64 Responses to Worker Ownership – The Untold Stories

  • Joe Marier says:

    Good stuff! The main risk with employee-owned companies is that, oddly enough, the employees will use their vote to get themselves more goodies when the company is doing well, leading to problems when the company is doing not so well (see USAir). Also, when the shareholders and employees have a majority stake, the consumers can kinda get left out of the equation (see, well, USAir).

  • Blackadder says:

    There are a lot of coops in the United States, but most of them are not workers coops. The rural electrical coops mentioned by Aplerovitz, for example, are not owned by their employees but by their customers. As I mentioned in my post on the subject, these coops follow Hansmann’s rule in that the “inputs” provided by the owners in exchange for their ownership interest is highly homogeneous. Labor, by contrast, tends to be heterogeneous, which makes workers coops difficult to operate outside of a few industries.

    Also, whatever the merits of Employee Stock Ownership Programs, I don’t think it’s accurate to consider a company “worker owned” when its employees receive a small percentage of their compensation in company stock (if receiving company stock as a part of one’s salary was sufficient to make an enterprise worker owned, then you would have to conclude that Wal-Mart was worker owned).

  • Joe Hargrave says:

    “There are a lot of coops in the United States, but most of them are not workers coops.”

    As was acknowledged. Thanks.

    “The rural electrical coops mentioned by Aplerovitz, for example, are not owned by their employees but by their customers.”

    That was only part of the introduction. And it shows that the idea of cooperatives, even if not all are worker owned, are still growing and spreading. How about the 30% of farm products produced by cooperatives?

    “Also, whatever the merits of Employee Stock Ownership Programs, I don’t think it’s accurate to consider a company “worker owned” when its employees receive a small percentage of their compensation in company stock (if receiving company stock as a part of one’s salary was sufficient to make an enterprise worker owned, then you would have to conclude that Wal-Mart was worker owned).”

    First of all it is accurate, and secondly I would conclude that it is partially true. I would add, however, that Wal-Mart and many other companies do not come remotely close to satisfying the conditions I would require to consider an economic enterprise truly cooperative. I would say a company would have to meet the criteria of Rohrabacher’s EOCC – at least 50% ownership and voting rights, for starters.

    And there are already several ESOPs that do meet those conditions, like the ones he mentions in the book. 30% are majority owned; half of those have voting rights. So by the 2003 figure, thats at least 1600 firms with majority ownership and voting rights. It’s not a lot, but its a start, especially considering that the trend is in this direction.

  • Blackadder says:

    How about the 30% of farm products produced by cooperatives?

    That’s great. But again, those aren’t workers coops. The fact that a dairy coop and a workers coop both have ‘coop’ in their name doesn’t mean the success of one proves the viability of the other.

    So by the 2003 figure, thats at least 1600 firms with majority ownership and voting rights.

    In 2001 there were more than 18.3 million businesses in the U.S. That less than one in ten thousand of these had ESOPs with majority ownership and voting rights does not, I think, tell us much about the future direction of the economy.

  • Joe Hargrave says:

    I love it when you make arguments for me! It’s so much fun to constantly be patronized by you. You should see if someone will pay you to be smug; you wouldn’t need a co-op then.

    “But again, those aren’t workers coops.”

    But they are co-ops. They embody the idea that people can organize their own economic affairs. It doesn’t take much to transition from one idea to another, if people want to – and the trend show that more people today than before, do.

    “In 2001 there were more than 18.3 million businesses in the U.S.”

    And how many of those are small businesses with only a few employees anyway? The vast majority, right? According to the US Census Bureau (you know, another one of those “random” websites), there are actually 24 million employers in the US.

    3/4 of them have no payroll, and “most are self-employed persons operating unincorporated businesses, and may or may not be the owner’s principal source of income.”

    That leaves, according to the Census, 5.8 million firms or 7.3 million establishments. 2.7 million firms have 1-4 employees. Another million have 5-9. The numbers get considerably smaller as you go down the list. By the time you get to a firm that has enough employees to really make a difference in a community and employ dozens if not hundreds of people, you’re looking at barely 10,000 firms.

    With businesses classified as establishments, the numbers are different, but the trend is the same. The vast majority of firms and establishments do not employ enough people to make a cooperative worthwhile. Out of the smaller percentage that do, there IS a trend towards greater worker ownership.

    And, if there are more politicians like Dana Rohrabacher willing to support these enterprises, then that DOES tell us something about the direction the economy COULD go as well. Especially if we ignore the cynics.

  • Blackadder says:

    But they are co-ops. They embody the idea that people can organize their own economic affairs. It doesn’t take much to transition from one idea to another, if people want to

    Aside from the name, a supply coop or consumer coop doesn’t have much more in common with a worker coop than it does with your standard business corporation. Your standard business is functionally not that different from a lenders coop; people invest money with the firm, in exchange for voting rights and a right to a share of the profits. If we started calling businesses lenders coops, this wouldn’t make widespread workers coops any closer to being a reality.

    And how many of those are small businesses with only a few employees anyway? The vast majority, right?

    How many workers coops are small businesses with only a few employees? The vast majority.

    Out of the smaller percentage that do, there IS a trend towards greater worker ownership.

    I’ve seen no evidence of such a trend.

    And, if there are more politicians like Dana Rohrabacher willing to support these enterprises, then that DOES tell us something about the direction the economy COULD go as well.

    Rohrabacher’s bill would exempt employee owned businesses from the corporate tax. The problem is that worker coops can already avoid corporate taxes if they are structured correctly. To suppose that this bill, if enacted, would lead to an explosion in worker owned firms is, I think, wishful thinking.

    Look, I understand why you would be attracted to the worker coop idea. It’s a really cool idea. The idea that we could use corn to power our cars is also a cool idea. But that didn’t make ethanol a viable product.

  • Joe Hargrave says:

    As I said,

    “The percentage of majority-owned worker firms jumped by 50% during the 1990s.” More, not less, ESOPs are becoming majority owned with voting rights. That’s a trend. Politicians are willing to help foster and develop them. That is also a trend.

    You don’t have any real problems here – you have nitpicking cynicism.

    I show that worker-ownership as a tendency is on the rise and give concrete examples of worker owned and controlled firms that are successful, and you try to bury it in a sea of 18 million businesses, 3/4 of which couldn’t be co-ops anyway.

    You understand why I am attracted to it? Do you understand why the Church is? Do you understand that if these firms actually do work – and they do – and they better correspond to the Catholic vision of society, that Catholics ought to be finding ways to make them work even better and on a larger scale?

    I am not interested in “cool ideas”. I am interested in finding solutions to the economic devastation that reckless greed, consumerism, and individualism have wrought upon millions of people, families and communities in the United States and all across the world. Maybe you don’t see as many problems. I’m proud to be in the company of Popes who did see them, who warned against them, and saw potential solutions as well.

    I frankly don’t understand what your problem is with all of this. These aren’t utopian blue-prints, they are models of already successful firms that can be implemented in more places. Maybe the whole economy can’t be cooperatives – but certainly more of it than is now could be.

    Comparing the cooperatives to ethanol is yet another one of your smug dismissals. If you can’t look at the examples that have worked then I don’t know what to tell you. You may as well be shouting that the sky is pink. It doesn’t correspond with reality. When people want to make this idea work, it does work.

  • Joe Hargrave says:

    Additionally,

    You address me as if I didn’t clearly state things such as:

    “the democratic model of the workers cooperative is still not as common as I would like”, or, “Not all ESOPs are completely owned by workers, and hence, not all are very democratic.”

    What part of these statements didn’t you understand? What did you think I meant by them instead?

  • Blackadder says:

    “The percentage of majority-owned worker firms jumped by 50% during the 1990s.” More, not less, ESOPs are becoming majority owned with voting rights. That’s a trend.

    Well, okay. But the overall number of firms increased by quite a bit during the 1990s too. I believe the number of corporations, for example, increased by more than 30%. So if there is a trend it is a slight one.

    I frankly don’t understand what your problem is with all of this.

    I’ve explained what my problem is here. If worker coops were to become a more attractive option to people than what we have today, I’d be delighted. But I don’t foresee that happening, for the reasons outlined in my post.

  • Joe Hargrave says:

    Alright, then once again, we agree. It would have been easier if you had said you’d be delighted from the outset. One sometimes gets the impression that you wouldn’t be.

    As for the problems, meh. I see nothing that cannot be overcome by a determined will and a moral vision. That is why Catholics will be more successful than secular socialists at building a society that treats workers and families with dignity.

