I have been a close reader of “austerity” versus economic stimulus arguments over the past couple of years in various magazines/websites of liberal and conservative/libertarian opinion as well as more traditional academic journals. This debate centers on whether prosperous, modern governments, especially those with large amounts of debt, should respond to recessions with stimulus measures or with measures of “austerity”. I put austerity in scare quotes because how it is defined is a key part of the argument as will become
So last week I was particularly interested to read latest missive from the liberal The New Republic on this subject written by a Brit named Robert Skidelsky whom the magazine describes as John Maynard Keynes’s biographer and a member of the British House of Lords. Lord Skidelsky begins his article as follows:
The last four years have created what economists call a “natural experiment” in economic policy. As a consequence of deregulation and globalization, Britain and the United States experienced the financial crisis of 2008 in much the same way. Large parts of the banking system collapsed and had to be rescued; the real economy went into a nosedive and had to be stimulated. But after 2010, the United States continued to stimulate its economy, while Britain chose the stonier path of austerity.
Now, to begin with it is amusing to read his confident appraisal of the causes of the U.S. and British financial crisis of 2008: deregulation and globalization. This by itself is nonsense on stilts, but is not the focus of his piece and is just an amusing example of bad opinion piece writing in general (examples of which you can find on the right and left). It is generally a bad idea to devote a throw-away sentence to a highly controversial and complicated historical topic as if there is a clear-cut answer that everyone and their brother knows as if recalling the date of the Battle of Waterloo.
Of more interest, is the next sentence in which he assumes like most liberals that government must respond to “problems”. Notice how he says “the real economy went into a nosedive and had to be stimulated.” Well, actually the real economy didn’t have to be stimulated and how governments should respond to recessions is a highly controversial and complicated topic that includes “nothing” as one solution to the question of “what should the government do when there is a recession.”
Be that as it may, Lord Skidelsky’s focus is on what he frames as the different responses of the United States and Great Britain – stimulus versus austerity. At first, Britain under Labor reacted in much the same way as Obama and the Democrats – their governments spent money they didn’t have:
In 2008–2009, Prime Minister Gordon Brown pumped an extra $41 billion into the British economy; in February of 2009, Obama signed into law a $787 billion fiscal stimulus package. Insolvent banks were bailed out and the central banks of both countries started “quantitative easing”—effectively, printing money—in an effort to expand the supply of credit by forcing down bank lending rates.The activist policies had an immediate impact in both countries. A year after the onset of the crisis, GDP growth started to pick up. However, while stimulus measures prevented another Great Depression, they helped expand government debt. In 2007, both the British and U.S. government deficits were 2.7 percent of GDP; in 2010, the figures were 9.9 percent and 10.5 percent, respectively.
Then there was a change of government in Britain and the ‘bad’ Conservative/Liberal government led by Prime Minister Cameron led the “austerity” charge:
The government set out to slash public expenditure by £99 billion—or 7 percent of GDP—per year by the 2015–2016 fiscal year and increase taxes by another £29 billion per year. Two years later, the score card is in. Since May 2010, when U.S. and British fiscal policy diverged, the U.S. economy has grown—albeit slowly. The British economy is currently contracting. Unemployment in the United States has gone down by 1.4 percentage points; in Britain, it has gone up by 0.2 percentage points. And despite keeping up stimulus measures, the Obama administration has been more successful in reducing the government deficit—by 2.5 percentage points compared with Osborne’s 1.9 percentage points. Earlier this year, Paul Krugman wrote that “Britain . . . was supposed to be a showcase for ‘expansionary austerity,’ the notion that instead of increasing government spending to fight recessions, you should slash spending instead—and that this would lead to faster economic growth.” But, as Krugman wrote, “it turns out that . . . Britain is doing worse this time than it did during the Great Depression.”For Keynesians, this is not surprising: By cutting its spending, the government is also cutting its income. Austerity policies have plunged most European economies (including Britain’s) into double-dip recessions. At last, opinion is starting to shift—but too slowly and too late to save the world from years of stagnation.
