In last week’s posting on this subject, we briefly answered four questions posed by a professor about distributism and the Just Third Way of Economic Personalism: 1) What lead you to become a proponent of this economic system in the first place? 2) What are a few of the most important principles of this economic system? 3) What do you see as the major advantages of this system? 4) What are the major challenges?
We answered these questions briefly last week. This week we will have a more in-depth comparison of the Just Third Way of Economic Personalism and distributism (or localism), both of which share a common core vision. That is widespread ownership of productive property as the foundation of economic justice and human dignity. CESJ’s book, The Restoration of Property, is a deliberate contrast to Belloc’s distributist work with a similar title (An Essay on the Restoration of Property, 1936), and CESJ acknowledges Chesterton and Belloc among their intellectual influences.
Both reject the false choice between monopolistic capitalism (concentrated ownership) and socialism (state ownership). Instead, each advocates a “third way” based on:
· Widespread private property ownership,
· Family-centered economics,
· Subsidiarity and local control, and
· Human dignity as the starting point.
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| G.K. Chesterton |
There are, however, some key differences. Primarily — and probably most importantly —the Just Third Way of Economic Personalism uses an advanced (and complete) understanding of money. Distributism, however, was and remains trapped within what Kelso called the slavery of past savings.
That means where in the Just Third Way of Economic Personalism anyone with a financially feasible capital project (i.e., one that has the potential to pay for itself out its own future production) can own that capital, in distributism non-owners can only become owners if existing owners permit it or are forced to do so.
This is because if you include the present value of future production — “future savings” — in your understanding of wealth, money, and investment, non-owners can become owners by gaining access to new money created out of future savings. Existing owners give up nothing except for a monopoly over future ownership — which is not legitimately theirs in the first place.
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| Hilaire Belloc |
True, few if any existing capital owners are willing to cut non-owners in on ownership, existing or future. This makes sense in the past savings paradigm. This is because if you think wealth, money, and investment consists exclusively of existing production, the only way non-owners can become owners is to take ownership from current owners. Not acknowledging future savings, people trapped in the past savings paradigm necessarily assume that if someone else becomes a capital owner, it is only at the expense of the currently wealthy.
That is why, although Belloc provided an otherwise insightful analysis of the situation resulting from lack of widespread ownership of capital, he was trapped by his assumption that all wealth, money, and investment consist exclusively of existing production. The best Belloc could do within this limited financial paradigm was to recommend burdening the rich with regulations to prevent them from blocking capital acquisition by others and to make it more difficult for the rich to acquire more.
In other words, Belloc advocated turning the usual class structure based on wealth on its head. Instead of the wealthy capital owners being on top, controlling and dictating to non-rich, non-owners of capital, Belloc would have the non-rich, non-owners of capital controlling and dictating to the wealthy capital owners.
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| Louis O. Kelso |
This is not social justice or a genuine restructuring of the social order. Instead, it is a mere replacement of the powers-that-be; the essential injustice remains and even increases both in degree and in kind. That is why adherents of the Just Third Way of Economic Personalism claim distributism:
· Is concerned with breaking up existing accumulations of wealth,
· Is focused on redistributing existing wealth, and
· Lacks a comprehensive and equitable mechanism for creating new ownership through future economic growth.
In contrast, the Just Third Way of Economic Personalism proposes removing systemic barriers through acts of social justice targeting:
· Monetary and credit systems. The commercial/mercantile banking system backed up with the central bank and using capital credit insurance in lieu of traditional forms of collateral should enable non-owners to become capital owners.
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| Adam Smith |
· Tax systems. In accordance with Adam Smith’s principles of a just tax (Equity, Neutrality, Certainty, and Economy), tax policy should not only be fair (the rich pay more because they have more), coherent (ordinary people can understand it), consistent (it is the same for everyone), and efficient (should be economical to collect), the Just Third Way of Economic Personalism insists the tax system should also encourage instead of discouraging broad-based ownership of capital.
· Corporate finance. Primarily this involves adopting the Economic Democracy Act and funding capital acquisition through broad-based offerings of qualified equity shares. It can also include the use of co-ops, Employee Stock Ownership Plans (ESOPs), and similar vehicles.
· Binary economics. Where distributism is trapped in the past savings paradigm and “one-factor” labor thinking in many instances (i.e., only human labor is truly productive), the Just Third Way of Economic Personalism recognizes — and indeed relies on “two-factor” thinking in its basic assumptions, viz., production is the result of both labor and capital, production (ideally) equals consumption, savings result from both past cuts in consumption and future increases in production, and other aspects as well (human beings are both individual and social — “political” — money and production necessarily go together, and others we can’t think of at the moment).
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| Mortimer J. Adler |
What is the bottom line here? Perhaps most simply put, distributism asks, “How do we distribute existing property more fairly?” (Not “redistribute.” Chesterton was quite emphatic on that point — although many people even today claim there is no difference.) In contrast, the Just Third Way of Economic Personalism asks, “How do we enable everyone to acquire new productive capital through future savings generated by the capital itself?”
By the lights of the Just Third Way of Economic Personalism, distributism pays little if any attention to the potential of the modern corporation. Distributism also fails to integrate an understanding of the money- and credit-creating powers of commercial/mercantile banks backed up by central banks. If used properly, commercial and central banking have the potential to accelerate growth and spread out ownership of newly added and transferred capital on credit repayable with the earnings of the capital itself.
In short, the Just Third Way of Economic Personalism provides an operational blueprint distributism lacks. Specific mechanisms like the Economic Democracy Act have the potential to harness modern financial tools to achieve distributist goals without confiscation or forced redistribution.
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