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.

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* 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!