Jul 3, 2014

In the Grip of Forces Beyond Their Ken - a guest post on Economics

  HRH Richard recently posted a link to an article about Distributism as an example of the uphill battle we face merely to undo the misconceptions others hold about the very core concepts of Distributism. The author of the piece, Kevin D. Williamson, makes the most common of errors: thinking that 'Distributism' is about 'controlling or planning the distribution of goods'. As I said, this is a very common error, but a profound one. 
  More critically it demonstrates clearly and directly that Mr. Williamson quite literally does not know what he is talking about
  Of course Mr. Williamson also reveals a painful ignorance of human history. He writes,
  "In the 200,000-year history of Homo sapiens, neither of those great religious traditions [Buddhism and Catholicism], nor anything else that human beings ever came up with, made a dent in the poverty rate. Capitalism did."
  If it were not said with such earnestness I would assume this was clumsy satire. But I must conclude that Mr. Williamson is, in fact, totally ignorant of the huge impact of the monastery system upon European, North African, and Middle Eastern poverty.
  Yes, many of the gains the Church won between 600 AD and 1600 AD were wiped out as  the common man suffered from Islamic invaders as well as by the dismantling of the monastery system in Europe by the Industrial Revolution, both of which  returned vast swaths of people to poverty. Mr. Williamson also seems ignorant of the fact that the nutrition and calorie count of a Medieval British peasant was better than a modern British citizen until the mid- to late- 20th century. And, of course, the medieval peasant had more leisure time and more of them were self-employed than a modern worker under Capitalism. 
  I am sure that the lack of debt-backed money in the peasant's pocket will be profound to Mr. Williamson in some manner, but I remain unconvinced that a British citizen of 1930 was substantially better off than a British citizen of 1330.
  It could also be pointed out that the greatest increases in human prosperity came from: the aftermath of the Black Death; the development of the various manorial systems we lump together as Feudalism; the monastic system previously mentioned; and the economics system called Mercantilism. In an historical analysis of economics and prosperityCapitalism is a flagging fifth at 'making a dent' in poverty!
  Then again, Mr. Williamson thinks Distributism would involve 'the State' deciding wages, union rules, etc. which, of course, Distributism explicitly wants the State to have as little to do with as possible.

  Mr. Williamson, who I must admit is consistent in error, also states,
  "Catholic thinking about the role of the state has evolved precious little since “render unto Caesar"..."
  Again, if he were not so earnest I would assume this was a joke. But it is a rather telling mistake. Indeed, all Mr. Williamson is doing in this sentence is admitting he is totally ignorant of an entire branch of political thought that includes works such as Augustine's The City of God, Aquinas' Summa Theologica, More's Utopia, and scores more books, many of which are considered essential reading for any serious student of politics or economics....

  Mr. Williamson does make arguments for Libertarianism.
  Well, actually- he has a series of clumsy emotional appeals, typically as part of childish jabs at the Church. These gems include such things as calling Distributism,
   "...a 19th-century [sic] model of economic analysis..."
  Does he consider Capitalism 'an 18th Century model of economics'? If not, why not? Distributism is, yes, based upon philosophical discourse that began in the 19th Century, but it was not even named until the 20th century and growth and development continue to this very day.

  Of all the various childish barbs he spouts, though, my personal favorite is this quote,
  "“The poor you will always have with you,” Jesus said, but in the capitalist world, that simply is not true"
  I must admit; I am not sure if I am more impressed with his disregard for the many poor that still exist within the realm of Capitalism or his unmitigated gall in implying Capitalism trumps Christ.

  Regardless, this article did little more than to convince me that Mr. Williamson is an ignorant hack with an axe to grind with the Church because it wants all activity to be moral and ethical, including business.
  If this sounds harsh and uncharitable to you, please understand - Mr. Williamson has decided to not just argue about economics but take a very direct stance of attacking the Church and its bishops. He has demonstrated that he is no gentleman both in this article and in his public conduct.

  So why am I writing an obscure writer of demonstrated limited knowledge of the topics he writes about?   There are two reasons; Mr. Williamson has waded into a discussion of Distributism and Mr. Williamson released this article today. The critical quote in the piece is not his discussion of profits (after all, just profit is a key element of Distributism) but rather this interesting quote,
  "...large, powerful firms such as McDonald’s and Walmart are effectively unable to raise prices, and firms such as Goldman Sachs and Wells Fargo are unable to dictate wages."
  This is a profound statement from a Libertarian. This is a claim that 'large, powerful' corporations are effectively helpless; gripped by economic forces of the market so pervasive, so powerful, so primal that there is nothing they can do to affect them; like ships in a typhoon, they are tossed about by wind and wave, helpless.
  Let us assume that Mr. Williamson is correct - in a laissez-faire Capitalist free market system (or however close we are) macroeconomics are so overwhelmingly true that a large firm is powerless against them. Let us also assume that the rest of his contentions are likewise true - no object has an objective value; there is no such thing as 'just wages' or 'a fair price'; etc. And, of course, a host of other things that neo-classical economists wish to be true.
  Together, these things imply that, if Mr. Williamson is correct, then large firms cannot be 'powerful' but are, rather, powerless. And we should therefore conclude that large firms are objectively bad because they obviate choice and thus remove freedom. Small firms do, indeed, trump large ones.
  Such is a key tenet of Distributism.

  But since Mr. Williamson has demonstrated that he is an ignorant hack I am hesitant to trust his analysis here. Just as I know that Rational Choice Theory is false I also know that the price for a charcoal grill at the local Walmart wasn't written by the Invisible Hand of the Market. As surely as I know that the theory of General Equilibrium is too off from reality to fit it, I also know that wage levels do not appear, pre-approved by the spectre of Adam Smith, on a whiteboard in Goldman Sach's HR department each Monday. 
  Further, if Mr. Williamson's contention were true there could never be a monopoly - any firm large enough to be able to constrain the market  would be too large to perform the actions needed to actually constrain the market.
  Yes, I am aware that some Libertarians claim that monopolies can only arise via governmental interference. I dismiss this for the claptrap that it is. Any analysis of the Standard Oil monopoly development proves this to be a falsehood.
  
  A key point to remember whenever thinking of economics is simply this - 'economics' is just a subset of 'human interaction'. Any claims such as, 
'morals and ethics have no place in economic theory'
  or, 
'large firms are so bound by the laws of economics that they cannot set prices or wages' 
you should translate to be,
'Morals and ethics have no place in human interaction'
  and
'large firms are so bound by human interactions that they can't set wages or prices'
  These claims, when understood for what they are, are laughable.  

  It does paint a chilling image of how Libertarians must see the world; a huge, impersonal place where they are not 'people' but merely 'labor' and the Iron Laws of Economics are so powerful that billionaire CEOs with HR departments staffed with scores of highly-educated wage and staffing specialists are unable to change prices or wages. 
  I prefer reality.
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