Tuesday, September 23, 2014

Buying Time, I: When the Solution is the Problem

Many people agree that something must be done, and done now, about the growing wealth and income gap.  When you add other problems, such as the mounting debt crises (government, student, and consumer), the alleged “recovery” from the “Great Recession/Depression,” spreading political instability, and a host of others, you end up with a seemingly hopeless situation.

In response, many people and organizations advocate a basic change in human nature, and distribution of the world’s goods on the basis of need (pseudo charity), rather than on the relative value of inputs to production (distributive justice).  This puts charity and justice into conflict, which is the last thing we need.

In our opinion, there is no real problem per se with programs advocating redistribution to address extreme material needs.  We can agree with what is demanded, or (at least) the spirit behind it.  The problem as we see it — and it is a serious one — is in the belief that redistribution is somehow a solution to what appear to be overwhelming problems, not allowed expedients to address a dire emergency as a stopgap on the way to developing and implementing a solution.

As we see it, the world today is plagued with some fundamental differences on basic concepts, especially the rights of life, liberty, and property, the nature of the common good as institutional (not an aggregate of individual goods), humanity’s nature as what Aristotle called “a political animal,” the principles of economic justice, and social justice.  We can where people are trying to go with the demand for increased redistribution, and appreciate what they’re trying to do. The problem is they’ve locked themselves into a labor-centric and past savings view of the world, and somehow don’t see the importance of widespread capital ownership.

This is key, because Say’s Law of Markets is a statement of the application of justice in the market.  This “law” gives the fundamental principle of participation in the economy: you can’t consume what is not produced.

There are, therefore, only two ways to consume as a participant in the market (not as the object of charity, which is a separate issue).  Either you produce for your own consumption, or you produce to trade with others to obtain what they produced for your consumption.  Again, this is the functioning of the moral virtue of justice and an application of humanity’s natural right to liberty (freedom of association/contract).

In our opinion, all the talk about “the logic of gift” and “restoring the missing element to economics” by eliminating exchange and distributing everything on the basis of need (“from each according to his ability, to each according to his needs,” as Karl Marx put it in his Critique of the Gotha Program, 1875), are efforts to restore the functioning of Say’s Law without taking into consideration the fact that both labor and capital are productive.

The “gift” approach also implicitly rejects Say's Law based on justice. It ignores the fact that the only way for Say’s Law to operate justly for the benefit of everyone is to ensure that everyone has an equal opportunity and means to own and produce with both labor and capital, not the equal opportunity to stand in line with your hand out.

Relying on charity or "gift" to run an economy and ignoring or rejecting justice is like trying to power your automobile by hitching a horse to it, and ignoring the fact that an automobile was designed to be powered by gasoline.  Yes, it will work for a while, perhaps even a long while, but it will never operate to your or anyone else’s optimal advantage, or as efficiently as it was designed to operate if you insist on using genuine horsepower in front of, instead of under the hood.

It passes by most commentators on Say’s Law, but Jean-Baptiste Say implied that if you want an economy to be in equilibrium, you must ensure that whoever wants to consume must also produce “by means of their labor, capital, and land.”  We combine land and other capital as “capital,” that is, the non-human factors of production, but that’s not the point here.

This point is Say assumed that for his “law” to function, everyone has to own, and own directly, what is productive.  As technology (capital) advances and becomes hyper-productive relative to human labor, it becomes essential that everyone own enough capital to produce a sufficiency for consumption, either directly, or to exchange for what others produce.

Viewing redistribution as the solution to the world’s growing problems attempts to bypass fundamental principles of justice and implement results directly.  This contradicts the laws and characteristics of social justice, the goal of which is to reform our institutions to provide the environment within which people can obtain desired results by their own efforts, not as an imposition from above.  The demand for redistribution as the solution confuses what is allowed as an expedient in an emergency (redistribution in many forms), with the solution: restructuring the social order so that every child, woman, and man can become productive and meet his or her own needs by his or her own efforts.



Baseball Billy said...

Michael, You say all the talk of logic of gift by distributing based on need are efforts to "restore the functioning of Say’s Law without taking into consideration the fact that both labor and capital are productive." Then, you say, "The “gift” approach also implicitly assumes that the only way for Say’s Law to operate justly for the benefit of everyone is to ensure that everyone has an equal opportunity and means to own and produce with both labor and capital." Seems we have contradictory statements here.

Michael D. Greaney said...

You're right. I thought I corrected that. I'll do it now. As I recall, I got caught in the middle of an edit by a phone call or something.

Michael D. Greaney said...

Time warp problem. I did correct it. I didn't see the time stamp on your comment.