In response to my posting on “‘A Distributist View of the Global Economic Crisis’: A Report,” several people asked for more specifics regarding the popssible shape of a contemporary Distributist public policy agenda. My address to the conference summarized such an approach, and follows:…..
HOW ‘THE BUSINESS GOVERNMENT,’
‘THE LOATHSOME THING CALLED SOCIAL SERVICE’
AND OTHER DISTRIBUTIST NIGHTMARES
ALL CAME TRUE”
A Lecture by
The Howard Center and Hillsdale College
For The Conference
“A Distributist View of the Global Economic Crisis”
St. Benet’s Hall
11 July, 2009
One of the more curious aspects of last Autumn’s global financial meltdown was the blame that was actually heaped on Distributist Theory. The argument sounded like this: efforts in America to extend property ownership in homes went too far; resulting in the issuance of “subprime” loans to unqualified buyers; resulting in turn in a liquidity crisis at the banks; bringing on a credit squeeze, panic, and global depression. This explanation has proven wonderfully useful. It has allowed inept bankers, market speculators, and the advocates of economic globalism to shift responsibility away from their own misdeeds and from the inherent instability of finance capitalism, and to place the blame instead on the slumping shoulders of G.K. Chesterton and a modest number of lower-income Americans. This explanation has also spawned the argument that, looking forward, the working poor should not really aspire to home ownership; it would be better for them to rent their living space and to find their security in state programs of unemployment insurance, state pensions, and the like.
This explanation is outrageous on any number of levels. Yet it does rest on a kernel of truth: instability in the American home mortgage market did apparently trigger the financial panic. However, I would respond that this development had nothing to do with good Distributist theory regarding home ownership. The essential problem has been that the initial Distributist impulse – to gain the broadest possible private ownership by families of property in the form of homes, land, and productive capital – this long ago ceased to be the driving force in the American housing market.
Let’s sort out historical truth from current fiction. It is certainly true that G.K. Chesterton favored home ownership for those he called “the moderately poor.” For them, the home was “the only place of liberty,” the realm of invigorating anarchy, a chamber of freedom that offered protection from the claims of both the great industrialists and the state. However, not just any home would do. Every true Englishmen, Chesterton argued in his 1910 volume What’s Wrong with the World, wants “a separate house; he does not want a semi-detached house.” Nor did he want an apartment: “a flat is not a house, because it is a house on stilts.” Rather, “[a]n idea of earthly contact and foundation, as well as an idea of separation and independence, is a part of this instinctive human picture.”
Delivery of such homes to families would be an important test of any nation. Chesterton again: “As every normal man desires a woman, and children born of a woman, every normal man desires a house of his own to put them into…. [H]e wants an objective and visible kingdom; a fire at which he can cook what food he likes, a door he can open to what friends he chooses…. To give nearly everybody ordinary houses would please nearly everybody; that is what I assert without apology.”
It is also true that Distributist ideas, filtered through American writers such as Ralph Borsodi, Herbert Agar, and the Vanderbilt – or Southern – Agrarians, had direct and indirect influences on the rehabilitation of American housing policy during the New Deal years of the 1930’s. Distributism directly inspired the Subsistence Homestead program, part of the National Industrial Recovery Act. This Federal effort backed the building of new villages for displaced industrial workers, where families would be able to buy a house and about five acres of land for cultivation. Nearly 400 Homestead projects were underway by 1940.
The Distributist goal of transforming families from renters into independent homeowners also motivated the National Housing Act of 1934. It “revolutionized” housing finance by creating the long-term, amortized mortgage; it established fairly uniform insurance and property standards for the national housing market; this act encouraged large-scale developers; and it created land-planning standards that “contributed greatly” to the development of new housing tracts out in the suburbs. The now infamous Federal National Mortgage Association (or “Fannie Mae”) came along in 1938, creating a mechanism for the mobilization of new capital behind home mortgages. Special loans—initially from the new Federal Housing Administration (FHA) and also from the Veterans Administration (VA) after 1944—made it possible for young families to borrow money to purchase a home without even a down payment. Tax reforms in 1944 and 1948 also made the interest paid on home mortgages fully deductible.
