Property-Owning Democracy & Welfare
Distributism & Social Insurance
I just finished re-reading Hilaire Belloc’s An Essay on the Restoration of Property and The Way Out. Belloc is a writer that I would place within the traditional conservative movement. He is also, in my estimation, one of the most important political thinkers of all time. While I do not agree with his religious views and do have some disagreements with him policywise, Belloc is one of the few writers on political economy that I believe actually has his head securely on his shoulders. Alongside Belloc’s works, I have re-read Noel Skelton’s Constructive Conservatism, and, while I do recognize that Belloc’s “distributism” and Skelton’s “property-owning democracy” are not entirely synonymous, I will be using them interchangeably for the purpose of this essay. I will tell you right here at the outset that the thesis of this article is that the best ideas of Hilaire Belloc and Noel Skelton ought to be combined with the best ideas of F. A. Hayek and Milton Freidman.
The Third Way
Hilaire Belloc is famous for being, alongside G. K. Chesterton, one of the most vocal proponents of Catholic social teachings. His political ideas are based on the teachings of the Roman Catholic Church. Nevertheless, he sought to justify his views by appealing to history and political economy. Perhaps it would be more accurate to say that he was a social critic who turned economics against the economists.
Belloc notes that the concentration of ownership into the hands of the few under industrial capitalism has deprived most people of their economic freedom. He speaks of the “two evils of insecurity and insufficiency” which society must eliminate in order to be sustainable. He argues that these can be eliminated in two ways without a restoration of “economic freedom” (which consists of ownership, independence, and self-sufficiency).
The first option is what he calls the “Servile State,” which he also calls “secure capitalism” or “State-guaranteed capitalism.” This is more or less the model of capitalism proposed by individuals like Milton Friedman, F. A. Hayek, Andrew Yang, and most social democrats. The Servile State has two chief characteristics: (1) its economic system is capitalism, where the majority of the population are dispossessed wage-slaves who work for a minority of individuals who privately control the means of production and (2) it has a welfare state with a system of social insurance or social services that guarantee everyone access to the necessities, even guaranteeing a certain minimum standard of living to people who society fails to furnish with a job. The Servile State may take various different forms. Bernie Sanders’ social democracy, Andrew Yang’s “human-centered capitalism,” and the social insurance models of Milton Friedman and F.A. Hayek would all fall under Belloc’s definition of a “Servile State.”
The first thing that one should note is that Belloc’s “Servile State,” while perhaps less desirable than the alternative which Belloc himself proposes, is actually infinitely better than what we currently have. Under such a system, everyone would be taken care of. No one would be deprived of food, shelter, healthcare, etc. This is certainly more than can be said for the existing system.
The second option is what Belloc calls “Communism.” All industry is owned by the State, all the people work for the government, and the government distributes the things that they produce at its own discretion. The Lange-Lerner Model of socialism would, perhaps, be the most ideal and defensible version of what Belloc calls the “Communist State.” Ideally, everyone would be guaranteed access to all the things they need, from food and shelter to healthcare.
Belloc argues that in both of these cases the problem of insecurity and insufficiency can be eliminated. However, people are not guaranteed true economic freedom under either model. He essentially argues that people are still deprived of republican freedom. In “secure capitalism” (social democracy or human-centered capitalism) people are provided for, but they are provided for in a way that puts them at the mercy of the State. They may be free in the liberal sense but they are not free in the republican sense. The welfare state, whether capitalist or socialist, can get rid of insecurity and insufficiency but it cannot allow one to be self-sufficient, to be independent, or to be “one’s own man.” This is why Belloc calls such a system the “Servile State.” Mankind cannot be emancipated from its position of slavery without the abolition of industrial capitalism. Yet the Communist State is essentially capitalistic in spirit. The people remain dispossessed and continue to be wage-slaves (or, perhaps, real slaves). The socialism of the Communist State is really just State-capitalism. The ownership of the means of production merely shifts to the State so that government takes over the exploitative role previously held by the capitalists.
What Belloc suggests, as an alternative, is a “Proprietary” or “Distributive State” (aka distributism or property-owning democracy). Under this system, property ownership is widely distributed throughout society. And, by property, in this context, we are referring primarily to ownership of the “means of production,” or such things as land and machinery. He contrasts this to capitalism (where property ownership is concentrated in the hands of a few capitalists) and socialism (where property ownership is concentrated in the hands of the State). Belloc argues that in order to make people free, you need to put them directly in control of the means of production, which can only be done by creating a widespread distribution of private ownership.
