Short Summary on Subsidiarity and Distributivism

I agree with the majority of this article, I am a bit stumped about the wage issue-who sets it if not the employer/employee? Surely not Govt, that is most known as a imcompetant thief. I have contacted this author in the past and will try to get ahold of him, ask him and updated down the road: (Pic to left is Pope Leo XIII)

Power to the People" Can Only Mean Property to the People
January 2000
By John C. Medaille
John C. Médaille is a realtor in Irving, Texas, a former city councilman, and a perennial student of theology at the University of Dallas.

“It is unacceptable to say that the defeat of ‘Real Socialism’ leaves capitalism as the only mode of economic organization.” -Pope John Paul II, Centesimus Annus

“Power naturally and necessarily follows property.” -Daniel Webster, address to the Massachusetts Convention, 1820

What are our economic options? Must we have either capitalism or socialism? Socialism’s obvious failures (Russia) and putative successes (China) have been brutally oppressive, while capitalism’s dubious results (a consumerist culture, ubiquitous advertising, wage-slavery, corporate conglomeration, practical monopoly) confront us daily in America. Are these the only alternatives?

On this subject the Catholic Church has great wisdom to offer. For more than a century the popes have shown themselves to be astute analysts of socialism and capitalism, and John Paul II has brought the papal critique to an unprecedented pitch of incisiveness. Both economic systems, he has written, are “in need of radical correction…. This is one of the reasons why the Church’s social doctrine adopts a critical attitude towards both liberal capitalism and Marxist collectivism” (Sollicitudo Rei Socialis, hereinafter SRS).

A radical correction means, of course, correction at the root. And John Paul in his encyclicals on economics and society has exposed the root error of both socialism and capitalism. Both are fundamentally materialist. Thus both fail to recognize man’s full nature. Though different in practice, capitalism and socialism share underlying philosophical assumptions that operate to reduce man to a cog of an economic system. They tend to absolutize economic life. In so doing they marginalize man’s spiritual and religious dimension either by openly persecuting it (as socialism does) or by treating it as a private matter deserving of no place in the public sphere (as capitalism does). Thus they not only thwart man’s spiritual freedom but also hamper his economic initiative and his achievement of his true economic vocation.

Since the American system is not socialist but capitalist, this article focuses on the Catholic argument against capitalism, primarily as made in the encyclicals of Leo XIII, Pius XI, and John Paul II. It then goes on to outline a corrective called Distributivism, a response first formulated by G.K. Chesterton and Hilaire Belloc, which is based on the realistic premise that power follows property.

The Catholic Critique of Capitalism Economism

For John Paul the faults of both systems are subsumed under the error of “economism” (see Laborem Exercens, hereinafter LE). The economistic view, whether socialist or capitalist, involves the divorce of the moral and ethical realms from the economic. But without moral guidance, economics oppresses man. In capitalism, says the Pope, oppression has happened as the “liberal socio-political system…in accordance with its ‘economistic’ premises, strengthened and safeguarded economic initiative by the possessors of capital alone,” while maintaining that “human work is solely an instrument of production, and that capital is the basis, efficient factor and purpose of production” (LE). In simple terms: To make the hammer almost everything and the man who wields it almost nothing is to reverse the right order of things. The Pope says, “Precisely this reversal of order, whatever the program or name under which it occurs, should rightly be called ‘capitalism’…” (LE). This reversal has at its root materialism.

Thus capital and labor are divorced and divided, abstracted into “impersonal forces” and “production factors.” With the worker reduced to a commodity and the pawn of blind economic laws, the spiritual realm is reduced to irrelevance (LE). This “practical” materialism leads to the theoretical materialism of the liberals and the dialectical materialism of the socialists, a state of affairs which leads inevitably to the depersonalization of society: “The individual today is often suffocated between two poles represented by the State and the marketplace. At times it seems as though he exists only as a producer and consumer of goods, or as an object of state administration” (Centesimus Annus, hereinafter CA).

