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What’s Wrong with the World is dedicated to the defense of what remains of Christendom, the civilization made by the men of the Cross of Christ. Athwart two hostile Powers we stand: the Jihad and Liberalism...read more

Back to the Future

From The New York Times, September 30, 1999:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

"From the perspective of many people, including me, this is another thrift industry growing up around us," said Peter Wallison a resident fellow at the American Enterprise Institute. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."

(HT: View from the Right)

Comments (35)

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.


There's your aporia right there. As one who is rather partial to the Chesterbellocian Distributist vision (and so naturally I know next to nothing of economics) I'm certainly not opposed to the idea of getting more low and low-middle income people into home ownership, such that it eventually comes to define the "general character of society." It's an implied conclusion from the argument of the catholic vision. The problem, as it seems to have played out recently, is that the market speculation-driven system that we currently have just doesn't support this sort of idealism. Its a contradiction in terms, and realizing this, you'd almost think that the meltdown of recent weeks was inevitable. Now, surely the "best and brightest" in the Clinton administration's economic team would would have foreseen this. You don't have to be Alan "Irrational Exuberance" Greenspan to know that no market boom lasts forever. If I was a conspiracy theorist, I'd be working up an analysis whereby the whole thing was part of a plan to crash the system and send us that much deeper into a fundamentally socialist commitment. That's if I was a conspiracy theorist. However, I'm sure it's all much more complicated than that.

Do I rightly take that to mean, Byronic, that even as a Chesterbelloc sympathizer you do not think it was right (or a good idea, or maybe not both) for the administrations (and the Bush admin. was in on it too) to pressure the mortgage lenders to lower their standards of credit-worthiness in order to get more people into home-ownership?

Byronic:
First, I appreciate the good will and self-deprecating humor in your post, as well as the high intentions of the Chesterbelloc vision, realistic or not. So, well done.

I think calling it a conspiracy gives too much credit to the folks in charge, both under this administration and Clinton's. I argue that there's a lot more rank incompetence among the experts than we often realize. They aren't quite up to the task of governance, let alone conspiracy. Geez, we still have experts who haven't noticed that Keynesianism is mortally flawed and cannot be fixed. I side with Bill Buckley on this one when he said he'd rather be ruled by the first fifty names in the Boston telephone directory than by the entire faculty of Harvard. It's what Vance Havner once called "the stupidity of the expert."

I take it to be a Biblical point as well: "The stone which the builders rejected has become the chief cornerstone." Notice that God did not choose as his cornerstone the stone rejected by the butchers, the bakers, or the candlestick makers, but the one rejected by, of all people, the builders themselves.

The stupidity of the expert is apparently an ancient phenomenon.

I don't suppose I've cheered you up (wink).

Well, I think the thing here is that you can't cut-and-paste Distributism onto the current system. Really, you need a revolution, and Chesterton knew it, and said so. He knew that the only way the "distributist" ideal could ever even come into consideration on a broad public scale is if the "general character" of society were to first become catholic--like it used to be way back when. So the revolution would have to be primarily spiritual. It has to start from a public change of heart, a public conversion of the sort that happened in medieval Europe, where the public ethic was a catholic ethic. This was a result of a gradual, transformative sort of revolution, the Christian gospel reforming the character of pagan Europe like a slow leaven--no sudden Bolshevik/Jacobin overthrow of the "structures of injustice and sin," with outright political goals. The European medieval revolution, as Chesterbelloc saw it, was a revolution that was an evolution (but not the Richard Dawkins kind).

Now the trouble is that most people take a look at Chesterbellocian Distributism and just think it's a pious socialism with catholic language. That's not the case at all, but in this polarized political climate, you just can't much talk Distributism out in the open. Hardly anyone understands it, even Catholic social conservatives. What you get are some of those Vox Nova types who really are just garden variety new liberals in Catholic guise. And of course, that's no good. The Distributist system just has no room for our modern technology of market speculation. It wants an agri-economy and a guild system, and it doesn't like mega-corporations and central banks that play around with currency (see Ron Paul vs. Bernanke). So when politicians and activists want to try some marvelous new engineering technique by which they hope to get more low-middle income people into homeownership, they try to do it by manipulating and stretching the current system, which just isn't set up to directly benefit people without capital and solid credit. To Chesterbelloc, a man without private property is a wage slave. But you can't just wave a magic wand and translate a wage slave into a homeowner in our system, which is what was recently tried, evidently. The rules can be bent for a while, but in the long run you can't outsmart our market economy. Once you start the Capitalist game, certain laws apply, and they will bite you in the end.