  • Speaking mostly for myself, I think what you’ll find, Joe, is that free market/pro-business types have a kind of mixed reaction to these kinds of ideas. On the one hand, we’re very much in favor of owning business, and see workers being and seeing themselves as owners as much better than seeing themselves as “wage slaves”.

    This is fairly personal for me, in that I was part owner of a small business for a couple years (not as successfully as as we could have wished) and I hope to start a business again when I have the contacts, experience and money to make it really work. Even where I work now, I put $40 out of every paycheck into buying stock in the company I work for, and the company chips in another $30 to match that. (Not being an eggs in one basket type, I’ve decided not to make company stock the primary thing in my 401k, but I strongly believe in having some.)

    However, as someone with a strong interest in business (and who thinks that a well-run small business can be a real force for good among it employees, it’s customers, and the community as a whole) I do see certain problems with the full cooperative model. (Pretty much the ones Blackadder outlined in his post.) Based on my own experiences, I don’t think that most people are interested in taking on all the risks of ownership, nor that they are necessarily able to handle well all its responsibilities. And while I think that CST is right to emphasize that workers should be free to and encouraged to be owners, and that means should be made available (profit sharing, employee stock plans, etc.) for them to gain stakes in the companies they work for, I don’t tend to think that a wholesale move to cooperatives would actually work very well.

    I think there may also be a different level of urgency that you feel in regard to the issue. You say:

    I am interested in finding solutions to the economic devastation that reckless greed, consumerism, and individualism have wrought upon millions of people, families and communities in the United States and all across the world.

    I guess I’m not necessarily sure how coops will help on this. I belonged to a credit union for several years, but the experience was exactly the same as having an account at a bank (except it closed earlier and wasn’t open on Saturdays) and it didn’t really encourage me to be less consumeristic. Similarly, I don’t think that the fact that most people I work with own significant amounts of company stock and have 10-25% of their annual pay based on a profit/performance bonus actually makes them less likely to want to spend that money on flat panel TVs and iPhones.

    So while I think that when people assume real business ownership or management responsibilities it gives them a bit more of a window on how the economy works and the importance of treating customers and employees well (though obviously, some people fail to draw this lesson from the experience) I don’t really see how pushing for more employee owned businesses will really change the consumer culture in the US.

    That said, I think the area where more worker owned firms would be a huge help is in areas which rest heavily on manual work with few capital costs. It annoys me no end to see the difference between the amount that cleaning and yard services that my two-income co-workers employ charge, and what they pay their workers. (~$30 for 30-45 minutes a week worth of work, while paying their workers well under $10/hr.) If someone was looking for an area where worker owned businesses would make the maximum positive impact in the lives of workers, I’d look to areas like that where a small amount of capital and marketing know-how is all that stands between workers and significantly higher pay.

  • Gusto says:

    “I am interested in finding solutions to the economic devastation that reckless greed, consumerism, and individualism have wrought upon millions of people, families and communities in the United States and all across the world”

    The link between “reckless greed, consumerism, and individualism” and “economic devastation” is far from proven. Some people argue that on the contrary, it produces economic growth. From the textbook I use in my Introduction to Economics course: “In his 1776 book The Wealth of Nations, Adam Smith first noted that the operation of a market system creates a curious unity between private interests and social interests. Firms and resource suppliers, seeking to further their own self-interest and operating within the framework of a highly competitive market system, will simultaneously, as though guided by an “invisible hand,” promote the public or social interest” (McConnell, 2004, p.69).

    On a deeper level “reckless greed, consumerism, and individualism” are personality traits and no amount of systemic/external/governmental controls (such as a worker’s cooperative) will change us. The beauty of Capitalism is that it recognizes how flawed we are and produces from it the greater good for society. Our own individual (selfish) choices make the best for society. It’s counterintuitive, but much of Economics is like that.

    Finally, as deeply committed Catholics we naturally want to implement a system that will create Social Justice. I think that the system that works best is the one that allows for the expression of our free will. Every day I’m faced with the choice to do the right thing. Don’t you think that a system that “forces” me to do the right thing would be worthless in the eyes of God?

  • Joe Hargrave says:

    This is for Darwin and Gusto.

    First, the Church does recognize consumerism as a socially corrosive, destructive force, to be fought and struggled against. John Paul II and Benedict XVI have made this clear on numerous occasions.

    Secondly, it would be wrong to reduce consumerism to excessive or frivolous consumption. Consumerism has been assessed as a social phenomenon, an attitude towards how society and the economy ought to be arranged. In my essay I covered JP II’s understanding of consumerism across several encyclicals:

    http://www.geocities.com/joeahargrave/consumerism.html

    Thirdly, and this is more for Gusto, the Church rejects the ideology of “the invisible hand”, and I reject it as well. The greater good has not been served – millions of people around the world still go without physical necessities, while many millions more go without spiritual and moral necessities. Yes, we in the West are physically sustained, but consumerism, as the Church has argued, has left man morally and spiritually drained.

    Economic growth rates, GDP, and a wide variety of consumer goods are not the highest or most important goals for a society to strive for, not in the Catholic vision. Businesses do not merely have an obligation to meet the needs of consumerism in a global market, but those of their local communities as well.

    Frankly if a moral social order means a lower GDP, means a few less gadgets on the shelves, a little less crap produced in Hollywood and the other armpits of society, I couldn’t care less. Our dignity does not depend even a little bit on how materially prosperous we are. I don’t oppose prosperity, I am for it – but it occupies a place on the hierarchy of values, and it is not the top place, or the second place, or the third. Insofar as the pursuit of wealth and prosperity does not conflict with higher moral goals, it is good. But when it becomes an end unto itself, the Church is unambiguously clear that this is an unacceptable social evil.

  • Blackadder says:

    the Church rejects the ideology of “the invisible hand”, and I reject it as well. The greater good has not been served – millions of people around the world still go without physical necessities, while many millions more go without spiritual and moral necessities.

    This would appear to be a nonsequitur. It’s true that there are millions of people around the world going without physical necessities, but this has more to do with opposition to what you call the “ideology of the invisible hand” than with its implementation. Nor is there anything inherent in a market economy that prevents people from meeting spiritual and moral necessities.

    Economic growth rates, GDP, and a wide variety of consumer goods are not the highest or most important goals for a society to strive for, not in the Catholic vision.

    No doubt. However, to the extent one views the material deprivations in the world a serious concern (and the previously quoted passage suggests that you do) it is hard to see how you could be against economic growth, or the structures that give rise to that growth, since this is the only way yet discovered to alleviate that problem.

  • Joe Hargrave says:

    “but this has more to do with opposition to what you call the “ideology of the invisible hand” than with its implementation.”

    It is not its implementation but its placement at too high a place on the hierarchy of values that is the problem.

    “Nor is there anything inherent in a market economy that prevents people from meeting spiritual and moral necessities.”

    I never argued that. No one is opposed to a “market economy”. The Church is opposed to the elevation of individualism (and certainly the pursuit of selfish desires) to a doctrine that cannot be challenged in economic life. That tendency is certainly present in a market economy and can run wild if unchecked, or cynically, flippantly dismissed.

    It is in the Catechism:

    “[The Church] has likewise refused to accept, in the practice of “capitalism,” individualism and the absolute primacy of the law of the marketplace over human labor.” (2425)

    Read that one carefully.

    It is in the Compendium:

    “The growth of wealth, seen in the availability of goods and services, and the moral demands of an equitable distribution of these must inspire man and society as a whole to practise the essential virtue of solidarity,[694] in order to combat, in a spirit of justice and charity, those “structures of sin” [695] where ever they may be found and which generate and perpetuate poverty, underdevelopment and degradation. These structures are built and strengthened by numerous concrete acts of human selfishness. ” (332)

    It is in probably a dozen encyclicals which I don’t need to quote, save one:

    ” the right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching. Destroying through forgetfulness or ignorance the social and moral character of economic life, it held that economic life must be considered and treated as altogether free from and independent of public authority, because in the market, i.e., in the free struggle of competitors, it would have a principle of self direction which governs it much more perfectly than would the intervention of any created intellect. But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life” (Quadragesimo Anno, 88)

    “it is hard to see how you could be against economic growth”

    It’s equally hard to understand why you would assume such a thing. You do read the entire posts I make, don’t you? I said:

    Insofar as the pursuit of wealth and prosperity does not conflict with higher moral goals, it is good. But when it becomes an end unto itself, the Church is unambiguously clear that this is an unacceptable social evil.”

    I know you know how to read.

  • John Henry says:

    the Church rejects the ideology of “the invisible hand”, and I reject it as well. The greater good has not been served – millions of people around the world still go without physical necessities, while many millions more go without spiritual and moral necessities.