Work as a “Commodity”

With man stripped of his religious nature and any institutional protection, capitalists “claimed all the products and profits, and left to the laborer the barest minimum necessary to repair his strength,…for by an inexorable economic law, it was held, all accumulation of riches must fall to the share of the wealthy….” So wrote Pius XI in 1931 in Quadragesimo Anno (hereinafter QA). Leo XIII’s 1891 encyclical Rerum Novarum (hereinafter RN) had noted that “it gradually came about that the present age handed over the workers, each alone and defenseless, to the inhumanity of employers and the unbridled greed of competitors.” Thus labor has become “a commodity to be freely bought and sold on the market, its price determined by the law of supply and demand” (CA).

Class Struggle

This sundering of capital and labor resulted in the “class struggle.” RN condemns the abuse of the working class and the avarice of employers, but Leo XIII is concerned that workers not be seduced by the violence inherent in the socialist notion of class struggle. In QA Pius XI is hopeful that class warfare “when it abstains from enmities and mutual hatred” will be converted into an honest discussion of differences. In CA, however, John Paul II not only acknowledges the class struggle as a right but also gives it a specific goal, namely, that it must be a struggle against “the absolute predominance of capital, the possession of the means of production and of the land, in contrast to the free and personal nature of human work.” Further, the object of the struggle cannot be “the socialist system, which in fact turns out to be state capitalism, but rather a society of free work and participation.”

Free Competition and Individualism

Condemned as well is that capitalism “which refuses even to consider these problems, in the a priori belief that any attempt to solve them is doomed to failure, and which blindly entrusts their solution to the free development of market forces” (CA). RN did not directly treat the question of the “free market,” but clearly exempted wages from its domination. QA noted that “the proper ordering of economic affairs cannot be left to free competition alone. From this source have proceeded in the past all the errors of the ‘Individualistic’ school.” Pius XI also notes the tendency of the free market to be succeeded by “economic domination,” because those who survive tend to be the most ruthless, “who pay least heed to conscience.” John Paul’s analysis acknowledges that the market “is the most efficient instrument for utilizing resources,” but he goes on to note that “this is true only for those needs which are ‘solvent,’ insofar as they are endowed with purchasing power, and for those resources that are ‘marketable,’ insofar as they are capable of obtaining a satisfactory price” (CA).

The Rights (and Wrongs) of Property

Key to the critique of economic systems is the Church’s position on property, a position rejected by both socialism and liberal capitalism. Despite the depth of the dispute between these two views, they are far closer to each other than either is to the Church, for both view private property as an absolute. Liberalism calls it an absolute good; socialism, with equal fervor, calls it an absolute evil. But the Church’s position is that private ownership, while necessary and even a “sacred” right (RN), is subordinate to the principle of the Universal Destination of Goods. This principle is that while earth is apportioned among private owners, those owners are merely God’s stewards. As the Catechism of the Catholic Church puts it, “The ownership of any property makes its holder a steward of Providence, with the task of making it fruitful and communicating its benefits to others….”

This principle resolves the capitalist-socialist dichotomy by uniting the use and ownership of property. Pope Pius noted the twin evils to be avoided: the “individualism” that denies the social aspect of ownership, and the “collectivism” that denies the private aspect. “To disregard these dangers would be to rush headlong into the quicksands of modernism” (QA). Pope John Paul condemns the “rigid capitalism” that “defends the exclusive right to private ownership of the means of production as an untouchable ‘dogma’ of economic life” (LE).

However, neither Leo nor Pius is willing to place the ownership of property in jeopardy on the basis of its improper use. While Pius does assign the state the duty of defining in detail the licit use of property for the common good, he forbids the state to seize property on account of its misuse. John Paul, by contrast, seems to make ownership itself dependent upon right use:

[Ownership] becomes illegitimate, however, when it is not utilized or when it serves to impede the work of others, in an effort to gain a profit which is not the result of the overall expansion of work and the wealth of society, but rather is the result of curbing them or of illicit exploitation, speculation or the breaking of solidarity among working people. Ownership of this kind has no justification, and represents an abuse in the sight of God and humanity (CA).

One must assume that an “abuse in the sight of humanity” could be addressed in the courts. Is this a radical departure from previous encyclicals? The differences may be more apparent than substantive. Both Leo and Pius are mainly concerned with protecting the property of the small holder on the one hand, and preventing a general seizure of property as a method of redress on the other. John Paul is more concerned with monopolistic and exploitative uses of specific properties.