To recap, Hilaire Belloc argues that capitalism and socialism are flipsides of the same coin. Both deprive the masses of true ownership and economic freedom. Under one, the masses are wage slaves dependent upon a minority of capitalist masters. Under the other, they are wage slaves to the State. The alternative is property-owning democracy or distributism — the “Proprietary State” — where you ensure that ownership is widespread throughout the economy so that people are self-sufficient and not dependent on either the capitalist class or the State for their sustenance. This is the third way, the alternative to the capitalism/socialism false dichotomy.
How Do You Restore and Ensure Widespread Ownership?
Belloc makes several policy proposals. In order to restore a widespread distribution of property ownership, Belloc suggests that we ought to impose various differential taxes (aka progressive taxes), restructure industry by embracing guilds and co-operatives as alternatives to capitalistic corporations, subsidize small businesses at the expense of big business, and restructure the credit/banking system.
“The principle of the Differential Tax is that a different proportion of taxation, as well as a different amount, may be applied to men in different circumstances. For instance, if you apply an income tax of zero to incomes under $2,000, of 5 per cent between $2,000 and $5,000 of 10 per cent between $5,000 and so on, that is a differential tax. Or again, if you charge an amount of $5 for taking out one license for a particular purpose, $15 for taking out two licenses, $50 for taking out three, and so on, you are applying a differential tax to licenses….
“The ways in which Differential Tax can be used to re-establish private property in the mass of men are various, according to the form of evil attacked. One obvious and primary way is to establish a Differential Tax upon the passage of property by sale: make it easier for the poor man to buy and the rich man to sell. Such a principle, applied to agricultural land, has already had excellent effects on certain parts of Europe, where the soil had fallen into few hands. When large property buys up small, let the tax be heavy. When small property buys fragments of large property and so helps to divide up property, let the tax be light and at last non-existent. In the same way Differential Tax can help to eliminate gradually — and, what is more important, to check at source — the growth of exaggerated distributing centers, big departmental stores and chain stores. The State grants a license, for instance, for the sale of tobacco. It makes that license cheap for the small man who runs a tobacco store, and more and more expensive for the big store which only makes tobacco one of the items among the innumerable ones it sells. The State taxes the individual business such and such an amount. When a chain starts in several towns, or in many places of the same large town, let each store in that chain be taxed progressively higher as the number of the stores in the chain increases until, at a certain limit, the tax makes the growth of chain stores impossible.” — Hilaire Belloc (The Way Out, Ch. 21)
In my opinion, it makes sense to advocate a progressive income tax upon these principles. Recognizing that accumulated capital is actually a means of production itself (since in order to build a factory you need both land and money), you could justify a progressive income tax along distributist lines. The wealthy should be taxed more than the middle class. The purpose of such a tax would be to eat at massive accumulations of wealth and slowly cause them to dwindle down in order to help restore property-owning democracy.
Belloc also holds that centralized types of industrial production can be restructured so that shares are owned by the workers themselves rather than shares being owned by third parties. Capitalistic corporations should be restructured as worker-owned co-operatives. In order to own some means of production, an individual doesn’t have to be running a small business himself but can simply be a dividend-earning shareholder in the company for which he works. “Have co-operative action at work by all means, but let it be in the hands of free men owning their proportion of the shares in the corporate thing.”(Hilaire Belloc, The Way Out, Ch. 24)
Belloc also advocates the revival of the guild system — this is an essential component of his plan for re-establishing property-owning democracy. Belloc asserts, “We shall do nothing toward the restoration of property unless we also re-establish the guild system…. Without property, held by the mass of citizens — there is no freedom; and without the guild there is no permanent maintenance of property.”(Hilaire Belloc, The Way Out, Ch. 22)
The socialists rightly observe that unbridled competition tends to lead towards monopoly or oligopoly. (Cf. Fabian Essays in Socialism) Under capitalism, two competitors on the free market will wage war against each other and ruthlessly try to put the other out of business. One means of doing this is by undercutting the competition. Often larger companies will temporarily sell at a loss in order to put their competitors out of business in a certain area, only to jack up the prices again when they are the only option left in town. Large stores like Walmart are notorious for such predatory pricing. They will temporarily sell items at a price below the cost of production in order to ruin small local businesses and establish a monopoly. Larger stores will also use mergers, whereby they buy smaller companies and absorb them, thereby eliminating competition. The free-market works best when there is pure competition, but unbridled competition tends to lead to the elimination of competition. What we really need is not unhampered competition but fair competition, competition within a set of rules that help foster and preserve economic justice. The guild system is the means of doing this.
