Wealth is generated de novo when someone does, produces, or creates something of value. It is just that they are rewarded in proportion to the value produced. A society is most healthy when hard work and creativity are valued and rewarded appropriately. It is detrimental when the doers and producers are paid the least, and vast sums of money can be made in non-creative professions.
Competing economic systems
The market economy goes back to ancient times. For ages, industry was done by individual blacksmiths, potters, cobblers, carpenters, brewers, bricklayers, and so forth. They would own their shops and equipment, eventually passing them down to their sons, along with the knowledge of their trade. As sole proprietors, they only had to answer to themselves. If they wanted to work longer hours to make some more money, that was all up to them. If they wanted to take a day off on a moment’s notice, they could if they felt like it. In the Middle Ages, the artisans and craftsmen formed guilds, which were based on mutual cooperation rather than everyone trying to drive each other out of business.
Capitalism developed from the market economy during the Renaissance when money was pooled for investment. This allowed large businesses to be built quickly, but it also separated ownership from labor. During the Industrial Revolution, capitalism flourished as new technologies were developed and fortunes were made from a proverbial shoestring by people in the right place at the right time. Production moved from small, individually owned shops to factories.
The partial ownership of businesses became instruments that could be bought and sold. From all this, we got stocks, futures, options, derivatives, and so forth. This led to the business cycle of alternating expansion and recession. Another major drawback is that unregulated capitalism leads to monopolies and vast extremes of wealth. This is best exemplified by the Industrial Age sweatshops (ongoing in the Third World) where the workers toiled every day for twelve hours or more in grubby, unsafe conditions and the boss got to live like a king. Even with today’s regulated capitalism, there are still CEOs who become insanely wealthy while paying their workers peanuts. Further, many are quite happy to export jobs to wherever they can pay the fewest possible peanuts, regardless of what sacrifices will be made in the product’s quality.
One reaction to Industrial Age exploitation was socialism, beginning as theory in the 1800s when the sweatshops were at their worst.. That had problems of its own. One of them was stagnation. Workers made the minimum effort to reach quota, caring little about quality. Simply put, “Work hard and one day you may be rich” is a better motive than “Work hard for the good of the country”. Inefficiency is another problem, especially with failures of central planning leading to shortages and rationing. Everyone worked for the government, which was as soulless and uncaring as any huge corporation. The Communist version of socialism was particularly despotic. Social stratification still existed, with Party members lording it over the rest of the public. Rather than redistributing wealth, they redistributed poverty. With unrestrained capitalism, workers are at the mercy of the monopolies; with socialism, government becomes the monopoly of all.
There is a third way. Distributism is an alternative to the means of production largely being in the hands of enormous corporations, or run by a faceless socialist bureaucracy. The name derives from the goal of distributing the means of production – from which wealth follows – within the public as widely as possible. The main focus is promoting individually-owned small businesses. Ideally, they’ll own the shop, tools, equipment, and vehicles, preferably avoiding debt where possible. Implementing this isn’t fully realizable; Mom-and-Pop groceries are possible, and workers could form a cooperative to buy or set up a factory, but individually-owned airlines or oil refineries aren’t practical. Although Distributism can’t be implemented completely, much progress could be made. Realistically, there will be a place for large corporations, but small businesses should have a greater role. One benefit among many is that they provide a valuable bright spot in the economy whenever a downturn in Wall Street happens.
This idea is likely to meet some resistance. Many today have great faith in the system as it is. (Getting one’s job “offshored” to India while the CEO gives himself a million dollar bonus is likely to shake even the most devout Libertarian’s faith! If you have a family to support, that’s really not cute.) Let us remember that not every assistant VP is John Galt! Also, capitalism isn’t identical with plutocracy; excesses and corruption are the problem. The free market can be used constructively, or abused. Adam Smith made a very good case for the “invisible hand” theory. However, things such as monopolies and price fixing remove the competition that make the supply and demand system work properly. Another example of corruption is interlocking directorates, when a group of CEOs on each other’s Board of Directors vote huge compensation packages for their friends. This conflict of interest cheats the stockholders. Further, large corporations have inefficiencies that small businesses don’t. For instance, they must pay for several layers of management swimming in gravy, as well as an HR department to police speech, enforce hiring quotas, and prevent workers from flirting with each other. All that is extra overhead.
