Robert T. Miller and I discuss two opposed views of Catholic Social Teaching as it relates to economics in this month’s issue of Dappled Things. Robert defends that “… for people like us in a society like ours, capitalism is the most reasonable choice among the various economic systems we might adopt.” I defend distributism. You can see the articles online at http://www.dappledthings.org/peterpaul11/feature_truthandtrade.php

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John Médaille is a businessman in Irving, Texas, and also an Instructor in Theology at the University of Dallas, where he teaches a unique course on the Social Encyclicals for Business Students. He is the father of five, grandfather of two, and husband of one. He is the author of The Vocation of Business: Social Justice in the Marketplace and is finishing up another book, Equity and Equilibrium: The Political Economy of Distributism. John also blogs at The Distributist Review.

21 COMMENTS

  1. I am not Roman Catholic — I am a heterodox Protestant, looking more to Wycliffe, Arminius and Wesley, than to Luther, Calvin, or even Knox. But Leo XIII had some valuable things to say. Just because I deny the spiritual or temporal authority of the Bishop of Rome, does not means that anything said by a Bishop of Rome must be wrong.

    I particularly appreciate the way you detail the ways in which the standard model of economics has destablilized the family and the community, along with economic order. However, it appears that redistributive legislation, based, as you say, on work, not pure entitlement, and a revived labor movement, are the more practical answers.

    Mondragan sounds good — and it had a parallel in post-communist Poland, when a chemical plant continued to function at a small profit, providing all the social resources it always had to its workers, much to the dismay of the liberal economists flooding in to “help” the new government. But the practical question, how to implement such a thing on a large enough scale to reform the American economy is an essential one, not a minor footnote. American history is littered with cooperative movements, lampooned by capitalist and communist alike.

    A good start would be to add to the minimum wage law that in any enterprise, the lowest paid employee must be paid no less than 1% of the total compensation package of the highest paid executive. That means if the CEO makes $7 million, the janitor makes $70,000. Another would be to restore 90% taxation of income over $10 million. No, it wouldn’t be worth having, so the money would go somewhere other than compensating executives.

  2. What is the realistic effect of a higher minimum wage? It prices low-skill laborers out of the labor market. Lost in all the talk of a “living wage” is that many of the people who don’t have jobs because of the minimum wage are not free to offer their labor at that price. Nor should someone raise up the specter of people living continually below the minimum wage; having earned employ, those people would gain on-the-job skills and, as they increased output and productivity, would be rewarded with higher pay. The minimum wage is one of the greatest pro-poverty measures in America.

    What do you think taxing income above $10 million at 90% would do? Experience shows it does nothing but shrink the tax base. When the highest marginal rates were 90%, federal income tax receipts were little different from when the rates were 30%. That means the rich, because they can afford it, just move the money offshore. That’s not 90% taxation, that’s 0% taxation. If the rates are lower, they have less incentive to do that, and so the tax base, and with it revenue, increases.

    Forcing a company to pay a janitor $70,000 if the CEO makes $7 million wouldn’t lead to any high-income janitors. It would lead to companies firing janitors and then sub-contracting janitorial services to janitorial companies, where the CEO-employee ratio would be within the 1:100 mandate not because the employee was making more but because the CEO of the janitorial company would not be making much.

    In the world of regulations, an invisible hand leads the best of intentions to have the worst of results.

  3. Well, Publius, I hate to be the one to introduce actual facts into the conversation; it is such a downer when people are repeating the magical incantations that pass for economic “science” these days. But here goes:

    1. Off-shoring of income has increased, not decreased; if what you said was even approximately true, all those banks in the Caymans would have closed by now, and Switzerland would be mainly known for its army knives rather than its secret bank accounts.

    2. Wages are set politically, but not so much through the minimum wage, but by immigration laws. Under free immigration, 90% of us could be replaced by cheaper, and likely more efficient, immigrant labor. Wages are as much a political decision as an economic one.