    In my opinion, the use of ambiguous and provocative phrasing (e.g. “ideology of the ‘invisible hand’”)makes it difficult to interpret your meaning at times, Joe. No one is advocating private property rights as an absolute good; they are arguing that markets and private property rights are one of the best mechanisms of removing the poverty you decry. From that perspective, your comment is a non sequitur. Blaming markets for poverty where they do not operate is an odd method of indictment.

    If you believe that free markets are causing poverty, then your comment makes sense given your assumptions, and then there may be a real trade-off between free markets and poverty. But nearly all of the evidence I’ve seen suggests that markets and private property are one of the best means of alleviating poverty. Do you believe markets are causing poverty?

  • Joe Hargrave says:

    Ambiguous and provocative?

    Please see Gusto’s last post. I didn’t introduce the phrase into this discussion, he did, with his textbook quote.

    Again, there seems to be some reading comprehension issues here.

    In the first place, in these last few posts – heck, I think even on this entire thread – I have only once mentioned poverty. I have been talking far more about consumerism and economic insecurity, yes. But poverty is far from the only problem facing society. Too much wealth is almost as bad, and in some cases worse, than too little, for the former poses far greater threats to the mind and spirit. This is at the heart of JP IIs and Benedicts critique of consumerism. Take it up with them if you don’t like it, but please, don’t take it out on the messenger.

    In the second place, let me state, once again, that my problem is not and never has been with markets as such – but with the elevation of, yes, the “invisible hand” doctrine to an economic dogma.

    I have made it clear on numerous occasions that I agree with Pius XI – markets, yes, but within reasonable limits, and always, always subordinated to a higher moral order. Why is this so hard to comprehend? Elsewhere Blackadder accused me of having an “all or nothing attitude”. Who really has that attitude here?

    “If you believe that free markets are causing poverty”

    I believe there are instances of market failures.

    So, in response to your question,

    “Do you believe markets are causing poverty?”

    I believe they can, but I also believe that markets properly subordinated to a moral vision – one that consists of more than force and fraud prevention and the enforcement of contracts – can alleviate poverty as well. Without that moral vision, what you get in the long run is economic chaos and collapse. Yes, I’m sure we’ll all disagree as to what caused the most recent debacle but I for one believe it was the deregulation of the financial sector.

  • Joe Hargrave says:

    More important to me than taking grandiose government measures to fix poverty is ensuring that workers in the developing world have their full array of human rights. The recognition of these rights and their enforcement go further than wealth redistribution in the long run.

    There is no excuse for a Catholic to ever justify the denial of these rights either, not on the grounds of property rights, not on the grounds of economic efficiency. These rights are listed in the Compendium, 301.

    Beyond rights, as I am sure you know I promote greater worker ownership of businesses, which is not at all in conflict with markets.

  • Joe Hargrave says:

    301. The rights of workers, like all other rights, are based on the nature of the human person and on his transcendent dignity. The Church’s social Magisterium has seen fit to list some of these rights, in the hope that they will be recognized in juridical systems:

    the right to a just wage; [651]

    the right to rest; [652]

    the right “to a working environment and to manufacturing processes which are not harmful to the workers’ physical health or to their moral integrity”; [653]

    the right that one’s personality in the workplace should be safeguarded “without suffering any affront to one’s conscience or personal dignity”; [654]

    the right to appropriate subsidies that are necessary for the subsistence of unemployed workers and their families; [655]

    the right to a pension and to insurance for old age, sickness, and in case of work-related accidents; [656] the right to social security connected with maternity; [657]

    the right to assemble and form associations.[658]

    These rights are often infringed, as is confirmed by the sad fact of workers who are underpaid and without protection or adequate representation. It often happens that work conditions for men, women and children, especially in developing countries, are so inhumane that they are an offence to their dignity and compromise their health.

  • John Henry says:

    I have not once mentioned poverty.

    You wrote millions of people around the world still go without physical necessities,. That sounds like a reference to poverty to me.

    As to the rest, I think everyone here agrees that individual property rights are not absolute; perhaps there is some talking past each other going on here.

    Yes, I’m sure we’ll all disagree as to what caused the most recent debacle but I for one believe it was the deregulation of the financial sector.

    Personally, I think there were a number of factors, and that people tend to latch on to the one that most suits their ideological predispositions. This happens on the left as well as the right; I’ll agree that market failures played a part, but monetary policy, relaxed lending guidelines, and high-risk loans backed by an implicit government guarantee were cumulatively at least as significant as de-regulation of financial institutions (and, imo, more).

  • Blackadder says:

    There is no excuse for a Catholic to ever justify the denial of these rights either, not on the grounds of property rights, not on the grounds of economic efficiency. These rights are listed in the Compendium, 301.

    This is not entirely accurate. As with the right to private property, the Church recognizes that the rights you list are not absolute, and may be limited in accordance with the common good.

  • Joe Hargrave says:

    John

    I know, and I went and edited my post, because I forgot what I had said. I’ll acknowledge here though that I did write too quickly. It happens.

    What is true, however, is that I am really not preoccupied with the problem of poverty here.

    The only thing I reject is this reactionary fear of taking measures beyond preventing/punishing force or fraud. I talk about cooperatives, which might require state assistance but not necessarily any market regulation, and people go bananas in defense of markets that I am not assailing. I talk about reasonable economic regulation for the common good, whatever that may be in a particular situation, and people act as if I want a command economy.

    At what point will it be acknowledged that the Church simply rejects the idea that human beings cannot willfully and purposefully intervene in the economy to serve a moral end?

  • Joe Hargrave says:

    “This is not entirely accurate. As with the right to private property, the Church recognizes that the rights you list are not absolute, and may be limited in accordance with the common good.”

    That is absolutely false.

    The right to private property is not on the list I mentioned for a reason – this is a list of the rights due to workers on the basis of their inherent human dignity.

    Everyone has a right to private property but they also have a right NOT to have private property.

    You can never say the same about any of the rights on this list. For instance, the next paragraph states,

    “The simple agreement between employee and employer with regard to the amount of pay to be received is not sufficient for the agreed-upon salary to qualify as a “just wage”, because a just wage “must not be below the level of subsistence”[662] of the worker: natural justice precedes and is above the freedom of the contract.

    It becomes more and more clear to me that you do not have a grasp of the basic themes or goals of Catholic social teaching.

  • John Henry says:

    At what point will it be acknowledged that the Church simply rejects the idea that human beings cannot willfully and purposefully intervene in the economy to serve a moral end?

    I think it has been acknowledged repeatedly. But there is not one right way to intervene, and a great deal is left to prudence. It is not mandatory for Catholics to support state incentives for co-ops; people may legitimately disagree with that approach to serving the common good. I think it’s great that you advocate for co-ops; the more approaches the better. Sometimes, however, I think you too easily identify support for co-ops (a conclusion about how to seek the common good) with first principles.

  • Blackadder says:

    Joe,

    One of the rights you listed was the right to assemble and form associations. This right was first recognized in Rerum Novarum. Here is a passage from Rerum Novarum discussing the non-absolute character of the right:

    52. There are occasions, doubtless, when it is fitting that the law should intervene to prevent certain associations, as when men join together for purposes which are evidently bad, unlawful, or dangerous to the State. In such cases, public authority may justly forbid the formation of such associations, and may dissolve them if they already exist.

    Would you agree with me, based on this quote, that the right to form associations is not absolute, and that the right may be limited in accordance with the common good?

  • Joe Hargrave says:

    “It is not mandatory for Catholics to support state incentives for co-ops”

    I never said that.

    “people may legitimately disagree with that approach to serving the common good”

    Fine. Supporting the social goals of the Church isn’t mandatory. But acknowledging what the Church really teaches about these issues ought to be considered of the utmost importance.

  • Joe Hargrave says:

    “One of the rights you listed was the right to assemble and form associations.”

    First of all, I didn’t list it. The people responsible for putting together the Compendium listed it. These are not my inventions.

    Secondly, I followed up my post with a recognition of that exception. I’m certain you must have seen it.

    Thirdly, the right to form unions and other associations that pursue legitimate goals is, I would say, absolute. Leo goes on to say,

    “But every precaution should be taken not to violate the rights of individuals and not to impose unreasonable regulations under pretense of public benefit.”

    So, there is another right in play here, a right that might be violated if the regulation or limitation goes to far. That right, clearly, is the right to form associations that pursue morally legitimate goals.

