What our Hands Have Wrought

m

RINGOES, NJ. In the fall of 2008, Americans were confronted with frightening news. The financial world was, the experts warned, teetering on the brink of disaster. Politicians from both parties grimly intoned that what was at stake was “our American way of life” and without massive intervention the country, and perhaps the world, was heading toward an “economic apocalypse.” These events seem to have caught many off guard. Despite the regular warnings from cranks, dooms-dayers, and other pessimists, few Americans, if actions are a reliable measure, actually believed that they would be staring into the abyss of economic disaster. The price-tag necessary to steer the economy away from the precipice is breath-taking, and even with such an infusion of money into the markets, there is no guarantee that our wild careen will be abated. In short, we could find ourselves spending an incredible amount of money and still lose the game. We should be skeptical when powerful people ask for more power. We should be doubly skeptical when they do so using fear as a motivation. When the putative choice is massive government intervention and spending on a scale never before contemplated or world-wide disaster, we do well to ask how we got into such a conundrum.

We can begin with a question that plenty of people have recently raised: are some companies too big to fail? Or more precisely, are some corporations so big that their failure would devastate the economy? Billions of dollars have been spent in order to shore up some corporations and entire sectors (banks and automobiles, for example), and the reasoning is that these are so crucial to the economy that public money should be spent to resuscitate them. But this simply raises more questions: Is it a fundamental problem when a corporation or sector becomes so big that its failure is believed to threaten the entire national economy? Could it be that scale and economic security are related? Can institutions become so large that their potential harm outweighs their actual (or occasional) good?

In order to answer these questions, it is instructive to turn to Hilaire Belloc’s neglected classic, The Servile State, first published in 1913. According to Belloc, capitalism is fundamentally unstable and is therefore a transitory condition. It is important, though, to pay careful attention to his definition of capitalism. “A society in which the ownership of the means of production is confined to a body of free citizens not large enough to make up properly a general character of that society, while the rest are dispossessed of the means of production and therefore proletarian, we call capitalist.” In Belloc’s mind, there are only two resolutions to the instability of capitalism. The first is socialism and the second is what he calls “the distributist state” or “the proprietary state” in which private property, specifically the means of production, are broadly distributed through out the populace.

Why is capitalism unstable? Capitalism, as defined by Belloc tends toward centralization of economic power, but when economic power is centralized, it requires a strong political structure to manage it. Herein we see the connection between economics and politics: centralized economic power goes hand-in-hand with centralized political power. Belloc’s friend and fellow distributist, G.K. Chesterton, argued that capitalism had come to an end, and the evidence was that the capitalists appealed “for the intervention of Government like Socialists.” In light of our current situation, it is difficult not to see Chesterton’s point.

F.A. Hayek argues that consolidation of economic power in the form of monopolies will invariably lead toward socialism. “A state which allows such enormous aggregations of power to grow up cannot afford to let this power rest entirely in private control.” The blame, according to Hayek, does not fall exclusively upon the capitalist class. Instead, “the fatal development was that they have succeeded in enlisting the support of an ever increasing number of other groups and, with their help, in obtaining the support of the state.”

Page 1 of 2 | Next page