    3. The canard about minimum wages increasing poverty is repeated ad nauseum, but data is never presented. This is because the data does not support the incantation. The reasons are both obvious and subtle. After all, one firm’s wage bill is every other firm’s demand curve, and you cannot drive down one without driving down the other. As for the more subtle reasons, labor is not a “commodity” market with a single equilibrium point, but a complex market with a multiple equilibrium points. (See https://www.frontporchrepublic.com/2010/07/naive-experts-economists-and-the-real-world/)

    3. You don’t have to talk about what would happen if CEO-worker ratios were lower: we can look at both American history and the “other than America” present to see what does happen. When the top marginal rates were 90%, the CEO-worker ratio was 20-40. Now with lower rates, it is 300-500 times. And CEOs in the rest of the world earn far less than their American counterparts, the most overpaid and pampered workers in the world. And we can look at places like Mondragon, where the CEO-worker ratio is set at 6. They seem to do just fine.

    4. The comments on outsourcing of janitorial work are bizarre, at least to anyone who hasn’t lived in a cave for the last 50 years. Such outsourcing has exploded, not declined, even as the relative value of minimum wages has declined.

    Sorry for the dose of reality, but as The Philosopher hath said, “It ain’t what you don’t know that hurts you; it’s all the things you “know” that just ain’t so.”

  4. By all means, let’s have some facts.

    1. I fail to see how the increase in off-shoring of income doesn’t reinforce my point. Off-shoring has increased because it’s now easier to move capital internationally. That means that the tax base is more sensitive to shrinking due to higher marginal rates, not less. The proof that lower rates widen the base can be seen in the fact that federal income tax receipts have stayed steady or increased after all major tax cuts (Coolidge, Kennedy, Reagan, Bush). The main determinant in income tax receipts is not the rate of taxation but the rate of growth (Hauser’s Law.)

    2. Wages are set politically to an extent through free immigration. The reason free immigration would no longer work is because the welfare state provides an incentive for immigrants to come to collect benefits (look at Europe). That is necessary. They are also set politically through minimum wage and attempts to use state power in favor of unions (card check). That seems to do more harm than good. I am dumbfounded by the proposition that simply because wages are set partly through political concerns, that means they might as well be set wholly through political concerns. That’s like saying the U.S. economy might as well be wholly socialized since it’s partly socialized.

    3. Data is mixed because a) studies don’t take into account where the actual effect would be found (primarily teens and minorities) and b) it’s difficult to find a control to use in comparing the effect of minimum wage when the wage is enforced nationally. But a logical argument can rest without empirical evidence, so long as empirical evidence doesn’t counter it. We can logically understand and accept the proposition that exorbitant tariffs discourage trade without having to look at a study confirming the effect. As for “subtleties,” I’ve read your discussion about labor in “Toward A Truly Free Market” and I frankly feel it’s all hat and no cattle. The “subtler” costs of labor that you think the free market fails to price in are priced in; each individual laborer represents his own interest and considers them against the employer’s offer. That’s how a market works.

    4. I didn’t say janitorial worked would be outsourced to China. I said it would be sub-contracted to newly formed janitorial companies. Also, correlation is not causation. Outsourcing has not exploded because the minimum wage has declined, or even because there is a minimum wage. It has exploded because international markets have become more connected. That bolsters, not weakens, the argument that companies facing onerous regulations will simply dodge that regulation.

    The greater point here is that no system has generated more wealth in the long-term and resulted in a greater increase in the standard of living for the ordinary worker than free-market capitalism. Never forget that standards of living in 1800 for the average worker were little improved from Ancient Rome. The quasi-distributist economies of medieval Europe which you seem to pine for produced little tangible increase in the average person’s standard of living. Moreover, the real effects of increasingly higher wages mandated by the government in a modern economy can amply be seen in Peron’s Argentina. Argentina began the century one of the wealthiest countries in the world but by the 1980s was the economic basket-case of South America. Standard of living declined. Trying to give everyone a “living wage” is no small part in understanding that story.

    Please, spare me the condescending “sorry for the dose of reality” as if sitting on top of a pile of G.K. Chesterton books entitles a man to epistemic arrogance.

    Yours, &c,

  5. 1. I fail to see how the increase in off-shoring of income doesn’t reinforce my point. Okay. If the off-shoring rates are x with a high marginal tax rate, and some multiple of x with lower tax rates, that proves your point that high marginal rates cause off-shoring? That could only be true if you hold your point in spite of the evidence, or if you don’t actually have a point. And it was just as easy to transfer funds to the Caymans in the 90’s as it is today. But is there any possible fact set that could dissuade you from your rather Platonic theories?