The guild is an institution that has mostly disappeared from the modern world, but in medieval times the guild system helped to create and maintain a widespread distribution of property and wealth. The guild was a free association of craftsmen and merchants that functioned almost like a mixture of a union and a fraternal society but also had a regulatory function as well. Belloc suggests that we ought to re-establish the guild system through government policy, establishing a new and improved version where “the guild [is] guaranteed and supported by the state.”(Hilaire Belloc, The Way Out, Ch. 24) All the workers of a particular trade would belong to one guild and the guild would create rules and regulations to guarantee fairness and justice within the industry. Since all members of a particular trade would be equal members of the same guild and the guild would be a public institution, the guild would have an incentive to ensure fairness by prohibiting predatory pricing and blocking mergers that are not in the public interest. The guild system actually prevents unbridled competition from leading to the development of oligopoly or monopoly. The guild system helps ensure fair competition by injecting an element of cooperation into the market. Without a guild system, small businesses and craftsmen tend to be replaced by large corporations while choices are eliminated in the marketplace as oligopolies and monopolies dominate in one area after another. Small proprietors are ruined, destroying the freedom and economic independence of the individual as a producer, while also narrowing his available options as a consumer. “When new mergers destroyed the small individual owner of property, freedom disappeared both at the consumer’s end and at the distributor’s end.”(Hilaire Belloc, The Way Out, Ch. 24) The guild as a public institution will help prevent such things from occurring. In some ways this system would resemble the Nordic labor market model with its collective bargaining system, but the guild system goes much further insofar as it focusses on ownership rather than income as the primary concern.
In the modern world, businesses often require loans in order to succeed. The worker/producer must be “backed by co-operative credit: by local co-operative banks of which he is himself a member and which, in their turn, are backed by society as a whole; that is, by the state.”(Hilaire Belloc, The Way Out, Ch. 23) Belloc goes on to say, “The distributor needs credit as much as the producer does. But let that credit be confined to co-operative banks, co-operative local systems of credit, closely connected with, and working with, the guild.”(Hilaire Belloc, The Way Out, Ch. 24) The big banks ought to be broken up and replaced by smaller co-operative banks, like credit unions and mutual savings banks. Under capitalism, the banks have to be bailed out periodically. My proposal is to start by nationalizing any bank that requires a bailout, then restructure it as a co-operative bank, with the revenue from interest on loans going to its members as dividends. Once the nationalized banks are restructured, hand them over to more local (state or municipal) level governments for oversight. It may even be desirable to require such banks to offer interest-free loans to the municipal and/or state government under which they operate. Private banks for too long have been allowed to create money out of thin air by giving loans through the fractional-reserve system. Private banks have taken over the State’s role as the sovereign issuer of currency. These banks generally are not lending out their own savings but instead are lending money into existence by fiat. Nevertheless, they are allowed to keep the interest that they collect as private profits for their corporation. If the interest belongs to anyone, it belongs to society. Belloc’s banking reforms would reduce or eliminate the usurious nature of modern banking.
The State itself should also have a central role in creating and maintaining a property-owning democracy. Belloc argues as follows:
“The state is also there to guarantee the stability of well-distributed property when we have arrived at that goal, and even while we are only on our way to it. Unless laws exist which guarantee well-divided property against ruinous competition; unless laws exist which jealously watch the just price and punish underselling; unless laws exist which prevent the small man being destroyed by usury and which exclude the grabbing of credit by agencies over which the small man has no control, unless, in a word, laws exist to support the guild, to reinforce its power and to give its freely made customs the force of law over its members, there is nothing going.” — Hilaire Belloc (The Way Out, Ch. 25)
Guilds, workers’ co-ops, and co-operative banks will need to be backed by the State itself, but the role of the State needs to go beyond just backing such institutions. We have already noted the need for a differential tax, which can only be enforced by the government, but there are other important regulatory functions that the State should carry out. As the guild puts a check on unfair competition on the domestic side, the State should put a check on unfair competition from foreign producers. Belloc observes that domestic producers in a country, like ours, with adequate safety and labor standards, can easily be ruined by “goods produced under labor conditions intolerable to our society.”(Hilaire Belloc, The Way Out, Ch. 25) A producer overseas that manufactures using slave labor can, of course, always offer lower prices than our own domestic producers can, since our companies have to pay their workers and their company does not. Belloc argues that the State must be “there to prevent foreign competition from destroying the small man at home.”(ibid.) I believe the current pandemic and corresponding crisis demonstrates the folly of relying too heavily on large cheap suppliers in foreign lands rather than small local suppliers within our own nation. Marco Rubio’s recent call for the government to “introduce cooperatives to spur the creation of domestic supply chains” and “build a more resilient American economy” reveals at least an inkling of distributist sensibility. I hope we will see more of this on both sides of the aisle in the days to come.
