August 14th 2004

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Articles from this issue:

COVER STORY: Foreign Minister launches Paul Gray's new book on Islam

EDITORIAL: Australia and the Timor Gap Treaty

CANBERRA OBSERVED: Latham loses lustre as poll looms


RURAL POLICY: Facing up to the farm income crisis

UNITED STATES: Transsexual case and marriage law

FOREIGN AFFAIRS: Pakistan and the Islamic N-bomb

POPULATION: 'Gender equality' partly to blame for fertility decline, says UN official

DOCUMENTARY: 'My Foetus' prompts abortion re-think

OPINION: US law professor blasts US court on gay marriage

OPINION: Distributism and capitalism

STRAWS IN THE WIND : Part-timers: pros and cons / Family Law changes / Timor's Labor pain

Latham, Iraq and free trade deal (letter)

Fishermen protest in marginal seats (letter)

Ethanol stand challenged (letter)

BOOKS: The Red Millionaire: Willi Münzenberg, by Sean McMeekin

BOOKS: GETTING ON TRACK: A Business Plan for Australia

BOOKS: Just War Against Terror, by Jean Bethke Elshtain

BOOKS: The Mystery of Olga Chekhova, by Anthony Beevor

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Distributism and capitalism

by Hal G.P. Colebatch

News Weekly, August 14, 2004
Writer and historian, Hal G.P. Colebatch, asks whether distributism's goal of property for all is necessarily at odds with free-market economics.

Distributism is an attractive theory. It seems to offer an alternative to the greed of capitalism and the spite of socialism, and to offer human dignity, good government, and a good standard of living for all.

Distributists frequently point to the shining example of the Mondragon Cooperative Corporation, which began under the inspiration of a Basque priest in 1956 in poverty-stricken post-Civil War Spain, making stoves and paraffin heaters on a co-operative, profit-sharing basis, owned and managed by its own workers. Today it consists of 160 flourishing cooperatives of many kinds with annual sales of more than US$6.5 billion and is the largest enterprise in the Basque region.

Yet this raises a question: if the principles of distributism are so good, why hasn't it worked more widely? Mondragon may be a beacon of what it can achieve, but why is there only one Mondragon (plus a very few smaller enterprises dotted here and there over the globe)?


A partial answer, I now think, is that distributism, or something like it, actually has worked widely, but under other names. It would be very hard indeed to find anything in the writings of Adam Smith at odds with distributist thinking. It is worth re-emphasis that Adam Smith and the political economists who followed him were not heartless advocates of laissez-faire lusting to thrust children down coal-mines and letting the poor starve.

Thomas Carlyle abused them and coined the description of economics as the "dismal science" because the economists wanted to abolish that good old colourful and natural institution, slavery. The economists were prominent in the move to abolish child chimney-sweeps and to regulate the hours of child-labour in factories. Adam Smith was a pioneer advocate of general state-supplied education, one reason being that it offered factory-workers upward social mobility.

It was the dear old medievalists and other pre-moderns who preceded Smith and the economists and have gladdened so many a sentimental latter-day distributist's heart who laid down the statutes under which beggars and other unemployed were to be flogged or branded.

In Britain the great distributist of recent times was Margaret Thatcher, who introduced legislation allowing council house tenants to buy their own houses. People began looking after and improving the houses they now owned or could own, and many formerly dreary, decaying slums became pleasant places to live as a result. People could sell their houses and move to follow jobs and opportunities, as they could not previously, and could leave their children inheritances and a stake in the country.

During Thatcher's prime ministership, the number of shareholders also greatly increased. Not long before, owning shares had, in Britain, been an activity largely identified with the rich (for various reasons, mainly cultural, the co-operative movement had not gone ahead much).

Naval novelist John Winton had a story of the Royal Navy, symbolic of changing times, in which the Captain of a warship was amazed to find the crew had share portfolios: "They're not sailors, they're tycoons!"

Thatcher took practical steps to create a "property-owning democracy." Despite suggestions by some that the present Blair Government is representative of a so-called "Third Way" between capitalism and socialism and is quasi-distributist, it has moved to undo this and make the private ownership of housing more difficult.

In Taiwan, too, there was a "Land to the Tiller" political program which may have been an important factor in Taiwan evolving into a stable, prosperous and genuine democracy.

There are many other examples elsewhere. Thanks to Bangladesh's Grameen Bank, which gives poor villagers, mainly women, micro-loans of cheap money to get them out of debt to rapacious money-lenders, new small business and property-owners are emerging there also.

In fact, distributism looks something like ordinary market capitalism when the latter is not distorted by barriers to market-entry. The Grameen Bank does little more than employ ordinary principles of market-capitalism: it offers people cheaper (much cheaper!) money than the money-lenders do and is helping break a vicious monopoly which is a distortion of the market.

Australia, too, is a "property-owning democracy." The fact many Australians own or are working to own their own homes, often have investment blocks, shareholdings, etc., puts them in an economic state not too dissimilar to the distributist ideal of small property owners, and may well account for the fact Australia is stable, peaceful and with governments that change via ballots rather than bullets.

I do some work for a trade union which is about as blue-collar as it is possible to be. Many of its members, in addition to paying off their own homes, also have investment blocks.

It might have been one of the great writers of distributism - Belloc or Chesterton - who said in support of widespread home and property ownership: "I do not believe that the real life of this nation is to be found in the great luxury hotels or the so-called fashionable suburbs.

"It is to be found in the homes of people who are nameless and unadvertised ... The home is the foundation of sanity and sobriety, its health determines the health of society ... Our homes are our best schools and most efficient hospitals. They give people a sense of belonging, of security and of having a real stake in our democracy." But in fact it was Robert Menzies, in his landmark 1942 "Forgotten People" speech, who said this.

The fact there is no capital gains tax on the family home is often deplored by classical economists, who point out - correctly - that it means over-investment in housing at the expense of more productive investment elsewhere.

But I wonder - it is one of my few queries of classical economists - if there is not an important market-external benefit in stability (I almost said in "social stability" but in any discussion of economics that weasel-word "social" should be banned).

  • Hal G.P. Colebatch

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