Georgism & Distributism: an “Existential” Dialogue

The Vocation of Business: Social Justice in the Marketplace by John Médaille, 2007, Continuum Press, New York. Review by Lindy Davies

Let’s imagine that there exists an idea. Upon examination, it is revealed to be more than just “an idea;” it’s a system — clear, consistent, elegant, useful; indeed, it offers solutions to problems long deemed intractable. If this idea, this body of potentially vital knowledge, is so obscure that scholars in its field see no need to mention it, then does it actually, uhmm, exist? If the voice of God utters a “sovereign remedy” in the wilderness, has it made a sound?

This thought occurred to me many times while reading John Médaille’s The Vocation of Business. The book is fascinating, authoritative and well-written; it has much good to offer. Médaille is a business professor, and a Catholic; the Catholic social teaching and the doctrine of Distributism are vitally important to him. The theme of this year’s CGO conference in Scranton was right up his alley, and he regretted not being able to make it (and he’d have made a very good presentation there, I don’t doubt). Seriously: I had many good reasons to like this book, and I found it very engaging — but deeply frustrating.

Now, we’re all familiar with the stereotype of a “cranky old Georgist” who listens for the one note that’s never heard, bitterly denouncing every singer for not singing it. That’s the kind of thing that gives the heebie-jeebies to Foundation Directors when they have to appear in public with the Georgist rank & file. So, I beg the reader’s indulgence while I rant like a cranky old Georgist — for just a moment.

In Médaille’s first section, “The Historical Background,” he carefully develops the history of moral concerns in economic thought, from “the preacher as economist,” starting with Aristotle and St. Thomas Aquinas, through the utilitarians and the marginalist revolution. He continues on, through the 20th century and “the Keynesian revolution” and “Utility triumphant,” but conceptually these were afterthoughts, reaction and counter-reaction to the fundamental quandary that was put to economics in the industrial fruition of the late 19th century. Out of this historical turning point emerged the ghastly formulations of Karl Marx — and the beacon of Pope Leo XIII’s encyclical Rerum Novarum, inspiring and undergirding the Church’s subsequent social teaching, which Médaille covers in detail. The history of the notion of economic justice, in other words, leads straight to Leo, and Leo’s response must be understood historically (and therefore, conceptually) as seminal.

Out of this historical turning point also came (by the way) Henry George. George understood the importance of the time in which he was writing, which is part of the reason why he felt compelled to issue an open letter in response to Rerum Novarum. It was an audacious thing to do, in many ways — but we should remember that in those days George was a household name.

Nowadays, alas, the very existence of Georgism is an open question. I have written before about my conversation with a panhandler in New York City; after plunging my hand reflexively in my pocket and finding nothing but a $20 bill, I was forced to admit to the man that I couldn’t afford to give him that. He didn’t mind. “I’m just glad you talked to me,” he said, “So many people act like they don’t see me, I start to wonder whether I’m even here.” As I have worked, over the years, to get out the good news of the Georgist remedy, I have never been able to forget what that man said — and never more so than as I read The Vocation of Business. Médaille develops the moral elements in economic thought, patiently, clearly, in a way that makes perfect sense — well, it would, at least, had Henry George never lived or published any books.

It’s not that Médaille hasn’t heard of George, or isn’t complimentary toward LVT; he has, and is. Later in the book he describes Taiwan’s Georgist-inspired “land to the tiller program” as a shining example of a society taking strides toward the ideal of Distributism. He even says, in the Taiwan chapter, that although this book isn’t the place to do it, Georgism “deserves a fuller treatment,” and he offers a brief, but correct, description of single-tax theory. “One can say,” Médaille writes, “that George socialized land while privatizing its development; it is an interesting view of the questions of the social and private values of land that we have previously examined.” Indeed it is. It is even, arguably, a way of reconciling the contradictions regarding questions of property and land that the earlier discussion leaves open — but George’s political economy is not mentioned there, where its relevance is greatest.

I hasten to say, however, that these complaints are not accusations of dishonesty on Médaille’s part; if anything, they point to a failure of Georgist educators to communicate the full symmetry of Henry George’s political economy, rather than focusing on the tactic of the single tax. This leaves the family tree of political economy maimed, as if by a lightning-strike, of a major limb. Even though the tree is cobbled and cabled together in extraordinary fashion, if we forget that the Georgist limb was ever there, the tree appears to be growing in a more-or-less normal way.

Médaille traces the development of two facets of justice in economic thought. Corrective justice is the notion of “justice in exchange;” the idea that equal values must be given in exchange, that goods must not be stolen, nor exchanges coerced. Distributive justice is the way in which society divides its (variously defined) common goods.* The tension between these two ideas of justice is shown in the development of two basic concepts of classical economics, the Labor Theory of Value, and the Law of Rent. The work of Adam Smith is seen as teetering between the two, embracing the labor theory of value, while affirming the efficient action of the invisible hand. Yet this is not schizophrenic, Médaille notes, but “merely the recognition of the two kinds of justice which must be part of any economic system.” Whereas “Smith’s heart went out to the workers,” Ricardo looked out for the investors; because of the Law of Rent, workers had no claim to any wages higher than their market value, which would inexorably decline toward subsistence. Then, Marx (and other socialists) declared that if the value of a thing is the labor that has gone into it, then the market, which is ruled by the Iron Law of Wages, cannot be trusted, and the just wage had to be mandated in some way by society.

