THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Wednesday, February 17, 2010

The Restoration of Property, Part III: The Second Pillar

A basic tenet of the Just Third Way is that the free market is the best means for determining just wages, just profits, and just prices. The free market is in many respects a natural extension of, and a complement to the rights of private property, the free enjoyment of which is a necessary corollary to ownership itself. As William Cobbett, the "Apostle of Distributism" explained,
Freedom is not an empty sound; it is not an abstract idea; it is not a thing that nobody can feel. It means, — and it means nothing else, — the full and quiet enjoyment of your own property. If you have not this, if this be not well secured to you, you may call yourself what you will, but you are a slave. (A History of the Protestant Reformation in England and Ireland, 1827, §456.)
(Distributism is the somewhat misleading term for the system of widespread direct ownership of the means of production that Belloc and his confrere, G. K. Chesterton, advocated.) Thus, the free market is simply the power in aggregate of people doing what they will with what they own, constrained by the bounds of common sense and justice. In the ordinary course of events, the free market is a concrete, and possibly the most important daily manifestation of human liberty. Another term for liberty is the natural right of free association, a fundamental law of social justice and thus one of the foundation stones of human dignity.

From what we read in the previous posting in this series regarding the laws and characteristics of social justice, it should be glaringly obvious that "free association," especially in the marketplace, does not mean laissez faire, or doing whatever you want when you want to do it with no restraint from any quarter, regardless of the consequences. Very much the contrary — liberty implies action within a just social order. This in turn implies a strong juridical order to maintain that social order within tolerable limits. As the great German jurist Heinrich Rommen (a student of Rev. Heinrich Pesch, S.J.) explained,
The foundation of law is justice. "Truth grants or refuses the highest crown to the products of positive legislation, and they draw from truth their true moral force" (Franz Brentano). But truth is conformity with reality. And just as the real and the true are one, so too the true and the just are ultimately one. Veritas facit legem ["truth makes law"]. And in this profound sense of the unity of truth and justice the words, "And the truth shall make you free," are applicable to the community of men under law. True freedom consists in being bound by justice. (Heinrich Rommen, The Natural Law. Indianapolis, Indiana: Liberty Fund, Inc., 1998, 236-237.)
Understood in this way, the free market is the antithesis of capitalism as well as socialism. Under both capitalism and socialism, significant barriers are raised against ordinary people becoming owners of the means of production. In socialism these barriers are legal, and private property is abolished outright. In capitalism, institutional barriers and even implicit assumptions about money and credit — the most common means of acquiring and possessing private property — (most of which assumptions are distorted or just plain wrong) erect barriers that prevent the great majority of people from becoming owners.

The first — and last — thing always to remember about money is that, to be legitimate and serve the purpose for which it is intended, "money" must always — always — be directly backed by a private property interest in the present value of existing inventories of wealth (marketable goods and services) or the present value of an anticipated future stream of income generated by the production (and sale) of marketable goods and services. Money is directly backed by the present value of existing or future production only through the link provided by the institution of private property.

An indirect link between money and production, or (worse) no link at all, is a form of theft — a violation of private property — on the part of whoever issues the currency or creates the money. To be legitimate and fill its proper role, money is necessarily linked to production. In modern terms, "money" is a derivative of production, and is a fraud (a "fictitious bill") unless the issuer of the money has a direct private property stake in the production that backs the money.

The end result in either capitalism or socialism, however, is the same: the establishment of the Servile State. The great mass of people becomes economically dependent on a private or State elite that illegitimately takes over private property by controlling money and credit. The elite does this by preventing people from becoming productive, or by controlling the means and the manner in which people can produce. Whether the State elite controls the private elite that controls the means of production (as in socialism), or whether the private elite that controls the means of production controls the State elite (as in capitalism), becomes a matter of complete indifference to anyone who subsists on wages or welfare alone, as long as the income keeps coming, and as long as the spirit of liberty has been sufficiently quelled in the human heart.