Distributism & the Welfare State
Now, Belloc is correct in his preference for property-owning democracy over capitalism/socialism. However, I think Belloc stops short. There is no reason why a distributist economic system cannot also have a robust social insurance system. I believe that we should be striving for a distributist property-owning democracy as Belloc suggests. However, I think we should also be demanding a social insurance system that eliminates the insecurity and insufficiency that Belloc rightly observed can be eliminated even within a capitalism/socialism framework. If we opt out of the Servile State (human-centered capitalism or social democracy) and choose distributism without a robust social safety net, then we end up having something that is better in one way but objectively worse in another.
A property-owning democracy can have a social insurance system that guarantees universal access to the necessities. Property-owning democracy and social insurance need not be mutually exclusive. And the beauty of combining the two is that distributism makes a robust welfare state much easier to maintain.
Under capitalism, most people are dispossessed wage slaves. The masses are not self-reliant. Since the majority of the population are wage-slaves, a large number of people will sometimes have to rely on the welfare state for survival. When cyclical recessions set in, unemployment will increase and the welfare state will have to compensate for the lack of jobs. And, as technology advances, more and more jobs will become automated. Workers will be replaced by robots and computers, leading to an ever-increasing unemployment rate. You can simply give people money to compensate for the high unemployment or you can give them government jobs, but the dependence on wage-labor makes the cost of such welfare expensive.
When you have a property-owning democracy, things are quite different. Since most people under such a system are not dispossessed and, therefore, can be more self-reliant, the cost of a robust system of social insurance would be much cheaper. Through taxes, subsidies, restructuring of corporations, and a predistribution scheme, the distributist approach would help ensure that the people become owners of machines as jobs get automated away. The average man will not be displaced by a robot and left without a job but will be likely to have actually become the owner of some robot. The average man will own some land or machinery — some means of production — that he can rely upon in order to be self-sufficient and not have to depend on welfare programs.
Since social insurance (or welfare) under property-owning democracy will be less expensive than under capitalism, it follows that property-owning democracy will require much lower levels of taxation in order to maintain a robust welfare system. A mixed-economy (social democratic or human-centered capitalist) welfare state is quite expensive and requires high levels of taxation to maintain. Since fewer people will be relying on welfare within a property-owning democracy, a very strong welfare state will cost very little. In fact, you will find that a very generous system of social insurance will cost less and require lower levels of taxation than even the most conservative welfare system would under capitalism. The welfare state as a social safety net will simply be relied upon much less. Most people will be able to afford the cost of their ordinary doctor visits, so Universal Catastrophic Coverage could serve as a safety net just in case people end up incurring medical costs that are truly unaffordable. Most people will own something (either individually or co-operatively) from which they can derive income and survive, so a Negative Income Tax could easily provide a guaranteed minimum income without costing too much. Such welfare measures, under property-owning democracy, would have a price tag quite small in comparison to more conventional social democratic welfare programs. The level of taxation needed to guarantee all people access to food, shelter, and healthcare is actually quite small when the economic system is designed optimally for maximizing republican liberty and well-being.
I believe the task for modern proponents of property-owning democracy is going to be to combine distributism with a call for a robust system of social insurance. We don’t need to choose between property-owning democracy and eliminating poverty — we can do both! We don’t need to choose between distributism and social welfare — we can have both!
High Taxes Are Antagonistic to Property-Owning Democracy
“High taxation is incompatible with the general institution of property. The one kills the other. Where property is well distributed, resistance to big taxation is so fierce and efficacious that big taxation breaks down.” — Hilaire Belloc (An Essay on the Restoration of Property, Ch. 6)
In a property-owning democracy, high taxes are bad. But, high taxes on certain people or behaviors are necessary in order to get from capitalism to property-owning democracy. The key is that progressive taxation ought never to be used primarily as a source of revenue but should be viewed, instead, as a means of fostering property-owning democracy. Once property-owning democracy is achieved, you do not want to adjust the tax rates or continue taxing people excessively. The amount of revenue will be less, but the amount needed will also be less.