Distributism is really a moral parable in economic/philosophical language. Greed kills it, and the law of "growth" kills it. It's a medieval conception. It was already almost an impossibility a hundred years ago, and it certainly is now. We're just committed to our system. The Capitalist tentacles are everywhere. It's a juggernaut. The economy is a world economy and its driven by currency speculation, central banks, multinationals, etc etc. So you just try to mitigate it with prudent regulation, and do the best you can to protect workers and small businesses while realizing that our system doesn't like small business much, nor does it care for workers much, as a general rule.

So yeah, I think it was clearly a huge error to try and force financial institutions to stop playing by the rules they know very well, the rules that are proven to work. You lend to a credit worthy borrower. End of story.

Prof. Bauman,

The stupidity of the expert is apparently an ancient phenomenon.

You can say that again. And I think you've likely identified the real problem. While we're talking Chesterton, he said that one sign of a democracy is that things are run badly. It means that all the people are involved. If we're conservatives, its likely not because we think that there are things that should be done, but rather that there are things that should not be done. Liberals like getting in there and doing things, tweaking with wire and knobs and buttons. They are endlessly fascinated with all the pretty lights, and wouldn't it be nice to add some more. There will always be a large contingent of Wall-Streeters who know they can make a quick buck in the short term off a long term bad idea. And they'll take their chances. So as long as you have Wall Street, you have to have fairly tight regulations, and regulations of regulations, and constant re-regulating to catch the guys that have full-time jobs getting around regulations. It never ends.

Well put Byronic! Distributism will be imposed from above, it requires a grassroots change of heart. Until then we need to keep all the plates in the air and spinning. And keep adding new ones.

I meant "will not be imposed from above"

It's amazing that hardly anybody has noticed that the Almighty Greenspan had been the one who jacked up rates all the way up, only to bring it down to such an unsustainable level of 1% for so ridiculous a period of time, which encouraged the equally (if not, worse) ridiculous mess of our times.

As for this seemingly noble notion of Distributism and the like, I subscribe to the reality:

Predicting a complex market economy is almost as perilous as timing the stock market. Because investors and consumers have imperfect information and do not always behave rationally, the business cycle will almost certainly be forever with us. The best we can hope for is skilled management of the money supply by the Fed, and avoidance of confiscatory taxes and unnecessary regulation by Congress.

Properly and fairly understood, standards of living continue to climb. People live in larger houses, with better apppliances, greater access to entertainment and superior quality health care than ever before. And yes, that is true at every level, including the working class and poor. I do believe there is an answer, and it is the flip side of the cause of this increased standard of living.

Our living standards are a direct result of an economy that is unprecidently robust, dynamic and international. Constant change is the order of the day. When workers are getting nice checks they worry, and with good reason, that those checks could stop tomorrow for reasons that they cannot understand. This is an inevitable part of a modern vibrant international economy. And change is stressful, especially when accompanied by a large dose of uncertainty.

Households would find this phenomenon more manageable if they saved and invested prudently, but they don't -- not in this country. People will say they cannot afford to save but for the most part they are engaging in self-deception. Americans are living beyond their means and they do not have to -- they choose to. Their lives as consumers are out of sync with their lives as producers. As producers they are aware that the marketplace can throw them a curve ball at any time, but they consume as though that risk was not there. Hence, instead of relieving the unavoidable anxiety associated with the change and uncertainty of a robust modern economy by prudently saving 10-20 % of household income, most households instead aggravate the anxiety by saving little if anything -- or even engage in negative saving via imprudent borrowing.

My 2 cents for what their worth.

