IN a recent Boston Review article, philosophers Martin O’Neill and Thad Williamson develop and defend Rawls’s ideal economic regime, property-owning democracy. Given that these two authors have recently put out an anthology devoted to working out the details of this ideal, I thought it would be worthwhile to offer a careful examination of its costs and benefits. So, that’s why I haven’t been blogging for awhile. I wanted to prepare a series.

Thus, my aim in this and five more posts is to critique the case for property-owning democracy. After explaining the idea of a property-owning democracy in this post and examining the case for it in the next post, I will offer three general criticisms. I contend that property-owning democracy is unworkable, unjust and authoritarian. To vindicate my conclusions, I will only offer arguments drawn from Rawls’s own philosophical toolkit. In other words, I shall use Rawlsian arguments to critique Williamson and O’Neill’s political and economic vision of a just society.

This post collects links to the next five installments here:

Part II: Why Property-Owning Democracy?

Part III: Property-Owning Democracy is Unworkable

Part IV: Property-Owning Democracy is Unjust

Part IVb: Property-Owning Democracy is Unjust, Free-Market Fairness is Not

Part V: Property-Owning Democracy is Authoritarian

Lets begin our series by explaining the need for a property-owning democracy and its characteristic features.

I. The Need for a Property-Owning Democracy

O’Neill and Williamson argue that left-wing political movements in American politics require a sound philosophical basis in order to successfully argue that “an energetic government, dedicated to promoting equality of opportunity and dulling the harshness of the market, is a basic requirement for a stable, free society.” The authors think that Rawls’s famous two principles advanced in A Theory of Justice provide that basis. Further, they agree with Rawls that the two principles require a certain sort of economic regime.

The authors correctly stress the fact that Rawls thought that welfare-state capitalism is unjust. Instead, Rawls thought that,

… the architecture of welfare-state capitalism … enthroned the disproportionate political power of the rich and militated against a shared sense among citizens that they are bound in a common enterprise, which operates in accordance with fair rules and respects the basic interests of all.

Consequently, the political economy of a nation must be organized with the explicit legal goal of “either sharing or else widely distributing wealth and capital.” Rawls preferred a regime that ensures that wealth and capital are distributed as widely as possible among citizens. Let’s now examine how Rawls fleshes out this ideal, and how Williamson and O’Neill extend it.

II. What Is a Property-Owning Democracy?

The article does not set out the institutional and policy structure of a property-owning democracy in enough detail to engage in a blog post. So I decided to read some of O’Neill’s work and Williamson’s work on the subject, though I couldn’t get access to their new anthology on the matter, so what I say here may be incomplete.

The key governmental aim that distinguishes property-owning democracy from welfare state capitalism is the attempt to forcibly broaden capital ownership “so that income returns from capital are broadly rather than narrowly distributed” thereby producing “a more equitable pre-tax distribution.” In other words, Rawls believed in the stringent “predistribution” of capital, setting pre-tax incomes at a more equal level from the get-go. In the article, then, the authors propose five institutional features of a property-owning democracy.

(1) A right to equal public education.

(2) A right to minimum income and/or the means for supporting oneself and one’s family at a minimal level of social acceptability.

(3) A public system of campaign financing and explicit limitations on corporate political activity.

(4) A right of individuals to a share of society’s productive capital and/or wealth.

(5) A collective right to sufficient productive capital to sustain viable democratic communities at the local level.

Implementing (1)-(3) only requires an extensive welfare state. Only (4) and (5) require something more drastic. Welfare-state capitalism relies solely on “redistributive” taxation but property-owning democracy works at the “core” of the economy, ensuring that those justice bars from having wealth never have it in the first place.

Rawls, O’Neill and Williamson stress that property-owning democracies have markets and a price system. But as Rawls says, price signals will only be used for “allocation” and not “distribution.” (I’ll discuss whether this distinction is viable in Part III.) People will also be allowed a free choice of careers and occupations and competitive markets will help to ensure that economic power is decentralized.