  • Joe Hargrave says:

    And before:

    “to enter into a “society” of this kind is the natural right of man; and the State has for its office to protect natural rights, not to destroy them; and, if it forbid its citizens to form associations, it contradicts the very principle of its own existence, for both they and it exist in virtue of the like principle, namely, the natural tendency of man to dwell in society”

  • Blackadder says:

    Joe,

    I see that we’ve cross-posted, and that you’ve conceded my point with regard to the right to associate. Very well. Moving on to the just wage, here is a passage from Quadragesimo Anno:

    Every effort must therefore be made that fathers of families receive a wage large enough to meet ordinary family needs adequately. But if this cannot always be done under existing circumstances, social justice demands that changes be introduced as soon as possible whereby such a wage will be assured to every adult workingman . . . In determining the amount of the wage, the condition of a business and of the one carrying it on must also be taken into account; for it would be unjust to demand excessive wages which a business cannot stand without its ruin and consequent calamity to the workers. If, however, a business makes too little money, because of lack of energy or lack of initiative or because of indifference to technical and economic progress, that must not be regarded a just reason for reducing the compensation of the workers. But if the business in question is not making enough money to pay the workers an equitable wage because it is being crushed by unjust burdens or forced to sell its product at less than a just price, those who are thus the cause of the injury are guilty of grave wrong, for they deprive workers of their just wage and force them under the pinch of necessity to accept a wage less than fair.

    Would you agree with me, based on this quote, that there can be circumstances in which it is not wrongful for an employer to pay his workers “a wage large enough to meet ordinary family needs adequately”?

  • Joe Hargrave says:

    Conceded your point? I did no such thing.

    Pat yourself on the back if you must, but the right to form morally legitimate associations is absolute, is a natural right.

    But unlike the other rights, one also has the right not to associate, just as one has the right not to own private property. That is the point here – you sought to put property ownership on the same level as these workers rights. Property rights and association rights may be accepted or refused, but there are other rights that cannot be negotiated away.

    Way to try and obscure the whole thing, though.

    As for your question, I would agree that ONLY the circumstance specifically cited by Pius in his passage would qualify. I would NOT agree that there are “circumstances”, in the plural sense, unless I knew what those were.

    I will not leave the door open, in other words, for you to sneak in circumstances that clearly have nothing to do with the spirit of this passage. And I will also note that the low wage being paid IS STILL an injustice – the only difference being that it is not the employer who is unjust, but “those who are thus the cause of the injury”.

    Now, I have a fair idea as to where this is leading. You’ll come up with the argument that policies that attempt to establish fair wages or minimum wages or what have you end up being the culprits, those guilty of the “grave wrong”.

    But aside from the fact that there have been new studies published in recent years that challenge the conventional wisdom on that topic, I myself have acknowledged on several occasions in the past that minimum wages are not the answer, and that the just wage is best achieved through the spreading worker ownership.

    You might also read the part of Quadragesimo Anno where Pius condemns the labor market, in a way, putting an end to what I anticipate will be your line of argument:

    “Labor, as Our Predecessor explained well in his Encyclical,[48] is not a mere commodity. On the contrary, the worker’s human dignity in it must be recognized. It therefore cannot be bought and sold like a commodity. Nevertheless, as the situation now stands, hiring and offering for hire in the so-called labor market separate men into two divisions, as into battle lines, and the contest between these divisions turns the labor market itself almost into a battlefield where, face to face, the opposing lines struggle bitterly. Everyone understands that this grave evil which is plunging all human society to destruction must be remedied as soon as possible. But complete cure will not come until this opposition has been abolished and well-ordered members of the social body – Industries and Professions – are constituted in which men may have their place, not according to the position each has in the labor market but according to the respective social functions which each performs.” (83)

  • Blackadder says:

    the right to form unions and other associations that pursue legitimate goals is, I would say, absolute. Leo goes on to say,

    “But every precaution should be taken not to violate the rights of individuals and not to impose unreasonable regulations under pretense of public benefit.”

    So, there is another right in play here, a right that might be violated if the regulation or limitation goes to far.

    I don’t deny that there is a right in play here. The question is whether that right is absolute or not. In saying that we ought to be skeptical about whether regulation of the right to associate really serves the public benefit, the Pope seems to be implying that regulation of that right is acceptable if it really does serve a public benefit. Certainly if you think that the right to associate for a legitimate purpose is absolute, then you would have to conclude, I think, that large portions of U.S. labor law are unjust, as they allow things like closed shops and prohibit things like company unions which limit and regulate the right to associate for a legitimate purpose.

  • Blackadder says:

    I would agree that ONLY the circumstance specifically cited by Pius in his passage would qualify. I would NOT agree that there are “circumstances”, in the plural sense, unless I knew what those were.

    Whether you agree that there are circumstances (plural) or only one circumstance (singular), you still have no concede that the right to a just wage is not absolute, since if it were absolute there would not be even one circumstance in which it did not apply.

  • Joe Hargrave says:

    No no, this is clever, but wrong still.

    “the Pope seems to be implying that regulation of that right is acceptable if it really does serve a public benefit”

    The Pope is implying nothing. You are implying. The Pope says,

    “to enter into a “society” of this kind is the natural right of man; and the State has for its office to protect natural rights, not to destroy them; and, if it forbid its citizens to form associations, it contradicts the very principle of its own existence, for both they and it exist in virtue of the like principle, namely, the natural tendency of man to dwell in society”

    So, first of all, this is a natural right. I would say, barring some different understanding of the word “absolute”, that it is there an absolute right. It means that the state may not prohibit morally legitimate associations.

    Next, note the difference between what you say, and what the Pope says. You say,

    “the Pope seems to be implying that regulation of that right is acceptable if it really does serve a public benefit”

    He says,

    “There are occasions, doubtless, when it is fitting that the law should intervene to prevent certain associationsas when men join together for purposes which are evidently bad, unlawful, or dangerous to the State”

    These are not the same thing. From the way you phrase it, these associations may not be doing any particular harm at all, but if it would be socially useful or expedient to get rid of them, then that would also be morally acceptable. That is what you imply.

    What the Pope says is that the danger to society has to be evident, in which case the association has lost its legitimacy.

    As for US labor law, I don’t see why it would be unjust. Closed shop means you must belong to the union if you work at a particular place; you don’t have to work there if you don’t want to be in the union. That said, while I don’t think the law itself is unjust, I do think many modern labor unions are corrupt.

  • Joe Hargrave says:

    “Whether you agree that there are circumstances (plural) or only one circumstance (singular), you still have no concede that the right to a just wage is not absolute, since if it were absolute there would not be even one circumstance in which it did not apply.”

    No, things did get a little confused. I said, after the part you quoted,

    “And I will also note that the low wage being paid IS STILL an injustice – the only difference being that it is not the employer who is unjust, but “those who are thus the cause of the injury”.

    So, actually, there are no circumstances in which it is just; it only means that there are circumstances in which the employer is not to blame. Ruling out one party as the cause of blame does not make the situation a just one. The right to the just wage remains absolute; only the burden on the employer has changed. In such circumstances it would be even more appropriate for society – for the state or the community, to get involved.

  • Joe Hargrave says:

    I have to check out of this for now. I’m sure there’ll be plenty to respond to in the wee hours of the morning when I’m at my best.

    For now I leave with this, repeating what has been said:

    “The rights of workers, like all other rights, are based on the nature of the human person and on his transcendent dignity.”

    This whole thing began because you wanted to take issue with my claim that these rights may not be denied by Catholics.

    It ended up as a debate over only one right; what of the others? The right rest? Maternity leave? These may be rescinded on some notion of the common good? No. The common good doesn’t exist unless these rights exist. The common good presupposes these rights.

    On the other hand, if “absolute” means “can never, under any conceivable circumstances be violated”, then we would have to conclude that the right to self-defense, which includes lethal force if necessary, somehow negates the right to life, which is usually thought of as “absolute”.

    So perhaps this word “absolute” is absolutely useless.

  • Blackadder says:

    Joe,

    Regarding the right to associate, one must distinguish between the State prohibiting people from forming associations, and regulating their right to do so. Pope Leo says that the State may prohibit associations formed for a illegitimate purpose. He then goes on to say that we should be wary of “unreasonable regulations” that are enacted “under pretense of public benefit.” I take this to imply that reasonable regulations which really are for the public benefit are legitimate.

    On U.S. labor law, the U.S. does prohibit outright the use of company unions, which is a form of union often praised by the Popes. So on that score, at least, you would I hope agree that the current law is unjust. I will defer elaboration on the closed shop issue, as it would quickly get complicated and I don’t want to get distracted from the main point.