Well, there you have it – a clear cut case of the evidence pointing to liberal policies triumphing over the foolish ideas of conservatives (and Conservatives in the current British government) and to top it off, that great liberal hero John Maynard Keynes and his ideas are vindicated once again.
Except the case isn’t clear cut and the ideas of Keynes aren’t vindicated.
The first problem with Lord Skidelsky’s analysis is that he doesn’t define austerity for his readers. This is a common trope of liberal writers on this subject and it tends to confuse the average layman who would naturally associate the idea of “austerity” with the common dictionary definition and their own household budget – cutting back on all but the essentials and living with “strict economy” (or as Dictionary.com puts it, living the “austerities of monastery life”). But liberals ignore this common-sense definition, instead claiming that any government that uses either cuts in spending or efforts to enhance revenue (i.e., tax increases) is practicing austerity. So if a government raises taxes after a recession to deal with their budget deficit, but they don’t cut ANY spending, they would still be practicing “austerity” in this topsy-turvy liberal world because they are at least trying to reduce their overall deficit/debt levels.
Of course, the problem with this approach to thinking about austerity should be immediately apparent to anyone with passing familiarity with supply-side economics or even classical economics as practiced for years before Keynes showed up. People respond to incentives and plan for the future – if they are being taxed more and their governments continue to spend money on unsustainable welfare programs – they will react accordingly. This usually leads to lower spending, less investment in capital and fewer entrepreneurs starting businesses – in short the economy will suffer. On the other hand, if their government gets serious about cutting spending and only cutting spending (maybe even throwing in some tax cuts to help) then governments can help the economy grow and at the same time get public finances in order and on a sustainable path for the future. Here is how economist Matt Mitchell at George Mason University summarizes the economic literature on this question:
Lots and lots of papers have now studied this question and the evidence is rather clear: the types of austerity that are most-likely to a) cut the debt and b) not kill the economy are those that are heavily weighted toward spending reductions and not tax increases. I am aware of not one study that found the opposite. In fact, we know more. The most successful reforms are those that go after the most politically sensitive items: government employment and entitlement programs.
Mitchell then provides citations to 21 different papers and reports backing up the above claim and says:
Most of the following papers directly test the question of whether spending-cut-focused reforms or tax-cut-focused reforms are more successful and more expansionary. A few test related questions but provide corroborating evidence for this question. All of them suggest that spending-cut-focused reforms work better and are more likely to aid the economy.
One of the papers Mitchell doesn’t cite, which is odd because he includes an earlier work by these authors, is this 2009 paper by economists Alberto Alesina and Silvia Ardagna, whose abstract says the following:
Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions.
Doing my own research I even found a recent book published by the IMF that studies the question of “fiscal adjustments” and comes to the same conclusions as all 22 papers listed above. However, I will note that I also came across one paper (ironically from the IMF) that casts some doubt on the methodology used in some of the above papers and hence the positive outcomes of austerity (although methodological problems plague all good macro-economic research). Nonetheless, there is still clearly ample evidence supporting the effectiveness of austerity via spending cuts.
Meanwhile, we know from Lord Skidelsky’s quote above that Britain planned to cut spending and raise taxes – what actually happened? It is curious that Skidelsky doesn’t quote any figures on the subject; he just provides statistics on the economic performance of the two countries, so we are left to do our own research to find out what actually happened over the past couple of years. Here the story gets particularly interesting.
The rate of government spending slowed, but total government spending was never cut (or “slashed” to use Lord Skidelsky’s dramatic phrase) by a single pound. The Cameron government did make good on the other half of its promise – to raise taxes as Veronique De Rugy details in this post from “The Corner”:
• a VAT hike from 17.5 percent to 20 percent (probably the main culprit of the U.K.’s current problems)• a new 50 percent tax bracket, which will drop to 45 percent next year on incomes over £150,000
• an increase in air passenger duty to 8 percent
• “temporary” payroll tax of 50 percent on bonuses over £25,000
• a capital-gains tax hike
• a 0.088 percent levy on banks
• an increase to 7 percent in the stamp duty on the sale of properties worth more than £2 million and on properties bought through “non-natural persons.”