Such a society will have a large public sector that provides public goods and their constitutions will protect equal basic liberties, both civil and political. But they will also have the four branches of government that Rawls endorses in Part II of TJ – the “allocation,” “stabilization, “transfer,” and “distribution” branches. They’re as bad as they sound. The function of the branches is as follows:

(a) The Allocation Branch: keeps prices competitive, prevents formation of “unreasonable” market power, identifies and corrects market inefficiencies through taxes, subsidies and the redefinition of property rights (TJ, 244).

(b) The Stabilization Branch: brings about full employment and protects free choice of occupation along with deploying financial resources to increase aggregative demand when necessary.

(c) The Transfer Branch: generates and distributes the social minimum by taking all needs into account and giving them the right weight with respect to other claims. A competitive price system gives no consideration to needs and “therefore it cannot be the sole device of distribution.”

(d) The Distribution Branch: preserves approximate justice in distributive shares through taxes and redefines property titles. It imposes great inheritance and gift taxes, along with restricting rights of bequest. It taxes to achieve a certain distribution of wealth and to raise the revenue required to impose justice (245). Thus, it requires that “social resources must be released to the government.” Yes, “released.”

Williamson helps to further flesh out a property-owning democracy by identifying three forms of capital that must be more widely distributed: residential, cash and stock.

To ensure the dispersion of residential or real estate holdings, Williamson argues that the government should subsidize home mortgage lending and provide grants for down payments (in a 2009 article, no less!). To distribute cash, the government should ensure that households at the bottom of the wealth distribution have at least $100,000 in wealth.

Finally, the government should provide people with savings, perhaps through a one-time lump sum derived from a fund of inheritance taxes. Of course, we can’t guarantee that all persons have the same savings, as this would “immediately create perverse incentives as well as a fiscal sinkhole,” so that would be crazy (notice the highly selective use of “bad incentives” arguments). Instead, the government could require people to see a government financial adviser before they could invest in short-term stocks or liquefy their holdings.

Williamson also appeals to the market socialist literature to meet requirement (5), as justice requires that the workplace be largely democratic. So workers may have to be part of the monitoring and enforcement of workplace regulations and may be given, say, non-tradable coupons for fixed stock ownership. Or a government institution could hold the stock for them.

III. Property-Owning Democracy and Economic Liberty

I want to stress here that our defenders of property-owning democracy see no deep conflict between their view and economic liberty. It seems obvious to us that imposing a property-owning democratic regime on normal, well-functioning persons would require constant interference with their liberty, a la Nozick.* Importantly, Williamson is alive to Nozick’s concern, though he thinks the following remark is sufficient to address it:

Once the background institutions for allocating property are established, the system should operate of its own accord to produce a less concentrated, far wider distribution of property, with no “interference” in the everyday operations of the economy required beyond that present in the existing system of periodic taxation (449).

To Williamson’s credit, he recognizes that the transition from welfare state capitalism to a property-owning democracy “would require, probably in quite a substantial degree, redistribution of assets accumulated under the ‘old’ rules defining property rights and taxation.” So the transition may involve a great deal of coercion, which he’s apparently OK with.

But this makes Williamson’s claim in the block quote all the more confusing. He seems to believe that a property-owning democracy would be in some sort of social equilibrium that would prevent deviation towards welfare state capitalism, laissez-faire or perhaps some form of command socialism. Otherwise, coercion would be necessary to keep society property-owning democratic. To defend his claim, I believe he must appeal to the Rawlsian assumption that members of a well-ordered society fully comply with legal rules that institutionalize the principles of justice. But if that is so, then why can’t we assume full compliance with the necessary transitional measures?

IV. Conclusion

Williamson, O’Neill and Rawls would assign states extraordinary economic power in the form of a property-owning democracy. In my next post, I will further examine the case for property-owning democracy, specifically why welfare-state capitalism is unjust. The following three posts cover my three criticisms.

——————

* Perhaps Nozick was wrong to think that Rawls’s principles required an income pattern that would in turn require constant governmental interference, but in light of the foregoing you can certainly see how he got the idea!

