Economics, Social Justice

Property-Owning Democracy is Unjust, Free-Market Fairness is Not

In my last post, in my series on property-owning democracy (POD), I claimed that it is unjust because POD frustrates the realization of Rawls’s (unmodified) two principles of justice. But another more interesting method of showing that PODs are unjust is to show PODs violate a more plausible, modified version of Rawls’s two principles.

John Tomasi has recently developed a modified version of Rawls’s two principles that I find attractive. Fortuitously, Martin O’Neill and Thad Williamson, POD’s foremost living defenders, have just critically reviewed Tomasi’s new book, Free-Market Fairness, that develops a modified version of Rawls’s principles. So I can address their criticisms directly. I will argue that Tomasi’s modifications survive their criticisms and that his two principles plainly demonstrate that POD is unjust on generally Rawlsian grounds.

I: Tomasi’s Alteration of Rawls’s Two Principles

In Free-Market Fairness, Tomasi offers a “market democratic” interpretation of Rawls that he calls free-market fairness. You can review the idea in his book or in our symposium on the book. Let me summarize the view quickly.

Tomasi alters justice as fairness in two ways. First, he adds a scheme of economic liberties to the set of basic liberties Rawls identifies in his first principle, specifically liberties endorsed by classical liberals, such as liberties of work, contract and rights to earnings. These economic liberties are far from maximally libertarian and they are only as basic as other rights, such as free speech or the right to vote. But while economic liberties are not the only fundamental liberties, they are basic and so no government can justly abridge them.

Second, John downgrades (upgrades?) the full-blown difference principle to a distributional adequacy condition (though this revision is not as clear in the text). So on free-market fairness, social and economic inequalities must be organized to work to the benefit of the least advantaged so the least-advantaged hold a large if not maximal bundle of primary goods (goods like healthcare, food, education and even exercises of economic liberty).

I have argued elsewhere that John’s main two modifications to Justice as Fairness are defensible. I think its hard to resist the pull of his argument from “economic exceptionalism,” the claim that the same reasons Rawls gave us to show that we must make two basic economic liberties basic (freedom of occupation and the right to personal property), give us reason to make some additional economic liberties basic. Other contractualist libertarians have offered related arguments, such as Loren Lomasky and Jerry Gaus, though their arguments differ from John’s in deep and systematic ways.

Further, I think the rationale for the difference principle is pretty flimsy. After all, the original argument for the difference principle was based on maximin reasoning, which many reject as the proper principle of rational choice in the face of uncertainty. Instead, it seems much more plausible that the large majority of members of liberal societies will endorse a principle that guarantees a social and economic minimum to aid the least-advantaged (as Gaus once argued here). Additionally, most will probably agree that within some broad margin economic institutions should be organized so as to increase the size of that bundle over time. This is why Tomasi places so much stress on economic growth.

Now, assume for the moment that John’s two modifications to justice as fairness succeed (and I think they more or less do, though I would alter justice as fairness far more and, unlike John, I’m not on board with the Theory of Justice Rawlsian arguments for basic rights).

If so, then property-owning democracy is flatly unjust. First and most obviously, property-owning democracy does not treat economic liberties as basic liberties. While a POD may well decide to enshrine economic liberties in a constitution, PODs could freely abridge them as well. PODs have only instrumental reasons to favor economic liberty, and so they fail to guarantee the fair value of economic liberty.

Second, a POD will probably fail to meet the distributional adequacy condition over the long-term. It will do well with respect to distributional adequacy in the short-term due to its extensive welfare programs, assuming they work well (though they won’t even in ideal theory, as I argued in my last post). But given how inefficient such a society would invariably be (even in ideal theory), PODs will significantly depress the holdings of the least advantaged over time, rendering them poorer without cause and so creating grave injustice.

In sum, a POD would impoverish a great many people and subject their economic liberties to shallow protections or restrictions.

II. Williamson and O’Neill’s Review of Free-Market Fairness: Two Preliminary Points

O’Neill and Williamson just published a review of Free-Market Fairness in the Boston Review, which also published the piece that inspired the series. So I’d like to try to show that their criticisms of Tomasi’s alterations fail, in particular their argument that POD can realize the aims of free-market fairness.

Let us begin by noting that while O’Neill and Williamson chide Tomasi for having an empirically unrealistic view about how economies work, their writings on property-owning democracy show far less empirical sophistication than Free-Market Fairness. As we have seen, they have begun to address economic concerns raised by classical liberals. And in their review, they cite as fact various social democratic economic claims without even mentioning alternative analyses. For example, they use arguably discredited research supporting the Easterlin Paradox, which holds that measured happiness does not increase with income (up to a limited point). O’Neill and Williamson inconsistently employ empirical literature by using economic views they like to criticize philosophical views they dislike while never engaging economic problems that threaten their own view. This inconsistency deserves criticism.

Second, let’s also note that they acknowledge Tomasi’s most basic claim, namely that a just society must permit that private control of productive capital. As they write,

If [Tomasi] simply means that a just society should accept and promote the basic right of individuals to control productive property, such as a small business, then high liberals can agree. Protection of a general right to operate a small business is consistent with a Rawlsian property-owning democracy.

I’ve read my Rawls and I’ve read a good bit of O’Neill and Williamson. I see little indication that they would accept this idea based on their work. But it’s nice to see that O’Neill and Williamson are prepared to make the concession that Rawls did not.