Now that we know Lord Skidelsky can’t bother to check whether or not his own government implemented its two-year old goals, should we trust him to get right his facts on the relative success of the U.S. versus Great Britain with respect to economic growth and deficit reduction? Of course not (remember he told us that “Since May 2010, when U.S. and British fiscal policy diverged, the U.S. economy has grown—albeit slowly. The British economy is currently contracting.) Yes the British economy contracted by 0.2% in the first quarter of this year, but it has just started to do so after a couple of years of slow growth since May 2010; basically just like the U.S. at a slower pace.
However, to use “Obama administration” and “successful deficit reduction” in a non-ironic manner in a sentence should basically banish you from polite company! The only way Skidelsky weasels his way out from this banishment is by using the phrase “despite keeping up stimulus measures.” I think what he means is that at the end of Bush’s last full year as President, since the federal deficit was almost $642 billion and then President Obama stimulated the deficit to a whopping $1.5 trillion by the end of 2009, Obama’s been able to reduce the deficit from that Olympic height since then. And yes, the U.S. has grown faster than Great Britain over the past couple of years, but then our Republican Congress has made sure that Obama and the Democrats have not gotten the tax increases they want and have been trying to impose more fiscal discipline on his administration since they’ve come to power in 2010.
So I have spent quite a bit of time taking apart a weak article by a British Keynesian scholar. Why bother? Because these types of articles influence our liberal friends and the broader public and are taken seriously by serious people. Lord Skidelsky might be a good biographer, and he might even upon reflection have corrected some of the points he made in this flawed article, but he shouldn’t get away with misleading readers and stating untruths. Those of us on the right who care about good public policy and the future of our country need to set the record straight and convince those who can still be persuaded that liberals do not have the answers to what ails the American economy.
Comments (22)
Despite being Keynes's biographer Robert Skidelsky is not a full-bore Keynesian, and he himself is a political economist. He and his son Edward, who is a philosophy prof at (I think) Exeter, have recently published How Much is Enough? Money and the Good Life, which is an attempt to reinvigorate economics as a moral science by tapping its pre-modern classical roots. I am about 3/4 of the way through the book and it seems to me that the Skidelsky's do not fall comfortably into any tired conservative/liberal binary. As a matter of fact Skidelsky is quite critical of certain of Keynes' ideas.
The younger Skidelsky also wrote this fine piece for First Things last year:
http://www.firstthings.com/article/2011/05/the-emancipation-of-avarice
Posted by Nice Marmot | July 12, 2012 2:07 PM
Nice,
That makes Lord Skidelsky's errors of commission and ommission in this article all the more egregious.
Posted by Jeffrey S. | July 12, 2012 4:03 PM
Perhaps. I'm not educated enough in the nuts-n-bolts side of economics to comment one way or the other. I'm more interested in the moral/philosophical side of the thing. When it comes to that the Skidelskys are not easy to pigeonhole.
Posted by Nice Marmot | July 12, 2012 4:14 PM
Slippery definitions of austerity are par for the course, unfortunately. No one knows what the word means, but 'not doing what Keynesians want' is about as good a stand-in as you'll find. Austerity as practiced is not going to work, because the goal is not to return to or maintain some sort of healthy economic balance, but rather to spur endless growth. It is not going to happen, any more than a tree can keep growing to the heavens. If we are truly at the end of the age of growth, then the debt-inflation state is done for. This idea is terrifying to our masters, for obvious reasons--they will blow trillions rather than admit it.
