May 11, 2011

Let’s Have at Those Caveats! (II): Socialism by Another Name Will Still Wreck Production

NB: Although we are almost at the end of our review of the first chapter of TCATL, the subsection labeled “caveats,” we are still only providing counterpoint to Mr. Ferrara’s undefended stage-setting assertions. As we meet the support he offers for his claims in later chapters, we will respond accordingly.
Our inquiry into Mr. Ferrara’s reference to unrestrained laissez-faire capitalism and free market, in order to determine whether they have distinct meanings, continues from the previous post.
3. Does unrestrained laissez-faire capitalism refer to something that exists or existed in history?
Mr. Ferrara’s claim that laissez-faire capitalism “has encouraged the rise of ‘soft’ socialism in Western nations” implies an affirmative answer: if it never existed, it couldn’t “encourage” the rise of anything (whatever he meant by “encourage”).
But has laissez-faire capitalism ever been unrestrained and, if so, does that restraint continue? That is, does unrestrained laissez-faire capitalism describe anything real?
If it does, then given the staggering growth of regulation (with its prohibitions and diktats), taxation, war and conscription in the West in just the last century—we frankly admit that we have no idea what meaning Mr. Ferrara attaches to unrestrained.
If it doesn’t—that is, if private enterprises are regulated in the above-enumerated ways—then Mr. Ferrara’s criticism has no real target.  (On the next page, however, he will identify his target to be “actually existing capitalism.”)
4. Does free market refer to something that exists or existed in history?
For Mr. Ferrara, a free market is a morally restrained and guided one. The way he relates political freedom to morality illuminates neither, and keeping them related but distinct will occupy us in future posts.*
In any case, if Mr. Ferrara favors what he calls a morally restrained market, but not the current politico-economic establishment, which he wishes to transform along Distributist lines, he must hold that free markets either don’t exist or exist only to the degree that the Distributist ideal is implemented.
We have a long way to go before arriving at Mr. Ferrara’s exposition and defense of Distributism, but for now we may safely say that Distributism is what he means by free market society, or at least one that best “conduces to true social freedom.” (10)**
Mr. Ferrara rejects socialism without giving a reason or even defining that term. Of course, Pope Pius XI declared in Quadrogesimo Anno that “No one can be at the same time a sincere Catholic and a true socialist,” and perhaps that is reason enough for him. But what did His Holiness mean by “socialist”? He might not have meant what Mr. Ferrara’s Austro-libertarian adversaries mean. Socialism, according to them, is intrinsically unrealizable, because without markets for capital goods, the latter cannot be rationally allocated, and consequently no production of any commodity can be rationally directed. If they are right, then socialist parties cannot genuinely offer socialism, but only plans whose implementation would destroy production.***
“All right,” some of you may be thinking. “So what?” Simply this: the achievement of Mr. Ferrara’s desired “society in which as many people own property sufficient for the support of themselves and their families” presupposes a certain understanding of production and exchange, which Mr. Ferrara nowhere offers and, as we shall see in a future post, doesn't intend to.
Assuming Mr. Ferrara’s morally restrained free market society uses money, all the things that household A needs for “support”—its “basket of goods,” so to speak—must be for sale at money prices and then bought from the vendors of the products households B, C, . . . n. This situation holds for each of the other households. The totality of these situations is a vast interlocking network of interdependency.
Goods must therefore be priced “just right” so that the expenditures of households A, B, C, . . . n (i.e., their purchase of their baskets) equate, day after day, with of incomes of those same households. If expenditures are too high or (what virtually amounts to the same thing) if incomes are too low, the result is injustice (by Mr. Ferrara’s standard). Markets (individuals making and responding to offers) improve the situation for each market participant, but they are never so obliging as to guarantee the continual balancing those expenditures and income for all households as the contents of those baskets change, creating imbalances. In the name of justice, according to that notion of justice, something would have to be done to correct the imbalance.
If one’s concept of justice demands balance, however, then, barring a miraculously continual coincidence of expenditures and revenues, those charged with the responsibility of administering justice would have to intervene in markets to ensure that each household can afford its basket. Who’s going to bell the cat of minimizing expenditures and maximizing revenues? Central planners cannot solve for any variable without solving for all, which is impossible. They will irrationally allocate as far as they can, and then leave a mess for their successors to clean up.
At some point it begins to dawn on some planners that one can cut the Gordian knot simply by abolishing money and money prices with it. This would "free" those in charge of administering justice to command, directly and centrally, the production process, thus ensuring (or so they think) the just distribution of the contents of household baskets. Of course, eliminating money prices does nothing to meet the challenge of allocating resources.
If Mr. Ferrara believes that such allocation ought to be left to markets rather than to central planners—and I take him at his word that he does—then he must accept that allocation’s uncertain import for individual incomes and expenditures. One of those consequences is the very acquisition of “property sufficient for the support of themselves and their families.” (In any case, how does the mere holding of property, unless it consists wholly of immediately consumable goods, “support” anybody? Genuine support presupposes the above-noted network of interdependency.)
Every act of intervention rends the fabric of interpersonal cooperation, which St. Thomas regarded as a common good. The logic of interventionism leads to totalitarianism, which all but destroys that common good. Mr. Ferrara says he rejects socialism in favor of free markets, but adheres to a notion of freedom that seems to warrant such intervention.  
When we revisit Distributism, we will look for evidence that Distributists reject interventionism as cordially as they reject the socialism toward which Distributism inexorably leads and which  they can coherently oppose only by embracing free markets as Austrians understand them (i.e., by ceasing to be Distributists).
To Be Continued

* We remind our readers of St. Thomas Aquinas’ concerns, explored in previous posts, that despite one’s good intentions, one might succeed in morally restraining markets to the point of destroying the common good that is the framework of peaceful cooperation. We differ with the Angelic Doctor over how little moralistically inspired restraint it takes to do that.

** According to Mr. Ferrara in this video interview, Distributism virtually surrounds him as he dines al fresco in Lake Garda, Italy, “which is Distributism in action” [5:37]. Shortly thereafter he refers to “their [Austro-libertarians’] indefatigable defense of the corporate status quo,” which is either evidence of slander or a symptom of hallucination. We recommend this video to readers who would like audiovisual images to go with Mr. Ferrara’s sustained literary sneer.
*** It is impossible for human beings to fly by flapping their arms.  It is also impossible to avoid the dire consequences of so trying. (Trying to fly by flapping one's arms is, unfortunately, not impossible.) The best short introduction to the theoretical and historical issues is, in my opinion, Murray Rothbard’s 1991, “The End of Socialism and the Calculation Debate Revisited.”