But for this hypothesis to be true, capital must be widely dispersed throughout society, and not accumulated by any limited group.

Distributism is not completely and wholly different from or opposed to market capitalism, rather is seeks to make justice its foundation and to make it hospitable to small and local government–am I correct?

The business cycle is a problem that has never been solved. Marx thought he had a solution to the problem (scientific planning), Keynes thought he had a solution (inflationary policies), the Austrians think they have a solution (free banking and 100% reserve ratio), and Distributists think they have a solution (Which I am sure you will outline in your next piece). I’ll believe all these solutions to be so much quackery until I actually see an economy experience constant economic growth. I don’t see the business cycle as a solvable problem without somehow having the ability to secure perfect knowledge.

Taiwan’s post-war unemployment rate it the product of massive foreign investment in the island after the KMT’s defeat as well as persistent government policies to keep wages low including but not limited to the suppression of independent labor unions.

I am not, as you have suspected, an Austrian. While the Austrian’s make valuable contributions to calling into question attempts at “macroeconomics” I don’t find all of their arguments convincing, such as their explanation for business cycles always being prompted by government intervention (As opposed to mostly). I’m also agnostic on the gold question.

I’m glad your curious but wish you would be a little more critical in your evaluation of economic systems and realize that economic data is not merely the product or a system but the decisions and interactions of people who live in a history and culture. Again I’m glad you’re attempting to bring distributism out of its ecclesiastical ghetto and into economic discourse but analysis is going to have to go beyond an indictment of the business cycle.

Yet, I just note a certain lack of curiosity on your part. This is not surprising. I take it (correct me if I am wrong) that you are an Austrian, an “axiomatic” system that answers all questions in advance, and hence has little need for actual history.

But I like to delve into things. I would like to know why a system like Keynesianism gets better results than pure capitalism, when it shouldn’t work at all. Yet work it has, and you and I have lived our whole lives under it, in a time of not only great prosperity and peace, but relative equality (until the last 10 years or so.) This is remarkable. You keep telling me that capitalism works, and I keep asking “When?” “Where?” The system you praise might not ever have existed, but the closer we get to it, the more misery results.

That’s history.

There are certain things that no economic system can escape. For instance, everyone dies, this is not dependent on any particular system be it communism, capitalism, distributivism, or a primitive barter economy. Also, they cannot control the weather. Similarly due to the fact that no human being or group of human beings has perfect knowledge inefficiencies and malinvestment will happen. These inefficiencies and malinvestment will cause booms and busts. I believe that the free market works best to clear out inefficiencies and malinvestment and minimizes the inevitable effects of the business cycle.

Keynesianism, as you have pointed out, minimizes these in an unsustainable way. It does not fix the problem but delays it and compounds its effects. With this knowledge, on which I believe we both agree, I would go with the sustainable model of free market capitalism.

I’m eager to see your alternative but there is no question that capitalism works. It may not be rainbows and sunshine every day but its a sustainable way to deal effectively with the problem of scarcity.

Dan, is that going to be the new Libertarian slogan? “Capitalism: It’s no worse than Cuba!”

But as I have repeatedly pointed out, the “purer” form of Capitalism had a 40% recession rate, the Keynesian a 15% rate. Which do you prefer?

The 40% of people you speak of do not exist in the data. The 40% are merely periods of negative growth. Not a pleasant thing for sure, and something that has the potential to cause all sorts of social ills. That being said that in no way means that 40% of the population did not have available the goods and services they wanted or needed. Those goods and services may have cost more than a certain amount of the population could afford due to unemployment and underemployment but I have never herd of widespread shortages of goods in this country’s history that were unrelated to either central planning (rationing, war or natural disaster. Feel free to correct me with data if I am wrong.

Keynesianism certainly does pass my definition of success in the short term. The question of its sustainability is a concern we both share.

As to unemployment at no time in our country’s history has it been higher than 25%. This high point in 1932 was, I would argue, the product of central planning (massive tax increases, price fixing, tariffs,and regulation of the labor market which Roosevelt would oppose in the Presidential campaign that year). If we consider under normal conditions 5% of unemployment to be transitional and temporary for most of our nation’s history no more than an additional 5% of the population who desired work has been unemployed not the significant portions that you claim.

I fail to see how your criticism of booms and busts is in any way unique to capitalism. Cuba has experienced a similar cycle since the revolution:

http://en.wikipedia.org/wiki/File:Rent-Cuba-Carib.png

No economic system the world has ever know has been able to escape this cycle. Inefficiencies happen, malinvestment happens, people are not omnipotent. Blaming capitalism for the business cycle it like blaming your doctor for getting old.

What we are bogged down in at the moment is not any sort of free market capitalism of any sort and you know it. I’m eager to hear you make your case for alternatives however.

But your machinations put you in a further bind: namely, the the Keynesianism you despise certainly passes your own definition of success, and passes it at a higher rate! Thus, you can only save Austrianism by further building up Keynesianism.