The Just Distribution of Property

The Church’s position “radically diverges from the program of collectivism as proclaimed by Marxism,” and just as radically “differs from the program of capitalism practiced by liberalism and the political systems inspired by it” (LE). The Church’s view avoids the twin evils of collectivism, which denies the private character of property, and of individualism, which denies the common good. The Church’s critique of property, however, goes much deeper than the issue of ownership. The Church is guided by the principle of the Universal Destination of Goods, a principle that impels the Church to comment on the unjust distribution of property. That poor distribution is condemned as a “grave evil” (QA).

Summary

The above account of papal teaching is brief, but it should invite us as faithful children of Holy Mother Church to look hard at current economic systems and to appreciate the Church’s moral dissent from them. These systems (capitalism or socialism) begin with a practical materialism that elevates things over man or — worse — reduces man to a thing. Man’s labor is a commodity, to be bought at the lowest rates. Property is absolutized, and economic life becomes the sole focus of man’s being. Mere possession replaces firm purpose; “having” replaces “being” (SRS).

The Catholic Response to Capitalism

But what the Church supplies is not an “alternative” system, not a “Third Way.” Rather, she offers guidelines and standards which arise from the moral order. Holy Mother Church, like all good mothers, reminds her children of their duties. She tells us that our rooms are dirty, but she does not propose to clean them up herself. Like a good mother, she does not nag, but offers guidance: It is for the laity to act.

The guidance offered in her social teaching is extensive, but I will concentrate on just a few principles: The Primacy of Labor over Capital, the Just Wage, the Just Distribution of Property, and Subsidiarity. But before any reform of the economic system can be attempted there must be at the same time a reform of hearts, for the structures of sin must be met both on the structural level and within the human heart, wherein we find the origin of sin. Above all other things, the Church seeks to replace the “economism” noted by John Paul with things of real value. “For this to happen, it is not enough to draw on the surplus goods which in fact our world abundantly produces; it requires above all a change of lifestyles, of models of production and consumption, and of the established structures of power which today govern societies” (CA).

The Primacy of Labor Over Capital

The first principle to be established is the primacy of labor over capital. Capitalism calls capital the efficient cause of wealth and labor merely the instrumental cause, but the Church asserts the opposite. Leo XIII says, “It is only by the labor of workingmen that states grow rich” (RN). Leo is attempting to re-establish the proper symmetry between capital and labor, noting that while the one could not do without the other, the decisive factor is labor. This is reiterated by Pope Pius. In John Paul’s teaching, this idea is greatly enlarged: Labor is always the “primary efficient cause” and capital a “mere instrument” in the production of wealth (LE).

This is not merely an “economic” point; it is a spiritual one, for the primacy of labor represents “the primacy of man over things” (LE). And to make man primary is to refute materialism and economism. From this analysis, John Paul derives the criteria for judging an economic system: A system can be just only to the extent that it is in accord with “the principle of the substantial and real priority of labor, of the subjectivity of human labor and its effective participation in the whole production process, independent of the nature of the services provided by the worker” (LE).

The Just Wage

But if labor is primary, what is this to mean in actual practice? The answer is the just wage. But how are we to determine what constitutes a “just wage”? It is not up to the mere “free consent” of the parties, a point on which all the encyclicals agree. This arises from the fact that labor has a social function, namely, the support of families.

For a wage to be just, it must be sufficient to support a family. “The wage shall not be less than enough to support a worker who is thrifty and upright” (RN). This wage must also allow support of the family without requiring mothers to work outside the home (LE).However, the “family wage” is not an end in itself, for the just distribution of productive property still needs to be achieved. Hence, the wage must be sufficient so that the workingman, through his savings, can acquire property of his own (RN). This is the heart of papal policy: that “the propertyless wage-earner be placed in such circumstances that by skill and thrift he can acquire a certain moderate ownership” (QA).

Finally, it should be noted that the right to a just wage is emphatically not a mere pious wish. It is a requirement of objective morality, a requirement that cannot be subordinated to the “criterion of maximum profit.” The just wage “must constitute the adequate and fundamental criterion for shaping the whole economy” (LE).