Property-Owning Democracy & “Third-Way” Social Democracy
Social democracy arose out of socialism. It was originally a form of democratic socialism. However, from the very beginning, there was a split within the social democratic movement between genuine democratic socialists and “revisionists.” The Marxists had predicted that private ownership would become a privilege of the few and most people would become dispossessed as capitalism advanced. The Marxists wanted the abolition of property in order to remedy this problem, but Eduard Bernstein and the revisionists saw a counter-trend towards widespread private ownership. And they started to think that a wider distribution of income might be sufficient and that the abolition of private property may be unnecessary. This non-socialist take on social democracy was further developed by individuals like Anthony Crosland and Anthony Giddens, who argued that expanding social services and strengthening the welfare state are more important than expanding public ownership. This third-way social democracy can be seen as being in contrast to both democratic socialism and capitalism. Thus, there developed a tendency among social democrats to advocate widespread distribution of wealth and income, which bears a close similarity to what Noel Skelton called “property-owning democracy” and Hilaire Belloc called “distributism.” In fact, Belloc pointed to Denmark as an example of a distributist economy, as a society “based on well-divided property…[and] not defaced by exaggerated extremes of wealth and destitution.”(Hilaire Belloc, The Way Out, Ch. 20)
When we look at third-way social democrats and certain advocates of Nordic Model social democracy — people who are not calling for public ownership of industry in general — we find a type of “social democracy” that is fundamentally compatible with distributism and property-owning democracy. Here we can find some common ground between the welfare state tradition and the distributist tradition. This overlapping consensus leaves room for a synthesis of distributism and social democracy, a synthesis which I have called property-owning social democracy.
At the same time, we should note that third-way social democrats tend to emphasize widespread distribution of income rather than widespread ownership of productive property. Therefore, bringing the distributist tradition into the social democratic movement is actually an innovation.
Property-Owning Democracy, Conservatism, & OG Neoliberalism
In the last section, I put forth the term property-owning social democracy as one description of the synthesis of distributism and social insurance that I envision. I must admit, however, that I am somewhat dissatisfied with that description. Primarily, because I do not want to give the social democrats too much credit for the welfare state. The modern welfare state is just as much the product of conservative reformers like Otto von Bismarck, the Christian democrats who followed Catholic social teachings, and classical neoliberal reformers. The Social Democratic Party of Germany was originally a Marxist party and Marx opposed the welfare state. According to Marx, the socialist revolution would only occur when the immiseration of the proletariat totally impoverished the working class, giving them no choice but to revolt. Democratic reforms that ameliorated the hardships caused by capitalism and made life easier for the proletariat were viewed as impediments to socialism. And Bismarck intentionally imposed his welfare reforms in order to thwart the rise of socialism.
Burkean conservatism, in its essence, is the recognition that stability, security, and social order are extremely important. Revolution and insurrectionary violence disrupt social order and, thereby, harm all of us. If we have a revolution, many people will die — and human lives cannot be replaced! A revolution is a dangerous time of anxiety, disruption, and violence. Whenever possible, democratic reform ought to be preferred to revolution. And if the existing arrangements are destabilizing and creating conditions that make revolution and insurrectionary violence seem likely, the most conservative thing to do is push through democratic reforms that increase social justice. The German Social Democratic Party (SPD) was pushing for a violent Marxian revolution and the creation of the welfare state was a conservative measure to prevent insurrectionary sentiments from growing and leading to total revolution.
Bismarck attempted to balance outright repression of the SPD with the introduction of a welfare programme. Although he was far from blind to the need to achieve social justice, the main aim of his welfare programme was to avoid revolution through timely social reform and to reconcile the working class to the authority of the state….
“After the elections of 1881 Bismarck returned to his welfare programme. The Reichstag approved a health insurance scheme in May 1883 and an amended accident insurance bill in 1884, which was expanded to cover more industries without involving any financial contributions from the state. In both schemes Bismarck introduced a novel element of corporatism [The attempt to defuse class hatred and unify society by giving both employers and workers a joint role in the running of welfare agencies, industry, etc.]….
“Bismark completed his welfare legislation with the introduction of the old age pension in 1889.” — David G. Williamson (Bismarck and Germany: 1862–1890, Ch. 10)
The following excerpt from Anthony Giddens, a leading theorist of third-way social democracy, demonstrates that the welfare state was really created more by conservatives than by progressives. The social democrats, of course, did end up embracing the welfare state, but the conservatives created it.
“The Dutch political scientist Kees van Kersbergen argues that ‘one of the major insights of the contemporary debate [about the welfare state] is that to equate social democracy and the welfare state may have been a mistake.’ He examines in detail the influence of Christian democracy upon the development of Continental welfare systems and the social market. The Christian democratic parties descend from the Catholic parties that were important between the wars in Germany, Holland, Austria, and to a lesser degree France and Italy. The Catholic unionists saw socialism as the enemy and sought to outflank it on its own ground by stressing codetermination and class reconciliation.” — Anthony Giddens (The Third Way: The Renewal of Social Democracy, Ch. 4)
In addition to the fact that the welfare state is less of a product of social democracy than people generally assume, the particular version of the welfare state that I support is modeled more on the vision of conservative neoliberals like F. A. Hayek and Milton Friedman than on the ideas of any social democratic theorist. While I have read Eduard Bernstein, Anthony Crosland, and Anthony Giddens, I don’t think any of them are even half as intelligent as either Hayek or Friedman. And, to be honest, their social democratic visions of welfare are often less impressive than the OG neoliberal vision of welfare. The Hayekian and Freidmanite models of welfare focus more on social insurance and universal programs than on means-testing and handouts. And, in my opinion, this model of the welfare state hampers the market less while also providing a more robust social safety net than the conventional social-democratic model does. While Nordic countries do have social insurance programs, it ought to be remembered that none of the Nordic social democracies have a guaranteed minimum income. Their emphasis is often on social services rather than cash transfers. The Hayekian/Freidmanite model is simple and direct, requires less bureaucracy, and distorts market processes far less than the social-democratic models do.