    2. You seem to be saying that if the minimum wage laws, the immigration laws, and any other laws impacting wages, then the double equilibrium point would disappear. I don’t see that you’ve made a case. But as a matter of curiosity, when you have reduced the mass of labor to subsistence, where do you think demand will come from? After all, there are any number of subsistence economies, and they don’t seem to be doing all that well. But if you think they are, I’ll bet we could arrange for you to take a job in a garment factory in these places. And rest assured, we will see to it that no one takes any money from your paycheck to pay for welfare benefits. Indeed, there seem to be any number of places on the globe were wages are set by the free bargaining of the market; none of them seem to be the Workers’ Paradise you are predicting for this method.

    And in 3, you seem to be admitting that there is no actual data to back up your theory, but you are going to hold it anyway, because there would be evidence if only the researchers were as smart as you are. Ooooo-kaaaay. And as far as “free bargaining” being able to set fair wages, Adam Smith–and anybody who has actually negotiated a contract–debunks that theory. Negotiations turn on the relative power of the parties, not their productivity. The seamstress in a sweatshop makes a pittance not because her productivity is low, but because her power is pitiful.

    4. Got no quarrel with your statement of the work being outsourced to janitorial operators; but this has increased with the lowering (actually, the doing away with, for all practical purposes) of marginal tax rates. There seems to be something else in play. Could it be the lack of rights and laws that protect janitors, combined with an insatiable greed on the part of their erstwhile employers? Just a thought.

    But then it really gets confused here. After telling me how bad the system is, you reverse course to claim it has generated more wealth in the long-term and resulted in a greater increase in the standard of living for the ordinary worker… Well, which is it? Both statements can’t be true. No one’s seen any thing close to a “pure” free market system at least since 1933, and likely since 1873.

    Besides your claim isn’t factually true. Wages peaked in the 16th century, before collapsing in the 1530’s. Up to that time a craftsman could provision his family with 10 weeks of work, and a laborer with 15. After the 1530’s wages collapsed and would not recover until the 18th or 19th centuries. The point is that the world has gone through any number of ups and downs, the downs usually occasioned by those who had no regard for actual evidence in the formation of their idealistic theories.

    Nor are your claims about Argentina true, since it was under the tutelage of the “Chicago-School boys” that the economy collapsed completely, bank accounts were frozen, and the country seized up. You seem to be engaged in a re-write of history.

    And I can see why you would be offended by “epistemic arrogance,” or indeed epistemic anything, since a contact with reality would only corrupt the purity of your Platonic ideals. But as a matter of curiosity, what is the color of the sky over there in La-La Land?

  6. 1. It actually is easier to move your money to the Caymans now than it was in the 1980s or 1970s because of a little thing called digitization. What matters is not absolute tax rates but relative marginal tax rates. Look what’s happened to the corporate tax base as other countries have cut corporate taxes while the United States keeps them the highest in the world. I furthermore don’t understand -are you really denying the capital flight effect? Because there’s literally a mountain of empirical evidence supporting it in numerous cases.

    2. Look at the American economic experience before the minimum wage laws & free immigration laws. Furthermore, the “reduction to subsistence” is sophistry. The societies closest to subsistence now are usually the most socialized. The societies furthest to subsistence are the least. Do you think a man on the dole is better off than a man who has a job and can rise through the ranks? Further, any decrease in the cost of labor translates to an increase in relative purchasing power, which translates into wealth for everyone in the long-run. What matters in an economy is ultimately goods, not labor. The Marxist labor theory of value has been shown to be bunk.

    3. You’re not really saying anything worth responding to in 3.

    4. Insatiable greed exists under every system. Blaming greed is like blaming gravity. I made no correlation between the number of janitors and marginal tax rates. My point had to do with what would happen regarding the proposal about limiting the pay of a corporate executive to 100 times the janitor’s pay within a company.

    5. It’s not wages that ultimately counts, it’s standard of living. Are you really telling me that the standard of living of the common man was higher in the 1530s than it is today? Because that’s easily the most ignorant proposition I’ve ever heard. I’d challenge you to convince even the most depraved people on the dole today that they would actually be better off in 1530s Munster.