The truth is that no one--Democrat, Republican, Left, Right, Keynesian, Austrian--has any clue at all how to fix the economy. Obama can't do it, Romney can't do it, and both of them are just praying that the economy fixes itself, the only difference being the time (Obama would prefer it to happen now, Romney later). All of the learned prescriptions of our elite intellects might as well be advising the sprinkling of pixie dust. It's rather disturbing if you think about it...so try not to.
Posted by Matt | July 12, 2012 6:26 PM
Lots and lots of papers have now studied this question and the evidence is rather clear: the types of austerity that are most-likely to a) cut the debt and b) not kill the economy are those that are heavily weighted toward spending reductions and not tax increases. I am aware of not one study that found the opposite. In fact, we know more. The most successful reforms are those that go after the most politically sensitive items: government employment and entitlement programs.
I don't know if Obama could have gotten the Democrats to sign up for his proposed debt deal with Boehner. It would have been a hard sell, plus there was major interference from the Senate. It doesn't matter though because House Republicans are much too afraid of Norquist to even make a deal that cuts spending if it involves raising revenue.
http://www.nytimes.com/2012/04/01/magazine/obama-vs-boehner-who-killed-the-debt-deal.html?pagewanted=all
Government jobs have been in decline since the Great Recession started, with a temporary upswing for the census being the only exception. Public sector employment is now down 608,000 workers since January 2009, a 2.7 percent decline. At the same point in President Bush’s term, public sector employment was up 3.7 percent. While federal employment has risen slightly (and mostly in Defense, VA, and Homeland Security), the total number is approx. a million less than the number of federal workers under Reagan or Bush Sr.
Posted by Step2 | July 12, 2012 6:57 PM
Nobody in the US government (well almost nobody) is talking about actually cutting government spending. They might talk about slowing the growth of government, but each year we will spend more than the year before - guaranteed!!
Posted by Chucky Darwin | July 12, 2012 7:24 PM
Step2, if I recall correctly most of that million was cuts made during Clinton's years, based on both the peace dividend and on the Republicans getting control of Congress and forcing some fiscal restraint (which, admittedly, Clinton seemed to go along with pretty well, once his first attempt at increased spending went crashing into flames). I consider one of W. Bush's greatest failures was in a lack of fiscal responsibility when he had the opportunity. Shame on him.
Posted by Tony | July 12, 2012 8:31 PM
Matt,
Your pessimistic musings are interesting, but I don't agree with your conclusion that "no one...has any clue at all how to fix the economy." I think lots of smart people (and even ordinary folks) understand that the government (at all levels) needs to shrink and focus on what it can do best. I also think that we need to think seriously about demography, but here I'm unfortunately in a minority among the "elite intellects". I want the U.S. to stop importing peasants and I want to strengthen healthy marriages among the middle-class folks who are already here. I also want folks within those marriages to have more kids. This solves the "endless growth" problem (at least for a couple of generations) and who knows what technology will accomplish by then ;-)
Posted by Jeffrey S. | July 12, 2012 9:20 PM
"The rate of government spending slowed, but total government spending was never cut (or “slashed” to use Lord Skidelsky’s dramatic phrase) by a single pound."
For the sake of exposition, I usually appreciate it when essayists and pundits boldface or all-cap the term "rate".
Good post, Jeffrey S!
Posted by Truth Unites... and Divides | July 12, 2012 10:47 PM
How about some personal austerity to go along with that government austerity? The mainstream Right certainly doesn't seem particularly interested in encouraging people to live more simply -- it hurts the economy!
"who knows what technology will accomplish by then ;-) "
Maybe our "devices" will be surgically implanted by then, enabling us to respond to market changes instantaneously.
Posted by Nice Marmot | July 13, 2012 8:13 AM
Jeffrey S. makes some excellent points regarding the slippery nature of "austerity" as a boogieman term. I also agree with his criticism of throwaway lines presupposing solid conclusions when none are extant (for instance, the pulverizing truth is that we don't really know the fundamental reasons why 2007-08, unlike so many other financial crises, spread such ruin to the real economy).
