Thursday August 1, 2013

Let’s say I decide to set up a lemonade stand, under the advice and counsel of my two friends: Clancy (a capitalist) and Douglas (a distributist).

So I build my stand, buy my ingredients, set up shop and open for business. At the end of the day I pack it up, take my profits and bank them in my own account.

At this point, Clancy and Douglas are both smiling down upon my fledgling beverage business with benign approval. But while both of them approve, they each secretly admire very different things about my lemonade stand.

Douglas, being a distributist, admires the fact that I own the property the business uses to bring in revenue — just as he admires the trim carpenter who owns his own truck and tools, or the writer who uses his own brain and laptop to write a bestselling book. He doesn’t just like the fact that I’m starting a business: he likes the fact that it’s an owner-operated business. He likes it because this gives me a measure of security. I can’t be “fired” from my own business. There’s no scenario where someone says I can’t work anymore. The property I own, combined with the skills I possess, are all I need to produce some measure of wealth.

Clancy, however, being a dyed-in-the-wool capitalist, is focused on the growth potential. He, too likes that I now own a little business — but he’d be all for giving up that ownership in a heartbeat if it meant expansion, growth and an exponentially larger return on my investement. He’s already envisioning ways for me to grow my stand as quickly as possible.

I’m kind of wondering about that as well. I want my business to grow into a bigger, more self-sustaining enterprise, and being raised in a capitalist pond, I naturally do the next thing a capitalist does and hire a helper named Joe, at the lowest wage I can negotiate.

This is when the first real disagreement surfaces between Douglas and Clancy. Clancy is happy with what I’ve done, but Douglas is a bit dismayed. He still likes my self-owned business, but he’s a bit concerned about Joe, my employee. You see, Douglas doesn’t just want me to own wealth-producing property; he’d much rather everyone owned some wealth-producing property. And my employer/employee relationship with Joe doesn’t really help him in that way at all; in fact, it’s actually step in quite the other direction. Douglas would prefer that I at least offer Joe some path towards a slice of co-ownership in the firm.

Five years later, my business has grown substantially. I’ve hired dozens of employees like Joe, and opened up new shops all over town. Business is booming, and frankly, Douglas looks like a big boob. I’ve built my business on family values; I pay all my people a generous wage and offer plenty of vacation pay and other benefits. So all his muttering about the security and freedom of the wage-earner seems unconvincing to say the least.

Meanwhile, Clancy is delighted and ready for me to move on to the next stage. He and I both know I can’t just sit around. Other lemonade stand franchises are snapping at my heels. If I’m going to crush the competition, I’m going to need to grow faster than simple profits would ever allow. I need an injection of investment capital.

When I talk to Douglas about this, he gives me his honest opinion. “Sure, you could go down that road,” he says, “and ultimately end up giving ownership to people who have no actual involvement in your business. They won’t just care about steady profits: they’ll want a constant rate of growth, growth, growth. And if there’s one thing uninvolved shareholders don’t give a hoot about, it’s the quality of your product and service. They’ll pressure you to cut every last corner in order to show good results on a quarter-by-quarter basis.”

“What else can I do? If I don’t grow, the competition will eat me alive.” I’ve spent a lot of time with Clancy, and it shows.

“Look, business doesn’t have to be all about cut-throat competition,” says Douglas. “Talk to your competitors. Organize yourselves into a group. Cooperate.”

“‘Cooperate?’ As in, fix prices and divide the market? Isn’t that kind of illegal?”

“No, not price fixing. Setting minimum standards of behaviour. Figure out guidelines that all lemonade stands should adhere to: quality of ingredients, and so forth. Prices would adjust within a fair playing field where the players hold each other accountable. Quality remains high. The whole industry benefits. It’s called a guild.”

I contemplate this; it sounds attractive, and while Douglas is speaking, I almost begin to hope it could happen in real life. But when I think about trying to convince all my competitors of the virtues of industry cooperation, it seems a weary, hopeless task. I start readying the slide deck for my first investor pitch.

Two Roads Diverging

At this point, you can kind of get the idea where this is headed. It’s a choice between two possibilities.

Douglas wants a scenario where just about everyone is a proprietor in some sense, an owner of something he or she can use to make a living, not just a holder of a job that can be taken away without penalty. To that end, he pushes for a market filled with self-policing groups of worker-owned businesses.

Clancy doesn’t really think about, or have any use for, any more individual independence than is demanded by the labor market, and the less the better. His focus is really on getting the maximum possible return on investement via growth opportunities. He likes to talk about the virtues of unfettered competition until he approaches a position of market dominance, and then does as much to squelch competition as he can through price wars and acquisitions. And he knows that the ultimate fuel for that race is investor capital — i.e., seed money from people not involved in production or operations.

There are two things I’m trying to illustrate with this illustration.

The first is that pockets of distributist elements can exist, tenuously, within a capitalist economy. For example, a freelance consultant or software engineer is very much in line with a distributist’s ideal for an individual. Nothing about capitalism prevents you from setting up your new business as a worker-owned cooperative. And even in capitalist America, we have industries organized in guild-like arrangements: The American Medical Association for doctors, the American Institute of Architects, the American Bar Association, etc.1

However (second thing), this coexistence is always an uneasy one. Without the incentives, legal frameworks and public awareness to support distributist solutions, businesses will, of course, tend to evolve along capitalist lines by default. Douglas’s ideals can never be fully realized in the hostile environment of Clancy’s system.

I could have continued this scenario to one of its possible ends: one in which I cede more and more ownership of the lemonade stand to outside investors, culminating in an IPO; my company’s “family values” of living wages and quality product slowly erode under the pressure of needing to show revenue and profit growth quarter over quarter; I either give in to these pressures, or I fight to maintain these values and am ousted by the board of directors.

The thing is, I could ignore Clancy’s advice. I don’t have to go there. I can just as easily grow my business to some self-sustaining level I’m comfortable with, keep ownership in the family, and enjoy life…for awhile.

But in a capitalist playing field, I will — eventually, inevitably — be uprooted by someone who is willing to go there.