Friedman famously observed that poverty is simply a lack of money. The solution he proposed is direct and simple: give poor people money. Direct cash transfers can immediately and effectively eliminate poverty. Poverty, unemployment, and severe illness are conditions that anyone can fall into through the result of mere bad luck. The best way to deal with such problems and maximize human wellbeing is to create social insurance programs that insure us against poverty and catastrophic injury. And this is precisely what Friedman and Hayek proposed.
“There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security [i.e. security against severe physical privation, the certainty of a given minimum of sustenance for all] should not be guaranteed to all without endangering general freedom….
“Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance — where, in short, we deal with genuinely insurable risks — the case for the state’s helping to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.” — F. A. Hayek (The Road to Serfdom)
It was along these lines that Milton Friedman and F. A. Hayek both concluded that we ought to implement a minimum income guarantee. Hayek says:
“The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.” — F. A. Hayek (Law, Legislation, & Liberty, volume 3)
And Friedman reached the same conclusion, saying:
“It can be argued that private charity is insufficient… I am distressed by the sight of poverty; I am benefitted by its alleviation….
“Suppose one accepts, as I do, this line of reasoning as justifying governmental action to alleviate poverty; to set, as it were, a floor under the standard of life of every person in the community. There remains the questions, how much and how….
“The arrangement that recommends itself on purely mechanical grounds is a negative income tax [a type of minimum income guarantee]. ” — Milton Friedman (Capitalism and Freedom)
And the principle extends also to healthcare access. There are certain medical treatments that are too expensive for the average man to afford and private insurance seems to have proven itself incapable of rendering healthcare truly affordable. Thus, Milton Friedman and Martin Feldstein, both advisors to President Ronald Reagan, ended up proposing a single-payer health insurance plan. Friedman writes:
“A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance — hard to justify with universal catastrophic insurance.
“This reform would solve the problem of the currently medically uninsured, eliminate most of the bureaucratic structure, free medical practitioners from an increasingly heavy burden of paperwork and regulation, and lead many employers and employees to convert employer-provided medical care into a higher cash wage. The taxpayer would save money because total government costs would plummet. The family would be relieved of one of its major concerns — the possibility of being impoverished by a major medical catastrophe — and most could readily finance the remaining medical costs.” — Milton Friedman (How to Cure Health Care)
The welfare state is a conservative creation, but so are distributism and property-owning democracy. Hilaire Belloc and Noel Skelton were both traditional conservatives. And the ideas of property-owning democracy and social insurance fit together quite well. While I don’t believe in fiscal conservatism for fiscal conservatism’s sake, people who do care about fiscal conservatism logically ought to be inclined to such a synthesis as the one I am proposing. While Friedman’s specific proposals for a Negative Income Tax and Universal Catastrophic Coverage have a lower price tag than Medicare for All and Universal Basic Income, they do accomplish the same goal — they eliminate poverty and guarantee universal access to healthcare. And the restoration of well-divided property under property-owning democracy would make people more self-reliant; fewer people would rely on welfare and this would further reduce the overall cost of such generous welfare programs.
Russell Kirk, in The Conservative Mind, tried to erase distributism from the history of conservative movements because he simply did not like the distributists’ rejection of laissez-faire. Chesterton and Belloc, of course, did say things beyond what Edmund Burke would have said, but this is because they lived a century after him. Burke did not speak out against “capitalism” and “wage-slavery” because they were not yet fully formed. The Industrial Revolution was just beginning and the horrors of capitalism had not yet materialized. Burke was living in a different time and protesting against the materialistic mindset that ultimately led to the proletarianization of the masses, but Chesterton and Belloc lived under the economic system that resulted from that materialistic mindset. Thus, they were in a position to be more fully conservative than even Burke himself — revolting against both the materialistic mindset and the social arrangements that emerged from it. But even Kirk, with his hatred of distributism, was forced to admit that in the early 20th Century “Chesterton and Belloc…did more to nourish the old conservative impulse during those dark times than did the men who should have carried on the tradition of Burke.”(Russell Kirk, The Conservative Mind, Ch. 11) Kirk, in his folly, held the impossible position that “Belloc and Chesterton were only auxiliaries of conservatism,” while simultaneous admitting that Chesterton’s Orthodoxy and Belloc’s The Servile State echoed the ideas of Coleridge, Newman, Bolingbroke, and Disraeli.
