Thursday, October 23, 2008

Jerry Pournelle on Wealth Allocation

Jerry Pournelle has given us this essay which I am sharing with you. Clear thinking on this subject is rare and always welcome. I personally had a full university educaton under my belt before I investigated what exactly a stock was or even begin to think how the economy worked. I am not too sure it is that different today.

I have jerry’s link in my link list and I recommend it strongly. He has built up a good group of correspondents over the many years that he has run his site – blog and a lot of good stuff pops up.

Distributism vs. Redistributism

Obama and the Democrats propose a redistribution of incomes though the "earned income tax credit". This is often confused with the distributist views of Belloc and Chesterton, The differences are profound.

Belloc and Chesterton were both conservative capitalists, and very much opposed to Socialism (which is the best single-word description of Obama and the left wing Democrats). They did not believe the State would or could be fair in implementing its policies. They did believe that using the State to distribute incomes would inevitably lead to corruption.

They also saw truth in Marx's observation that unrestrained capitalism led to capitalists devouring each other, with more and more of the wealth and means of production concentrated into fewer and fewer hands. Marx saw that as leading to revolution, with the elimination of social classes entirely. Government would shrink to nothing, and a man might be a worker in the morning and an artist in the afternoon.
Management would not be for maximum profit, but merely for maintenance. The resulting stability -- some would call it stasis -- would be the end of history.

Fascism accepted Marx's principal observation that history was the history of class warfare, but solved the problem of class warfare by erecting a State superior to all the social classes and institutions that would force everyone to work together, not for the benefit of any particular class or institution, but for the good of all. Mussolini began as a Socialist and said he remained a Socialist to the day he died; his Socialism was intended to be progressive. He built airports and not only made the trains run on time but built many of the railroads.

Socialism is sometimes described as Marxism with a human face. Hilaire Belloc presciently said that the result would be "The Servile State" in which subjects begged state bureaucrats for favors, and nothing was allowed without a permit. A man might not erect a chicken coop in his back yard without permission -- indeed, it wasn't his back yard. It belonged to the state which graciously allowed him to live there. One may judge the success of this approach by the fate of Pruit-Igoe in St. Louis, or any Chicago or New York public housing project. Proponents of public collective projects have various fixes which they say will take care of the problems if applied. The fixes do not usually include giving actual ownership to anyone but the state.

The distributist approach would be to give actual title to the property to the occupants. Chesterton argued for peasant ownership of the land even as he understood that English yeomen would not care to be called peasants. At the time he was writing, about 90% of the land in England belonged to a few hundred families who rented out farmland to those who worked it. At that time agriculture was a significant part of the British economy, and factory management, though more complex than Marx believed, was still considerably simpler that it is today. From the distributist view, if peasant ownership of farms was a proper solution in agriculture, worker-owned factories would likely be the proper solution to industry.

Both Chesterton and Belloc were concerned by the trend of increasing consolidation of industry into large conglomerates and trusts, in theory responsible to stockholders but in practice responsible to no one but the managers. James Burnham, formerly an anti-Stalinist Communist and at one time a leader in Trotsky's Socialist Workers Party, took up this argument in The Managerial Revolution (1941) and Suicide of the West. He later broke with the left and became one of the founding editors of National Review; he was a major influence on the late Samuel Francis, the populist paleo-conservative.

Most of these socio-economic views have one major concern: the increasing concentration of control over society into the hands of fewer and fewer people. This is not quite the same as increased concentration of wealth: wealth itself is no great threat to the social order although it can be used for that purpose. Socialism would tax wealth in order to set up bureaucracies that would fairly redistribute the wealth. At one time Socialism demanded the nationalization of the means of production, but experience showed this didn't work very well, either in the Soviet Union, or in the Scandinavian welfare states, or in England. Bureaucratic management "for the public good" is neither efficient in production nor particularly effective at pleasing its public clients (who are usually very much treated as clients; see the Roman origin of the word).

Distributists claim to be a third alternative to ruthless capitalism and bureaucratic socialism. The distributist view can be summarized fairly in Chesterton's statement "Too much capitalism does not mean too many capitalists, but too few capitalists." They believed in transparency and subsidiarity -- local control of most resources coupled with maximum freedom. (Note that the late
Jane Jacobs thought those principles the only way to avoid a coming Dark Age.) One means of distributism would be through death taxes : the money would not go to the state, but be instantly and irrevocably divided.

Distribution of ownership of the means of production might lead to Jeffersonian Democracy in a largely agricultural country, but it's much more difficult in industrial states. Worker owned companies are sometimes both efficient and successful, but they often succumb to ruthless competition from manager-controlled companies and cartels.

There are plenty of Socialists who seek to redistribute the wealth through government action (which always means creating a bureaucracy). The neo-conservatives generally favor unregulated capitalism, which generally leads to concentration of wealth. There are few distributists in the modern political picture. Yet many of us can agree that "Too much capitalism does not mean too many capitalists, but too few capitalists."

I suppose that the free lance programmer who owns his own computers is the best modern example of what Chesterton and Belloc sought. I would also suppose that more vigorous enforcement of the anti-trust laws, even if that led to some inefficiencies, would meet their approval. To the charge that this would destroy local industries through ruthless international competition, they would probably answer by raising tariffs.

Incidentally, the Regulatory State seems determined to restrict America to two kinds of companies: those with fewer than 50 employees, and giant corporations with thousands of employees. No one in his right mind would expand a company -- particularly in California but Federal Law is making this universal -- from 49 to 51 employees. The instant one gets to 50 (or 51 depending on the state) a huge panoply of regulations kick in, so many that even if one can afford to comply with them all, one will also need a compliance staff of several employees to make sure one is in compliance. This means that up to 10% of one's work force does nothing productive except keep the owners out of jail. This makes the company singularly uncompetitive when faced with companies that don't have to devote so many resources to complying with regulations. This is probably not what distributists had in mind.

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