Interview with John C. Médaille, author of
Toward a Truly Free Market
What is “distributism”?
Distributism seeks to correct a grave error in modern economic science, namely the idea that economics can be divorced from justice, especially distributive justice. Economics, since the end of the 19th century, sought to do away with the idea of justice, and hence lost the ability to accurately describe any actual economy. Therefore, no one should be surprised to learn that 90% of economists missed the warning signs of the current meltdown. The same was true during the last meltdown, and the one before that, etc. You cannot accurately predict the course of a system if you cannot accurately describe that system.
But isn’t economics a science? Can science allow terms like “justice”?
Physical sciences can dispense with notions of justice, but the humane sciences are different. Every humane science depends on some idea of what is “right” or “normative.” For example, a doctor cannot diagnose illness unless he has some notion of “health.” Now, just as human health depends on a certain balance of forces within the body, so too does the health of the economy depend on the balance of certain forces in society, forces generally known as supply and demand, and these forces cannot be balanced economically unless there is justice, particularly in the wage system.
“Just wages”? But isn’t labor itself just a commodity whose price is set by the market?
That is the theory behind modern economics, namely that the market left to itself will give the worker a fair share of what he produces. But Adam Smith debunked this theory long before the modern economists proposed it. He noted that in any wage negotiation, the owners could hold out much longer than the workers, and hence the resulting wage contract would reflect not productivity, but power. A CEO gets 500 times more than the line worker not because he is 500 times more productive, but because he is more powerful; he has more friends on the board of directors than does the seamstress in his sweatshop.
But who is to say what constitutes a “just wage”?
In any particular case, it is certainly difficult, and largely a matter of reasonable judgment. But it is fairly easy to determine when overall median wages are too low: the economy cannot balance itself and must rely on taxes and government spending to make up the shortage in demand. That is why we have the level of government intrusion into the economy that we do, and have had it since the 1930’s. Capitalism was simply unable to balance supply and demand, so much so that in the 80 years before the Great Depression, the economy was in recession fully 40% of the time. Government stepped in to prevent collapse, and has been dominant ever since.
Isn’t the solution just to get rid of big government?
Yes, but more accurately the solution is to get rid of the cause of big government. And the cause of big government is big business, that is, the concentration of economic power. Big corporations and big government grow together and feed off each other. Where wealth is concentrated, you will always see a concentration of political power with the result that the government grows in size, expense, and power. Big business and big government always go hand in hand, and there are no exceptions to this rule.
So, how do we get to an economy of “just wages”?
So long as capital, in the form of tools or land, is highly concentrated, you will not be able to get there. Wages depend on the bargaining power of the worker, and without some ownership of productive property, the worker doesn’t really have any bargaining power. The key to just wages is, therefore, a just distribution of productive property. For example, companies that are truly employee-owned have a much better track record both of fairness and productivity.
A redistribution of property? Wouldn’t that require a government of tyrannical powers?
Actually, it is not so much a question of what the government should do as what it should stop doing. In truth, the accumulation of property depends on government power. The higher the piles of capital, the thicker the walls of government necessary to protect them. There are, of course, positive things that government can do, with tax policy, for example, or simply by enforcing its own laws against monopoly and oligopoly. And there are cases where the title to land or other resources is questionable to begin with. But in general, a distributive society requires a smaller government with powers properly distributed throughout all levels of society.
Isn’t this just another utopian scheme?
On the contrary, it is capitalism and socialism which are utopian, in the sense of there being no actual examples. Capitalism has always been imposed through, and sustained by, government power, while socialism has had to allow some freedom in the market in order to function at all. Distributism, on the other hand, can display any number of working models, both on large and small scales. There is the worker-owned Mondragón Cooperative Corporation of Spain, which does $25 billion in sales; there is the cooperative economy of Emilia-Romagna, where 40% of the GDP is from cooperatives. And there are thousands of ESOPs, cooperatives, mutual insurance companies, and credit unions.
Can such firms really compete in the global economy?
Can and do. Both Mondragón and the Emilian companies derive a large portion of their sales from foreign trade. Experience is always the real test of a system, and distributism passes that test. Capitalism, on the other hand, seems to have some problems in balancing its trade, even after giving high subsidies to exporters. In thinking about these things, there is one principle we need to follow: No theory without practice; no practice with practical examples. Distributism passes all the real-world tests, and does it without government help.
Isn’t distributism just a form of socialism?
It is the opposite of both socialism and capitalism: it is the free market. Capitalism tends to concentrate property in the hands of a few, thereby choking off the market, and socialism continues this by concentrating ownership in the hands of the state. In practice both end up with control of the most important resources of the nation in the hands of a few bureaucrats, über-managers, who claim to represent the interests of the nominal owners, be they the shareholders or the general public, but who actually control these resources for their own benefit. Distributism, on the other hand, seeks to build an ownership society of free men and women, conscious of their rights and able to defend them.
Can distributism really offer practical solutions to the problems we face today, such as health-care or the budget deficits?
Yes, in fact that is why I wrote the book. Distributism, being a more complete economic theory, offers a range of tools for economic analysis which can give practical answers on a wide range of questions, such as how to build a truly free-market health care system, how to balance the budget, how to maintain our failing infrastructure, and many other such questions besides.