(Pic is of Pope Pius XI)




The Just Distribution of Property

Throughout the encyclicals, the acquisition of property by the working class is the key to overcoming the divisions within society. This teaching finds its most complete expression in Laborem Exercens. After attacking the capitalist view that treats private property as an “untouchable dogma,” John Paul insists that the concept of ownership “should undergo a constructive revision both in theory and in practice.” What is this constructive revision? It is nothing less than the “socialization” of capital. In the Pope’s view, the only legitimate title to private goods “is that they should serve labor and thus by serving labor that they should make possible the achievement of the first principle of this order, namely the universal destination of goods and the right to common use of them.” The encyclical expands on this idea: “In the light of the above, the many proposals put forward by experts in Catholic social teaching and by the highest Magisterium of the Church take on special significance: proposals for joint ownership of the means of work, sharing by the workers in the management and/or profits of businesses, so-called shareholding by labor, etc.

”This is not to be confused with “collectivization,” which would merely transfer power from the owners to a group of managers. Rather, we can speak of socializing capital only when “on the basis of his work each person is fully entitled to consider himself a part owner of the great workbench at which he is working with everyone else.”

We might pause to catch our breath, for what John Paul has done is breathtaking. Whereas the strategy proposed by Leo and Pius is a gradual one, John Paul’s is radical. Whereas for the previous popes a just wage and the encouragement of thrift would lead to a gradual acquisition of property and so make the classes “neighbors to each other,” for this Pope the workers are to be included in the ownership of the workbench by virtue of being workers. Further, while the term socialization certainly doesn’t mean socialism (quite the opposite!) it is nonetheless a bold and provocative term for the Pope to use.

Subsidiarity

Subsidiarity is concerned with seeing that power is decentralized. Subsidiarity supports the idea that there should be various intermediary institutions, both public and private, that protect the individual by standing between him and the (national) state or powerful corporations. In all of the encyclicals, the most important aspect of subsidiarity (aside from a wider diffusion of property itself) is the union. RN mentions associations for mutual aid, agencies to care for the worker and his family in the event of accident, sickness, or death, and so on, but among all these, “associations of workers occupy first place.” In QA the “syndicate” or binding union (“union shop” in current parlance) becomes the key organization for achieving the social aims of the worker and society at large. In CA the primary responsibility for overseeing human rights and “welfare” belongs first to subsidiary organizations, and only partially to the state, and the key organization is the union.

Summary

This brief sketch reveals the outlines of papal strategy. In answer to the elevation of things over people and capital over labor, the popes advance the primacy of labor. With capital removed from its pre-eminent place, the Church calls for a wider distribution of property and hence a wider diffusion of power among the people.



(Pope John Paul II)

The Distributivist Response

While the Church’s teachings are not a program or a platform, this is not to suggest that they are unrealistic or impractical. On the contrary, they are impressive for their groundedness and forthrightness. But it is the role of the laity to make the Church’s teaching come alive in quotidian reality, to examine prudently the situation in which we find ourselves, and to devise strategies to implement the teachings. Distributivism originated early in this century mainly as a lay response to Rerum Novarum, and it continues to be inspired and guided by the teachings of the Roman Pontiffs.

Economic Subsidiarity

“Power follows property.” To put the proposition succinctly, Distributivists believe that the best way to spread the benefits of freedom and economic initiative is through small property. Distributivists fear, above all else, the concentration of power that is the inevitable consequence of the concentration of ownership. In the economic order, the just distribution of property is itself the major instrument of subsidiarity. With no one to control the market, free competition will thrive, and the economic talent and initiative of the people will be released. It is important at this point to clarify what is meant by a “free market.” Too often this term is taken to mean a market “free of unwanted government interference.” I say “unwanted,” because there is a great deal of government interference that established capitalists welcome and crave, such as subsidies, loan guarantees, protection from liability and lawsuits, and regulations that thwart potential competitors. It is not governments alone that can make markets un-free, but monopolies and oligarchies as well. A market is truly free if no buyer or seller can control the market. And the sign of this freedom is the diversity of the market; if there are no or few choices, we must assume a controlled market, a market that lacks freedom. Distributivism is against such market domination. The economic diversity implied by many small owners is the only real antidote to the economic domination of which Pius XI warned us.