    The “Chicago School Boys” weren’t even around when Argentina began its downward spiral. And Peronism certainly owes nothing to the Chicago School, or any of the wage inflation that ravaged Argentina in the 30-50s. Or do you maintain that Milton Friedman sparked wage inflation in Argentina when he was just a boy studying at Rutgers?

    Please, refrain from the ready-made references to “Platonic ideals” and implicit psychoanalyses that are a response not to what I’m saying, but to some imaginary opponent somewhere. If you knew anything about me, which you don’t, and apparently don’t need to, you would know that Platonic ideals are the last thing I have.

  7. P.S. The existence of a degree of nuance doesn’t void the existence of a degree of clarity. The existence of gray doesn’t void that of white. No system has ever been 100% any ideology. But when you compare economic freedom with economic growth there is a precise correlation. And the extent to which an economy veers from pure economic freedom directly translates to adverse effects on growth.

  8. “The societies closest to subsistence now are usually the most socialized. The societies furthest to subsistence are the least.”

    So the U.S. and Western European nations have the least socialized economies in the world? Has the increased distance from subsistence in the U.S. and Europe in the last hundred years been the result of a proportionate decrease in “socialism”? That’s a weird history you’re writing there.

    I readily admit that I don’t understand economics (though vanity also compels me to doubt whether anyone else does either), so I can’t really tell whether Medaille is as right as he thinks he is, but I can’t really see how claims like the one I’ve quoted above could be true without a very fat and multi-layered ceteris paribus clause thrown out in front of them. I find it quite empirically plausible, from my limited knowledge, that there is a broad positive correlation between economic freedom and standard of living. What seems implausible to me, both off-hand and looking around at the world, is that economic freedom is the only thing that contributes to increased standard of living and that it always so contributes. But then I suspect very little headway can be made in this discussion unless everybody gets clear on just what they’re talking about — since, for instance, Medaille seems to think that the U.S. *ever* had something “close” to a “pure” free market (how is a slave economy a free market economy?) and Publius seems to think that we had one until some imbeciles passed a silly minimum wage law. It may also be worth wondering out loud whether appeals to “standard of living” are very likely to have much weight at FPR, where lots of the contributors and readers believe (recognize, I would say) that certain aspects of what we call a “high” standard of living tend, in fact, to make people far worse off than they would otherwise be.

    But I digress…

  9. “So the U.S. and Western European nations have the least socialized economies in the world? Has the increased distance from subsistence in the U.S. and Europe in the last hundred years been the result of a proportionate decrease in “socialism”?”

    Umm, yes. The measure of economic freedom isn’t just levels of taxation & government spending. It includes trade freedom, freedom to start a business, property rights, labor freedom, monetary freedom, investment freedom and other facets. By those measures Western nations & a handful of other non-Western nations (Hong Kong, Singapore, Macau, Chile, Japan, Qatar come to mind) have the freest economic systems. That’s not say those systems are absolutely free, but they are relatively free.

    Economic development in all countries in the past two hundred years has absolutely been relative to the degree in which they moved towards freedoms of those kind. That’s not to say that any country has developed under a completely free economic system, but that comparing countries with otherwise similar socioeconomic factors (say, Chile and Peru or ) the differing degrees of development can absolutely be pinned down to the differentials in economic freedom (indeed, it is very difficult to find any other differential that explains the growth).

    If you compare levels of real median income (read: real growth in the wealth of the “common man”) to levels of economic freedom, there is absolutely a positive correlation.
    http://filipspagnoli.files.wordpress.com/2008/06/economic-freedom-and-income.jpg
    There’s a chart showing that that plots every country in the world. You can take that chart through history and find it to be true.

    Moreover, the debate over whether a standard of living is really desirable for the “ordinary man” boils down to condescension. Jason Peters might find that he is not better off when his wealth increases by conventional measures, and that’s just fine, but he has no right to prevent a working-class man from believing that he will be better off through a wealth increase and acting accordingly. Judging from all the (rightful) groaning about unemployment and the stalling economy, I would say that the vast majority of Americans, and especially the unemployed, do not share the Front Porch view that they might be “better off” with a lower standard of living. The point is not merely whether you think they’re better off -the point is that they ought to be free to decide for themselves what they think, and act accordingly. And when left to their own devices, most people usually decide that a higher standard of living is better than a lower one. No one coerces them into believing that; they choose. And people who choose otherwise have no right to make that choice for them.