As for this seemingly noble notion of Distributism and the like, I subscribe to the reality:

What's ignoble about Distributist theory?

Byronic:
I suppose you've noticed the clash of experts on the national debt and bail out thread.

To quote a great philosopher named Gump "That's all I have to say about that."

Michael Bauman:

Do you deny all the imprudent borrowing that had occurred at the time of the Great Greenspan's 1% rate to support lifestyles that such folks (as I alluded to above in my comments) couldn't afford in the first place as being one of the primary reasons for all this mess to begin with?

Or are you one of those other idiots who believe everybody is entitled to The American Dream regardless if they can't afford the affluent lifestyle that many of these keep aspiring to but only do so by owing debts they can't actually afford?

theByronicman,

I didn't say "ignoble"; I said "seemingly noble".

You will have to forgive me if I should think that although distributism might be found by many as being attractive due to its rather idealistic aspects; it seems, as one Partner in a leading firm with specialty in Corporate Finance & Economics had put it, "grounded in exraordinarily naive economic assumptions as an economic system -- though has many attractions in terms of guiding private behaviour".

On what principles of market economics can you or Dr. Bauman (or, for that matter, other proponents of Distributism) claim the validity & efficacy of such a notion as an actual economic system?

Can there actually be such an egalitarian distribution of wealth possible without making everybody else less well off?

Can any basic concept of private property survive even as a result of such a system?

Although I enjoy fairy-tales, it neglects the reality of the real world.


Concerning the basic tenets of Distributism, kindly consider:

Basically, it describes not so much a system but an ideal outcome. In short, it would be capitalism without concentrations of wealth or capacities to produce or consume. Some modern advocates also ladle on the concepts of job and industry protection, though it isn't clear to me that this was the focus of Chesterton et al. Its advocates have never, as far as I know, articulated (a) how exactly one arrives at such an outcome and (b) how exactly such an outcome can be maintained. Most people assume a lot of government control would be required. Businesses would be allowed to be successful, of course, but not too successful; and consumers would be told what to consume in order to keep maintain the outcome equilibrium. The legitimate economists who have examined distributivism have mostly concluded it is somewhat of a romantic ideal, but not really an economic system as such.

Ultimately, the system seems to be grounded in two concerns: (i) a recognition that the changes wrought by private decisions in the market can hurt people and (ii) a belief that markets inevitably lead to concentrations of economic power. Actual history suggests that the pain that accompanies free market processes is very real but is necessary for progress. And there have always been ebbs and flows of concentration, but history demonstrates that the composition of such concentrations is in each case remarkably fleeting. Compare today's Fortune top 30 with that of 20 years ago, and 30 years ago, and 40 years ago -- very instructive actually.

The ultimate moral problem with the type of market interference resumably required under distributivism is that serves the needs of the haves by insulating them from the pressures of the want-to-haves. It is based on the idea, subconsciously I suppose, that the subjective pain caused by an existing producer being displaced from his position is less than that of a new producer being denied a position, and that therefore the reduction in ineffiency caused by denying the new producer is a social price worth paying in order to minimize subjective pain. In my opinion there is no moral basis for this -- only the understandable impulse to sympathise with people who are hurt by free markets.

Although I enjoy fairy-tales, it neglects the reality of the real world.

Now, certainly you don't wish to imply that the capitalist world is the only world that has ever existed? I wonder if you are considering the whole of reality. Chesterton would have us reconsider.