These were all good Distributist ideas and – for about a third of a century – they worked splendidly. Default rates were extremely low. Between 1940 and 1960 alone, the number of owner-occupied homes in the USA doubled. Where only 44 percent of Americans were in owner-occupied homes in that former year, 64 percent of American families owned homes by the 1960’s. Importantly, virtually all of these state subsidies or encouragements to home ownership were focused – in practice – on young families. For example, about 99 percent of federally guaranteed VA and FHA mortgages went to young married couples buying their first home. Policymakers emphasized “that our homes are decisive influences in family life” and young Americans responded: between 1940 and the mid 1960’s, the marriage rate climbed; the divorce rate fell; and the marital fertility rate soared in the remarkable mid-century American episode called the “Baby Boom.”
However, around 1970, things began to go sour in the American housing sector. At the economic level, state subsidies for home construction and mortgages did arguably produce a growing “over-investment” in housing, as compared to other possible capital investments; this was true among both individual families and financial institutions. More problematically, the common purpose of a home purchase was shifting: from a desire to provide decent shelter for one’s family in a stable community to a form of investment, where “resale-ability” replaced “livability” as the standard and where “buying up” a new house in another neighborhood every few years became the favored practice. This indirectly contributed to neighborhood instability.
At a still more troubling level, there is evidence that shifts in federal housing policy were actually coming to favor family break-up. In brief, by 1970 most married-couple American families with children were in their own homes. To keep up housing demand, regulators subtly shifted mortgage subsidies away from intact traditional families toward “underserved,” “non-traditional,” “non-family” households: single persons; sole-mother households; unmarried couples; the divorced. In fact, two analysts showed that as early as 1980, the American population was “diffusing itself” into a still expanding housing supply; the number of housing units was growing at nearly twice the rate of population increase. Put more bluntly, the new availability of subsidized mortgages for the non-married actually appears to have encouraged divorce and other forms of modern post-family living. In a manner that Chesterton would have deplored, lawmakers and regulators had stripped American housing policy of normative content. No longer family-centric, with a special focus on the needs of children, it would now be “neutral” as to lifestyle. In practice, these changes blended the U.S. mortgage market together with certain emerging social pathologies and unstable speculation to create a precarious system: again, a problem already evident to some observers as early as 30 years ago. The wonder is that the contradictions in this system took nearly three decades to work themselves out as part of the current crisis.
Again, my point is that the fault for the economic panic of 2008 does not lie with the Distributist goal of widespread home ownership. To the degree that home ownership was involved, the fault lies instead with policy corruptions, derived at least in part from a loss of normative vision, that pushed the American mortgage market onto troubled terrain as early as the 1970’s.
The winner in all this, of course, will be the Servile State: Hilaire Belloc’s label for a system where monopoly capitalists, financiers, and government bureaucrats merge into an entity practicing state capitalism. Under its terms the capitalists and bankers gain order and protection of their wealth and property while property-less workers receive welfare benefits specifically tied to their wage labor, such as unemployment insurance, which provides security but also confirms their servile status. Indeed, Belloc offered the odd warning that this system would tend toward a form of compulsory labor, a modern version of slavery. For his part, Chesterton called this arrangement a “Business Government” which, he says, “will combine everything that is bad in all the plans for a better world…. There will be nothing left but a loathsome thing called Social Service.”
At one level, our current global financial crisis is merely an acceleration in the growth of the Servile State. Since 1973 economic inequality in America – as measured by the GINI index – has grown steadily. This gap between those of wealth and power and those dependent on a mix of wages and welfare can also be seen in the decline of the American middle class. A few climb into the capitalist ranks while the majority sink toward minimum wage jobs at places like Walmart or to “service” jobs tied to the state welfare system.