Matt's pessimism is warranted. Granted the very real impediments to business success throw up by overweening government; granted the distortions introduced into debt markets by central bank machinations; granted the climate of class envy fomented by demagogues and fools -- granted all this and more, there are still good reasons to suspect that the economy would not appreciably recover even without them. One reason is indeed globalization. We could slash the US Federal Government back to its 1920 size tomorrow, and still the financial world would be awash in governmental meddling. China's capitalism is unapologetically statist, and its influence grows by the day. Europe is hardly turning away from its social democratic model; on the contrary it is consolidating that model on a continental scale. The energy sector worldwide is dominated by state-run corporations. Finance is suffused with sovereign wealth funds and the like.
Moreover, there are good reasons to think that even the most unregulated markets are subject to pressures and forces, usurpations and frauds, sufficient to beggar all of us. Take a gander at this article: http://www.marketrap.com/article/view_article/91172/did-the-markit-group-a-black-box-company-partially-owned-by-goldman-sachs-and-jp-morgan-devastate-markets
It's some years old, but recent events only augment its ominous warnings. It turns out the LIBOR was systematically gamed to enrich certain bankers. Markit Group may soon be exposed in a similar way. It's possible, in other words, that the scale of derivatives trading opened up opportunities from unscrupulous short-sellers to gain immensely by fraudulently ruining the mortgage securities market. Overstated? Consider that just last month we learned that the baseline interest rate for interbank lending, that is to say the baseline interest rate for most lending, was basically a scam. Turn that one over in your head a few times. While you're doing that, keep in mind that this stuff really has nothing to do with government overreach or meddling.
What this comes back to is the subjection of free enterprise to usury. Healthy capitalist economies must have a vibrant banking sector, but one that is the servant of enterprise, not its master. This wise pattern has been inverted over the past few decades, to our extreme detriment, and the sad fact is that no one has a very good idea about how to fix it.
Posted by Paul J Cella | July 13, 2012 9:29 AM
Nice Marmot,
2008 U.S. Budget Deficit: $438B
2008 U.S. Trade Deficit: $698B
Net U.S. Private Sector Deficit: $260B
2011 U.S. Budget Deficit: $1400B
2011 U.S. Trade Deficit: $560B
Net U.S. Private Sector Surplus: $840B
The private sector has cut back, enormously, since the 2008 Financial Crisis. It's long past time the government followed.
Posted by Andrew E. | July 13, 2012 10:45 AM
"People respond to incentives and plan for the future – if they are being taxed more and their governments continue to spend money on unsustainable welfare programs – they will react accordingly. This usually leads to lower spending, less investment in capital and fewer entrepreneurs starting businesses – in short the economy will suffer."
Just to be clear, by "the economy will suffer" do you mean less spending and investment simply, or do you mean less spending and investment than would have otherwise transpired had governments not intervened and misappropriated taxpayer money? I think the distinction important, because less spending and investment can at times be a natural phenomenon of the economy (by which I mean that, at those times, people generally choose to spend and invest less) and thus can't really be considered an indication that the economy is "suffer[ing]."
Matt: "The truth is that no one--Democrat, Republican, Left, Right, Keynesian, Austrian--has any clue at all how to fix the economy."
...which means the Austrians are right. They seem to be the only group that recognizes that planners don't know the first thing about "fix[ing] the economy."
Posted by J. W. | July 13, 2012 10:50 AM
I don't think that forced cutbacks really qualify as austerity.
Posted by Nice Marmot | July 13, 2012 11:13 AM
J.W.,
Your point is well taken -- there is much to admire about the Austians, although I'm not totally convinced by their monetary arguments.
Paul,
Ahhh, I long for the 20s and silent Cal!
More seriously, your comment seems to muddle a couple of ideas together:
1) you are worried about what the rest of the world will be up to while the U.S. pursues free market policies -- this seems like a strange worry as we did fine in the 20th Century while the Communist countries of Eastern Europe, Latin America and the Soviet Bloc failed to grow. Now the free world is bigger and our trading block is larger so why worry if Venezuela foolishly nationalizes its oil industry? Or if France beggars its citizens with foolish socialist policies? We can sell our goods and services (and our own energy!) to countries, and the list is long, that have adopted free market policies and are enjoying the success that comes with such policies.
