Wednesday, June 30, 2010

A Defence of Capitalism

Proving that the GK Chesterton of Ireland is open to criticism of the great man's ideas, Colm Culleton offers us a critique of GKC's economic philosophy, Distributism, and makes a defence of the capitalism Chesterton often criticised...

Chesterton believed in the economic system called "Distributism", the core of which appears to be that capitalism is not the "natural" state of the economy, and that capitalism treats the workers too harshly. My proposition is that neither of those tenets is correct.

I start by pointing out that there is no such thing as a "Ball of Prosperity", whereby I must become poorer if you become richer by grabbing a piece of the Ball. The fact is that both of us becomes richer at the same time. True, the Third World is much poorer than us, but they were very much worse in the past. Thanks to capitalism, we are all richer now than we used to be, even though there are many more people in the world now. The reality is that a capitalist inevitably makes other people richer from the very fact of making himself richer.

My second basic point is that the Free Market means that both parties who consider trading with each other are free to reject the other’s offer. That is why the market is called "free". The trade does not happen until both parties are satisfied. Not necessarily ecstatic about the trade, but consenting to it. And the reason that they consent is because they derive a benefit from it.

Take a man who invents a gadget called a widget. Either it sells, or it doesn’t. If it doesn’t, he becomes bankrupt, and drops out of the scenario, thereby evading criticism from Distributionists. So, let’s see what happens when the widgets do make him rich.

Start with the people he pays to build his factory, and those who provide the parts for making the widgets. Whatever he pays them, they are richer than if they don’t work for him, because otherwise they wouldn’t work for him; so he makes no widgets, goes bankrupt, and drops out of the scenario as before.

If he borrows from a bank to get started, he makes the bank richer, from the interest he has to pay. Otherwise, they would not provide the loan.

He makes his employees richer. Whatever it is he pays them, they are willing (but not necessarily ecstatic) to accept, otherwise they wouldn’t work for him at all, he goes bankrupt, and drops out of the scenario.

He improves the lives of his customers, and this, too, is a tangible improvement to their lives. They are content ((not necessarily ecstatic) to pay what he asks, otherwise they wouldn’t buy at all, the man goes bankrupt, and drops out of the scenario.

He will pay taxes, thereby giving the state more money with which to make its citizens better off: health care, roads, schools, and all the rest. True, he will try to evade paying taxes or at least reduce them. Oh, boy!, will he ever! But he has to pay an accountant to provide the figures to make the claim, thereby making the accountant richer.

Let’s say he never spends a penny of his profit. But, when he dies, his next of kin and/or the state will benefit, and begin spending the money, as above.

But he will probably invest his profit, thereby making other companies richer; and they in turn will scatter the same benefits as he did.

All the people who benefit directly from the man will, in turn, go on to make other people richer when they spend the money which came to them. And those people will spend that money on yet other people, and so on and on. And thus, from a combination of ideas and work, the Ball of Prosperity just keeps on getting bigger and bigger. Everybody wins, nobody loses.

-- posted by Colm Culleton


  1. I have to admit that I'm unsure about Chesterton's Distributism myself-- although I understand economics so litle, I have decided to suspend judgement.

  2. "... And thus, from a combination of ideas and work, the Ball of Prosperity just keeps on getting bigger and bigger. Everybody wins, nobody loses."
    What a wonderful place is this land called Capitalism. Where is it? I'd like to move there, it looks like heaven on earth.

  3. I'm afraid I'm deeply unconvinced, both by your reasoning and your analysis. To confine my comments to Chesterton, though, I think it's fair to say that his Distributism arose out of a particular account of British history, and was in some measure a response designed to correct what he deemed had previously gone wrong. Equally, and probably primarily, his critique of capitalism was premised upon a particular account of liberty (and how capitalism overrode certain fundamental freedoms), something that can be read in tandem with the likes of Belloc and Cobbett, and which looks very different from the atomised hedonism that passes for 'liberalism' today.

    Perhaps it is a legitimate criticism of Chesterton to say that he viewed capitalism through reactionary-romantic lenses, a vision of the good life that our post-modern world would decry as hopelessly subjective. I think that's unfair too, as it goes, but I can see where it comes from. Nonetheless, whether it is true or not, it is also the case that just such a response to capitalistic society has surfaced and resurfaced continually throughout history, a spiritual and social longing that still has a large amount of emotional currency today.

  4. I have to admit that I tilt towards Colm's opinion here. Chesterton wrote constantly about gratitude. I feel that critics of capitalism-- by which I mean, those who believe that we should create a system radically different-- just aren't grateful for the benefits, the standard of living, the variety, and the emancipatory qualities of trade and commerce.

