Libertarianism, Liberalism

Why Property-Owning Democracy?

In this post, following my previous post, I will review the Rawlsian arguments for property-owning democracy (POD) and comment a bit on their structure. In short, POD is required to realize Rawlsian principles because welfare-state capitalism (WSC) fails to properly disperse capital and provide worker control required to realize Rawls’s two principles of justice.

I. POD Review

Remember that POD is characterized by five distinct aims: it institutionalizes a (i) right to equal education, (ii) a right to minimum income, (iii) a public system of campaign financing and limitations on corporate political activity, (iv) a right of individuals to a share of society’s productive capital and/or wealth, and (v) a collective right to sufficient productive capital to sustain viable democratic communities at the local level.

I will focus on conditions (iv) and (v) because they distinguish a POD from WSC so by critiquing them we critique POD directly.

Remember that part of condition (iv) is that citizens be guaranteed access to extensive real estate, cash and stock holdings. Further, remember that POD requires four branches of government: an allocation branch, a stabilization branch, a transfer branch and a distribution branch.

II. The Arguments for POD

The basic argument for POD is that it is the best way to institutionalize Rawls’s two principles. Let’s reproduce those principles (these formulations are found in Justice as Fairness: A Restatement):

Liberty Principle: Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all.

Second Principle: Social and economic inequalities are to satisfy two conditions:

Fair Equality of Opportunity Principle: they [the inequalities] are to be attached to offices and positions open to all under conditions of faith equality of opportunity.

Difference Principle: they [the inequalities] are to be to the greatest benefit of the least-advantaged members of society (JF, 42-43).

Importantly, in Political Liberalism, Rawls adds a condition to the Liberty Principle: “and in this scheme, the equal political liberties, and only those liberties, are to be guaranteed their fair value.” This is critical to O’Neill and Williamson’s case for POD. I do want to stress that O’Neill in particular has argued that Rawls overblows the WSC-POD distinction, but there is still a distinction to be made, one that O’Neill draws on.

Note: I will abbreviate these principles as LP, FEO, DP and I shall refer to the “political liberty” part of the LP as PLP or the political liberty proviso.

We can set the first part of the LP aside for the moment. Instead, let’s focus on PLP, FEO and DP, in reverse order, comparing WSC and POD for each principle.

a. DP-Based Arguments for POD

Many of you might think that the case for POD is based primarily on the DP. After all, if inequalities must be to the greatest advantage of the least advantaged, surely a great many people must have access to productive capital, not merely in holdings (such as real estate, stock and savings) but in control (such as workplace democracy). So the least advantaged must be guaranteed access to capital. Furthermore, given how little people like to be taxed, direct redistributive taxation might be unpopular, so it is important to organize the economy for “predistribution” where wealth is more equitably distributed in the first place, rather than relying entirely on redistributive taxation. That consideration is also supposed to favor POD.

Rawls’s case for POD is based primarily on PLP and, secondarily, on FEO. But O’Neill has argued that FEO-based and PLP-based arguments are less satisfactory than DP-based arguments (see his “Free (and Fair) Markets without Capitalism” chapter in the recent POD anthology, especially pgs 84-7). O’Neill’s DP-based case runs roughly as follows:

The aim of the kind of radical socioeconomic reorganization characteristic of property-owning democracy … is to realize the value of equality through ex ante compression of objectionable economic inequalities. A property-owning democracy aims to do this through the organization of economic life in a way that reduces the likelihood of social domination or of loss of status. Therefore, satisfaction of the difference principle, when viewed as ranging not only over income, but also over wealth in productive capital, as well as over the social primary goods of (a) the powers and prerogatives of offices and positions of authority and responsibility, and (b) the social bases of self-respect, plausibly mandates a move toward greater dispersal of control over productive resources (89).

The key is the idea of ex ante distribution, which arguably requires policies like (iv) and (v) in order to ensure the right, just economic outcomes. Ex-post redistribution characteristic of WSC won’t resolve inequalities of wealth and status, so we need something more. So for O’Neill the best argument for POD is DP-based, or perhaps we might say “equality-based,” as O’Neill puts the point this way: “Rawls’s best reasons for advocating a POD are grounded in the value of equality rather than the values of liberty and democracy.” (93)

b. FEO-based Arguments for POD

The FEO-case for POD is that conditions (iv) and (v) are required to guarantee fair equality of opportunity to acquire and use critical goods, services, titles and offices (roughly, Rawls’s primary goods). A lot of FEO is realized via (i)-(iii). So why think (iv) and (v) are required?