Byrum E. Carter offers the following critique of Kirk in a book review:
“Liberals, as well as conservatives, like diversity. Many conservatives have criticized them for liking it too much. The liberal efforts at social reform in this century have not been carried out with the objective of making life uniform, gray, and colorless. The aim has been to alleviate that poverty, fear, and insecurity which make life dull, monotonous, and sterile. Poverty, fear, and insecurity are among the great obstacles to individuality. Similarly, liberals do not propose to abolish order and classes, thus destroying ‘natural distinctions among men.’ Far from it, the liberals have tried to tear down some of the artificial barriers which have hindered the rise of talented individuals from the lower strata of our society. Nor do the liberals propose to destroy property. Since the first days of the New Deal, the number of property owners has increased proportionately, not declined. If the objective of modern conservatives is a ‘property-owning democracy,’ then it must be said that the liberals in the United States have made great contributions toward the achievement of such a goal.
“What then remains as a program for modern conservatism? Its most important responsibility is to reaffirm the principles already mentioned, i.e., to expose the over-simplifications and excessive optimism of the more ardent disciples of reform. But this is not enough. The conservative sees real problems with which he must grapple. It is not enough merely to criticize; the conservatives, too, must have a program of their own although it need not be definite and precise. However, the reader searches in vain for a realistic analysis of modern problems in The Conservative Mind. Professor Kirk is more concerned to condemn than to perform the more difficult, but vastly more rewarding, task of developing means of dealing with current actualities.” — Byrum E. Carter (Indiana Law Journal, Volume 29, Issue 2, Artice 11)
In many ways, the neoconservatism of Irving Kristol comes much closer to advocating something like what I am proposing, but Kristol did it very imperfectly. The ideas of Kristol were a definite improvement upon those of Kirk, but Kristol was under the delusion of supply-side economics, one of the not-so-great ideas of Milton Friedman. Kristol supported both property-owning democracy and a social insurance welfare system. Irving Kristol asserts that widespread distribution of property-ownership is the means by which a democratic society can prevent the overreaches of big government and he asserts that social insurance does not conflict with conservative principles.
“Neoconservatives, though respecting the market as an economic mechanism, are not libertarian…. A conservative welfare state — what once was called a ‘social insurance’ state — is perfectly consistent with the neoconservative perspective…..
“An individual who possesses property, and has the right to augment this property as best he can, has the basic means to withstand the pressure of even the most autocratic government. If such property is divided very unequally, then it is only a relatively small proportion of the population that can set limits to the power of government…. Moreover, if the free market operates as it is supposed to, with everyone gradually bettering his condition, an ever-larger percentage of the population will come to own property of one kind or another. This, in turn, will represent an immense diffusion of economic power that will make tyrannical government more difficult.” — Irving Kristol (Reflections of a Neoconservative: Looking Back, Looking Ahead, Ch. 6 & Ch. 12)
Kristol believed that property-owning democracy would create a popular mindset that would guard against the errors of the intellectual elite who promote the philosophies of nihilism and socialism.
“The cultural nihilism will have, in the short term, only a limited political effect — unless we have a massive, enduring economic crisis. The reason cultural nihilism will not prevail — this is still the good news — is that a bourgeois, property-owning democracy tends to breed its own antibodies. These antibodies immunize it, in large degree, against the lunacies of its intellectuals and artists. The common people in such a democracy are not uncommonly wise, but their experience tends to make them uncommonly sensible. They learn their economics by taking out a mortgage, they learn their politics by watching the local school board in action, and they learn the impossibility of ‘social engineering’ by trying to raise their children to be decent human beings. These people are the bedrock of bourgeois capitalism, and it is on this rock that our modern democracies have been built.” — Irving Kristol (Neoconservatism: The Autobiography of an Idea, Ch. 12)
Moving on from property-owning democracy, let’s turn to Kristol’s thoughts on the welfare state. He recognizes that insurrectionary and revolutionary sentiments result from rampant poverty and inequality, so he asks the following question: how can capitalist democracy “inoculate itself against a resurgence of anticapitalist dissent?” And he offers the following answer:
