P2P and Distributism

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John C. Médaille:

"The most salient point about a peer-to-peer network is that it is a network of peers. That is, at each node, there is an entity that is, in some sense, the equal of all the others. The participants on the net will be, of course, of vastly different sizes and abilities, but in relation to each other, there is a kind of equality. However, if some nodes contain critical code, information, or resources that others must use, and this use can be restricted, then the peer network becomes, in actual fact, a hierarchical one.

Economies are also networks, and “free” economies require a certain equality between participants. Each person produces what he can and trades as he pleases. But if some parties are vastly more powerful than others, then the market cannot be free. If some parties have vast piles of wealth, superior access to public resources, monopolistic control of critical supplies, then the market is no longer “free” in the sense of being a series of free exchanges between peers.

This, in a nutshell, is the idea behind the economic philosophy known as “Distributism.” It is simply the idea that economic and social systems work better when productive resources, such as land, tools, and education, are widely distributed throughout the population. There need not be a precise equality in the distribution of these goods, but each person needs some goods in order to make his or her contribution to society, to support himself and his family, to enrich her particular neighborhood, to make their contribution to the common good.

Distributism is distinguished from both capitalism and socialism by its attitude towards productive property. Capitalism, although it formally allows for anyone to have property, tends to gather property in a few hands on the grounds that economic growth is dependent on the control of vast accumulations of wealth. Socialism extends the idea of accumulations by gathering all property into the hands of the state. Functionally, there is very little difference between them, and in practice the two ideologies tend to merge in the welfare state: the corporate world provides what jobs it will at what wages it chooses, and the state provides everything else.

Capitalism and socialism may be critiqued on both economic and social grounds. Economically, capitalism is not as efficient as it claims. Its economies of scale become, at some point, dis-economies, as management becomes more and more remote from both the actual operations and from the nominal “owners” of the firm, while the cost of gathering information in such large organizations exceeds the value of that information However, it is politically “efficient”; that is, it is efficient at getting subsidies and privileges from the state and externalizing its costs. The mere size of these organizations gives them superior access and influence in the political process, and their dis-economies can be offset by public subsidy.

Before the government elected to intervene decisively in the markets, that is, before 1929, capitalism was an extremely unstable system. Indeed, the turmoil we are experiencing today was more the rule than the exception; in the period from 1853 to 1942, the economy was in recession or depression no less than 41% of the time. Since then the economy has been in recession only 15% of the time. Further, the pre-war recessions were, on average, twice as long and twice as deep as the post-war ones. So, does this mean we can safely leave the task of correcting the problems of capitalism to the state?

Although state intervention has worked reasonably well for the last 70 years, the current crises and the rising debts give us reason to doubt that this system can continue much longer. But even if we manage to survive the present turmoil and continue as before, there is another problem. Statism converts everybody from being a citizen to be a client of the state. A citizen is one who takes responsibility for himself and his community; a client demands services for a fee, a fee he frequently demands that somebody else pay. This is not the way to build community. But an economic system must aid community, must be part and parcel of building up the person, the family, and the polis. Indeed, it can have no other justification, for the mere accumulation of wealth justifies nothing, especially when the wealth is gathered into fewer and fewer hands.

The Origins of Distributism

Distributism is a new name for an old system. But in its modern form, it traces back to the meditations of the Catholic Church on economic conditions since the 19th century. It begins with the encyclical (a letter from the Pope, Leo XIII in this case), Rerum Novarum (“Of New Things”) written in 1891. This was the moment in history when the art of Political Economy was re-inventing itself as the science of economics. The new economists imagined that they could develop a pure science valid for all times and places, and divorced from any particularities of culture, political systems, or institutional settings. And most especially, they wanted to make it a value-free science. Leo scandalized the new scientists by insisting that economic systems were not value-free, but properly based in the natural virtue of justice, the virtue that regulates relations among persons and societies. The signs of economic justice were, for Leo, the just wage and a more equitable distribution of property.

This perplexed the new scientists because labor was just another factor of production, its price set by the market, which seeks to purchase it at the lowest rate possible. But the distributists point out that this is self-contradictory. Wages are the major source of demand, and if the workers do not get an adequate share of what they produce, there will be a failure of demand with a recession as the result. As G. K. Chesterton noted,

Capitalism is contradictory as soon as it is complete. For the master is always trying to cut down what his servant demands, and in doing so is cutting down on what his customer can spend. He is wanting to treat the same man in contradictory ways: He wants to pay him like a pauper but expects him to spend like a prince.

If a just wage was perplexing, the equitable distribution of property was even more so, since “freedom” in this reckoning means the freedom to acquire without limit. But physical property, and especially land, is at any given moment a finite quantity, which makes it a zero-sum game. The more for one, the less for others. This allows not only property, but power, to be gathered in a few hands. However, this concentration of power is contradictory to free market theory, which depends on the production of any given commodity being spread over a vast number of firms, such that no firm has any real pricing power. But in order for the “vast number of firms” assumption to be true, productive property must be widely spread throughout the social order. Persons who have access to productive property are more properly citizens, while those who do not become the mere clients of state or corporate bureaucracies.

The gift economy

As problematic as these principles are for the economists, the current Pope, Benedict XVI, has seriously raised the ante. Benedict insists not merely on the natural virtue of justice, but on the supernatural virtue of love. In his recent encyclical, Caritas in Veritate, Benedict insists on the Principle of Gratuitousness, the idea that underneath the economy of exchange and profit, there is the idea of the gift. At this point, the economist is likely to say, “We can discuss this some other time,” and the businessman is likely to grumble, “I’m in business to make a profit.” And the businessman is right, since without making a profit, he cannot tell if he is running his business correctly and allocating his resources efficiently.

However, profit is not the sole reason for going into business. Rather, business is the way that some express their talents, provide for themselves and their families, contribute to their communities. Profit, save in pathological cases, is never the sole reason. The world of commerce and exchange funds the gift, but never completely explains it. A social order that abandons the idea of the gift, the Principle of Gratuitousness, will find that it has lost the ability to sustain itself. Something over and above the logic of exchange is required for social order, a true lagniappe, as the Cajuns say.

The test of Reality

“Perfect” economic systems are a dime a dozen, in the abstract. It is getting them to work that is the real test. We need to be able to examine a system on the ground and functioning, to walk around it, kick the tires, and see what its problems and its promises are. And distributism passes this test. It passes it in the Mondragón Cooperative Corporation of Spain, where nearly 100,000 worker-owners do $24B/year in sales in over 200 cooperatives. It passes the test in the cooperative economy of Emilia-Romagna, where 40% of the GDP is from cooperatives of every variety and kind, and which boasts an average wage of twice that of the rest of Italy, and one of the highest living standards in Europe. It is tested in cooperative and mutualist ventures around the world.

The viability of a peer-based economy is not a theoretical construct, but a functioning reality. Indeed, distributism goes from success to success, while capitalism goes from bailout to bailout."

More Information

  1. Distributism
  2. The Political Economy of Distributism, book by John C. Médaille