III. Tomasi Does Not Ignore Worker Well-Being

One of O’Neill and Williamson’s concerns is that John’s case of economic liberty, the case of Amy’s Pub-in-the-Tub small dog grooming business, is unrealistic because it “privileges the experience of the small business order” without accounting for the place of “the worker in a large-scale firm.” Of course, Tomasi does address the plight of workers, arguing that a free marketplace will put competitive pressure on firms not to dominate their workers and that an increasing share of primary goods will give workers the freedom to take other jobs or to rely on the social minimum. As a result, Tomasi has lots of resources for workers in large firms.

O’Neill and Williamson also claim that a right to organize “would raise thorny questions about how to handle conflicts between the claims of people such as Amy and the claims of workers who wish to bargain collectively.” On John’s view there’s little reason to think that these “thorny questions” have no good answer. A right to organize is a basic liberty, but this right does not include the right to expropriate Amy’s capital, as O’Neill and Williamson’s POD would permit in a great many cases. Instead, John takes the standard classical liberal view about unions, namely that they are free institutions that can do a lot of good to improve the condition of workers but that they morally overreach when they try to force non-members to join the union as a condition of work or when unions demand the coercive expropriation of capital goods for their benefit. John argues that, at the level of ideal theory, we have reason to think that Amy’s rights and workers’ rights will be compatible given the great wealth produced by the market, the competition it fosters and the presence of a strong economic minimum.

O’Neill and Williamson then cite nonideal cases from the real-world to criticize John. For instance, they claim that “Walmart’s expansion across continents has ruined the lives and accomplishments of many independent business owners.” Insofar as Walmart is a product of the market (and it partially is, though libertarians argue about the extent), it has helped to liberate people by creating new jobs, providing lower prices for a huge range of goods and so on. O’Neill and Williamson, true to their progressive proclivities, completely ignore these benefits.

The right to own capital is not the right to be protected from competition. Such protection, if coercive, would be unjust and would create inefficiencies that would lower the wealth of the least-advantaged over time because such protections would hamper competition.

IV. Economic Liberties are Basic Liberties

Probably the most interesting part of O’Neill and Williamson’s review is their speculation about why Rawls didn’t make more economic liberties basic liberties. Rawls thought it “wise” to exclude economic liberties from the list of basic liberties because schemes to regulate the relationship between employers and employees would “involve a thicket of complex issues and practical judgments.”

I’d bet apologists for China’s restrictions on free speech would say that regulating the relationship the state and individuals “involve a thicket of complex issues and practical judgments” such that it would be wise to exclude free speech from the list of basic liberties.

My point? Complexity in institutionalizing liberties cannot be a reason to think they are not basic liberties. Regulating any liberty raises complex issues and calls for complex practical judgment! Along with John and other classical liberal contractualists like Lomasky and Gaus, I freely admit that some economic liberties require more definition by political institutions than other rights, but this fact alone does not even begin to show that we can leave economic liberties off the list of basic liberties, as Lomasky made clear twenty-five years ago and that Gaus has made especially clear recently. So O’Neill and Williamson’s first serious attempt to address John’s challenge is a non-starter.

Moving to their second attempt, O’Neill and Williamson claim the following: “since the goods that market society can provide—satisfaction, a sense of achievement—are obtained through multiple institutional mechanisms (some individual, some collective), there is a strong case against morally privileging the liberty of the small business owner.”

In other words, since the relevant goods generated by economic liberties can be achieved in other ways, economic liberties should not be basic liberties.

This too is a bad argument. Suppose that command economy socialism could generate satisfaction and a sense of achievement among the people due to an authoritarian culture that prizes successful, rational economic planning. This would not be a reason to take freedom of occupation off the list of basic liberties.

Further, there are probably non-liberal regimes that could pass legislation that would help to realize the goods that flow from exercising the non-economic liberties O’Neill and Williamson endorse. The sense of satisfaction and achievement that comes from effective free speech could be realized by non-liberal regimes that permit free speech in a narrow range of circumstances. Further, the sense of satisfaction and achievement that comes from voting could arguably be realized in a constitutional monarchy where only part of the government is subject to democratic control. Again, the mere fact that the goods generated by the protection of a liberty can be realized without treating the liberty as basic does not establish that the liberty is not basic.

Thirdly, I have argued in a previous post that O’Neill and Williamson’s property-owning democracy is unworkable even in ideal theory. If I’m right, then property-owning democracy will not be able to realize the benefits of economic liberties made basic by free-market fairness both because of serious incentive and information problems and because it will probably have to monitor, pressure and control capital owners. PODs will therefore often frustrate the generation of satisfaction and achievement that comes from private capital ownership, accumulation and entrepreneurship.

So when the authors confidently claim, “the moral goods of exercising freedom through market activities would be more widely realized under a regime of Rawlsian property-owning democracy than under the sort of minimally regulated capitalism that Tomasi celebrates” we have good reason for skepticism.

V: Property-Owning Democracy is Unjust

In this post, I have argued that Tomasi is basically right to modify justice as fairness to make more economic liberties basic and to upgrade the difference principle to a distributional adequacy condition. If so, then POD is even more unjust than it is given unmodified versions of Rawls’s principles.

But I am not finished! POD is indeed unworkable and unjust. But it is also authoritarian because it can only be realized in a society where reasonable pluralism is significantly restricted. So, in this and the previous post, I show that POD fails the 1971-Rawls test. In the next I will show that POD fails the 1993-Rawls test, the test of political liberalism.

  • John Tomasi

    Here’s a line from the O’Neill and Williamson critique, also cited by KV, and that I personally found plausible and perhaps worthy of a fuller response: “Walmart’s expansion across continents has ruined the lives and accomplishments of many independent business owners.” In my BHL reply to Samuel Freeman, you can see direction I would take.

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