    On the issue of the just wage, you say that “the low wage being paid IS STILL an injustice – the only difference being that it is not the employer who is unjust, but ‘those who are thus the cause of the injury’” The problem with this is that the cause in question may not be any moral agent. It may simply be that the conditions of the society in question are such that an employer can’t pay his workers an adequate wage. Pope Pius says that in such circumstances we ought to try and change things so that the employer will be able to do so as soon as possible. How best to go about doing this, however, is a matter on which people may legitimately differ, and if someone things that the best way to achieve this as soon as possible is to allow a free labor market, one cannot accuse him of departing from Catholic Social Thought on that account (indeed, to the extent that one’s position is based on things like empirical studies of the effectiveness of the minimum wage, one cannot with justice be accused to disregarding Catholic Social Thought for taking a different view).

  • Blackadder says:

    This whole thing began because you wanted to take issue with my claim that these rights may not be denied by Catholics.

    It ended up as a debate over only one right; what of the others? The right rest? Maternity leave? These may be rescinded on some notion of the common good? No. The common good doesn’t exist unless these rights exist. The common good presupposes these rights.

    The discussion so far has focused on two of the rights listed (the right to associate and the right to a just wage). Since these are the two which have gotten the most attention in CST, I think this is appropriate. However, were we to discuss the other listed rights I think it would come to the same thing (if, for example, it can be legitimate to pay less than an adequate wage in a certain circumstances, what reason could we have for thinking that the employer absolutely must provide a set amount of maternity leave in the same circumstance?)

  • Gusto says:

    First, I must confess my superficial knowledge of our church’s social teaching and I’m awed by the command some of you have of Encyclical thought and even of our Catechism. Please enlighten me, do I understand correctly that the Church teaches that Capitalism is bad and Communism good? This may be a good subject for a longer posting by some contributor, specially when you consider B16’s opposition to Liberation Theology.

    Second, everyone agrees that markets need rules often citing as examples the enforceability of contracts and the protection of property rights. But how can the markets be subsidiary to our moral values? Quoting Joe “markets, yes, but within reasonable limits, and always, always subordinated to a higher moral order”. It’s like saying “abortion, no; but under special circumstances maybe?” Could it be that our difference of opinion is that I think morality and values are part of our free will and cannot be imposed by social order? Public morality is the collection of individual moralities. In the same fashion a market that acts morally is the result of us individuals acting morally.

    Third, I’m very new to commenting on the blog and couldn’t find any rules or moderators; so for what it’s worth (I wish there was a way to say this in private) Joe and Black seem to have some sort of private disagreement. From the sidelines your bickering is distracting. Maybe it’s time to exercise a little Christian Love. This Internet business of asynchronous communication often creates this sort of situations (believe me I see it every day in my online classes). One always has to assume good faith on the other part of the other; and a little humility always helps. I apologize in advance; you both have so much knowledge to share with all of us.

  • I think that the say that statement that markets are subordinated to a higher moral order is essentially that “the market allows it” is not considered a moral argument from a Catholic point of view. If one thinks about it, this is not necessarily a controversial point.

    Imagine the following:

    A milling operation cuts its flour with chalk and talk in order to save money, and when the owner is confronted about the fact his he cheating his customers and causing them ill health he shrugs and says, “They still buy it.”

    A worker goes to his boss at a factory and asks for two weeks unpaid leave to help his sick mother. The boss says there are plenty of other workers out there to hire and simply fires him — even though he is full able to work around his leave if he wants to.

    A region is swamped with impoverished migrant agricultural workers, so a farmer hires people to work for him for less than the price of a day’s food and lodging, despite the fact the price of his produce very well allows him to pay enough for cover food and lodging.

    All of those might fit with the rule of markets, but the arguably represent instances where an economic actor behaves in an immoral fashion. From a Catholic point of view, those actors should have behaved differently regardless of whether the market would allow them to do so or not. This means that the forces of the market, while economically valid, are subordinate to the moral law. (This does not, necessarily, mean that a Catholic must support laws to prevent the above, though he may, since a Catholic might disagree as to the ability of the law to regulate these situations in detail.)

    Thus far, I’m assuming that both BA and Joe probably agree with me.

    Let me go ahead and tackle a few of the other points from the compendium since I must confess that this section has always bothered me.

    the right “to a working environment and to manufacturing processes which are not harmful to the workers’ physical health or to their moral integrity”; [653]

    It seems to me that this is probably a right which is relative to economic availability. A company owner must not needlessly subject his employees to dangers which are easily avoided. However, in many poor countries, workers continue to use old or unsafe techniques which do not fit modern safety standards. If banning those techniques involved destroying their livelihood and leaving them unemployed, I think it would be a bad idea.

    An example that struck me recently was that in the Indian slums in which Slumdog Millionaire was set, a number of people make livings doing recycling type work by hand. A number of people injure or sicken themselves doing things like buying barrels that used to contain industrial chemicals and scrubbing them out by hand. This results in exposure to chemicals and skin damage. The Indian government is trying to keep these people from being able to obtain the barrels to recycle, and keep them from being able to sell the barrels once cleaned, in order to keep them from being hurt. However, these people don’t have any other jobs — they’re slum entrepreneurs trying to take care of their families in a way they know how.

    I’m not sure that CST requires that they be forced into unemployment — though it would clearly be a virtuous action for someone to come in and provide these people with the tools and capital to set up a safe recycling operation.

    the right that one’s personality in the workplace should be safeguarded “without suffering any affront to one’s conscience or personal dignity”; [654]

    I would think this covers a lot of immoral things that managers might do to workers: demean them, insult them, browbeat them, harass them. However, some people might consider doing repetitive manual work to be an affront to their dignity (in that they wish they had more interesting work) and if so I would say that CST does not necessarily make such jobs vanish. The fact one doesn’t like a job doesn’t make it immoral.

    the right to appropriate subsidies that are necessary for the subsistence of unemployed workers and their families; [655]

    Looking at the source of this in Laborem Exercens 18, it looks to me like this is being talked about essentially as a responsibility of a developed world state. I don’t think that’s really at argument here. (In a sense, BA may have the most ambitious ideas here, since he supports a negative income tax to deal with poor and unemployed.) However, I don’t think it would necessarily work to consider this an absolute human right, since clearly in an agricultural or developing country there might simply not be resources to provide this at the state level and these moral responsibilities would fall on more traditional social structures like the family and community.

    the right to a pension and to insurance for old age, sickness, and in case of work-related accidents; [656] the right to social security connected with maternity; [657]

    All of these represent situations where people will have some sort of moral duty to take care of each other. These duties may or may not fall on the employer or the state. And frankly, some of these strike me as overly related to a modern, individualistic state. For instance, in my family the duty of providing social security connected with maternity falls on me, since I am the sole provider for my wife and children. If falls to me, in my duty as a husband, to provide her with economic security as she bears children. And to an extent, initiatives to provide state or employer funded maternity benefits make that harder for me as a single income earner, since they provide incentives towards two income households and disincentives toward traditional family structures.

  • Joe Hargrave says:

    BA,

    Obviously there is a difference between a right to exist and a right to do whatever one pleases. I have a right to life; I don’t have a right to live in any way I please.

    Moreover, every right in the Catholic tradition comes with a corresponding duty. A right to property comes with the right to use it for the common good. A right to form associations comes with a similar duty.

    Cutting through all of the nonsense, the simple point is this: neither businesses nor the state may deny the right to associate or any other worker right on the grounds of profitability, economic utility, or some other imagined positive benefit. The real point is that the dignity of the human being comes before any of these things.

    “I take this to imply that reasonable regulations which really are for the public benefit are legitimate.”

    They are – but NOT when they come at the expense of natural rights. Meaning, something considered a right cannot be tossed overboard on the grounds that there is some “public benefit”, whether it is a trickle-down effect or “one day the economy will improve enough to make us all forget about this” argument.

    “So on that score, at least, you would I hope agree that the current law is unjust.”

    Given the exigencies of the time, I understand why company unions were outlawed; they were considered little more than extensions of the will of management. In outlawing company unions, the intention was to stop owners and managers from tampering with the union structure.

    I suppose the law could be clarified; if workers really want a company union, I see no reason they shouldn’t have one. But, it certainly ought to be illegal for employers to make membership in a company union, as opposed to an independent union, some sort of condition for employment.

    With regard to the just wage:

    “How best to go about doing this, however, is a matter on which people may legitimately differ, and if someone things that the best way to achieve this as soon as possible is to allow a free labor market, one cannot accuse him of departing from Catholic Social Thought on that account”

    Fine. People may legitimately differ, but if a “free labor market” means prohibiting unions or denying any other right following from the inherent human dignity of the worker, then that legitimacy ends. One right may not be pursued at the expense of others.