At another level, the Crisis has produced its own forms of servility. The 2008 version of Fannie Mae and its cousin Freddie Mac – mortgage companies that privatized executive pay and profit while socializing risk and loss – are splendid examples of a Business Government at Work. This same Business Government can be seen in the skillful way in which Goldman Sachs executives have alternated between “creating” and “solving” the financial crisis. For example, it was then Goldman Sachs CEO Henry Paulson who successfully lobbied a half decade ago to weaken the reserve obligations of private U.S. investment banks; then, as U.S. Secretary of the Treasury, he wound up in charge of the 2008 bank bailout, which saved the great banks from their follies (although, for reasons we can only speculate about, he did let former arch-rival Lehmann Brothers go under). The concept of Business Government also explains the preference these days by both American and European governments for so-called “public-private partnerships,” cozy arrangements for the relatively few “owners” and “leaders” who effortlessly move between both sides of the partnership, reaping rewards either way, while the majority of people struggles along.
Back in the 1920’s, Chesterton already saw how owners of the great corporations had themselves abandoned liberal market economics. Instead of believing that if men were left to bargain individually the public would automatically benefit, they now pleaded with workers not to strike “in the interests of the public.” Chesterton commented: “The only original case for capitalism collapses entirely, if we have to ask either party to go on for the good of the public.” Instead, he said that “ordinary conservatives are falling back” on Communist arguments “without knowing it.” Over the last 12 months, the American government’s remarkable takeovers of the insurance giant A.I.G. and auto legend General Motors are a similar repudiation of capitalism, in favor of an arrangement not quite socialism either: but a form of Business Government that serves the well-off and the well-connected.
This is the Servile State. The model of Business Government – not Capitalism nor Communism, nor Socialism, nor Fascism – this model won the great ideological contest of the 20th Century. We also see this victorious system in contemporary Russia, where “Mafia capitalism” and state-favored oil and gas companies have grown among former KGB agents and their ilk, to create a class proudly self-labelled “the oligarchs.” Meanwhile, a crude welfare state inherited from the Communist time keeps the Russian masses alive… and propertyless.
Journey to China, and there you find still another iteration of the Servile State. Western corporations have moved their production lines to the Peoples’ Republic, where an authoritarian regime – a reliable Business Government – keeps the laborers cheap, docile, and strike free. Indeed, in 2002, the Communist Party of China actually invited capitalists to join its ranks, cementing another kind of partnership. Neither Belloc nor Chesterton would have been surprised over this merger of Capitalism and Communism, finding it the predictable consequence of a common materialistic world-view.
A less obvious, but more telling, sign of the modern Servile State is to be found in the new subjegation of women. Feminist dreams of perfect social and economic equality have fallen prey to what the women now call “public patriarchy.” In predictable fashion, feminist theorists blame men; but the real oppressor here – I assert – is the Servile State.
Political scientist Frances Fox Piven explains how public patriarchy works. Ever fewer women are in traditional families, she reports. Men, for their part, “are increasingly ‘liberated’ from their obligations under the moral economy of domesticity.” A few working women reach top positions as doctors, lawyers, professors, and corporate executives. However, most wind up in the low-pay service sector. Many single mothers in America, for example, now work via government mandate at minimum wage jobs tied to a basket of welfare benefits (the very form of coerced labor, I note as an aside, predicted by Belloc). Indeed, Piven shows that “[w]omen have … developed a large and important relationship to the welfare state as the employees of [its] programs.” In social welfare agencies, for example, the women commonly account for 80 percent of the workers. Piven accepts this “public patriarchy” – where women do exercise some power through “their ‘dependent’ relationship with the state” – as the best option available.
However, another feminist theorist – Carole Pateman – argues that this interpretation distorts reality. As she writes: “The power and capriciousness of husbands is being replaced by the arbitrariness, bureaucracy, and power of the state.”