So, let’s go with your definitions. Frequently in these long, pre-war downturns, the shelves were indeed bare. But let’s put that aside, and note that there is one “commodity” which must people want but which a significant number could not get, and that commodity was work. When you talk about “efficiency” in supplying goods, certainly one of those goods has to be good work. And yet, significant portions of the labor force could not find this good. By your own definition, this is failure.

Booms and busts are not “self-correcting” mechanisms, they are merely stumbling from one kind of failure to another. The boom is merely the preparation for the bust, because it misallocates resources, which then get negated by placing the opposite sign on them. It seems to me that the best your economic system can do is do things badly.

I think there are better solutions; solutions that are on the ground, working, and have a long history. At this moment in history, bogged down in what clearly does not work, it is a good idea to look at what does.

For something to “work” or not “fail” the threshold is extremely low. My lawnmower works if it cuts grass, no matter how much it rattles or blows smoke. So long as the blades keep twirling and it doesn’t catch on fire it gets its job done.

One of the chief problems distributivism has is that it’s underlying analysis of the problem with capitalism is fundamentally Marxist. Belloc’s understanding of the way capitalism works or rather fails to work, and indeed must inevitably break down is the same as Marx’s. This analysis is not merely one of addressing problems or inefficiencies but the structure of the system itself.

The Soviet system did lead to shortages which eventually crippled the economy. It failed to make goods scarce resources available. The Nazi regime in Germany had three distinct economic policies during its life. The first might be described as mega Keynesianism under Schacht (1933-1937) which I’m sure John would agree is just as unsustainable as American Keynesianism if not more so. Under Goering (1938-1942 the system was transformed into a Soviet style command economy and shortages emerged as a major problem. Speer then directed the economy until the end of the war, again under a command economy model (Again shortages, although by this point the war had more to do with that then economic policy).

The economic problem is one of scarcity, there is simply not enough for everyone to get everything they want all the time. An economic system is a system to allocate scarce resources. An economic system succeeds or fails on its ability to make available those scarce resources to the people who want them.

So an economic system succeeds in the most basic way when goods and services that people want or need are widely available. An economic system fails in the most basic way when goods and services that people want or need are widely unavailable (Think going to the grocery store and seeing bare selves.)

What you believe as signs of failure are simply inefficiencies (Not to say inefficiencies can’t be a legitimate cause for concerns or cause people real problems). You admit your self that recessions are caused by a “misallocation of resources”. Inefficiencies. You also admit that these inefficiencies self correct in capitalism through booms and busts. You object to the booms and busts in that they cause social ills yet agree they are necessary for the system to function effectively in the sense of being able to maintain the availability of scarce resources.

I don’t see this as failure. Failure is a failure to function, to break down. If you were grading capitalism’s essay would you give it an F? Did capitalism fail to address the problem? Did it fail to deal with the fundamental issue of scarcity? Or is the complaint rather that it fails to do what it does as efficiently as possible? That sounds like at least a solid C to me, certainly no lower than a D-.

The temptation is there for all of us, no matter who we are, to misuse whatever power we have. We all have power to harm other people, innocent people. In the realm of business the temptation to harm their competitors or would be competitors confronts business people who run large and small companies alike. Real freedom can be a scary thing. Who wants to fail and go bankrupt? Who wants to see their customers leave for greener pastures, for businesses who do a better job of giving them what they want? So their fear compels them to use the law, to make alliances with local, state and federal governments to hamstring their competition. Politicians being hungry for power are happy to oblige. The cover story for we the people is these laws are here to protect you from greedy, unscrupulous people. Thank you massa.

There are plenty of business people who want to compete freely and do not support protectionist policies and taxpayer handouts to bankrupt banks and other businesses. One example: The CEO of BB&T, the 9th largest US bank publicly opposed the bailout and refused TARP funds but was forced to accept them when he was overridden by his board of directors after they were threatened with expensive audits if they didn’t accept.

In a real sense power does follow property as you point out. Our most intimate property is our minds and bodies. But we have a choice as to how to use whatever power we have. We do not have to violate the natural right of others to their life and property in order to better ourselves. To do so, in my opinion, is unjust. And to enshrine these injustices in the law is the epitome of corruption.

I have taken recession, and the unemployment, misery, and destruction of financial wealth that it brings, as a sign of failure; I don’t know how it could be otherwise. I have not yet pronounced on what the criteria for success is; I will get to that in section III. But what I certainly won’t do, and haven’t done, is take growth per se as the sign of success. Indeed, the “booms” are as much a failure as the busts, since they usually involve a gross misallocation of resources. That the numbers show that the purer form of capitalism failed 40% of the time is indisputable. I would go farther and say that there was an equal set of failures on the upside, giving an 80% failure rate. But I do not insist on the point. I view the booms as mere preparations for the busts, but if someone wants to see them as a sign of success, that’s fine as well. I merely point out that these booms are always followed by busts, and that one should at least express some curiosity as to the cause.