Problems with the current system
Front-line workers do the production, be it in a kitchen, an assembly line, coal mine, etc. Management and other departments have their roles, but are one step away from production. The stockholders are two steps away. The brokerages are further distant yet. Companies that write derivatives contracts on the underlying stock, such as options or credit default swaps, are even further away. So are huge banks providing leverage for buyouts and mergers. Everyone makes every last cent of their money from what the workers produce, but take a wild guess who gets paid the least! During tough economic times, the people doing the real work suffer the most from layoffs and “offshoring”. The parties furthest from production get bailed out with tax money because they’re “too big to fail”.
When labor and ownership are separated, the workers are considered disposable units. An executive moving a factory to an overseas sweatshop is an example. This is no abstract matter as some would have you believe; lives are disrupted, especially if it’s difficult or impossible to get comparable employment elsewhere. This, along with corruption, drives income inequality. When it goes on long enough, a formerly prosperous country will approach Third World conditions where vast extremes of wealth prevail.
Worse, vast power and influence are often detrimental. For just one example, some wealthy CEOs use their influence in the government and access to the media to push globalism. Big business routinely uses lobbies and “campaign contributions” to seek preferential treatment by big government, and neither are looking out for ordinary workers.
The flow of money is also important. When you spend your money, would you prefer the profits to go to some large corporation elsewhere, or continue to circulate within your community? Few people consider this, but the effects of countless transactions over time will have a great effect. This is one reason why “flyover country” is in the economic doldrums, but California and New York are very wealthy. Another effect is that chain stores disrupt local businesses. For example, a certain big box store used to make a point of selling only American-made products; now they’re importing 10% of China’s exports. Their change in business plan was surely bad news for many American manufacturers.
Finally, the more people in creative professions there are, the better. For just one example, a society where engineers outnumber lawyers is better off than one in which the reverse is true. This is not to say that there isn’t any place for lawyers (or bankers, middlemen, etc.) Still, productivity is maximized when the number of productive jobs increases.
How to do your part
Implementing Distributism won’t require sweeping changes like socialism did. Still, reforms such as abolishing corporate welfare are large steps that won’t happen overnight. Until then, individual choices can make a difference:
- Rather than patronizing Fivebucks Coffee, find a locally-owned business that sells what you like.
- Go to Mom-and-Pop restaurants rather than huge franchises.
- Visit your local farm and market, where possible. Buying locally also helps reduce pollution from transporting food long distances. If you’re into health food, note that “all natural” effectively means the same thing as “organic”. Lots of red tape is required for organic certification. This is easy for huge agribusiness companies with departments handling that, but harder for family farmers.
- Instead of seeing a Hollywood film, first check out your local theater company to see what plays they’re showing. That would be a great place to bring a date; likely a first-time experience for many.
- If your community has a local currency, then participate in it, as this increases liquidity within your community.
- Pay off your credit cards. Every dollar of interest might as well go into a paper shredder. Don’t feed the banksters.
- Use a credit union rather than a megabank. Smaller is better.
- If you really must smoke weed, then grow your own (where legal, of course). Don’t feed the cartels.
- If you’re skilled with computers or know a trade, start up your own company. This is the gold standard of Distributism. It can be a side job at first, but if all goes well, one day you could be working for yourself. This is a little tricky, since you’ll have to figure out taxes (such as the 1040 Schedule C), regulations, and advertising. Still, getting out of the cubicle and away from the HR department’s watchful gaze may well be worth it.