The problem in a technologically advanced economy such as the world now for the most part enjoys, is that the system will eventually break down unless the great mass of people become direct owners of the means of production. When the production of most marketable goods and services is due not to human labor, but to machinery, a well-ordered system absolutely requires that people have access to the means of acquiring and possessing private property in the non-human means of production, as formerly they enjoyed natural access to the direct ownership of their own labor.

Of course, everyone is aware that in the past, when human labor was the primary means of production, there were always attempts to prevent people from enjoying the full fruits of their natural ownership of labor, just as today there are continuing efforts to keep people from becoming owners of technology. Preventing people from enjoying the fruits of ownership of their own labor is called "slavery." Preventing people from becoming owners of the non-human factors of production is called "wage slavery," or "the wage system."

Not that there is much difference in the justifications used for the two systems. For example, as David Christy explained in his appalling justification of chattel slavery published on the eve of the American Civil War, Cotton is King (1855), the economic health of Anglo-American civilization, that is, the British Empire and the United States, was presumed to rely absolutely on the slave cultivation of cotton and other agricultural products needed to supply the mills of Manchester and the factories of the northeastern United States. By no other means could the wealth and power of Anglo-American civilization be preserved — or so Christy took as his basic premise.

Further, Christy claimed that black slaves were fitted by nature to fill no other role, living in utter barbarism in their home continent until brought to America as slaves and raised as far as their nature permitted. The observed behavior of free blacks presumably proved them incapable of the sustained effort necessary to succeed in being productive because they could not be forced to work. Whites were not physically suited to the cultivation of cotton, coming from the temperate climate of Europe, while blacks were especially designed by nature to be guided by whites and put to work in a climate that most closely matched that of their native land.

And so on — all argued with sincerity and supported by a great mass of statistical data that was very effective in convincing a great many people, then and now, of the truth of the assertions. The logical flaws in Christy's argument are obvious to anyone familiar with the Aristotelian/Thomist basis of binary economics, but remain hidden to those who take as a given the same assumptions as Christy about human nature as well as money and credit that afflict us today. Christy's argument was persuasive enough to provide a presumably sound economic argument for succession of the southern states when they feared that abolition of slavery would be mandated with the election of Abraham Lincoln. Cotton is King was quoted at length in Congress and in the press in debates about slavery.

Tellingly, the arguments in favor of chattel slavery do not differ substantially from the arguments advanced in favor of the concentrated ownership of the means of production that characterizes industrial capitalism and socialism. The main difference is in the factor of production being monopolized. In the chattel slavery system, ownership of human labor is separated from the slave and vested in a master. In capitalism, ownership of technology is separated from the worker and vested in the capitalist. In socialism, ownership of both technology and labor is separated from the worker and vested in the State.

Just as David Christy provided the economic argument to support chattel slavery, John Maynard Keynes provided (or at least congealed into an unquestioned dogma) the economic argument to support the Servile State of capitalism and socialism, that is, wage and welfare slavery. These arguments are well known to anyone who has ever read the book that made Keynes's reputation, The Economic Consequences of the Peace (1919), or the Keynesian "bible," The General Theory of Employment, Interest, and Money (1936). The most important Keynesian dogma, established solidly on the wrong definition of money, is found in The Economic Consequences of the Peace, and calls forcibly to mind a similar claim by David Christy with respect to slavery:
The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably. (The Economic Consequences of the Peace, Chapter 2, Section III.)
Examined objectively of course, the reasons given why a presumably economically healthy society requires chattel slavery, capitalism, or socialism all have one thing in common. They all share the same assumption that ownership of the means of production must be concentrated if the economic health of society is to be maintained. And why must ownership of the means of production be concentrated rather than "divided equitably"? Because capital formation can, presumably, only be financed out of existing accumulations of savings, and only the rich (and the richer, the better, to maximize economic and social progress) have the ability to cut consumption and save. Ownership of the means of production must be concentrated and private property in the means of production effectively abolished in order to justify limited redistribution of the fruits of ownership to non-owners.