    And again, it is clear to Pope Pius XI that the “free labor market” can be a destructive social force as well, and that the common good is best served by the development of what he calls Industries and Professions, of a social order that totally transcends the labor market.

    In the end, we may disagree, but someone has to win the argument. Something eventually has to be done. And which do you think that ought to be? That which the Popes have rejected, or that which they have embraced?

    Frankly, what you believe doesn’t matter to me. What matters is what you are willing to do as more and more people eventually come to reject the free labor market in favor of cooperative economics, a development in progress and which will continue to grow by leaps and bounds. You say the spread of cooperatives would leave you “delighted”. If that’s so, then we have no real argument. But a cooperative society will not have a free labor market, not because it was forced out of existence, but because people will have largely walked away from it.

    Finally, it simply can’t ever be argued that the Church actually supports the notion that the free market fixes social problems on its own. We’ve already heard Pius XI reject the invisible hand. Here is JP II in Centesimus Annus:

    “Indeed, there is a risk that a radical capitalistic ideology could spread which refuses even to consider these problems, in the a priori belief that any attempt to solve them is doomed to failure, and which blindly entrusts their solution to the free development of market forces.”

    Without keeping this in mind, an economic ideology cannot possibly be legitimate from a Catholic viewpoint. Americans may “demand” to the point where they, as 5% of the world’s population, consume 25% of its resources. That does not obligate the global economy to furnish them with that 25%. It is simply intolerable, not only from a moral but an ecological standpoint as well. The whole world cannot consume at American levels, but neither can this imbalance in world resource consumption continue. And these are points recognized by the Church. That is why JP II also says:

    This may mean making important changes in established life-styles, in order to limit the waste of environmental and human resources, thus enabling every individual and all the peoples of the earth to have a sufficient share of those resources.”

  • Blackadder says:

    Cutting through all of the nonsense, the simple point is this: neither businesses nor the state may deny the right to associate or any other worker right on the grounds of profitability, economic utility, or some other imagined positive benefit. The real point is that the dignity of the human being comes before any of these things.

    Not on the grounds of some imagined benefit, surely. But look, Pius says that it is acceptable for a business to pay less than an adequate wage if it is unable to pay more (it’s not acceptable in a broader societal sense, but it’s not immoral in that case for an employer to do so). This would seem to be a matter of business profitability. As Sammuel Gompers put it, “the worst crime against working people is a company which fails to operate at a profit.”

    if workers really want a company union, I see no reason they shouldn’t have one. But, it certainly ought to be illegal for employers to make membership in a company union, as opposed to an independent union, some sort of condition for employment.

    Didn’t you say earlier that if an employer wanted to compel membership in a union as a requirement of employment, this was fine as “you don’t have to work there if you don’t want to be in the union”? (I’m not trying to play ‘gotcha’ here, it just seems that the statements are in conflict).

    You say the spread of cooperatives would leave you “delighted”. If that’s so, then we have no real argument. But a cooperative society will not have a free labor market, not because it was forced out of existence, but because people will have largely walked away from it.

    I think we may have a different understanding of what is meant by a free labor market. In my view, there’s no reason coops couldn’t come to dominate a free labor market. I don’t think that they will, for the reasons I’ve outlined, but if I’m wrong about that it won’t mean we’ve ceased to have a free labor market just because there are a lot of coops about.

    Finally, it simply can’t ever be argued that the Church actually supports the notion that the free market fixes social problems on its own.

    I think the evidence that the free market fixes at least some social problems on its own is overwhelming. Why would anyone want to set the Church in opposition to this idea?

    an economic ideology cannot possibly be legitimate from a Catholic viewpoint. Americans may “demand” to the point where they, as 5% of the world’s population, consume 25% of its resources. That does not obligate the global economy to furnish them with that 25%. It is simply intolerable, not only from a moral but an ecological standpoint as well.

    If one considers the world’s resources to be like a buffet table, then the fact 5% consumes 25% of the resources would be intolerable from a moral and ecological point of view. But it doesn’t work like that. The reason people in America are able to consume 25% of the resources consumed in a given year is that they produce 25% of the resources produced in a given year. Indeed, if you take into account the positive externalities associated with technological and entrepreneurial innovation, we probably produce far more than 25%.

  • Joe Hargrave says:

    “But look, Pius says that it is acceptable for a business to pay less than an adequate wage if it is unable to pay more (it’s not acceptable in a broader societal sense, but it’s not immoral in that case for an employer to do so). This would seem to be a matter of business profitability.”

    If it isn’t acceptable in the broader societal sense, first of all, that means that the imperative to discover new ways of addressing the problem becomes even greater – i.e., cooperative economics, where this ceases to be an issue at all.

    It isn’t to say that a worker-owned firm can’t fail and will never have to make cuts, but it is done in a democratic fashion, at pace acceptable to those being affected by it, and if other Catholic rights are taken into account, a social safety net that aids those who have fallen on hard times.

    Meanwhile, who can say, especially today with widespread corporate fraud, what the real situation of an autocratic or oligarchic firm is? Democracy brings transparency and accountability to the work place, so that the claims of employers are not taken at face value.

    It is for these reasons and more that, once again, Pius was not simply describing what could be allowed under harsh circumstances, but what ought to be done in order to improve the condition of the worker in the long run, which in his view certainly involved phasing out the labor market and phasing in a modern cooperative and corporatist vision.

    “Didn’t you say earlier that if an employer wanted to compel membership in a union as a requirement of employment, this was fine as “you don’t have to work there if you don’t want to be in the union”?”

    There is a difference between existing employees and future employees. I don’t think anyone should ever lose their job because they wanted to form or join an independent union. But that doesn’t necessarily mean that anyone should be granted a job in opposition to arrangements that the workers currently find to be in their best interests.

    “In my view, there’s no reason coops couldn’t come to dominate a free labor market.”

    If people are situated in a job on a long term, and eventually permanent basis through ownership and civic responsibility, they aren’t a part of the labor market anymore. They are not wage workers competing with other wage workers; they are worker/owners competing with other worker/owners. Maybe we do have different understands of what it means.

    “I think the evidence that the free market fixes at least some social problems on its own is overwhelming. Why would anyone want to set the Church in opposition to this idea?”

    As long as you remember to insert the words “at least some”, we don’t have a problem. But this isn’t about what I want to “set” – it is about what has actually been written. You know that Pius rejected the invisible hand, you know that John Paul II rejects “market fundamentalism” – he said it, quite clearly, with additions or modifications needed from my end.

    “The reason people in America are able to consume 25% of the resources consumed in a given year is that they produce 25% of the resources produced in a given year.”

    Even if that were true, and I don’t believe that it is at all, it is still intolerable from a moral and ecological point of view. Even if you made 25% of the food at the buffet table that people are eating off of at any given time, you wouldn’t need to eat 25% of the food.

    Consequently you should not be entitled to 25% of it, especially considering the doctrine of the universal destination of goods, the preferential option for the poor, the repeated (many, many times repeated) insistence that global imbalances in wealth be redressed, that life-styles and consumption habits must change. There is this passage from JP II’s “Redemptor hominis”

    Indeed everyone is familiar with the picture of the consumer civilization, which consists in a certain surplus of goods necessary for man and for entire societies-and we are dealing precisely with the rich highly developed societies-while the remaining societies-at least broad sectors of them-are suffering from hunger, with many people dying each day of starvation and malnutrition. Hand in hand go a certain abuse of freedom by one group-an abuse linked precisely with a consumer attitude uncontrolled by ethics -and a limitation by it of the freedom of the others, that is to say those suffering marked shortages and being driven to conditions of even worse misery and destitution.

    This pattern, which is familiar to all, and the contrast referred to, in the documents giving their teaching, by the Popes of this century, most recently by John XXIII and by Paul VI,104 represent, as it were, the gigantic development of the parable in the Bible of the rich banqueter and the poor man Lazarus105. So widespread is the phenomenon that it brings into question the fìnancial, monetary, production and commercial mechanisms that, resting on various political pressures, support the world economy. These are proving incapable either of remedying the unjust social situations inherited from the past or of dealing with the urgent challenges and ethical demands of the present. By submitting man to tensions created by himself, dilapidating at an accelerated pace material and energy resources, and compromising the geophysical environment, these structures unceasingly make the areas of misery spread, accompanied by anguish, frustration and bitterness106.