Political Subsidiarity

We in America consider ourselves a democracy because we have the forms of democracy — elections, legislatures, political parties, etc. But consider: In the Roman Empire, elections were held, elections as bitterly contested and broadly debated, as any of ours. Yet no one will contend that the Empire was a democracy. Throughout the Communist period, all of the so-called people’s republics held elections, as they still do in China. Such forms hardly mask the fact that no real choices are involved. The reality of democracy can only be judged by the choices actually given to the people and by how closely those choices coincide with the traditions, customs, mores, and will of the people.

I think the “choices” represented in American democracy are similarly hollow. The analysis offered by Mary Ann Glendon in The End of Democracy is useful here: “It does not seem an exaggeration to say that we currently have a party of big business paying lip service to traditional moral values, and a party of big government paying lip service to the needs of working people and the poor. Even that distinction is collapsing as Democratic Party leaders cozy up to big business, and Republicans discover the joys of big government.

”How has this come about? I would argue that without subsidiarity, and particularly subsidiarity in the economic realm, real democracy is impossible. Power will follow money, and if the wealth is concentrated, power will be likewise. Consider, the average congressional campaign costs about $650,000 per candidate. The winner holds office for 730 days. Thus each and every day in office he must raise $867 (Sundays and holidays included). That’s $6,000 every week, over $25,000 every month. Note that this is the cost for an office that amounts to only 1/435 of 1/2 of 1/3 of one of the many levels of government that the American regime comprises. With concentration of economic power, there are limited sources of such large amounts of cash and all candidates must beg from the same sources. Is it surprising that, by and large, the candidates tend to say the same things? Political subsidiarity will be the natural outcome of economic subsidiarity. Further, without economic subsidiarity, politics can never be more than a sham for those too small to have their own powerful lobbies.

Implementing Economic Subsidiarity

In discussing the implementation of economic subsidiarity, two things need to be made clear. The first is that it is not utopian, and the second is that it must involve a revival of the sentiment for property. Concerning the first question, Distributivism is not a cure for poverty, ignorance, or bad luck: An equal distribution of wealth is not sought. Some will strike it rich, fools will gamble away fortunes, and the poor will be with us, as always. What is sought is to restore the institution of small property so that it becomes a distinguishing mark of our society and so that real power — economic, social, and political — is shifted to the lowest possible level.

Concerning the second point, we find a real bar to Distributivism. Mary Ann Glendon notes the problem:

Most Americans are highly dependent on big business and government: about a fifth of the labor force are public employees; a third work for the central core of large corporations (many under government contract or subsidy); the pensions of retirees are invested in the same corporations; recipients of governmental largesse include not only welfare clients, but a substantial fraction of the middle class (through government-insured loans, Medicare, and retirement income funded with general tax revenues). Most of these dependents have children or others who are in turn dependent on them.

In such a situation, reform is impossible without a reform in thinking. To some extent, that is happening, as people discover that the corporate world treats workers as temporary, movable, and replaceable. People are learning to take more responsibility for their own economic well-being, and may be more willing to heed suggestions for basic, needed changes. Let me suggest a few ways in which the sentiment for property may be revived and a meaningful subsidiarity can begin to be restored.


Differential Taxation

Tax rates for employee-owned businesses could be lowered relative to tax rates for corporations. This would recognize the social value of employee-owned businesses and provide them a real advantage in the marketplace.

Differential Regulation

No one would deny the need to regulate the workplace for such things as employee safety. Yet it seems that the real experts on this subject are the employees themselves. Government regulations often involve matters of no importance while overlooking areas of real danger, are expensive to implement, and are not surprisingly often poorly enforced. I would suggest that in companies where workers have real rule-making authority, either because they own the company or because they have a strong union, rule-making should be left to the workers. This would give an advantage to the employee-owned company and give other companies an incentive to have a union.

Co-operative Ownership and Employee Stock Ownership Plans (ESOPs)

Co-operatives allow holders of small capital to pool their resources for larger projects and enterprises. ESOPs allow for worker control of corporations by the purchase or distribution of company stock to the workers.

Property Tax Burden

Many governmental expenses that have nothing to do with income-producing property are funded by the property tax. In Texas, for example, this tax is a substitute for a state income tax; it is highly regressive; and it funds functions, such as schools and junior colleges, that have nothing to do with property. Property should be taxed for those services it receives, such as public works, police and fire, etc., but other services should find other sources of funding.