What Chesterbelloc tried to show (and I think perhaps successfully, if their assertions were generally correct) is that the Europe of the high Middle Ages, or at least a good part of it, was actually very close to the distributist sort of world they envisioned, because it was essentially a Christian society. So this means that there is more here than just theorizing. There is practical experience to examine. We tend to think that the existing conditions are somehow inevitable, somehow necessary. Capitalism just must be necessary. But it's not. It's just not. The criticism above, well, it simply assumes the basic capitalist standpoint and critiques from that standpoint. But that's a fallacy, of course. If one's society is dedicated to a worldview where Distributism makes sense, then distributist economies are possible even in this present world. The laws of Capitalism are more or less the laws of the jungle translated and systematized in economic terms, and our modern system, it seems to me, tacks on certain safeguards in an ad hoc way, while leaving the system basically intact. But we don't have to live that way. We choose to, or rather, the strong have chosen it for us. In a Christian society with Christian laws, you get Distributism. That's the argument. Capitalism favors the exceptional man, but not necessarily the morally exceptional man, or even the morally decent man. A distributist succeeds through hard work and ingenuity, but not through tactics and manipulation of markets. A distributist produces apples and rugs and pottery, not widgets and gadgets. I think that's essentially the Chesterbelloc argument, and it's the one glaring fact that the critique above, for all its apparent learnedness in distributist theory, has left out. Distributism is not merely a critique of our current economic system, a critique of capitalism. It's a critique of the modern Western world, which is deemed to be post-Christian. That critique seems to me to be correct. To get bogged down in it's "workability" from a Capitalist standpoint is to miss the critique. I would think that this week, of all weeks, it might be a bit easier to see that.

Answer the questions:

1. On what principles of market economics can you or Dr. Bauman (or, for that matter, other proponents of Distributism) claim the validity & efficacy of such a notion as an actual [workable] economic system?

2. Can there actually be such an egalitarian distribution of wealth possible without making everybody else less well off?

3. Can any basic concept of private property [even] survive as a result of such a system?


No florid rhetoric, please. Give me only facts that corroborate such a system as being a practicable system.

Aristocles, I think you're quite far off if you think of Dr. Bauman as an advocate of distributism. He's just not taking this particular opportunity to launch into a debate on the subject. I, too. That's an aspect of Chesterton's thought with which I have little sympathy, but that doesn't mean I have to argue about it every chance I get.

Aristocles,

Sorry, all I've got for you is florid rhetoric. It's the only thing I'm good at (that, and I play a mean jazz piano).

So anyway, I defend distributism on certain grounds, but the Chesterton bros, Belloc and their cronies--they were dead serious about it. It was a pipe dream that they all gave their lives and fortunes to. But it was a pipe dream for reasons other than those to which most critics of distributism would hold.

Now if capitalism is so damned practical, how is it that less than 1% of the people in the world control over 90% of the world's wealth? Or am I way, way off base on those (made up) statistics? Like I said (like all distributists), I know nothing of economics. And you also have to keep in mind that how Chesterton would have defined "well off" might entail both something more, and less, than we do today. He would have defined it primarily in terms of security of private property, leisure time, spiritual health, family integrity, and production of real culture. In those three areas, I wonder how our contemporary society is doing? It's hard for me to meet your argument since your argument makes a good deal of presuppositions that the distributist just isn't inclined to accept. That, and I know nothing about economics.

But as to your questions:

1) Any economic system is a subset of a moral system. A higher morality gives you a better economic system. Capitalism, on a moral scale of 1-10, on a good day rates about a "5" in my book. Socialism about a "1.5" and Communism a "0".

2). Everyone already is less well off. If one thinks of "well off" in merely economic terms, then isn't one a half-crypto-Marxist oneself? But of course you don't and of course you aren't. I'm just trying hard to make a point and keep my nose above water under your withering criticism.

3). As for the practicality of distributism, this also depends on how much one knows, and what one thinks, of medieval European economics. If Chesterbelloc was right, it wasn't nearly as backward as is commonly thought, and on some things they had a leg up on us. So maybe, at one point in European history, it was practical. Remember: Chesterton, like Marx, reacts to the evils of 19th century/early 20th century capitalism in Europe (sweatshops, child labor, slumlords, smog, debtors prisons I suppose, etc) The Marxist critique is not wholly wrong, even if wholly one-sided and a Christian heresy. Chesterton also thinks in reaction to Marx. If Marx was only partially correct, thinks Chesterton, then there must be a third way.

Aristocles wrote:

"Michael Bauman:

Do you deny all the imprudent borrowing that had occurred at the time of the Great Greenspan's 1% rate to support lifestyles that such folks (as I alluded to above in my comments) couldn't afford in the first place as being one of the primary reasons for all this mess to begin with?