Classical economics, Médaille writes, had failed to provide the science with these crucial elements: a theory of general equilibrium, a theory of value, and a “natural law” basis for the science capable of removing philosophical or ethical considerations. This state of affairs led to the “marginalist revolution” in economics — which in turn led to “the disappearance of justice” from any consideration in today’s mainstream economics.

But it might not have needed to. Whether or not Henry George’s political economy exists today, it did at one time, anyway, and it provided those things. The recourse to marginalism, in order to lay to rest questions of distributive justice, was not necessary. George corrected the key errors that had allowed the Labor Theory of Value and the Law of Rent to lead economic science into disarray.

On value, George affirmed Smith’s insight that labor is the true measure of value, but saw that the proper measure is not the amount of labor that went into a thing, but rather the amount of labor that people are now willing to give for that thing, or a suitably similar substitute. This allows economic science to deal with the fact that some things have value independently of labor; their value arises from the obligation to render labor or its products in exchange for them.

Then, on the Law of Rent, George made the crucial observation that improvements in productivity can vastly increase production even on poorer-quality land. This means that the natural Law of Rent cannot be the force that pushes wages down to bare subsistence — not while high-quality lands are held out of use, or barely used — as they pervasively are throughout the modern economy. George’s corrections on the Law of Rent and the Labor Theory of Value provided the foundation for a coherent system of political economy that could reconcile corrective and distributive justice — and this is what Henry George was so urgently trying to tell Pope Leo XIII.

The thing in George’s message that Leo was just not trying to hear, though — and which has framed the Catholic Social Teaching ever since — is the issue of private property in land. All of the doctrinal statements affirm the primacy of distributive justice, saying that property must not be seen as “absolute,” that it has a “social component,” that it cannot be enjoyed in good conscience while widespread poverty persists. But never is the church willing to address the idea that property in land is different from property in other things. In fact, property in land is, for Leo (and for his later interpreters, right up to John Paul II) a good and blessed thing. In Rerum Novarum we read

For it is a most sacred law of nature that a father must provide food and all necessaries for those whom he has begotten; and similarly, nature dictates that a man’s children… should be provided by him with all that is needful to enable them honorably to keep themselves from want and misery in the uncertainties of this mortal life. Now, in no other way can a father effect this except by the ownership of profitable property, which he can transmit to his children by inheritance.

It is absurd to think (as some Georgists seem to) that this amounts to an aristocratic or Malthusian position, that the opportunites of a righteous life should only be extended to current landowners and their fortunate descendants. Not at all: it leads to the philosophy of Distributism. Private ownership of land, far from being evil, is such a good thing that it should be extended as widely as it possibly can be, “and every man, ‘neath his vine and fig tree shall live in peace and unafraid.” And, much in the same way that the single tax is the great tool of Georgism, the great tool of Distributism is the Just Wage.

Médaille admits that this moment in history may not be the most opportune time to talk about this, as globalism and the “race to the bottom” erode wage gains in every labor market that has enjoyed them. (Maybe Distributism doesn’t exist, either.) However, he notes that today’s global marketplace is unsustainable in many ways — and he ought to get no argument from Georgists on that point. He argues that we must, for our own health and our planet’s, consider more than our short-term bottom line in our economic decision-making.

The most obvious question about the Just Wage, of course, is how to quantify it. Médaille takes a brave stab at this; he notes that the take-home pay of most workers today is augmented from two sources: government welfare, and usurious consumer lending. These amounts could provide a broad guideline for the amount of aggregate income that ought justly to be distributed to labor. As soon as he says this, though, he thinks better of it: people are buffaloed by screaming media into putting all kinds of hyped-up crap on their plastic — should that be part of the just wage? Perhaps not. Perhaps economic justice cannot be objectively determined outside of a society whose citizens exhibit the kind of values that would enable a healthier lifestyle, on a lower income level than what folks are currently borrowing to maintain. But, obviously, this cannot be a matter of public policy, at least not in a secular society. So, the just amount of wages is, and, I’m afraid, will remain, a hopelessly indefinite figure.

Again and again during the Catholic\Georgist sessions at the Scranton conference, Georgists made passionate pleas for the exemplary social-justice results that would arise from the public collection of rent and abolition of other taxes. And again and again, the Catholic commentators replied, “That sounds like an OK public policy; nothing sinful about it. If you want to advocate that, God bless you, but the Church doesn’t get involved with fiscal policy.” Like many Georgists, I tended to feel that was a cop-out; my sympathies were with the libera-tionist orientation toward radical social change. Having read Médaille’s book, however, my understanding of these matters has evolved a bit. I can now see that Distributism is not — and when the chips are down, doesn’t really claim to be — an economic policy, but rather an attempt to coherently apply the moral principles of Catholic theology to economic life. Maybe that is an even harder job than getting people to see the cat — or maybe it isn’t — but we ought to realize that the two endeavors do not contradict each other, and they are not opposed.

The Vocation of Business seems to be aimed at business students in Catholic universities, and I hope that a great many of them buy and study it. I also hope that such students are led to take a clear-eyed look, not at the (Gasp!) seizure of landed property, but at, as Henry George put it, the science of political economy which, “in her own proper symmetry, is radiant with hope.” That might seem to be two ways of saying the same thing, but I don’t think it is, because although some might call it “the evidence of things not seen,” I still believe in the existence of Georgist political economy.

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