Everything in Keynesian economics flows from this assumption. To understand this, we need only realize that this Keynesian dogma is, broken down to its essential elements, 1) the belief that capital formation cannot be financed except out of existing accumulations of savings, 2) that "savings" consists exclusively of unconsumed production, 3) that "money" is solely determined and created by the State, and 4) no economic activity can be carried out except that which is directly sanctioned by the State. (See Thomas Hobbes, Leviathan, II.22.)

Capitalism (and, more obviously, socialism and slavery) is therefore as far from being a "free market" as it is possible to get and still delude yourself that capitalism and the free market are the same thing. The main difference between capitalism and socialism with respect to the free market is that, where capitalism claims that a free market is good (at least for a few), perhaps even the greatest thing that exists, its adherents recognize that a few socialist expedients may be necessary to keep people quiet. For its part, socialism claims the free market is evil, although a few capitalist expedients may be necessary (to be enjoyed, of course, only by a few) to keep the economy running.

Once capitalism and socialism meet on the common ground of the Servile State, however, we readily understand why, 1) a free market is so essential to basic human dignity, and 2) equating capitalism and the free market, or claiming that "free market reforms" make socialism less unjust is simply a way of fooling ourselves. Then there is the fact that adherence to such unthinking dogma simply obscures the real problem with the free market — which is that the so-called free market is anything but free when the great mass of people lack access to the means of acquiring and possessing private property in the means of production. Until and unless that criterion is met, no economy can be called truly free.

Ownership of at least a moderate stake of income-generating assets is essential not only as the chief support of individual human dignity and a democratic political order, but to equalize the condition and bargaining position of participants in the marketplace. Alexis de Tocqueville made this strikingly clear in his monumental sociological study of the United States during the Jacksonian era, Democracy in America (1835, 1840). As de Tocqueville related in a passage of which most people fail to realize the significance,
In democratic countries as well as elsewhere most of the branches of productive industry are carried on at a small cost by men little removed by their wealth or education above the level those whom they employ. These manufacturing speculators are extremely numerous; their interests differ; they cannot therefore easily concert or combine their exertions. On the other hand, the workmen have always some sure resources which enable them to refuse to work when they cannot get what they conceive to be the fair price of their labor. In the constant struggle for wages that is going on between these two classes, their strength is divided and success alternates from one to the other.

It is even probable that in the end the interest of the working class will prevail, for the high wages which they have already obtained make them every day less dependent on their masters, and as they grow more independent, they have greater facilities for obtaining a further increase of wages.

I shall take for example that branch of productive industry which is still at the present day the most generally followed in France and in almost all the countries of the world, the cultivation of the soil. In France most of those who labor for hire in agriculture are themselves owners of certain plots of ground, which just enable them to subsist without working for anyone else. When these laborers come to offer their services to a neighboring landowner or farmer, if he refuses them a certain rate of wages they retire to their own small property and await another opportunity. ("Influence of Democracy on Wages," Democracy in America, Volume II.)
Arguing an unsuspected familiarity with de Tocqueville's work, in this passage we can discern concepts that Pope Pius XI seems to have lifted wholesale and inserted into Quadragesimo Anno ("On the Restructuring of the Social Order"), 1931, notably paragraphs 59-63. More to the point, however, we find affirmation of Belloc's (and Cobbett's) principle that the Servile State consists not in the formal institution of slavery, but in the powerlessness and consequent dependent status that afflicts those who own nothing.

The Servile State consists principally of removing the free choice whether or not to work by making subsistence completely dependent on wage or welfare income. Clearly, then (just as Cobbett claimed) true slavery consists of the inability to enjoy the fruits of ownership of the means of production. In contrast, the free market consists of a marketplace in which everyone not only has the right to participate freely as consumers and producers, by means of both their labor and their capital, but also has the means to exercise that right in a meaningful fashion, that is, freely.