Or are you one of those other idiots who believe everybody is entitled to The American Dream regardless if they can't afford the affluent lifestyle that many of these keep aspiring to but only do so by owing debts they can't actually afford?"


I reply:

Ari,
I'm honestly wondering how I gave you that impression. But, if I did, it surely was unintentional. The issue of distributism has come up in the past on this site, and I recall that I classed it as a sort of Marxism-lite, which, from my perspective, is as damning a comment as it is possible to make. (Perhaps the archives will reveal what I actually wrote. I'm going on faint memory.)

I did applaud Byronicman above for his good will and for his theory's high intentions, but high intentions are never enough, and distributism is not a theory that can succeed in this universe by any measure known to me.

I recall that I classed it as a sort of Marxism-lite

I'm really not trying to continue the beef here. None of us, it seems, has much energy for another go 'round on Distributism. I will only say that I find it interesting that you are the first person to have called it "Marxism-lite" that I've heard, at least. Most of the time it's "Capitalism-lite." Distributists insist on private property, personal ownership and custodianship of property among families, and that is heresy to Marx. Distributists also affirm that people should work for profit. Of course distributists think that workers would have some ownership in the means of production, but this is a notion we've come around to these days as well. The primary difficulty with Distributism from what I can see is not the theory itself but the virtual impossibility of converting to it, given the present situation. You can't get there from here. Perhaps, someday after the apres le deluge, a child sifting through the rubble will come upon a copy of The Servile State and a New World will be born.

I want to hear Byronicman play jazz piano. You don't have any youtube clips up of it anywhere, do you?

No youtube clips, sorry. I'm strangely averse to success.

byronicman,

The 2004 American statistics for wealth as a percentage of total are 34% owned by top 1% of households, 71% by the top 10%, and 85% by the top 20%.

Income follows a less steep curve, with 22% going to the top 1% of households, and 50% going to the top 20%.

For comparison, the bottom 40% earned 12% of the income, but owned only .2% of the total wealth.

So it looks like you could make some sort of argument that ownership stakes are concentrated among those in the top 20% of incomes and this gives them the ability to restrict the other 80% from gaining access.

Byronicman,
Count me in on the Youtube club. I'd love to see it, hear it. I might even practice a little distributism in order to persuade you -- a little (wink).

My reluctance to endorse the Chesterbelloc vision is based on the impossibility of ever seeing it happen without coercion by the state, and that's where its (to me) inescapable likeness to Marxism comes in. I also think that nothing, literally nothing, has done as much to raise the lot of the poor in the world as has capitalism.

Four brief quotations from Michael Novak's The Spirit of Democratic Capitalism:

"Of all the systems of political economy which have shaped our history, none has so revolutionized ordinary expectations of human life -- lengthened the life span, made the elimination of poverty and famine thinkable, enlarged the range of human choice -- as democratic capitalism." (p13)


The invention of the market economy in Great Britain and the United States more profoundly revolutionized the world between 1800 and the present than any other single force. After [5,000 years] of blundering, human beings finally figured out how wealth may be produced in a sustained and systematic way. In Great Britain, real wages doubled between 1800 and 1850, and doubled again between 1850 and 1900. Since the population of Great Britain quadrupled in size, this represented a 1600 percent increase within one century." (p17)


"At its founding, [the United States] was at least as poor as the colonies of Spain in Latin America. These two Americas, North and South, equally colonies, and equally underdeveloped, were founded upon radically different ideas of political economy. The one attempted to recreate the political-economic structure of feudal Spain . . . the other attempted to establish a new order based on ideas never before realized in human history." (p22)

(How the two experiments worked out seems to me quite obvious. MB)

"Democratic capitalism is neither the Kingdom of God, nor without sin . . [But] now that secrets of sustained material progress have been decoded, the responsibility for reducing misery and hunger is no longer God''s but ours." (28)

Well, that was terrific!

I owe you some distributism. Where shall I begin?


Where shall I begin?

Considering it's been 2 days since I quite smoking, howza' 'bout distributing me a cigarette? Anybody got one?

I hope this isn't too crass to ask, but just to be sure: That was you on the keyboard in the clip, Byronic?