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  • http://twitter.com/FBLiberty FB

    Unfortunately the current debate surrounding POD and Rawls is ahistorical in nature. I think Libertarians should embrace POD as a FMAC ideal, and would do so if they knew a little more about the ideas past.

    The term ‘property owning democracy’ is actually much more associated with the Conservative party here in the UK than with John Rawls. the term POD was coined by a Conservative MP, Noel Skelton in the 1920’s and referenced frequently by two Conservative primeministers – Anthony Eden and Margaret Thatcher. Speaking in 1946, (long before Rawls) Eden had the following to say:

    “Our objective is a nationwide property owning democracy. Whereas the socialist
    purpose is the concentration of ownership in the hands of the state, ours is
    the distribution of ownership over the widest possible number of
    individuals….This is what freedom means. It is precisely in the conception of
    ownership that man achieves mastery over his environment. Upon the institution
    of property depends the fulfilment of individual personality and the
    maintenance of individual liberty.”

    The success of the idea in British politics meant that those on the British left became interested in the idea, with the British economist and nobel laurate being one of the key left wing figures to appropriate it. Rawls attributes his idea of a POD directly to Meade in both a ToJ and later in Justice as Fairness: A Restatement.

    In truth it is a free market idea and about everyone having access to capitalism and the market. Oneill and Thad pervert it out of all recognition, and Libertarians of a Tomasian bent should argue for a POD vision closer to Thatchers, which still shares the same Rawlsian ends but promotes different means.

    I would recommend the following articles for more reading on the ideas much longer and richer history on the free market right:

    ‘A Crusade to Enfranchise the Many’: Thatcherism and the ‘Property-Owning Democracy’ – Matthew Francis: http://tcbh.oxfordjournals.org/content/early/2011/08/31/tcbh.hwr032.full

    Property Owning Democracy: Skelton to Rawls and Beyond – Amit Ron: http://www.ingentaconnect.com/content/imp/hpt/2008/00000029/00000001/art00006

    and for how the idea is taken on by the British left: ‘Revisionism Reconsidered: Property Owning Democracy and the Egalitarian Strategy in Post-War Britain’, by Ben Jackson (Jackson also writes the chapter on the ideas History in Oneill and Williamson’s recent collection on POD): http://tcbh.oxfordjournals.org/content/16/4/416.full

    • http://twitter.com/FBLiberty FB

      Oops – when I say “British economist and noble laureate” the man I’m referring to is James Meade.

    • john tomasi

      fascinating, and well-stated. many thanks for this, fb.

  • TracyW

    A public system of campaign financing and explicitly limitations on corporate political activity.

    A property-owning democracy necessitates giving publicly-funded advantages to existing political parties? Really? (If public money is handed out equally to everyone who wants to fund a political party, then everyone will want to fund a political party. Consequently some limits on public funding will need to be set. Guess who such limits will favour?)

  • TracyW

    (4) A right of individuals to a share of society’s productive capital and/or wealth.

    A market economy does this anyway, particularly when combined with point (2). Everyone is a consumer as everyone has to eat, and everyone gets consumer surplus.

  • TracyW

    Instead, the government could require people to see a government financial adviser before they could invest in short-term stocks or liquefy their holdings.

    He has a rather narrow view of what causes losses in savings. How about the people who brought long-term government bonds before the 1950s-1980s inflation?

  • http://www.facebook.com/les.nearhood Les Kyle Nearhood

    In my view, Legitimate “property owning democracy” means that you don’t get to vote unless you own property.

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  • j_m_h

    It’s so great that we’ll have two mechanisms for allocative processes. Must mean that it will be twice as good — or will that mean we simply won’t have markets (except perhaps in name)?

  • Blain

    Three quick comments on this post.

    1. In order to gain an improved understanding of the idea of a property-owning democracy (POD), I would strongly recommend that Kevin read: (a) R. Krouse and M. McPherson (1988) “Capitalism, ‘Property-Owning Democracy,’ and the Welfare State,” in Democracy and the Welfare State, ed. A. Gutmann (Princeton University Press), pp. 79-105; and (b) M. O’Neill (2012), “Free (and Fair) Markets without Capitalism,” in M. O’Neill and T. Williamson, eds., Property-Owning Democracy: Rawls and Beyond (Wiley- Blackwell), pp. 75-100.

