In light of the excellent recent posts on the question of political economy from Tony and Jeff, it may be well to review some of the observations and principles which form a wise basis for evaluating that tangled question.
Readers unfamiliar with our history should be aware: The pernicious dominance of the financial interest, and its plunge into fraud and usury, has been a frequent subject for conversation around here for many years. When a Distributist commenter pronounces thusly: “Mere financial property, apart from other things, makes its holders more beholden to [the] state than otherwise,” he may perhaps be surprised to discover little disagreement from us.
That situation, however, is not broadly descriptive of America, even after the financial crisis and rescue late in the previous decade.
How many there are in this country, or for that matter across much of what used to be called the West, who hold exclusively or primarily financial assets, eschewing land, machines, luxury items, etc., is unknown to me but it cannot be a very large number.
I'm willing to conjecture that generally speaking wealth in financial assets strongly correlates with wealth in physical possession of land and the means of production. But that should not lead us to neglect the many millions who are indeed the Distributist’s ideal of small property holders: They own, let us say, a house, two cars, an iMac, cellphone and several other devices; perhaps a small hobbyist's beer-brewing operation, or some rifles or shotguns for recreational shooting, or tents and camping equipment, or bicycles, kayaks, golf clubs; antique chess boards, a nice smoker or grill, a collection of Churchill first editions. I could go on.
America is still a middle class country, and a vibrant middle class is what both Distributism and free markets, rightly understood, aim to achieve
It is true that a want of understanding (and among some a conniving and studied ignorance) has made Americans complicit in usury. It is true that our usurers have much to answer for: they should repent and sin in this way no more. As with many other sins, usury once embraced is not so easily extirpated.
But so long as financial assets are created by a contractual agreement to associate in a business venture, either by means of share ownership or lending, they are not inherently disreputable. The mere size of the business, the investment, or the securities that stand for them, tells us little. Even lending at interest is permissible if the creditor’s claims cease with certain staked assets. At any level of actuarial complexity, these ventures and investments require lawyers, accountants, analysts, experts, traders. In a word, they require a sophisticated banking sector.
Again, the pooling of resources, by means of financial securities, is not an inherently disreputable enterprise.
We should aim to reduce the influence of usury over our financial industry. There are some reforms, mostly minor and targeted, that I think could help. Not massive overhauls and “comprehensive” legislation, but careful amelioration by calculated revisions of the law.
Investment banks should return to private partnerships. Some restoration of the old barrier between commercial banking and securities trading remains advisable. Bankruptcy laws should emphasize sounder collateral, while at the same time permitting for individuals the kind of “strategic default” on debt that firms undertake with regularity. The creditor gets the collateral, the borrower gets free of the debt burden. Voilà, non-usurious lending.
After the crisis, we passed the Dodd-Frank financial reform. Most of Dodd-Frank did not help, but rather made things worse. The Consumer Financial Protection Bureau is likely to result in far more mischief and mountebankery than it cures, not least because Congress foolishly untethered it from the normal appropriations process and thus disarmed its own supreme power of the purse.
In the end, the hue and cry against finance has far too often empowered socialists who just keep making everything worse. Many of the trends in prosecution of financial crimes have abetted the putrefaction of our legal system which is now evident to anyone with eyes to see.
I want usury curtailed, but frankly I'm reluctant to give our currently lawless prosecutors any more arbitrary power over us. The Supreme Court let stand a recent appeals court decision reproving prosecutors for their excessive zeal in expanding the already impossibly vague insider-trading doctrine. While it is galling that we so rarely see usurers hauled to the hoosegow, at this point I find it heartening when these adventurous prosecutors get rebuked by a court. Ubiquitous prosecutor misconduct may be a graver problem than usury, and the details financial prosecutions have clearly encouraged this misconduct.
All of which is a roundabout way to stating that I have little patience for vague anti-capitalist diatribes these days. Distributist ideals, while largely benign in and of themselves, yoke themselves far too often to insidious schemes.
In the end, widely distributed property and true economic liberty are more likely to arise and flourish under conditions of middle-class democratic capitalism, than under autocratic redistributionism or paternalistic technocracy.