2) you are also worried about global financial markets and insist on describing these markets as unregulated; I just don't think this is correct. Yes, I guess some forms of private equity have few regulations governing their use, but never forget that for all the so-called deregulation of the 90s, our banking system is still watched by an alphabet soup of federal and state regulatory agencies. The question you raise at the end of your comment is a good one however -- is our financial system doing a good job of serving productive sectors of the economy as it is desgined to do? And are there any ideas for reforming this sector that make sense? On previous usury threads I have pointed you to some interesting thinkers on the right who think we need to break up big banks as the ultimate solution to the problem of "too big to fail" and the entanglement of government. I'm sure there are others, although I don't know if they meet your elusive standard of a "very good idea".
Try not to be so pessimistic
Posted by Jeffrey S. | July 13, 2012 1:19 PM
I described LIBOR and the Markit Group as unregulated. The former is a set of interest rates at various maturities that together form the market rate for money. How much does it cost, day to day, to get money? That's what LIBOR tells you. It's not built by regulators or central bankers; it's built by private credit market participants. Meanwhile Markit Group is an secretive company that has somehow cornered the market for pricing aggregates of derivative contracts.
The LIBOR scandal is obscure and weird, but it's huge. LIBOR forms the basis for pricing of hundreds of trillions of dollars worth of financial contracts. The bulk of the pricing fluctuates in a very small range, one or two basis points. We have evidence that London bankers manipulated the rate by 30 or 40 basis points. So we're talking about the vast majority of loans outstanding since 2005 being underpriced by an order of magnitude.
Government didn't do this.
That said, my confidence in the power of regulators is if anything lower than my confidence in financiers. There is even frightening evidence of collusion by regulators in London in this mess.
Better than breaking up the banks (which may prove necessary still; and when it does, everyone will wish it had happened in 2009) is pushing broker-dealers back into private ownership. Let them operate their exotic trades as they please, but as private partnerships using private capital, which is constantly exposed to the markets they participate in.
Anyway, this is a bit of a threadjack, so I'll stop there.
Posted by Paul J Cella | July 13, 2012 2:14 PM
Jeffrey S.,
Any man who appreciates Silent Cal is okay in my book.
Matt,
The economy always ends up fixing itself in any case. It's more a question of "How badly is the government screwing up the economy's efforts to right itself?" The problem is our masters are always elected by promising they'll do something. That doing nothing might be the best solution never occurs to them.
Posted by Beefy Levinson | July 13, 2012 5:47 PM
I am in favor of at least looking at a more radical option: re-consider whether to treat derivatives instruments (and similarly abstruse highly ethereal artifacts) as valid contracts under law - i.e. consider not providing government protection of such contracts, so as to make them unenforceable.
Why? The primary reason is that they are designed in part to obscure the real risks, so that a player is by design not freely participating in known risks, he is guessing about part of it based on someone else's attempt to disguise something about the truth. Generally, a direct attempt to defeat a buyer's standard ways of obtaining the truth about a product can invalidate the contract: If you intentionally change documents to make a used car look like it was never junked for being in a flood, and instead make it look like was never junked at all, this attempt to obscure the truth can invalidate a sale of the car, and the government will not enforce the contract. Can also get you charged with fraud.
The more steps that are intermediate between the holding of a sliced up interest by the buyer and the actual asset whose worth makes all the intermediate instruments putatively worth something, the more opportunity for sophisticated persons to intentionally cloud up just what property rights (and risks) are part of which instrumental intermediary component. I have read about a person establishing a limited partnership LP1, have that entity create a holding company HC1 limited liability corp, which created a second holding company HC2 limited liability corp, which borrowed $50 mil to buy a piece of property, and then split various term interests from other remainder interests, place part of the remainder interest with still a third LLC, and make gifts of conceptual slices of each interest - all for the sake of being able to manipulate the gift tax treatment of the situation (with no real basis in the claim of gifts). The multiple entities and partial slices of property interests were all designed to obscure reality.
