A fundamental assumption of both capitalism and socialism is that ownership of capital must be confined to an élite, whether private as in capitalism, or public as in socialism. The necessary corollary to the concentration of capital ownership in the hands of the few is the shackling of the many to the wage and welfare system.
|Smith: the purpose of production is consumption.|
As we saw in the previous posting in this series, such measures as the living wage, welfare, redistribution, etc., are essential at times as expedients, but are not solutions to the problems of a modern industrialized economy. We need not concern ourselves with the myth of the so-called “service economy” that allegedly follows a “post-industrial economy” — a discussion for another day. Human labor is being displaced by non-human capital, and that is the bottom line.
The brutal fact of life is that advancing technology as an integrated aspect of economic life as became the case with the Industrial Revolution necessarily results in the replacement of human labor with productive technology . . . and the alienation of the average person from what was formerly the primary source of income: selling labor for productive purposes. Combined with a reliance on “past savings” to finance new capital formation, advancing technology sets up a “paradox of production.”
If ownership of advancing technology is concentrated for whatever reason and in whatever manner — whether capitalism or socialism — increases in production resulting from employing technology result in less production per worker. “Productivity” may increase, i.e., the number of labor hours required to produce a given amount of output decreases, but that only means the burden of production is shifting from labor to capital.
Ignore for the sake of the argument the charity essential to completing justice to ensure a living wage when labor is the only source of income and technology is advancing. That is, in fact, what the extreme capitalists do when they insist on the letter of justice without the charity John Paul I called its “soul” or completion.
|Briefs: a challenge to civilization.|
In strict (commutative) justice, labor receives only what it is due as an input to production. At the same time, everything else being equal, increases in productive output due to advances in technology necessarily mean a decrease in demand, and thus less of a need for the increased production.
To correct for this and provide for the subsistence of people who are unable to be productive due to their displacement by technology, capitalists or (increasingly) government must shoulder the burden of redistribution of existing wealth. What the solidarist labor economist Goetz Briefs called “a challenge to western civilization” (Goetz A. Briefs, The Proletariat: A Challenge to Western Civilization. New York: McGraw-Hill, 1937) — providing for people’s needs when they do not own capital and cannot employ their labor — transforms from the means of enjoying “the good life” of virtue, to the sole goal of human existence. Envy grows and conflict increases as people look to existing wealth as the only source of both subsistence and new capital formation.
In this way the means for attaining a life of virtue becomes transformed into an end in itself. This justifies material wellbeing achieved by any means necessary — the credo of the New Christianity/Neo-Catholicism. That which belongs to the owners of capital must be redistributed to non-owners, nullifying the natural right to be an owner. Unproductive behavior becomes favored over productive behavior and rewarded. Owners and non-owners begin seeing each other almost as members of different species.
|Pius XI: a despotic economic dictatorship.|
As a result, some capitalists then justify their possession of wealth as due to some inherent characteristic or talent they have that others lack, such as entrepreneurship, breeding, or some such thing. At the same time, it is astonishing how often people who have been raised wealthy have no clue how to take care of themselves, much less the wealth that maintains them in their presumably exalted condition — hardly proof of innate superiority.
In consequence, managers, stewards, servants, and other hirelings do not merely assist the wealthy in many cases, they run the lives of their ostensible employers — and everything else. As Pius XI noted,
In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure. (Quadragesimo Anno, § 105.)
We can reasonably conclude that those who condemn the wealthy for being evil or indifferent are in many instances completely off-base. Many of the wealthy who inherited what they have are ignorant of daily life, not vicious or evil, although the results of evil or ignorance are often indistinguishable.
|Hemingway: the rich are different because they have money.|
Just as one of the underlying problems of socialism is that it makes people less than human by taking away natural rights and vesting them in the collective, the underlying evil of capitalism is that it isolates the wealthy and removes them from the society of the rest of humanity, thereby inhibiting or preventing natural solidarity from developing. “The rich are different,” said F. Scott Fitzgerald, to which Ernest Hemingway apocryphally replied, “Yes, they have more money” — and, like Ebenezer Scrooge, they use it to insulate themselves from others.
In contrast, when productive capital was primarily in the form of land, the number of the wealthy was necessarily limited, and they were in a sense forced to mingle with others less well off. You cannot separate the owner of land from those who work the land and expect things to go well; an absentee landlord is necessarily a bad landlord, as Ireland was plagued with for centuries.
|Dickens: Scrooge honest but isolated.|
Scrooge, however, a financier dealing in monetary contracts representing existing inventories or capital instruments and not involving human beings, was a good businessman, and strictly honest. This was a point Charles Dickens stressed in the very opening of the story and a number of times thereafter: “And Scrooge’s name was good upon ’Change, for anything he chose to put his hand to.” In other words, if Scrooge indorsed something, it was money in the bank.