  10. P.S. Regarding the relative freedom of the U.S. market. I’m not saying we, or any country, has ever had a pure free market. But that goes back to my point that gray doesn’t invalidate the existence of white. You mention slavery, which is an excellent example. Slavery absolutely is no part of a free market. And look at the differentials in growth and income between that part of the U.S. that held slaves and that part of the U.S. held no slaves but let its citizens be crushed by “robber barons” (until about the 1910s); the freer part was by far the more prosperous part, even before the war, and the one that sustained the far greater increase in the wealth of the common man. Also, you may be interested in Adam Smith’s analysis in “Wealth of Nations” of the relative poverty of the freeman in Roman society due to slavery in and how that poverty occasioned both political corruption and military aggression.

  11. Publius, you say there are no pure free markets, and I agree. Indeed, that is the point. The system you praise as producing so much wealth is in fact a mixed system, but the system includes all the things you say it shouldn’t, like the minimum wage. Historically, you simply cannot make a statement that “free markets” work better because there are no things, as you admit. The only thing you can do is compare degrees of mixed markets. The plain historical fact is that the “purer” a “free market” system is, the poorer it functions. We can see that in our own history. In the period between the Civil War and WWII, the US economy was in recession or depression an astounding 40% of the time. Since the war, by comparison, we have been in recession 15% of the time, even including the current debacle. If you wish to return to those “purer” days, fine. But there ought to be some truth in advertising, some statement that, “Hey, depressions are fun! Creative destruction and all that.”

    As far as Argentina goes, as quirky as Peronism is, nothing that happened on his watch compared to the horrors of what followed. He did not have thousands of “disappeareds”; nor did he freeze bank accounts (after first alerting the rich and allowing them to ship their money to Spain) so that no one could write a check or withdraw a single peso.

    As far as Hong Kong goes, they do not have property rights in our sense. The government owns 100% of the land and leases it to developers. (In Singapore, the government owns 77% of the land.) Both were founded as Georgist states. And the government subsidies housing; it has to, because without the subsidies, the working class could not afford such high valued real estate. For all the lovers of irony out there, it is the Chinese Communists who have re-introduced the notion of private property to the former British colony.

    And Qatar as a model of “freedom”? Oh, please.

  12. John,

    I’m glad we agree on the non-existence of the pure free market. Where we seem to disagree is that you say the deviations from that market are precisely what have allowed the growth in the various countries. I say the deviations are precisely what has limited and capped growth. My reason is empirical, not ideological (my ideological sympathies, you should know, were distributist not so long ago). When you isolate the deviations and compare them to other countries, you find that they don’t help, they hurt.

    Which is to say, look at two very similar socioeconomic countries. One has wage controls, tariffs, strong labor unions. The other has strong labor unions, no wage controls, no tariffs. The other one is more prosperous. Does it make any kind of deductive sense to say that the latter one is prosperous because of its labor unions? The natural conclusion, rather, is that it is prosperous because of its lack of tariffs and wage controls.

    Re: Argentina & Qatar. The “disappeareds” are no part of a free market, & Qatar is not politically free. I didn’t pretend otherwise. Economic freedom is distinct from political freedom. Economic freedoms are necessary but not sufficient for human freedom; but they are sufficient for economic prosperity. As for the bank shutdowns, what you are missing is the financial history behind the bank shutdowns, i.e. the crippling inflation which is what happens when you force an above market living wage.

    The problem with distributism is that it must make a choice; are distributist arrangements voluntary or ought they be coerced by government? If they are voluntary, then distributism can operate within the free market. If they are not voluntary, but coerced by government, then distributism is a species of planned economy and doomed to failure. Is distributism saying that a corporation should pay a living wage & would were it not for various grants and benefits that have been unjustly given it, or is it saying that a corporation should be made to pay a living by mandate? There’s all the difference in the world.

