Monday, January 23, 2017

The Problem of Wealth, III: The Fabian Failure

Last Thursday we gave a summary of the capitalist solution to global poverty . . . which bears a striking resemblance to the socialist solution.  Both bear a striking resemblance to what Hilaire  Belloc called the Servile State in his 1912 book with that title.
(We also mentioned that the World Economics Forum would conclude its business on Friday and recommend job creation and training to establish and maintain its brand of “ethical capitalism.”  We were close: its recommendation was for governments to create money . . . to finance job creation and training . . . More on that in a later posting.)
G.B. Shaw, Fabian socialist, friend of Keynes, advocate of "full employment."
Belloc's book was written to counter the Fabian socialist demand that wage labor should constitute the only legitimate source of income, and “full employment” be embedded in law as national policy.  In The Servile State Belloc described what he saw happening as industrial capitalism became increasingly socialized under the Fabian onslaught in the early twentieth century.
In lieu of Fabian socialism — which, as George Bernard Shaw admitted, tended to be whatever you wanted it to be — Belloc and G.K. Chesterton advocated “distributism.”  To counter the Fabian idea of attaining a heaven in this life through simple living, pacifism, and vegetarianism, the Chesterbelloc (as Shaw referred to the duo) suggested a policy of widespread capital ownership, with a preference for small, family owned farms and businesses.
Belloc and Chesterton: full ownership, not full employment.
Distributism was not intended to make a heaven in this life, but to provide an environment within which to prepare one’s self for the real heaven in the next life.  That’s why Chesterton and Belloc insisted on preferences rather than the Fabian mandates.  To a socialist, there is only one way to create a heaven in this life: his way.
To a distributist (or anyone who accepts the assumptions behind distributism), there are as many ways to heaven as there are people, for each one applies truth in a different way than anyone else.  That is fine as long as the different applications don’t get away from the fundamental principles of truth.
That is why Chesterton could treat with amused toleration those crazy (to him) people who like machinery and technology.  Let them have their big factories and industries . . . as long as the workers owned them.  Just include him, and anyone who doesn’t care for that sort of thing, out.  That’s also why people like Fabian-turned-guild-socialist-then-fascist Arthur Penty demanded that machinery be abolished.  People had to be forced to do what he believed right.
No, Fabian socialism and distributism are not the same.
Right away a number of problems cropped up, however.  Because distributism was developed as an alternative to Fabian socialism, Chesterton and Belloc naturally made outreach to Fabians a priority.  Chesterton even wrote an introduction to one of Penty’s books.  It is, frankly, one of the most remarkable things Chesterton ever wrote in that for once he managed to avoid saying anything.
Unfortunately, because the goals of Fabian socialism and distributism appeared in many respects to be similar, if not the same, many people — including Shaw — thought they were the same.  That has continued down to the present day.
Another problem, and at least as serious, was Chesterton’s and Belloc’s (mis)understanding of money, credit, banking, and finance.  While it is understandable, their grasp of the subject was dictated by adherence to the Currency Principle, conscious or not.  This meant that they assumed as a given that the only way to finance new capital formation is to consume less than you produce; that the sole source of savings is past reductions in consumption.
This means that ownership of new capital is, as a rule, a monopoly of whoever has the ability to save.  As technology advances and becomes increasingly expensive, the rich tend to become richer, and the poor tend to become poorer.  Is this, however, because the rich are greedy and refuse to share what their capital produces with others?
While it may seem counterintuitive, the answer is “no.”  The rich are not any greedier as a group than other people, however much they have better and more opportunities to indulge that vice.  As we saw earlier, simply redistributing what the rich have in the way of marketable goods and services really wouldn’t solve the problem of global poverty.  Even the rich don’t have that much money.
Hopping a freight to find work.
So what makes the rich, rich, and keeps the poor, poor?  Not income.  Instead, it’s the ability to generate income.
If you only own labor, you can only own what labor produces.  If you own capital, however, you can own what capital produces, as well as labor.
When the productive capacity of capital so far outstrips the productive capacity of labor as to make the production of labor negligible, the rich will become super-rich, and the poor will be completely dependent on redistribution.  The goal of politics, pointed out as early as 1937 by the solidarist labor economist Goetz Briefs, becomes to redistribute just enough wealth to keep demand up by enabling labor owners to consume without taking away the incentive of capital owners to produce.
By now you might already see what became obvious to Louis O. Kelso when he followed the train of thought that began when he saw the unemployed riding the rails during the Great Depression of the 1930s.  That is, if what you own determines your income level, doesn’t it make sense that if capital is producing the bulk of marketable goods and services, then everyone should own capital as well as labor?
The problem becomes how to do that — which is what we’ll look at tomorrow.

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