Does the world REALLY need financial instruments more complex than a simple stock, or a simple purchase of a commodity future, or a life insurance contract? Piling complexity on top of complexity is for con-artists. Honest people who don't want to gyp their neighbor out of the true value of the assets they are selling don't need to resort to really complex ways of structuring ownership of property. The fact that someone can imagine an obscure way to slice up ownership of the property doesn't mean the government has to give support to that obscurity, does it?
Posted by Tony | July 15, 2012 3:40 PM
I don't think I'm ready for something so drastic, Tony. First of all my mistrust of the chance that regulators would enforce such a move with anything approaching fairness and honor, precludes much hope for it -- even assuming it is possible to distinguish the "plain vanilla" swap from the more parlous variety of derivative.
Secondly, this discerning of what right of property actually inheres in a derivative contract is a real problem, not easily assayed with a board instrument; to say that there is none would amount to a pretty extreme directive in the face of such muddled uncertainty.
That said, the potential you describe, that derivatives become mere agents of sharps, is no tired Marxist mirage. It is very real. There are way too many fools out there investing money they are soon parted with. The biggest fool of them all is the American taxpayer. But he has a very hard time making his outrage become discipline, or ever making will persistent.
Posted by Paul J Cella | July 16, 2012 10:51 AM
Paul, I am not convinced of it either, that's why I limited my suggestion to putting the idea on the table for discussion. Also, I too agree that there is a real property interest in these constructs. It's not that there is no real value. It's that the reality is so piecemeal, so obscure, so shredded in nature, that it's "true" nature cannot be known. And since its nature is unknowable, then it is impossible to rationally assess the risks and suitable rewards for those risks. They amount to a craps game. Well, I can see allowing legal craps games in Las Vegas, but I sure don't want pension plans and college endowment funds invested in them, for goodness sake! People who bet their vacation money on games of chance are losing nothing critical. People who bet their retirement on sheer chance are not engaged in Christian husbandry of their talents.
Posted by Tony | July 16, 2012 8:18 PM
"The fact that someone can imagine an obscure way to slice up ownership of the property doesn't mean the government has to give support to that obscurity,"
Hasn't a Pope said that the anonymous property characteristic of the late-stage capitalism is NOT the kind of property the Church has in mind when the Church defends ownership.
The diffuse, anonymous ownership divorces man from the things he "owns" so there is no stewardship thereby defeating a purpose of the ownership.
This is where the Distributionists should strike.
The CCC also has many things about how the profit is NOT the sole justification of a private enterprise. Even classically, the Common Good is the justification. And Christianity adds to it the commandment to Love Thy Neighbor that is NOT abrogated in the commercial transactions.
Otherwise we have no justification and no vocabulary to handle such abuses:
1) Politicians ganging up with Public union bosses to create unsustainable pension commitments that can NOT be reneged since it is a CONTRACT.
NO, we say. A contract that does not further Common Good and that flagrantly so is invalid.
2) A Speaker gets 1.6 million dollar contract with a quasi-public entity to talk one hour a month.
Again, is this a contract tending to public good or a conspiracy against it?
Yet many conservatives defend it saying that it was a CONTRACT and the Speaker had every right to earn money.
Posted by Gian | July 17, 2012 3:09 AM
"This is where the Distributionists should strike.
The CCC also has many things about how the profit is NOT the sole justification of a private enterprise. Even classically, the Common Good is the justification. And Christianity adds to it the commandment to Love Thy Neighbor that is NOT abrogated in the commercial transactions."
All for the good, but it will fall on deaf ears, especially since the scale of the "polity" is all wrong and unamenable to positive change.
Posted by T. Chan | July 19, 2012 10:46 PM