“One of the things that can be done is to design all measures of ‘social welfare’ so as to maintain the largest degree of individual choice. The demand for a ‘welfare state’ is, on the part of the majority of the people, a demand for a greater minimum of political community, for more ‘social justice’ (i.e. distributive justice), than capitalism, in its pristine, individualistic form, can provide. It is not at all a demand for ‘socialism’ or anything like it. Nor is it really a demand for intrusive government by a powerful and ubiquitous bureaucracy — though that is how socialists and neo-socialists prefer to interpret it. Practically all of the truly popular and widespread support for a ‘welfare state’ would be satisfied by a mixture of voluntary and compulsory insurance schemes — old-age insurance, disability insurance, unemployment insurance, medical insurance — that are reasonably (if not perfectly) compatible with a liberal capitalist society. Over the past quarter century, a host of ‘conservative’ and ‘neo-conservative’ economists and social critics have showed us how such mechanisms could and would work, and their intellectual victory over earlier ‘Fabian’ conceptions of social reform has been decisive. The problem, at the moment, is to persuade the business community and the ‘conservative’ (i.e., anti-socialist) political parties of their practicality. Not an easy mission, but not in principle an intractable one.” — Irving Kristol (Reflections of a Neoconservative: Looking Back, Looking Ahead, Ch. 10)
Where Kristol falls into the most grievous error — apart from his hatred of homosexuals and his globalist and aggressive foreign policy ideas — is in his devotion to supply-side economics. As a result of this error, he ended up opposing the types of economic policies that foster the sort of property-owning democracy that he believed we needed to protect us from nihilism, socialism, and tyranny. As a supply-sider, Irving Kristol was convinced that economic growth would automatically lead to better conditions for all. As the amount of wealth increases overall, some of it will trickle down to the people at the bottom. The result will be, in his estimation, that the poor tend to be raised up alongside the rich and become property-owning citizens themselves as our society becomes more and more prosperous. This, however, is quite mistaken. Instead of wealth trickling down, the people at the top have hoarded it all. As GDP has gone up, so have CEO salaries and the wealth of people at the top, but wages have largely remained stagnant. The solution to this problem is Belloc’s idea of the differential tax, something that Kristol opposes on principle.
Progressive (or differential) taxation is the means by which government can actually make wealth trickle down as it is supposed to! If you make the top marginal income tax rates very high, it effectively serves as a maximum wage policy and induces corporations to spend a greater portion of their excess profits on paying their workers better wages rather than on paying their senior executives more. There was a trend towards more widespread distribution of wealth and a tendency for wages to rise as GDP went up, but this trend was killed by the Nixon and Reagan tax cuts that slashed the top marginal income tax rates. The result was that as productivity increased, wages remained stagnant because CEOs decided to line their own pockets. Back when the top marginal income tax rate was 77%, it was a waste for an executive to give himself a raise because most of the raise would be taken away by the tax collector, so the executives tended to give their employees raises instead. The Republican Party started cutting top marginal income tax rates in the mid-1970s. As a result, the average CEO compensation has risen by nearly 1,000% since 1978, while the wages of normal employees have remained relatively stagnant. The more money that is given to the people at the top of the hierarchy, the less money is left for everyone else.
Kristol erroneously thought that neoliberal capitalism would automatically lead to property-owning democracy. This could not be further from the truth. Without differential taxes, the restoration of the guild system, reforming banking and industry along co-operative lines, and all those other distributist proposals we have talked about, property-owning democracy cannot be established and maintained. In short, capitalism is antagonistic to property-owning democracy. In practice, Kristol’s ideas would unwittingly destroy widespread ownership by opposing all of the policies that were proposed by Hilaire Belloc. The end result would be that the welfare state would be quite a bit more expensive than it needs to be, since more people would need to rely upon it than ought to. And, ultimately, the lack of property-owning democracy caused by the failure to embrace Bellocian policy proposals will thwart democracy and allows tyranny to overtake the republic.
Conclusion
What we need now is a mass movement in favor of civic republicanism and philosophic conservatism, where property-owning democracy is pushed as the primary goal. The right wing in America has come to neglect republican and conservative principles. Property-owning democracy is part of the civic republican and traditional conservative traditions. A republican system cannot work unless ownership is widely distributed. But we also need to combine this with a push for a Hayekian/Friedmanite free-market welfare state, based upon European-style social insurance programs.
The terms “property-owning democracy” and “distributism” were unknown to the American Founding Fathers, as they were coined by Noel Skelton and Hilaire Belloc respectively in the early 1900s. However, the terms designate a system in which there is widespread private ownership of land and the means of production, something that our liberal-republican Founding Fathers did in fact advocate. And Hilaire Belloc is correct: we need to push for widespread private ownership, the revival of small producers, the revival of small distributors; and we need to revolt against excessive centralization and monopoly. We need to apply the principles of republicanism and federalism to industrial organization as well as to political organization. But most of all, I think we need a Bellocian-Hayekian synthesis and a popular movement to advocate the idea of a distributist welfare state.