    As for Hong Kong, you have it exactly backwards. Because the government owned 100% of the land, in the face of growing demand, housing and land prices skyrocketed beyond market value & government then had to step in to build public housing to make it affordable. The inaffordability was due to government ownership and occasioned more government intervention, not the other way around. Which continues to prove my point that when you isolate the variable through which any country deviates from economic freedom, you see it has negative effects on the economy. (http://www.ceauk.org.uk/2010-conference-papers/full-papers/KC-Wong-CEA-final.pdf)

    Nor do Singapore’s subsidies bolster your argument. Again, these subsidies first became necessary because of government ownership of land. But beyond that, the HDB in Singapore explicitly moved from a policy of “affordable housing” to “market pricing” because of the distortionary effects of affordable housing. That means the government tries to guess the market price and claims it sells its flats at that price. This is a strange system & it will probably put a severe fiscal strain on the government in the future. In the meantime, it pushes the prices of non-subsidized housing (private housing) very high & reduces the number of private-owned homes (isn’t private home-ownership the cornerstone of distributism?).

    Many, many Third World countries have subsidies for public housing and government ownership of land. What those countries do not have that Hong Kong and Singapore do is the commitment to other economic freedoms. Hong Kong & Singapore are therefore wealthy in spite of, not because the public housing subsidies and government land ownership.

  13. Publius, you claim that your beliefs are empirical, not ideological, but then you provide a series of examples which are all–without exception–counter historical. Then you top it by finishing with a statement in the form, “Yes, they are rich, but they would have been richer if…” Now, I leave it to others to judge whether you really have the ability to know the result of a counter-factual. But what I can say with perfect confidence is that such arguments cannot in any sense be considered to be “empirical.”

    You start your “empiricism” with a counter-historical claim about tariffs. The truth is that no great nation got to be great by following free trade. The United States was the most protected economy until the Second World war, with Britain in second place until 1860. It wasn’t until these nations achieved a dominant position in manufacturing that they began to preach free trade. Their very dominance gave them a “comparative advantage” that made tariffs unnecessary for their own economies, while brow-beating other countries to drop their own tariffs meant that they would never be able to compete. The history of free trade is a history of failure. Every country that followed the free trade line, followed it to disaster. In the so-called “third world,” growth rates were much higher before trade liberalization than after; and by the way, that liberalization was forced on them by the so-called Washington consensus acting through the power of the IMF and WB. Now, you claim that you have made your determination “empirically”; could you possibly share your data with us, because in all of modern history, I don’t know of a single exception. Perhaps you can supply it for us, based on your “empiricism.” Every great trading nation that I know of got to be great by protecting its home markets. What is the exception that you can offer us? There are, to be sure, failures with protectionism, but there are NO successes without it. Unless I am sadly mistaken, and if I am, I am sure your empiricism will be the corrective.

    Further, the protection of markets is not confined to tariffs, and protectionism continues to this day, for everyone but us. In the case of Britain, even after it proclaimed “free trade,” it was still the head of an extensive empire, for which it unilaterally set the terms of trade, so the claim rang hollow for the colonies. The border-adjusted VAT of the euro-zone is actually an import tax–export subsidy scheme, and currency manipulation (eg, the Chinese) also has the tariff-subsidy effect. And Japan protected its home car market by excessive “inspections” of American cars, and did so until its own industry achieved a world-trade status. There are many ways of protecting markets other than tariffs.

    As for housing in Hong Kong, you seem to be claiming that high-density urban land would be cheap without government interference in the housing market. Is this your claim? Okay, what’s your example, because I can’t think of one. It would defy any land economics that I know of. The situation in HK is especially revealing. HK, unlike say, New York, has no place to expand. It had the sea on one side, and a dark and hostile tyranny on the other. Its choices were to allow a free market in housing, thereby driving up labor rates (or driving out labor) such that its goods would be non-competitive in international markets, or to socialize and stabilize a portion of the market, in order to be a trading nation, the only real option open to it. These judgments are not abstract, but prudential.

    I started off this by noting your claims struck me as “hollow incantations,” and nothing I’ve seen since have has dissuaded me from that opinion, and certainly not this foray into “empiricism.” And most unconvincing of all is the claim, “Yes, they’re rich, but they would have been richer if only they listened to me.”

  14. Mr. Medaille, I am sorry that you find yourself incapable of distinguishing between a counter-factual and a comparison.