    We have before us here a great drama that can leave nobody indifferent. The person who, on the one hand, is trying to draw the maximum profit and, on the other hand, is paying the price in damage and injury is always man. The drama is made still worse by the presence close at hand of the privileged social classes and of the rich countries, which accumulate goods to an excessive degree and the misuse of whose riches very often becomes the cause of various ills. Add to this the fever of inflation and the plague of unemployment -these are further symptoms of the moral disorder that is being noticed in the world situation and therefore requires daring creative resolves in keeping with man’s authentic dignity

  • Blackadder says:

    If it isn’t acceptable in the broader societal sense, first of all, that means that the imperative to discover new ways of addressing the problem becomes even greater

    I agree. I think the evidence suggests that the best way of addressing the problem is through the free market.

    i.e., cooperative economics, where this ceases to be an issue at all.

    It’s not clear to me why the use of the cooperative form would make these issues disappear. Suppose, for example, that an adequate wage in a given circumstance is $10 an hour. And suppose that, given the profitability of the firm, workers can only be paid $8 an hour. Whether the firm is organized as a for profit corporation or a worker coop, the problem would seem to be the same. The only way the form of the business would matter is if you thought one form was less likely to find itself in this situation than the other, i.e. if one form tended to be more profitable. The problem is that worker coops tend to be less profitable that other sorts of businesses, so if anything problems of this sort would be more common in cooperatives than otherwise.

    Even if you made 25% of the food at the buffet table that people are eating off of at any given time, you wouldn’t need to eat 25% of the food.

    Suppose that the U.S. has 25% of the world’s MRI machines. Does that mean that the U.S. has too many MRI machines? I would say no. It might mean that the rest of the world has too few MRIs, in which case the solution is to make more MRIs, not for the U.S. to go with less. So also for wealth and consumption generally.

  • Joe Hargrave says:

    I’m not going to repeat all of the reasons I already gave as to why I think the cooperative form is better.

    But on the last point, you missed the point. If you don’t need 25% of the world’s resources, you shouldn’t have them – especially if it is not possible in the near and urgent future for the rest of the world to “make more” whatever.

    Nothing at all to say about Redemptor hominis?

  • Joe Hargrave says:

    Oh, and…

    “I think the evidence suggests that the best way of addressing the problem is through the free market.”

    Seeing as how there’s never been a free market, seeing as how the free market is a theoretical construct, seeing as how every economy in the modern world is either a command economy or a mixed economy, I can’t imagine what this “evidence” would be.

  • Joe Hargrave says:

    Nonsense? Then please go edit the wiki page on “free market”

    “A free market is a purely theoretical term that economists use to describe a market which is free from government intervention (i.e. no regulation, no subsidization, no single monetary system and no governmental monopolies)…

    In reality, a free market has never existed due to various government interventions and monopolies on the physical use of force and monetary system. Whether there should be any governmental role within a market is a subject of debate, however, if there is a governmental role, it is called a mixed market, not a free market.”

    I’ve yet to find anyone who has argued otherwise – even people who argue in favor of free markets.

  • Blackadder says:

    Seeing as how there’s never been a free market, seeing as how the free market is a theoretical construct, seeing as how every economy in the modern world is either a command economy or a mixed economy, I can’t imagine what this “evidence” would be.

    It’s true that there has never been a society that has been completely free of government interferences in the economy. Does this mean that there cannot be evidence in favor of free markets? Hardly. Frictionless planes don’t exist either, but that doesn’t mean there is no evidence in favor of what physics has to say on the subject. Even if no society has adhered completely to free market principles, different societies have approximated them to differing degrees, as have different areas within a society, and so forth. Given that your own preferred system has never been completely instantiated on a societal level either I’d think you would grasp the point.

    If you’d like, I’d be happy to send you a book that goes into more detail about what I’m talking about here.

    On Redemptor Hominis, in the passage you quoted, JPII says that the presence of so much poverty in certain parts of the world while there is so much wealth in other parts “brings into question the fìnancial, monetary, production and commercial mechanisms that, resting on various political pressures, support the world economy.” Yet as you yourself note, the “financial, monetary, production, and commercial mechanisms” in question are not those of the pure free market. Rather they are those of mixed and command economies. So to the extent that the persistence of poverty discredits the current system, it is the mixed and command economy, and not the free market, that should on your view be discredited. Further, if you look at specific examples, I think it becomes quite clear that it is precisely those departures from free market principles that are sadly all too common in the world today that are the cause of much of the continued persistence of poverty in the world. Why is North Korea so much poorer than South Korea? It’s not because Kim Jong Ill is an adherent of Milton Friedman. Why did millions in China starve to death during the Great Leap Forward, and why have millions in China escaped poverty over the last couple of decades? It’s not because China abandoned its commitment to the free market.

  • Joe Hargrave says:

    “Given that your own preferred system has never been completely instantiated on a societal level either I’d think you would grasp the point.”

    We seem to be having this same problem again – my “preferred” system is a simply any society that does not invoke some sort of economic orthodoxy – be it command economy or laissez-faire, Marxism or libertarianism – to rule out community and state intervention in economic affairs.

    My preferred economic system is one that is first and foremost accountable to a higher moral order and respects the natural, God-given rights of workers, then to the democratic will of the people.

    I’ve said many times now that I don’t have an issue with markets “as such”. The cooperative model is not some sort of rival to the market – cooperatives operate in markets.

    “So to the extent that the persistence of poverty discredits the current system, it is the mixed and command economy, and not the free market, that should on your view be discredited.”

    I think imperialism is what is discredited, military and economic.

    As for whether or not the “free market” is discredited, I don’t know. If “free market” means total deregulation of the economy and privatization of everything, then it is without a doubt as discredited as command economies are.

    We may never agree on it, but I take the word of Greenspan and Bernanke as worth something; deregulation was the catalyst for the sub-prime crisis. Predatory lending, which was perfectly legal, which was nothing but individual agents pursuing their own short-term, immediate self-interest, drove what might have been a manageable problem into overdrive.

    Meanwhile areas of the economy where social, public investment might do a great deal of good, such as sustainable agriculture, green energy, etc. are routinely denied it on the grounds that cutting spending and allowing private companies to do it is a better policy. I don’t think that has been the case. I think “structural adjustment” in the third world has lead to catastrophes.

    And don’t get me started on speculation in food driving up food prices. Whether or not it is a part of the cause or the whole cause, it is yet another example of the pursuit of short-term gain by some leading to suffering and deprivation for others.

    In short, I don’t think everything benefits from competition. I think competition on a global scale leads to the centralization of wealth and power, because the goal of every competition is to win, and that there is little “the consumer” can do about it as a consumer.

    It is time that businesses are completely accountable to society, to communities, to workers – and not just to investors and shareholders. It is time that great inequalities are reduced, not simply so that the poor may benefit from redistributed wealth but so that a minority of individuals and institutions do not completely dominate the global economy.

    Insofar it can exist while these more important things take place, I am completely in favor of markets. I am completely in favor of making them as free as they can be while remaining within the parameters outlined above.

  • Joe Hargrave says:

    And, once more on what the real solution to the problem is, from Pope Benedict:

    “I appeal for an increase in brotherhood and solidarity and a global generosity that is truly concrete,” the pope said, adding that the world’s richest nations must rediscover the ethical value of living a simple and balanced lifestyle for their own good and the good of the poor.

    http://www.catholicnews.com/data/stories/cns/0902682.htm

  • Joe Hargrave says:

    Then there is this:

    “Looking ahead to a U.N. financial summit in New York June 24-25, the pope said the meeting should be carried out “in a spirit of wisdom and solidarity, so that the current crisis can be transformed into an opportunity.”

    The goal should be to “promote an equitable distribution of decision-making power and of resources, with particular attention to the number of poor, which unfortunately is increasing,” the pope said June 14 at the Vatican.”

    http://www.catholicnews.com/data/stories/cns/0902729.htm

    Sounds like economic democracy and distributism to me. I’ve yet to find the report, interestingly enough, that says that the “free market” is the solution. It may well be a part of it. But it is very far from the whole of it.

  • Blackadder says:

    We seem to be having this same problem again – my “preferred” system is a simply any society that does not invoke some sort of economic orthodoxy – be it command economy or laissez-faire, Marxism or libertarianism – to rule out community and state intervention in economic affairs.

    If this were the case, then you would be indifferent as to whether businesses were organized as cooperatives and so forth. No, it’s not the case that just any society will suit you so long as it doesn’t invoke some sort of economic orthodoxy. What you want is a society that follows *your* preferred economic orthodoxy, rather than some other. There’s nothing wrong with that (orthodoxy is actually a good word in my book), but you really oughtn’t fall into the trap of thinking that ideology is what the other guy believes.