Presumably an equal opportunity to achieve better life outcomes will require that all persons have access to capital goods, such that they could start their own business (which, on the Rawlsian view, the state could expropriate whenever it likes) and free themselves from the thumb of capitalists. Further, dispersion of capital will keep the very rich and powerful from denying opportunities to the least well-off. Similarly, democratic workplace rights disperse capital by dispersing control over the capital that exists. And if people really are to have equal opportunity to own and operate capital, then perhaps it makes sense to give workers a greater share of capital, including in a workplace where someone else fronted the capital and took on all the risk.

FEO arguments for POD are rarely worked out in much more detail than this. A successful FEO-argument for POD requires showing that WSC is not enough, but this comparative judgment is to my knowledge seldom defended. As we have seen, even O’Neill has argued that the connection is under-defended (84-7).

c. PLP-based Arguments for POD

Recall that the political liberty proviso is part of the Liberty Principle, and that it singles out political liberties as requiring a guarantee of their fair value. No other liberties require a guarantee of their fair value. I find this privileged status highly dubious, especially given how inconsequential political liberties are to realizing the ordinary person’s interests and plans, but I will make the case for that in the fourth post. The point here is that PLP is the main moral foundation that Rawlsians typically use to defend POD, following Rawls (both in Justice as Fairness: A Restatement and Political Liberalism). Here’s Rawls in Justice as Fairness arguing that WSC is still vulnerable to political domination by the rich,

Property-owning democracy avoids this, not by the redistribution of income to those with less at the end of each period, so to speak, but rather by ensuring the widespread ownership of assets and human capital (that is, education and trained skills) at the beginning of each period, all this against a background of fair equality of opportunity. The intent is not simply to assist those who lose out through accident or misfortune (although that must be done), but rather to put all citizens in a position to manage their own affairs on a footing of a suitable degree of social and economic equality (JF, 139).

We need “asset-based” policies, not merely redistributive ones. Redistributive systems are the treatment for the power of the rich, not the cure. Thus, Rawls’s goal is not to tax the rich but to keep anyone from getting too relatively rich in the first place. Otherwise, the rich can coopt the political process and undermine the fair value of the political liberties.

So what exactly does PLP come to? For Rawls it means that everyone must have effectively equal influence on the use of political power. Without roughly equal influence, we don’t really have a free and equal society. The many poor are dominated by the few rich if the system of property ownership is not fundamentally restructured.

In his last major article, “The Idea of Public Reason Revisited,” we can see Rawls at his most polemical, which coincides with his (in my view regrettable) mixing political liberalism with deliberative democracy. Watch this logical leap:

There are three essential elements of deliberative democracy. One is an idea of public reason…. A second is a framework of constitutional democratic institutions that specifies the setting for deliberative legislative bodies. The third is the knowledge and desire on the part of citizens generally to follow public reason and to realize its ideal in their political conduct. Immediate implications of these essentials are the public financing of elections, and the providing for public occasions of orderly and serious discussion of fundamental questions and issues of public polity. Public deliberation must be made possible, recognized as a basic feature of democracy, and free from the curse of money. Otherwise politics is dominated by corporate and other organized interests who through large contributions to campaigns to distort if not preclude public discussion and deliberation (448-9).

Immediate implications? The “curse of money”? Not one of Rawls’s finer arguments.

But you get the idea. The political liberties are critical for a free and equal society, as they allow all people to play a role in crafting their polity, not just through voting but through public deliberation. Welfare state capitalism plays the important role of aiding the least well-off and ensuring that they have the resources to exercise their liberties. Those are important matters, but they don’t by themselves make for a just society. A just society ensures that everyone has an equal voice in the shape of their coercive institutions. Rawls thinks this principle immediately implies stuff like campaign finance reform and, in the end, the wide dispersion of capital. It doesn’t, of course. But that’s the argument.

And to his credit, O’Neill recognizes that the PLP-based arguments for POD are limited and so may not vindicate POD over WSC. As O’Neill says, “with regard to the protection of the fair value of the political liberties, it would seem that the argument for preferring POD over WSC is to some degree incomplete.” (84)

d. Summary

So, there are DP-based, FEO-based and PLP-based arguments for POD. We’ve seen that they’re all pretty inconclusive as they stand, and that Williamson and O’Neill’s Rawlsian case for POD places different relative stress on these arguments than Rawls’s original case. Rawls puts more weight on the PLP-based argument, whereas O’Neill places more weight on the DP-based argument.

What is curious to me is that Rawls himself places less stress on the DP in his later work and his later critiques of capitalism. He seems to think the strongest arguments are FEO-based and PLP-based. But O’Neill thinks the DP-based argument is the strongest. My sense is that the DP-based argument is just as weak and under-defended as the others and that Rawls sensed this. Plus, I don’t think he wanted the case for POD to depend on the DP as he increasingly accepted that the DP is incredibly controversial and so no necessary component of a reasonable liberal political conception. That’s why PLP is so important, because any reasonable liberal political conception of justice must guarantee the fair value of the political liberties. So the most powerful candidate argument for POD in Political Liberalism is the PLP-based argument, or so it seems to me. My sense, then, is that O’Neill, Williamson and Rawls all provide reason to think that all three arguments are incomplete.