    As for your claims about the United States, there were quite a few tariffs in this country. That was because there were otherwise few taxes -tariffs were the main source of federal revenue. The combination of that revenue with concerted special interests made it politically desirable for certain factions of both parties to promote tariffs.

    However, a tariff cannot help but impoverish a country. You see the benefits (they accrue to the favored industry), but you don’t see the costs (you don’t see the industries that aren’t there). A tariff cannot work but by making a few producers better off at the expense of the great many consumers. Every isolated reduction of tariffs has translated into a corresponding increase in economic welfare. I am sorry to be so unpleasant as to recommend an actual economics paper, but read this one: http://wber.oxfordjournals.org/content/22/2/187.abstract

    The conclusion? “Analysis based on the new data set suggests that over the 1950–98 period, countries that liberalized their trade regimes experienced average annual growth rates that were about 1.5 percentage points higher than before liberalization. Postliberalization investment rates rose 1.5–2.0 percentage points, confirming past findings that liberalization fosters growth in part through its effect on physical capital accumulation. Liberalization raised the average trade to GDP ratio by roughly 5 percentage points, suggesting that trade policy liberalization did indeed raise the actual level of openness of liberalizers.”

    Re: HK. I didn’t say it would be cheap. I said it would be cheaper than w/ government ownership but w/o affordable housing. Government ownership + affordable housing of course is cheaper on paper, but it masks the fact that more people move into a city than would otherwise. That surplus population can be problematic in different levels (for one example, increased urban density can be linked to declining, below replacement population levels which eventually cause massive fiscal and social crises).

    Moreover, every great trading nation did not get to be great by protecting its home markets. Almost every nation protects its home markets. The difference between the greatest trading nations and the less great ones are that the greater ones have less protection compared to the impoverished ones, not more (controlling for other factors -yes, the U.S. had high tariffs, but those allowed very low taxes).

  15. Publius, you say that I am incapable of distinguishing between a comparison and a counter-factual, and in this, you are quite right. I had assumed that a comparison would be between facts, and you say, no, it’s not between facts. Okay. Now we agree on something: you have no facts.

    Indeed, all of your evidence thus far has been “BUT-evidence”: “True, there is no evidence for my claim about wages, BUT they don’t know where to look.” “True, off-shoring has increased with lowered tax rates, BUT that’s due to easier transfers.” “True, nations grew rich with subsidized housing, BUT they would have been richer if they had taken my advice.” “True, all trading nations protected their home markets, BUT…” etc. Those sure look like counter-factual claims to me, BUT you call them “comparisons.” Fine. BUT one can always make BUT-claims (ceterus paribus, and all that) BUT they do not constitute evidence; they are touching statements of faith, a dearly-held faith, no doubt, but the science lies elsewhere.

    Now you make some claims that can only be called “factual,” but in fact are counter-factual. For example, you claim that the richest nations had relatively lower tariffs than poorer nations. Counter factual. To repeat, the United States had the MOST protected economy (industrial tariffs averaging 45-55%) and Britain the SECOND MOST. And the pattern repeats itself in every successful trading nation: Japan, Korea, Taiwan, China, Germany, etc. Where are the exceptions?

    You point me to the abstract of an article. Well, they want $32 to read the article, so I think I will pass. But here’s from an economist for free (Ha-Joon Chang): “Growth performances in regions that have faithfully followed the neo-liberal recipe – Latin America and Sub-Saharan Africa – have been much inferior to what they had in the ‘bad old days’. In the 1960s and 70s, Latin America grew at 3.1 per cent in per capita terms. Between 1980 and 2009, it grew at a rate just above one-third that – 1.1 per cent. And even that rate was partly due to the rapid growth of countries in the region that had explicitly rejected neo-liberal policies sometime earlier in the 2000s – Argentina, Ecuador, Uruguay and Venezuela. Sub-Saharan Africa grew at 1.6 per cent in per capita terms during the ‘bad old days’, but its growth rate was only 0.2 per cent between 1980 and 2009.”

    Chang, Ha-Joon (2011-01-02). 23 Things They Don’t Tell You about Capitalism (p. 73). Bloomsbury Press. Kindle Edition.