Scrooge failed to take into account, however, that in the greater scheme of things, mankind was his business. Separate technology from people by concentrating ownership, and you naturally separate non-owners from owners, as John Paul I explained in his letter to Charles Dickens (Luciani, Illustrissimi, op. cit., 4-5).
This results in another paradox. With the Industrial Revolution that separated labor and production by shifting the latter to technology and concentrating ownership of that technology in fewer and fewer hands, the number of the wealthy greatly increased, and the natural limit on wealth imposed by land disappeared. Yet, while there were more wealthy people in aggregate in the industrializing countries, they began disappearing from daily life, and started forming not merely a separate class, but their own exclusive society, even economy, entirely separate from that of the rest of humanity.
|Leo XIII: income is immediate, but ownership is important.|
And the one thing that separated workers from owners more than anything else was the wage system. That is why in Rerum Novarum Leo XIII always put the question of wages in the context of capital ownership — always. To characterize Rerum Novarum as the encyclical that legitimated the living wage, while in a sense accurate, is to misunderstand the pope’s point to an astonishing degree.
Yes, it is critically important that a just wage be paid, and that workers and employers be free to enter into such contracts as meet the demands of strict justice. At the same time, it is often necessary (increasingly so as technology advances and drives down the value of labor relative to capital) to complete justice with charity. As Leo XIII observed,
Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner. (Rerum Novarum, § 45.)
Largely through the efforts of socialists and others with an interested motive in maintaining the wage system, the reference to “a dictate of natural justice” has been interpreted as redefining distributive justice to mean distribution on the basis of need. This has caused serious problems, beginning with twisting the meaning of the qualification that “wages ought not to be insufficient, etc. (emphasis added). Justice qua justice, whether commutative or distributive, is more severe; the wording would have been must not, not ought not if the referenced virtue was mere justice.
“Natural justice,” then, is not to be limited to the classical virtue of justice, just as Leo XIII implied by referring to natural justice superseding “any bargain between man and man,” i.e., strict (commutative) justice or distributive justice. Given that caveat, “natural justice” is — and can only be — justice fulfilled and completed by charity. Lest there be any doubt, Pope Pius XI made this explicit in Quadragesimo Anno, his encyclical on the fortieth anniversary of Rerum Novarum. As he explained,
To avoid the reefs of individualism and collectivism. the twofold character, that is individual and social, both of capital or ownership and of work or labor must be given due and rightful weight. Relations of one to the other must be made to conform to the laws of strictest justice — commutative justice, as it is called — with the support, however, of Christian charity. (Quadragesimo Anno, § 110; cf. § 125.)
|John Paul I: Charity is the soul of justice.|
In other words, as Pius XI noted (ibid., § 88), and John Paul I reiterated (General Audience, 09/06/1978), charity is the soul of justice. Just as the soul can no more do without the body than the body can do without the soul, charity imposed without fulfilling the demands of justice as the socialists demand is itself an injustice, while justice without charity as the capitalists insist is a mockery.
Can we conclude, then, that justice is fulfilled when employers pay workers a living wage?
By no means. To make that inference is to miss the point of the entire encyclical. Leo XIII’s idea was not to promote either socialism or capitalism. Both of these rely on maintaining the wage system, the common ground on which the seemingly irreconcilable antagonists meet, like the farmers and the pigs in George Orwell’s Animal Farm, or the State bureaucrats and the capitalist élite in Hilaire Belloc’s The Servile State (1912).
It is therefore important to note that immediately after stating that relations between employers and workers must partake of justice fulfilled and completed by charity in order that the propertyless worker receive enough to meet his needs, Leo XIII made it clear what he considered the principal economic and social need of those whose income came exclusively from selling their labor. As he declared, making explicit the whole object of his encyclical,
If a workman's wages be sufficient to enable him comfortably to support himself, his wife, and his children, he will find it easy, if he be a sensible man, to practice thrift, and he will not fail, by cutting down expenses, to put by some little savings and thus secure a modest source of income. Nature itself would urge him to this. We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners. (Rerum Novarum, § 46.)
Thus, the immediate end of gaining an adequate wage income and increased benefits — the traditional goal of labor relations — is subordinate to the mediate end of as many people as possible becoming owners. Does that, however, release employers from the responsibility in justice and charity from paying a living wage, given the belief that it is impossible for workers or anyone else to save enough money to purchase a sufficient capital stake?
Of course not. The urgent almost always takes precedence over the important. It does, however, lead to an uncomfortable conclusion for the ethical capitalist who knows that he can only raise prices so far to cover increased costs of labor without losing his market, and not being able to pay any wages at all.
There is, however, a solution — but not if people remain fixated on the living wage or any other similar measure as an end in itself. We will look at one possibility in the next posting in this series.#30#