    The Krouse and McPherson piece is cited by Rawls in part IV of Justice as Fairness: A Restatement, as influencing his later thinking about POD. In addition to clarifying the idea of a POD, Krouse and McPherson also propose that Rawls is too quick in dismissing certain institutions and policies of ‘welfare-state capitalism’ (WSC) (an argument with which Rawls apparently disagreed, given what he says in JF).

    The O’Neill chapter explains, contra Rawls, that WSC (if properly organized) is capable of realizing the first principle of justice as fairness (including the ‘fair value of the political liberties) and the fair equality of opportunity principle. O’Neill also contends that the sharp contrast that Rawls draws between WSC and POD is misleading, and instead Rawlsians (and liberal egalitarians more generally) should draw on policies and institutions associated with both kinds of political-economic systems in order to promote the freedom of all citizens.

    2. I agree with O’Neill that the way in which Rawls contrasts WSC and POD is unhelpful. I also think that Rawls’s description of WSC in part IV of JF is rather uncharitable (it may be a roughly accurate of the American welfare-state, but there are other kinds of welfare-states that, I think, fare much better with respect to justice). That said, I do think that there are elements of the idea of POD that are worth pursuing, namely, the importance of achieving a more widespread distribution of human and non-human capital in society.

    3. I found the tone of this post quite off-putting, and I suspect that many other readers sympathetic to Rawls and the idea of POD would do so likewise. The tone seems to be: “this is obviously a crazy idea!” Um, right, thanks. Inserting (what I take to be libertarian) buzzwords like “statism” and “authoritarianism”, without explaining what is meant by them, is unhelpful. ( Any author who refers to any society that adequately realizes Rawls’s first principle of justice, and gives that principle ‘lexical priority’ over other political matters, as “authoritarian” is, I think, using that term in a radically different way than most English speakers.)

    Now I don’t visit BHL very often, so perhaps the goal of most posts at BHL is not to engage with non-libertarians in respectful dialogue. If so, then this comment is inapplicable. But if Kevin is hoping to do anything other than “preach to the converted,” then I don’t think that the tone of this post is conducive to that goal.

    • Kevin Vallier

      Hi Blain, thanks for the comment. I’ve been studying the POD reader for some time, and I’ve read a few of O’Neill and Williamson’s articles on the subject. You’ll see more evidence of this in the next post.

      I’m not sure what to say about the tone save for three quick points:

      (i) I find the idea of a POD deeply morally unattractive, as O’Neill and Williamson clearly find laissez-faire. So I like to think I’m explaining my genuine, sincere indignation, just as they were in their piece. I assume that sort of criticism is permitted in blog form, especially given the way the authors put their proposal into the public sphere via the Boston Review.

      (ii) I will explain what I mean by “authoritarian” in the post dedicated to it. But roughly the idea is that POD is incompatible with the constraints of political liberalism, and so will be authoritarian in Gaus’s sense or “sectarian” in Rawls’s sense. Its authoritarian because it cannot be publicly justified in anything like modern conditions.

      If anything, I’m going to spend too much time explaining all of my terms. The combined posts will be roughly 10,000 words.

      (iii) I’m very interested in engaging non-libertarians in dialogue. I’m not sure about POD-loving Rawlsians, though, given that they often seem completely immune to economic modeling and empirical data. So, clearly you and I have apparently read many of the same pieces. Where is the discussion of government failure? Where is any general sensitivity to informational problems associated with the various branches of government? Where is any serious engagement with contemporary economics? O’Neill and Williamson’s pieces are largely free of these concerns. So I’m not sure I’m going to convince many people who agree with them, given that their arguments seem deeply underdefended.

      So, given that I’m mostly interested in engaging in everyone to “the economic right” of most POD-loving Rawlsians (which is arguably the vast majority of intellectual elites in most free societies).

      Even so, I went back and toned down some of my language given your reaction just in case some POD-loving Rawlsians might want to engage me anyway.

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