A Distributist Manifesto
It recently occurred to me that I, and many others, talk an awful lot about Distributism without defining it. This is no longer an acceptable practice to indulge in, as the word becomes more known in Catholic circles in these economically troubled times.
There is a great deal of confusion about what Distributism is, what it means, what its place is in Catholic social thought, and even over who started it. This essay will attempt to address some of these confusions, by answering the following questions:
*What is Distributism?
*What has the Papacy said about Distributism?
*Why Distributism?
*What is the relation of Distributism to capitalism and socialism?
*How does Distributism answer its critics?
I will state forthrightly that I speak only for myself, and not for any other individuals or organizations purporting to be Distributist themselves. Though I have written for The Distributist Review, the following arguments and opinions are mine alone.
With that said, I hope you will find the following exposition helpful in your own mission to understand this idea, which is regaining popularity among Catholics. With this newfound popularity comes a great deal of criticism and sometimes even distortions by those who are sympathetic to it.
What you will not find here are technical details about cooperative firms or Distributist legislation, though I may always make future additions or posts on the topic.
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While I may have a few quibbles, they are just that, quibbles, and therefore not worth mentioning. Overall I think this is a very thoughtful and intelligent post. Well done, Joe.
Joe,
That was a very helpful post. I tend to like what I hear about distributism when you write about it. I’m still uncertain about how distributism translates into concrete public policy, but I’m willing to take your word for it that state intervention is a variable with cautious upper bounds (paraphrasing).
I wonder how important ownership (as opposed to other economic outcomes) is to justice? Certainly, excessive wealth concentration can be very socially damaging, but how far do we go to ensure distributed ownership of production? You wrote:
Rather, the law should “favor” ownership, possibly through incentives and other legislation that does not infringe on the property of others.
Are government incentives for home ownership a good idea? Normally we think so, but recent experience with the subprime fiasco begs reconsideration. Maybe ownership is not always the answer; maybe some people are better off renting (for a time), and by extension, maybe some are better off as wage earners. The risk downsides are nothing to sneeze at when we push for more ownership of property.
Joe, do any distributists advocate for a more vigorous FTC in terms of blocking mergers and favoring less industrial concentration and more competition?
I’m highly receptive to distributist ideas, but color me a bit of a “corporatist” as well.
Thanks Mike.
J.Christian,
“I’m still uncertain about how distributism translates into concrete public policy, but I’m willing to take your word for it that state intervention is a variable with cautious upper bounds (paraphrasing).”
The best example is the Employee Ownership Act.
http://dept.kent.edu/oeoc/publicationsresearch/Sum1999/EOOwnedSum1999.html
Since 1999 many different and perhaps less ambitious pieces of legislation have been introduced, but they all share the aim of expanding employee ownership, and none of them to my knowledge involve forcible redistribution of wealth.
“Are government incentives for home ownership a good idea? Normally we think so, but recent experience with the subprime fiasco begs reconsideration.”
I’ve never seen a historical event more clouded by politics than the sub-prime crisis.
The idea that the actual policy was to give home loans to unqualified lenders is absolutely false. The bad loans were given out by unregulated lenders to many unsuspecting and/or greedy buyers, trying to make a quick buck, selling the bad loans to Wall Street who then packaged them up in securities and sold them all over the world.
The Community Reinvestment Act on the other hand has been US law since 1977. Banks following its guidelines were LESS and not more likely to get involved in sub-prime.
That said, Distributism isn’t about home ownership; it is about ownership of the means of production. And quite frankly, I think it was foolish to encourage home ownership without first encouraging employee ownership, which might have actually enabled more people to be able to afford homes on more reasonable terms.
” do any distributists advocate for a more vigorous FTC in terms of blocking mergers and favoring less industrial concentration and more competition?”
As a matter of fact, yes. I’m not quite sure what to make of such policies myself, though.
And quite frankly, I think it was foolish to encourage home ownership without first encouraging employee ownership, which might have actually enabled more people to be able to afford homes on more reasonable terms.
If a person receives a substantial portion of his pay in the form of company stock and the stock market crashes won’t this make it harder for him to pay his mortgage?
I realize that distributism is about allowing men and women to participate and have stakes in both the capital and labor markets, not home ownership. I can see the advantages of marrying such participation so that the participation is via the same enterprise, pursuant to ESOPs or similar plans. There are serious dangers, however, especially regarding investment diversification. I have been involved in many ESOPs as an attorney, and I just don’t think it is possible to view them in a simple favorable light. Like so many things, it depends.
As far as home ownership is concerned it is indeed overrated from a financial perspective. Many families are better off renting, but much depends on the local markets. What normally should drive the decision is where one desires to live. In many cases rental options abound; in many cases there are few if any rental options. The real estate industry is correct that home ownership often produces the most valuable equity asset that a family will own. But that is mostly because it is a forced savings system (especially before ome equity loans became so available) in a society in which few families save responsibly. But the real ROI is usually pretty underwhelming.
As far as home ownership is concerned it is indeed overrated from a financial perspective. Many families are better off renting, but much depends on the local markets.
As I am sure I don’t need to remind you, there are significant tax incentives to buy: 1) Interest deductions; 2) No capital gains tax if the house appreciates (for most sellers); 3)no annual taxes as the house appreciates. Granted, these incentives get priced into the rental market to a certain extent, and no one is likely to forget any time soon that houses can depreciate as well as appreciate, but there still are a number reasons to buy.
John,
As a tax lawyer I’m well aware of those incentives. Studies indicate, however, that they still generally don’t translate into making homeownership a good investment as a general rule. I believe Consumer Reports summarized those findings within the past year or two. This is not to say that home ownership is a bad idea, but its desirability should turn more on lifestyle needs than a wealth accumulation strategy.
As a tax lawyer I’m well aware of those incentives.
As I said, I am sure you did not need the reminder – writing that particular comment was like pointing out the notes for ‘Twinkle, Twinkle Little Star’ to a concert pianist.
Studies indicate, however, that they still generally don’t translate into making homeownership a good investment as a general rule.
Right. A number of different considerations can outweigh the tax incentives; for instance, ownership for two or three years is unlikely to be that financially beneficial because the transaction costs (closing costs, realtors fees, etc.) are fairly high. Also, as with any other investment, during a short period of time, the timing may not work in your favor in terms of depreciation/appreciation. I was just pointing out that there are favorable tax incentives in place that can, in some circumstances, outweigh the risks. At the same time, given the pro-buying bias in our culture (and tax system), it’s probably more important to emphasize, as you have, that buying is not always better than renting (and in many cases is much worse).
Thanks, John. LOL. Completely agree. Interestingly, one of the reasons people often get the impression that homeownership is such an obviously good financial decision is simple forgetfulness. Many times one will meet someone who is pleased to note that the home he purchased 15 years ago for 300K is now worth 500K, which is not a bad return at all especially considering the tax incentives you mention. But then ask him about improvements, and he would have forgotten about the 70K kitchen renovation, the 45K basement refinish, the 12K landscaping additions, and the 15K deck improvement. In tax or accounting parlance what is happening is that in computing gain people fail to take into account numerous basis adjustments. This happens all the time with Americans unsophisticated in financial matters (or perhaps sophisticated but just thoughtless in their analysis). That said, building equity through home ownership can operate as an effective “forced” savings system in a culture that probably can use one.