    Angelo asked where this heaven-on-earth that capitalism created exists. I would say, "If you seek its monument look around you". The world we inhabit, speaking in purely material terms, is a heaven on earth compared to what most people have endured for millennia. The poor of Chesterton's time were much worse off, I think, than the poor in today's developed countries. I think that has more to do with the increase of wealth than with any government or trade union action.

    Chesterton believed in radical democracy. No democracy is more radical than the democracy of the wallet and the credit card-- and even the poorest person probably has more power through his or her spending than through his or her voting.

    I share the backwards-looking vision of the good life that Cobbett, Chesterton and Belloc held. But I no longer believe that capitalism is antagonistic to that. The malaise of our society is spiritual and cultural, not economic. Materially, we've never had it so good- all of us.

    At least, that is what I tend to believe. But I'm very conscious that I may be wrong and I'm still open to other arguments. Thanks for the comments.

  5. Again, I'm not so sure, on various levels. Just to take a few of the points you bring up...

    Whilst it may well be true that people are better off (materially) than they have been before, that is not to say that it can never get better, nor that social constructions that existed previously throughout history mightn't be the best way to achieve that betterment. Of course, the poor in Chesterton's time had a rotten time of it, but he maintained (with Cobbett, largely) that that was due to the ongoing injustice of their initial dispossession, and that helping them wasn't merely about throwing them a few more crusts of bread, but about giving them the liberty to make their own bread. Of course I'm speaking metaphorically to an extent, but it is a strange world that capitalism has delivered when it is largely only the rich that can afford to live with the privileges of peasants. And I think this central insight is important; I wonder if too often people ascribe natural technological and medicinal development as factors for arguing that the poor have never had it so good, when in fact, contextually speaking, they really have, and better.

    I'm not sure that the democracy of the wallet and the credit card is all that radical, nor indeed democratic, if one considers that some can have dozens of platinum cards whilst some get refused even one. If a radical democracy would be run along the lines of 'one man one vote' (I'm not saying it necessarily would; but if it was), then contemporary capitalism would be rejected at the very outset. Indeed, the opportunity to vote with one's feet might well give capitalism the appearance of being a fundamentally democratic system, but then the man on the dole that walks resolutely by the nearest Porsche garage is not so much voting with his feet as being excluded from voting at all.

    I agree that our malaise is spiritual and cultural, and I always liked de Lubac's comment that perhaps people don't need curing so much as converting. I suppose where I differ is that I just don't think one can detract the economic sphere from that malaise, as if the economic systems we have created are wholly distinct and unrelated to our spiritual condition, nor that they in some important manner reinforce that weakness (I think contemporary criticisms of neoliberal economics focusses on precisely this point).

    After all that, the question remains what could replace the capitalist system as something that generates development and well-being? I simply don't have an answer, and it's beyond my abilities to construct one; but I think Chesterton's Distributism was a noble attempt at an answer, and something that in certain important aspects was preferable to that which it was seeking to replace.

  6. First off, let me say that I think you may well be right and I could be agreeing with you heartily in six months or six years.

    But I still have strong doubts. What you said "such a response has surfaced and resurfaced continually throughout history." I think of another institution that has undergone constant attacks throughout history, from all directions. It reminds me of the lines in Orthodoxy:

    "Suppose we heard an unknown man spoken of by many men. Suppose we were puzzled to hear that some men said he was too tall and some too short; some objected to his fatness, some lamented his leanness; some thought him too dark, and some too fair. One explanation (as has been already admitted) would be that he might be an odd shape. But there is another explanation. He might be the right shape."

    When I said capitalism was a radical democracy, I'm very aware that it's a deeply inegalitarian democracy, to put it mildly. But every single one of us shapes society every single day by our choices as consumers and workers. That kind of perpetual plebescite seems to me far more of an expression of the vox populi than any election or referendum.

    It also seems to be a perfect example of subsidiarity; a decision could hardly be taken at a lower level than a kid with his pocket-money.

    Distributists are all for small businesses, local economy and family-run enterprises. So am I. But it seems to me more likey that big business is big because millions of people choose to patronise it, rather than because the game has been rigged in its favour. Here I may be naive.

    It may also be that the poor were actually better off in Chesterton's day; also your point about technological and medical advances is well made.

    The Catechism tells us "a theory that makes profit the exclusive norm and ultimate end of economic activity is morally unacceptable". Also that "reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended". Piecemeal reform of our economic system seems eminently reasonable to me; but one of the lessons of history, to be, is that all radical change tends to be destructive.

  7. Colm’s response to Michael: I wish Michael had given the reasons why he is "deeply unconvinced, both by Colm’s reasoning and analysis". With them, Colm might be able to defend capitalism. Without them, we will never know where Colm was wrong.