Evidence backing this latter view actually comes from Scandinavia, where the feminist ideology has been the most aggressively pursued. Observers have noted, for example, the relative paucity of female CEO’s in Sweden; Swedish executive suites remain overwhelmingly male. Meanwhile, a 2006 study of “public patriarchy” by two Israeli sociologists used a so-called “Welfare State Intervention Index” to measure the status of women in 22 developed Western countries. The researchers found that after 40 years of intense feminist activism, Scandinavian women are still doing so-called “women’s work,” only with this change: rather than performing such tasks for their own families, they now do them for the state. As the researchers explain:
…state activities, while facilitating women’s entrance into the labor market, do not facilitate their entry into high-authority and elite positions. Rather, the very same characteristics – generous family policies and a large public service sector – seem to reproduce the gendered division of labor and, in effect, decrease women’s chances of joining desirable positions.
Instead, Scandinavian welfare states “channel women in disproportionate numbers into feminine occupational niches” such as child care, elder care, nursing and elementary education. Among the 22 nations surveyed, the odds of a woman being employed in classically “female” occupations are actually highest in Sweden, Denmark, Finland, and the United Kingdom. And at least in Sweden and Denmark labor outside the home by mothers has become, in practice, compulsory.
Again, while feminists blame a clever and adaptable “Patriarchy” for these results,  a much cleaner explanation is the operation of the Servile State. The Business Government in Sweden and elsewhere has simply socialized traditional women’s tasks, so turning them into what Chesterton called the “loathsome thing called Social Service.” Observers have noted as well how changes in Scandinavian law over the last several decades have been premised on a declining public interest in material property in favor of state pensions, annuities, and welfare claims. It is true that in terms of job loss, the current economic crisis has primarily hit men; about two-thirds of the newly unemployed are males, who find their servility in unemployment insurance (a measure that Belloc particularly loathed). Women, for their part, find servility in their strange, new, functional marriage to the state. Jointly surrendered by their mothers and fathers to the public crèches and to the state schools, children also quickly learn the posture and peculiar whine of a servile population.
So, to borrow a question from Lenin: What then should be done?
Critics of Distributism have long argued that this social-economic scheme lacks specific policy ideas. The charge is unfair. Both Belloc and Chesterton advanced clear ideas for building a property state, where giant economic institutions would be cut down to a human scale and where all responsible families would own a home, productive land or a small shop, and garden. Specifics included:
- To greatly expand home ownership by families, mobilize “the credit of the community” through locally-controlled, cooperative credit unions to enable “private ownership of houses and small plots just outside our great urban centers.”
- To break up monopoly corporations, legally support the extension of profit sharing and ownership to workers’ guilds.
- To break up the financial trusts, mobilize prosecutors to enforce laws banning loan-sharking and fraud. In addition, put would-be monopolists violating anti-trust laws in prison, because “private property ought to be protected against public crime.”
- To restore the small shop, use differential taxation against chain stores (aiming at no more than a dozen shops per corporation) and against big department stores as well (here, Belloc specifically cited Harrods of London as the problem).
- To redistribute land and other properties, tax real estate contracts “so as to discourage the sale of small property to big proprietors and encourage the breakup of big property among small proprietors.” Their model legislation was Ireland’s Wyndham Act of 1903, which successfully transferred farms from absentee landlords to peasants.
- To decentralize industry, cheapen electricity through, expanded access grids “which might lead to many little workshops.”
- To encourage agrarian resettlement, the small family farm “must be privileged as against the diseased society around it.”
- To restore craftsmen, subsidize “the small artisan at the expense of Big Business.”
- To defend the poor against the great, provide the former free legal services.
- “To protect new experiments in small property and micro-enterprise, employ tariffs, “even local tariffs.”
- To decentralize transportation, end government monopolies of public transportation, discourage the railroads, and favor the automobile.
- To encourage families, provide generous tax relief to parents according to number of children, while taxing the bachelor.
- And to encourage urban home ownership, “there ought to be a simple rule: every [rental] lease should automatically contain the power of purchase by installment.”
One may find these ideas misguided or wrong; yet they do offer specifics and add up to a comprehensive alternative to the servile state.
How might this policy orientation be applied to our current financial and political situation? Good Distributists would take the opportunity, I think:
- To break up, prudently, the great, politically-favored banks;
- To sharply restrict the revolving door between regulated banks and corporations and the regulatory agencies;
- To focus mortgage lending on small, locally controlled savings banks (such as the pre-1981 American “Savings and Loans”) and Credit Unions;
- To replace welfare benefits with opportunities for property ownership and the creation of “children’s trusts.”