Cool keyboard.

That was me, playing the fake piano.

I'm distributing questions today:

Why "Byron" (as in Lord Byron?), and, if Lord Byron, how does one get from him to Belloc and Chesterton? They seemed to occupy different universes.


That is made of awesome.

thebyronicman,

The primary difficulty with Distributism from what I can see is not the theory itself but the virtual impossibility of converting to it, given the present situation. You can't get there from here.

Not only the impossibility of a transition to such a system but also, as I tried to express in my previous comments, I don't see how such a system -- in spite of its noble intentions -- could not actually lead to tyranny in the real world given the likelihood of corruption on the part of its custodians to whom such egalitarian distribution of wealth would be under their purview.


On an entirely different matter, u da man when it comes to the keyboard!

Not only the impossibility of a transition to such a system but also, as I tried to express in my previous comments, I don't see how such a system -- in spite of its noble intentions -- could not actually lead to tyranny in the real world given the likelihood of corruption on the part of its custodians to whom such egalitarian distribution of wealth would be under their purview.

Well, as someone noted earlier, even Alexis de Toqueville knew that capitalism could only really work in a society with a moral citizenry. Distributism would require the same, of course, with the addition that this morality be a wholly Christian one in the older catholic mold, and held as a matter of public consensus. Distributism is democratic, no less so than our present system, and at least in theory, rather more, I'd say. Distributist public officials are not godless soviet managers--they are catholic Christians. They aren't saints, but neither are they secularists.

Now, even in our present society, public moral conviction still exerts a great deal of pressure, a factor with which men of business and power still have to contend. Even Bill Gates cares a good deal what the public thinks of him, and in fact rather counts on the public goodwill in order to do business. Whether or not that goodwill is actually warranted is perhaps a debate for another time. Perhaps the argument could be made that we are holding ourselves and our public men and men of business to a rather low standards, all things considered, but maybe its the best we can hope for. How much this lowering of standards is merely the result of "human nature", and "they way things really are" and how much they are, perhaps, a result of some error in our public philosophy, for which there is a workable remedy, is another point could be argued somewhere else, by someone else. It seems to me that the system we have is an ingenius device for wealth creation. Neither do I deny that in successful capitalist economies, the wealth does trickle down significantly. There is no argument to be had there. And I do not take the evidence and arguments adduced by the likes Prof. Bauman, Michael Novak, of Fred Hayek lightly. But...

One of the things that does tend to bother me just a little bit, I will admit, is that I do feel as if, whenever I get involved in these discussions, I inevitably come against what strikes me as something of a Leibnitzean Best of All Possible Worlds argument. Given that the world is fallen and man is corrupt, capitalism must be the best system in a world of all possible conceivable economic systems. And this usually winds up being part of a larger debate about the nature of the medieval, what was lost and what was gained by the implementation of the modernist project, etc. There have been those in the past century who dared to imagine a different world than the one with which they were presented. A few of these imaginings were put into practice, with tragic results. But it does not follow that all of them would.

I know most "fans" of Chesterton these days leave the train when it comes to his distributism, but that seems to me a much more difficult proposition than perhaps it first appears. The economic theory of the Chesterbelloc was a natural extension of their catholic thought. Probably insofar as their thought is true, so is their economic theory. Perhaps distributism is a function of the errors in the larger vision that brought it forth. Perhaps they misread Rerum Novarum, and perhaps they really did get the Middle Ages wrong.

Playing piano helps me keep my typing chops up to snuff.

Why "Byron" (as in Lord Byron?), and, if Lord Byron, how does one get from him to Belloc and Chesterton? They seemed to occupy different universes.

It's multiple word-play. My actual given name is Byron, and it's "ironic" since I don't actually admire the Byronic Hero, but, I sort of did, once, some time ago. "But then I met a man who told me why I stole, and I have never stolen since."

I said "Alexis de Toqueville" but of course I meant "Adam Smith."

Byronic:
Many thanks for distributing the screen name explanation. I'm glad for the glimpse behind the scenes on that point. Let me distribute my gratitude in return.

Ah, you are quite welcome, sir.

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