Religion & Liberty Online

There Are No Alternatives to Free Market Capitalism

Hilaire Belloc (centre) with his friends G.K. Chesterton (right) and George Bernard Shaw (left) (Image credit: Public Domain)

Exploring Catholic social teaching in relation to economics is fine, but if we’re too open-minded about seeking a new “common good” capitalism, our brains might fall out.

Read More…

Alexander William Salter’s new book, The Political Economy of Distributism: Property, Liberty, and the Common Good, is an odd fish. It begs questions, contains numerous chapters that consist mostly of lengthy quotations, and at times seems to contradict itself, yet in the end it affirms an essential truth that we may forget from time to time, that private property is essential for political freedom. That it does so in a meandering fashion is not a recommendation against reading it. In fact, I recommend it—just be sure to read it with a critical eye.

Salter begins with a discussion of how many politicians and commentators have reintroduced discussion of the common good into the American political discourse, particularly in how it relates to capitalism. However, in discussing the speeches of Marco Rubio and the works of Patrick Deneen and Adrian Vermeule and then connecting them to older strains of thought that form the meat of the book, Salter engages in serial assumptions that amount to question begging. First, that common good capitalism is worth distinguishing from capitalism itself. Secondly, that Catholic social teaching is the best place to look for common good capitalism. Thirdly, that the school of political economy briefly popular in Britain in the 1920s and ’30s, distributism, is compatible with common good capitalism.

To tackle these in reverse order: Distributism is explained by Salter with extensive reference to the works of the Anglo-French politician and writer Hilaire Belloc, and the great novelist, poet, and thinker G.K. Chesterton, who together provided the intellectual core of the distributist philosophy. Their professed position was that they were neither capitalist nor collectivist, representing instead a Third Way.

This third position led to some unfortunate associations. When I was a student debater in the 1980s, I visited the Glasgow University Union, whose parliamentary debate system recognized six political groupings, of which one was still distributist. When I asked my host what this party represented, never having heard the term before, he replied, “Non-racist fascists.” Belloc is still regarded with significant distaste in his native France. It takes until the penultimate footnote of the book for Salter to acknowledge this problem. My own impressions of Belloc are rather more favorable: he was an excellent president of the Oxford Union in the 1890s (when he was regularly characterized as a socialist).

As an aside, Salter really needs to learn the art of paraphrasing. He relies on extensive quotations from these men’s works, taking up almost 100 pages of the 220-page book. This becomes a serious problem with Chesterton, as florid a writer as there comes, whose flourishes therefore suffer from being quoted shorn of their surroundings.

Those hundred pages thereby become quite a slog, especially as Salter understandably pauses to point out where their economics is lacking, simply wrong, or in some cases just plain nuts. While Salter should be commended for his forthrightness in these cases, it distracts from his argument that distributism has important insights that we need to pay attention to. These amount, I think it is fair to say, to the following: that private property is essential to political liberty and that capitalism comes with a “political externality” in terms of costs to political liberty that we ought to think about ways to address. This could probably have been summarized in far fewer pages.

The second assumption is best illustrated by a long discussion that takes up another third of the book—that of the works of the German thinker Wilhelm Roepke, a Lutheran who represents the ordoliberal philosophy that helped Germany recover from the depredations of Nazism. Salter argues, with some evidence, that Roepke was influenced by distributism and was a proponent of Catholic social theory. However, the word Catholic barely appears in the chapters about Roepke, and his economics, of which Salter plainly and rightly approves, are far different from the error-strewn economics of the distributists. So while much is made of Belloc and Chesterton’s Catholicism, their economic thought is derided, but in contrast the influence of Catholicism on Roepke’s correct ordoliberalism is left understated. There’s a strong case to be made, as Samuel Gregg has shown, that Roepke was both influenced by and criticized Catholic social teaching, but Salter oddly fails to make it.

Finally, in his obvious approval of Roepke’s economics, Salter shows how weak the case is that common good capitalism is in any appreciable sense different from free market economics as generally understood. For instance, Salter makes much of the idea that the state has a role to play as guardian of competition through antitrust law, but Roepke makes the case, as do virtually all free market economists, that monopoly is almost always the creation of the state. If competition is part of the common good, and I think Salter shows that is, then surely the first duty of any common good government is to remove the barriers to competition that regulation and protectionism erect. That is exactly what traditional free market economics would suggest as well.

So how can common good capitalism differentiate itself from traditional free market capitalism? Salter’s first and most important insight from his review of distributism and Roepke is that private property is essential for political liberty. Therefore, common good capitalism should emphasize property rights at its core. Yet even here, there is little difference from free enterprise capitalism. The Nobel Prize–winning economist Ronald Coase emphasized that most of the problems of economic externalities were the result of badly allocated property rights. And free market environmentalists routinely point out, for instance, that the majority of America’s land west of the Mississippi is publicly owned to the detriment of American citizens who could own and use the land.

Indeed, one of the great insights of modern free enterprise thinking is Hernando de Soto’s idea of the mystery of capital. He points out that formal land titling enables people in the developing world to utilize that title as a source of capital. Traditional societies where all land is owned by the chief and corrupt polities that confuse land titling are equally guilty of removing this source of capital from the people. We should therefore always be looking for policies that enable access to capital—even for the landless. People as old as I am might remember that one of Margaret Thatcher’s most successful policies was to allow tenants to buy their state-owned “council houses.” But if Mrs. Thatcher was a distributist, I’m a Dutchman.

As for the political externalities of capitalism, perhaps Salter is right that political liberty is worth paying a premium for. However, maybe we should try other things first. Hayek himself, for instance, argued that we need to strengthen the property rights of owners of corporations as a form of discipline on corporate management back in 1960. Part of his suggestion was a ban on corporations voting on other corporations’ shareholder resolutions. This would do a great deal to lessen the power of activist corporations like Blackrock that use their economic power to influence corporations to intrude into the political space and crowd out individual political liberty.

The non-economic contributions of the distributists and Roepke are probably more important here. Political liberty, they agree, requires a strong moral consensus among the people and a government that backs that up. As Roepke said, free enterprise requires

a general acceptance of such norms of conduct as willingness to abide by the rules of the game and to respect the rights of others, to maintain professional integrity and professional pride, and to avoid deceit, corruption, and the manipulation of the power of the state for personal selfish ends.

This is, of course, right, and it is not something economics alone can accomplish. It reflects something Edmund Burke said: “Men are qualified for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites.” Burke was in turn a great friend and admirer of the father of modern capitalism, Adam Smith.

In his dissection of the bad economic arguments of Belloc and Chesterton, and his drawing to our attention the good economics of Wilhelm Roepke, Salter does us a great service. When we hear modern voices echo the policies, if not the arguments, of the distributists, we should remember that however good their policies sound, they won’t work. Instead, if we want a common good capitalism, we should look more to ordoliberalism than to distributism.

Iain Murray

Iain Murray is vice president for strategy and senior fellow at the Competitive Enterprise Institute, and also directs the Center for Economic Freedom. In addition, he is the author of the bestselling books The Really Inconvenient Truths and Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You. Murray holds a master of business administration degree from the University of London and a master of arts degree from the University of Oxford.