglis, however, assigns the 'bad pre-eminence' to the canton of Berne, in which he says the greatest landowners reside, and which, 'for this reason, contains the greatest number of poor'."

From Thornton's language on this point and his argument, we suspect that he might have been a primary source for Chesterton and the distributists.

Thornton also went on at some length about conditions he had observed in the Channel Islands, Guernsey, Jersey, and Alderney. These islands, too, were characterized by large numbers of small farms owned by those who worked them, were invariably prosperous, and there were few extremes of wealth or poverty. For the 1874 edition Thornton added several pages of historical examples of countries and empires that had grown strong and wealthy when ownership of capital was well-divided, and which fell into decay once ownership of capital became concentrated.

Of interest to both the Pro-Life and Pro-Choice camps is Thornton's observation, in common with a number of other critics of Malthus's Essay, that while poor people seem to reproduce beyond their ability to support themselves, the population of middle class small proprietors grows more slowly, and is frequently stable, matched to the productive capacity of the local economy.

John Weyland had noted the same thing in 1816. In The Principles of Population and Production, Weyland claimed that poor people tended to reproduce at great rates, the middle class tended to reproduce at replacement rates, and the rich below replacement. Weyland concluded, as did R. Buckminster Fuller a century and a half later, along with Jane Jacobs, that the level of economic development determines the rate of population growth, not the other way around, as Malthus had asserted, and as many people still affect to believe. Thus, the solution to the "population problem" is to develop economically. If you want to raise living standards and slow population growth, you encourage widespread participation in economic development through direct ownership of capital. You do not reduce population and hope that standards of living will rise.


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