  16. Publius is a sincere true believer, but from his first post to his last, what rang out over and over again was, this guy can rant at length about what he believes, but unless he’s preaching to the choir, there is nothing in here that someone still trying to make up their mind could weigh, to see if he knows what he is talking about.

    I tend to agree with those who have questioned whether economics is really a science at all, and certainly whether there is such a thing as “pure” economics, divorced from politics. Every economy rests on a platform of laws and politics designed for that economy. Medaille makes more sense out of the subject than anyone from Samuelson to Laffer to Marx.

  17. “Insatiable greed exists under every system. Blaming greed is like blaming gravity.”

    This would be true only if gravity were an inherent evil. While one’s economic system, whatever it is, must necessarily account for greed, one need not take the next step and baptize it.

  18. Publius demonstrates an inability to actually respond to the philosophical and normative criticism of modern economics propounded by Mr. Medaille. His only redress is to resort to the tired and mythical fact-value distinction by claiming that he is merely an “empiricist.” However, this sort of lazy relativism will not do. While he may not care to admit it, his utilitarian support for capitalism in regard to living standards, his capitalist/socialist binary scale, and his very selective use of examples, all betray him as a person very engaged in values and ethics, whether he will admit it or not.

  19. One other point: Publius is avoiding the real argument. He argues that capitalistic systems are the most just because they are the most efficient and that distributism is inefficient and reliant upon socialistic designs of the state. These claims are problematical because (1) he does not substantiate the position that utilitarian concerns should be primary and (2) he is making claims about an economic model that has not been implemented on a widespread scale. One would think that an empiricist would be more careful.

    Mr. Medaille, on the other hand, substantiates his approach with a discussion of justice and ethics. As long as the economic system he advocates delivers on these normative grounds, he wins the argument. He does NOT need to demonstrate that distributism is the most efficient or utilitarian system because those aren’t his claims. The only problem he has is whether distributism is sustainable on a widespread scale of implementation.

    The point to all this is that because he makes a philosophical case and substantiates it with examples, as few as they are–though that is due to a lack of evidence and not any fault on his part–Mr. Medaille is the clearer and more reflective thinker, while Publius, who smuggles in his assumptions without substantiating them, is the Priest preaching dogma.

    • It is the standard tactic to deal with distributism by screaming “Socialist!” This is an odd claim, given that socialism concentrates property in the hands of the state, while distributism does the opposite. People with their own productive property can be independent of both corporate and public bureaucracies, and hence can be a source of opposition to both. The claim of “socialist” is especially ironic when it comes from Austrians in light of the fact that the nearest thing in captivity to a functioning libertarian system is the Mondragon Cooperatives of Spain. There they have not only worker-owned production systems, but school systems, training institutes, social safety networks, R&D facilities, banking systems, even their own university, all without government help. Nor is Mondragon unique in this; thousands of distributist enterprises exhibit the same self-organizing social tendencies apart from the government. Hence, the actual successes of Austrian libertarianism are exactly zero, while the “libertarian” successes of distributism are multitudinous.

      As for the claim of “efficiency,” this word should never be taken at face value; you have to ask, “Efficient at what?” Efficient at creating vast piles of personal wealth for a few clients of the system, or efficient at the material provisioning of society, which is after all the purpose of an economy. To call the current system of waste, fraud, and abuse, in both public and private bureaucracies, “efficient” is some sort of sick joke. The truth is that “capitalism” has always meant “state capitalism” because no other form is stable. Capitalism is not the alternative to statism, but its economic manifestation.

  20. Agreed. I would also add that his criticism of distributism is socialism because it would involve government enforcement of a distributist model of organization is a case of special pleading. All but the most anarchic liberals claim that the purpose of government includes the enforcement of contracts and prohibitions against activity that violate property rights. Why is government enforcement of the liberal model then not similarly socialistic? Why is this particular model exempt and, if it is, how is this not a case of special pleading on behalf of the liberal model? Furthermore, how does this criticism of distributism not render socialism as a category so broad as to be useless, effectively rendering all government activity anywhere as socialistic?

    This capitalism/socialism binary is too elastic. The theoretical slippage employed by Publius and other liberals renders the category too problematical.

    For fun: http://www.youtube.com/watch?v=7QDv4sYwjO0

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