The Educational Monopoly

The largest monopoly in this country is education. Vouchers, charter schools, freedom to choose one’s district, and home-schooling would help break this monopoly and restore control and responsibility for education to parents.

The Partisan Political Monopoly

Effective entry into the political system is controlled by the major political parties, which in itself is an extra-constitutional arrangement. Nonetheless, these parties have gained for themselves structural and legal protections that make alternative parties difficult to launch and sustain. The major parties are also the recipients of vast public subsidies. The subsidies should be ended, and the requirements for getting on the ballot should be lightened so that politics may encompass a wider range of views.

Conclusion

Distributivism is based on the realistic and intuitively grasped notion that power follows property, combined with a genuine love of freedom and a desire to spread the benefits of freedom and economic initiative as widely as possible. It is a real response to the call of the Church for “a change of lifestyles, of models of production and consumption, and of the established structures of power which today govern societies” (CA). As such, it deserves the serious and prayerful consideration not only of Catholics but of all followers of Christ.



(Pope John Paul II w/Lech Walesa)


+++ADDENDUM++++

Several months ago, I asked the wirter of this article some questions. Here is the exchange-nice guy, interesting:


CR:Is there a large difference? I read Rerum Novarum and its sounds the same. What are the differences ,if any?

JM:Subsidiarity is a part of distributivism. It is the "political" principle. Distributivism is based on the distribution of productive property, without which subsidiarity will mean very little. Power will follow property, and if property is concentrated, so political power will be concentrated. If it is disbursed, subsidiarity will be a real possibility.
Hope this helps.
John

CR:It does, but who distributes the property? and who owns it? IT is my understanding that the individual/family own property and use it for their sustenance and possibly, for monetary gain.

JM:Of course, the "distribution" part of distributivism is the hard part, especially in a society where property is highly concentrated. The answer will depend on the circumstances. In Taiwan, the gov't distributed the land to the peasants who worked it. The results were dramatic. Productivity increased and the improved incomes fueled an industrial expansion that lasts till this day. Taiwan catapulted itself from a feudal society to an industrial powerhouse in only one generation. In the Mondragon Cooperatives, the workers own the companies they work for. In America, Employee Stock Ownership plans transfer companies to the workers. Positive steps can be taken by the gov't, perhaps by way of differential tax rates (taxing employee owned companies at a much lower rate, or financing employee buyouts, steep inheritance taxes on large estates, etc.) The answer will vary with the actual situation of the society.

CR:I believe that power should definitely be diluted-when it comes to civil Govt. I am a supporter -for instance- of states' rights as properly understood and limited constitutional govt.

JM:Yes, but I don't believe that power can be diluted so long as ownership is concentrated.

CR:Thank you for your time, I am really beginning to take interest in these topics and more interested to study them, just not sure where to start.

JM:Belloc's The Servile State and The Restoration of Property is a good place to start.
John


++UPDATE 10/19/06+++:



The Essential Classics
The Restoration of Property by Hilaire Belloc. Best single work. A long essay, clearly articulating a definition and the benefits of a distributist state, the heritage of a free, Christian Europe.
The Servile State by Hilaire Belloc. Book length; the definitive text. Sometimes difficult, but well-worth the effort --perhaps the most insightful book of the 20th Century.
Rerum Novarum, by Pope Leo XIII. The most brilliant thing ever written on the subject of economics, concerned primarily with the condition of the workers. This is the 'must-read' that inspired Belloc
Quadragesimo Anno (On Reconstruction of the Social Order) by Pope Pius XI. (1931) Written for the anniversary of Rerum Novarum and expands on areas such as subsidiarity, and treats capitalism, specifically.


Contemporary Works
Distributism, A Catholic System of Economics, by Donald Goodman. A Book available on-line. Excellent non-technical explaination, from a catholic point of view.
Small is Beautiful, by Schumacher. Very insightful, easy to read, and with many practical examples on both large and small scale.
Small is Still Beautiful by Joseph Pearce.
Gilbert! Magazine. As their namesake, (Chesterton), very penetrating on current topics, with great wit --always with sections on Distributism.
Catholic Worker Movement, especially the Houston Catholic Worker.



Other Works That Treat Distributism
Outline of Sanity by G. K. Chesterton.
What's Wrong with the World? by G. K. Chesterton.