But I think the problems with the case for POD come to much more than that it’s not clear whether POD follows from DP, FEO and PLP, or so I shall argue in my next post.

III. Ideal and Nonideal Theory in the Defense of POD

Just a note on the role of ideal theory in the defense of POD, which I’ll review in my next post. It turns out that we can use a variety of incentives and information arguments even at the level of Rawlsian ideal theory. Many of you know that Rawls’s determination of regime types assumes “strict compliance” with the principles of justice. As Rawls says, on strict compliance “Everyone is presumed to act justly and to do his part in upholding just institutions” (TJ, 8). Thus, I presume that Rawls means that members of a well-ordered society governed by his two principles will, at the very least, comply with all the laws imposed upon them and to create and maintain institutions that embody the principles of justice. However, strict compliance does not require citizens to act on principles of justice as guides to individual conduct. Justice as fairness is not an individual ideal but rather a framework within which persons can pursue their diverse goals and ends and live in accordance with their personal principles. For Rawls, justice as fairness is global, not local.

This distinction is important, for it permits members of a well-ordered Rawlsian society to engage in economic activities that generate bad results, such as inefficiencies or tragedies of the commons. Rawls acknowledges, for instance, that in a laissez-faire regime there will be market failures even if citizens act justly. Thus, to be consistent, we must allow that citizens of a POD will still respond to economic incentives as rational individuals so long as those incentives don’t require them to violate the laws laid down by just institutions.

While I will criticize POD at a level of nonideal theory, we can provide a more compelling critique of POD if we can show that it is unworkable even at the level of ideal theory. In other words, I believe we can show that POD is unworkable even if all members of a well-ordered society are calm, virtuous and rational and comply with any and all laws laid down by just institutions. If I’m right, we can show that POD is an ineligible Rawlsian regime type even at the level of ideal theory. If POD is unworkable both in ideal and nonideal theory, then it is fair to say that POD is unworkable simpliciter.

Thus ends our explication of POD and the case for it. Next week my criticism begins in earnest.

* For Rawls, liberal socialism is an eligible regime type, but it focuses on joint ownership of the means of production. Although Rawls is open to it, I assume readers of the blog are familiar enough with the problems with central planning of this sort that I will leave it aside.

  • I’m embarrassed when I hear my fellow philosophers talk about the public financing of elections. It’s clear they either haven’t read or have willfully ignored the empirical political science literature on this issue, which shows that money just doesn’t matter the way Rawls thinks it does.

    • Sean II

      You don’t even need empirical data to know that public financing of elections is a dreadful idea. You just need to know that money is not unlimited, therefore someone will have to decide who does or doesn’t get it, and how much they get. Since that someone can only ever be an incumbent of the existing system, you end up with a bias toward stagnation that should be revolting to just about anyone who doesn’t happen to think the current set up is Goldilocks perfect.

    • Dan

      Could you give some references to this literature? (I’m not being snarky, rather genuinely interested).

    • Sure money doesn’t matter. That’s why half of the US Congress (and most Senators) are millionaires. Just a random effect that, and a fact that has no bearing whatsoever on the political equality of US citizens. Poor people, without access to public funds would stand just as good a chance as those rich guys …. Oh sorry, I misunderstood. You meant that private lobbying and finance isn’t a great predictor of which plutocratic party wins.

      • To be an NFL linebacker, you need to weigh 300 pounds. That doesn’t mean that getting really heavy gives any random person a good chance of being an NFL linebacker, or even that a typical college linebacker who is over 300 pounds should try to gain weight. That applies to political representation in the US as well. At any rate, the “the way Rawls thinks it does” qualifier is important. I can’t imagine what Rawls or most other philosophers write what they write except by assuming they make a lot of empirically-repudiated assumptions.

  • good_in_theory
    • Yes. (From the first of those links) “Even if money didn’t determine winners, it still determines who can run in the first place.”

  • TracyW

    This I think is interesting, but I kept forgetting what the acronyms stood for, having to scroll back to see, and then lost the thread of the argument.

  • TracyW

    For Rawls it means that everyone must have effectively equal influence on the use of political power. Without roughly equal influence, we don’t really have a free and equal society.

    Is this achievable under any real world voting system, ignoring the influence of money? Don’t voting systems give the most power to the swing voter, so people at the extremes will have virtually no influence? For example, given the preferences of the bulk of the NZ population, I don’t see how any voting system could give effectively equal influence to anarchists and unreformed communists.

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