- To limit direct and indirect mortgage subsidies – including tax benefits – to only one residence per family (disallowing them on “second” or vacation homes and investment properties);
- To let real bankruptcy courts divvy up failed, albeit politically favored dinosaurs like General Motors;
- To move toward a modest, uniform protective tariff;
- To fill the prisons with white-collar criminals who have violated the public trust through fraud;
- To redirect farm subsidies ($20 Billion annually in the USA) away from vast agri-businesses toward the encouragement of small, general purpose farms (with the quid pro quo that families receiving assistance would open their properties to visiting school children, and so on)
- To loosen zoning laws and other restrictive covenants so as to allow greater use of family homes as places of work and production for market (e.g., telecommuting, professional offices)
- To make credit available, at favored rates, to new family businesses and other micro-enterprises.
- To impose a progressive corporate income tax on retail giants;
- To improve the highway system; and
- To focus tax relief on families with dependent children.
This policy platform rests on two pillars: trust in widely distributed private property as the safeguard of liberty and democracy; and faith in the natural family economy as humane and just. At another level, the Distributist order also requires that everyday tasks be reconnected with the Transcendent. Only then do common acts bend toward the purposes of the Creator. As the contemporary American agrarian Wendell Berry explains, “it may be that our marriages, kinships, friendships, neighborhoods, and all our forms and acts of homemaking are the rites by which we solemnize and enact our union with the universe.” We find the economy of The Kingdom of God only as we experience a true homecoming.
 G.K. Chesterton, What’s Wrong with the World; in Collected Works, Volume IV: Family, Society, Politics (San Francisco: Ignatius Press, 1987), 72-74
 An influence noted in: Russell Lord and Paul H. Johnstone, A Place on Earth: A Critical Appraisal of Subsistence Homesteads (Washington, DC: U.S. Department of Agriculture, Bureau of Agricultural Economics, 1946), 12-17, 20.
 James B. Mason, History of Housing in the U.S.1930-1980 (Houston, TX: Gulf, 1982), 13.
 “Housing Get No. 1 Spot at Family Life Conference,” Journal of Housing (May 1948); 125.
 Michelle J. White and Lawrence J. White, “The Tax Subsidy to Owner-Occupied Housing. Who Benefits?” Journal of Public Economics 3 (1977): 123.
 Gertrude Sipperly Fish, ed., The Story of Housing (New York: MacMillan, 1979), 484-85.
 George Sternlieb and James W. Hughes, America’s Housing: Prospects and Problems (New Brunswick, NJ: Center for Urban Policy Research, Rutgers Universities, 1980), 58-66.
 G.K. Chesterton, The Outline of Sanity (Norfolk, VA: IHS Press, 2001 ), 173-74.
 Chesterton, The Outline of Sanity, 41-43.
 Frances Fox Piven, “Ideology and the State: Women, Power, and the Welfare State,” in Linda Gordon, editor, Women, the State, and Welfare (Madison: The University of Wisconsin Press, 1990), 251-55.
 Carole Pateman, “The Patriarchal Welfare State,” in Amy Gutmann, ed., Democracy and the Welfare State (Princeton, NJ: Princeton University Press, 1988), 234.
 See: Steven Goldberg, Why Men Rule: A Theory of Male Dominance (Chicago and LaSalle, IL: Open Court Press, 1993), 24-25.
 Hadas Mandel and Moshe Semgonov, “A Welfare State Paradox: State Interventions and Women’s Employment Opportunities in 22 Countries,” American Journal of Sociology 111 (May 2006), 1913, 1916, 1933.
 Sylvia Walby, Theorizing Patriarchy (Oxford, UK: Basil Blackwell, 1990), 197.
 D. Bradley, “Marriage, Family, Property and Inheritance in Swedish Law,” International and Comparative Law Quarterly 39 (April 1990), 378-81.