    As for whether or not the “free market” is discredited, I don’t know. If “free market” means total deregulation of the economy and privatization of everything, then it is without a doubt as discredited as command economies are.

    We may never agree on it, but I take the word of Greenspan and Bernanke as worth something; deregulation was the catalyst for the sub-prime crisis.

    It cannot be the case that total deregulation of the economy and privatization of everything was responsible for the sub-prime crisis, as this total deregulation did not occur.

  • Joe Hargrave says:

    So, you simply assumed that because I said total deregulation in one paragraph, and deregulation in the next, that I really meant total deregulation instead.

    Well, that isn’t what I did. I mentioned “total deregulation” as a goal of some people, and “deregulation” as what happened – and as indicator that the goal of “total deregulation” would not be a good one. If that wasn’t clear, you now have clarification.

    As for this:

    “If this were the case, then you would be indifferent as to whether businesses were organized as cooperatives and so forth.”

    Cooperatives are not an ‘economic system’ – they are a model of a firm. They could theoretically exist in a totally free market with no regulation whatsoever. The degree to which a market is regulated has nothing to do with the structure of the firms participating in that market. And I don’t think I have ever indicated that I conflate those two things.

    “What you want is a society that follows *your* preferred economic orthodoxy, rather than some other.”

    What I want is what I said I want – a society wherein economic activity is clearly subordinated to a higher moral order and the democratic will of the people.

    Such a society would not be a totally free market, because there will always be situations where either morality, or the will of the people, demand that social organizations such as communities and governments involve themselves to some degree in economic affairs, and more likely than not, to a degree that laissez-faire types will object to on either moral or ‘scientific’ grounds.

    Of course, back on Feb 26 Pope Benedict said,

    “[E]goism, the root of avarice, consists in loving myself more than anything else and of loving the world in reference to myself. It happens in all of us. It is the obscuring of reason, which can be very learned, with extremely beautiful scientific arguments but which, nevertheless, can be confused by false premises.”

    http://www.zenit.org/article-25283?l=english

    Nor would a society I prefer trample on the right to private property, freedom of association, or any other economic right to establish a command economy on the basis of a different kind of economic orthodoxy.

  • Joe Hargrave says:

    As for the book offer, I don’t turn down a free book.

    We’ll do this. Pope Benedict’s encyclical on social and economic issues is supposed to come out on Monday. Let’s read that first. Then we’ll see about your book.

    I’ve edited this comment because I said something that I can’t be sure was fair. For now, I’m going to stop this debate. Let’s both step back for a bit, read the encyclical, and then we’ll see where to go.

  • If “free market” means total deregulation of the economy and privatization of everything, then it is without a doubt as discredited as command economies are.

    We may never agree on it, but I take the word of Greenspan and Bernanke as worth something; deregulation was the catalyst for the sub-prime crisis. Predatory lending, which was perfectly legal, which was nothing but individual agents pursuing their own short-term, immediate self-interest, drove what might have been a manageable problem into overdrive.

    Though the thing to understand there is — it was deregulation combined with a lot of subsidy and intervention that made that problem possible. The examples of deregulation that are pointed to would have been much less of a problem had there not been an implicitly government backed organization out there buying up mortgages as a commodity. That created an artificial demand for mortgages qua mortgages, regardless of quality.

    The combination of intervention and deregulation led to problems that true non-interventionalist deregulation would not have.

    This leads back to one of the key points which free market libertarians tend to make: When you accept it as normal for the state (as opposed to distributed social action coordinated by some set of standards such are moral ideals) to step in and regulate and subsidize — the benefits to having those regulations and subsidies work in your favor is so great that almost invariably powerful economic actors will end up having those regulations written to help them.

    For instance, farm subsidies are invariably passed with appeals to “save the American family farm”, and yet most of the actual money goes to benefit large corporations.

    Regarding Benedict’s quote:

    The goal should be to “promote an equitable distribution of decision-making power and of resources, with particular attention to the number of poor, which unfortunately is increasing

    First off, I think there would be argument among different serious Catholics as to whether Benedict’s statement here is meant to be economic in a policy sense or moral. (Recall the old chestnut: the problem with socialism is socialism, but the problem with capitalism is capitalists.)

    However, taking it as a policy point, keep in mind that often freer markets are how we’ll see a more equitable distribution of decision making power and of resources. One very good example which hurts a lot of the poor in Africa and elsewhere is the economics of coffee growing. In a number of coffee producing countries, the government has given itself a monopoly on exporting coffee, and all coffee growers are required to sell their coffee to the government at a single fixed price. This means there’s no incentive to grow better coffee or to do it sustainably — just to produce as much as possible in order to get the set price.

    This serves to enrich a small number of kleptocrats favored by the regime, but does nothing for farmers themselves. (And gives us lousy, commodity coffee.) By comparison, moving to a free market system allows growers to put extra work and resources into growing high quality coffees, which in turn allow them a much greater livelihood.

    Taking life to be nothing more than free markets (with all moral norms null in the market life) is indeed a great error, but there’s nothing about the free market approach to economics which demands ignoring moral norms.

  • Joe Hargrave says:

    “The examples of deregulation that are pointed to would have been much less of a problem had there not been an implicitly government backed organization out there buying up mortgages as a commodity.”

    As I understood it, Fannie and Freddie got involved in sub-prime following the deregulation because everyone else started doing it. It was the extent to which it was competitive, and not government-backed, that caused it to engage in the risky behavior. Meanwhile it wouldn’t have happened at all if it weren’t for the repeal of Glass-Stegall.

  • Blackadder says:

    I think the argument that the repeal of Glass-Steagall had anything but a positive role in mitigating the effects of the financial crisis is pretty weak. The banks that got into the most trouble were investment only banks, not the investment/commercial blend prohibited by Glass-Steagall, and some were only able to stave off bankruptcy by converting to investment/commercial or being sold to investment/commercial banks (which would have been prohibited under Glass-Steagall). There’s also the fact that Canada, whose financial markets didn’t have the problems here, doesn’t have a Glass-Steagall type restriction.

  • Art Deco says:

    Blackadder,

    The government guarantees bank deposits in order to guard against the implosion of fractional reserve banks from public panic, as occurred to thousands of banks during the period running from November 1930 to March 1933. The Federal Deposit Insurance Corporation has a long history of passably competent superintendency of bust banks. The trouble is, Citibank, JP Morgan Chase, Bank of America, and Wells Fargo/Wachovia are deeply involved in capital markets and superintending an institution with this diversity of operations is rather outside of the FDIC’s established skill set. Also, most of Citibank’s deposits are in foreign accounts uninsured by the FDIC. These four megabanks have beetween them about half the assets of depository institutions operating in the United States and constitute (by assets) about 20% of the financial sector in toto.

    The ‘investment only’ banks to which you refer were not merely investment banks. They undertook a mix of securities underwriting, proprietary trading, assets management, and private equity. Institutions like Lazard which stuck to securities underwriting have not caused problems as yet. The thing is, Drexel Burnham Lambert (the junk bond king) went bankrupt in 1990 without causing a general financial panic. What do you suppose differentiates that situation from that of Lehman Brothers? My suggestion would be the uncertainty generated by the effect of the credit default swaps bought and sold on Lehman bonds, the artifact of another regulatory failure.

  • There are now 11,400 ESOPs with over 13 million participants, including some very large companies that are majority employee owned (for current data, see http://www.nceo.org/main/article.php/id/2/ and http://www.nceo.org/main/article.php/id/11/). They certainly are not all democracies, but they are a lot more democratic as a group than conventional companies, even though most ESOP companies started out much more conventionally managed.

    There is a tendency to focus on whether employees have voting rights and board seats, but our research has shown that employees are much less interested in that than in day-to-day opportunities for more control over their jobs. Because the research and experience shows that companies that provide this also perform a lot better, most ESOP companies have at least some, of often, many elements of this approach.

    What I really like about ESOPs, and what drew me to them in the first place when I started the National Center for Employee Ownership, is that is marries self-interest to economic justice. Altruism is a wonderful thing, but it’s a lousy motor for broad economic change.

  • Joe Hargrave says:

    Mr. Rosen,

    Thanks for your contribution here, and for the links. I will read them with great interest, since my source for this post is six years old.

    I am also glad to see that the trend towards worker ownership, and democracy in the workplace, continues to grow.

    Consider me a big fan of what you do, especially since it accords well with Catholic social teaching.

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