The use of -isms distracts us from the basic question: what political and private institutions are better at matching people to capital?
The debate over redistribution frequently hinges on arguments about efficiency; its opponents highlight the success of market processes, and the failures of command-driven systems. By contrast, those in favour of the redistributive state usually advance arguments first and foremost about morality.
Seventy years ago, Bertrand De Jouvenel’s case against state-centric redistributionism, delivered in two 1949 lectures at Cambridge University, and republished by Liberty Fund in 1990 as The Ethics of Redistribution, made the moral case against redistribution. De Jouvenel maintains a focus on ethics and human flourishing, and suggests that while economics reveals truths of human existence, it always remains subservient to man’s moral life.
De Jouvenel invokes a relevant position on the morality around market processes themselves. He was one of the 36 scholars at the first meeting of the Mont Pelerin Society organized by F.A. Hayek, though his work has received less attention than many others in subsequent years as moral views were supplanted by utilitarian arguments for contemporary capitalism.
In making a moral case for open economies, The Ethics of Redistribution is no less relevant than it was in 1949.
By placing human flourishing at the center of the economy, De Jouvenel affirms a society in which both liberty and virtue are foundational. Compromises with economic liberty require that the state usurp the role of the family and the mediating institutions of civil society.
Redistribution and the State
De Jouvenel defines redistribution as state-led, for the sake of a definition in his book. He argues unequivocally that “relief (of the poor) is an unquestionable social obligation,” and he views the provision of a basic social safety net by the state as absolutely vital. De Jouvenel held that such a safety net should not be thought of as state-centric redistribution, but rather a basic function of government (partly as the author argues, because the modern welfare state has eroded the non-state welfare which preceded it).
De Jouvenel’s abiding concern midway through the 20th century was the growth of redistributionist views within non-socialist, self-ascribed market economies like France and the United Kingdom. Were he around today, neither Cuba nor Venezuela’s socialists would have been the target of his writing. Instead he focuses his attention on those places where individuals privately own the “means of production” and create wealth but are heavily taxed in the name of fairness or social justice. Recent moral arguments in the West in favor of taxing the very wealthy on moral grounds make his work particularly pertinent.
The fundamental challenge of redistribution by the state—in pursuit of an equalization of incomes—is the erosion of human flourishing, and in particular, by undercutting the potential for a growing middle class: “The urge to redistribute is closely attended by a sense of scandal,” a common notion today when observing the existence of dire poverty in a world where the wealthy enjoy great riches. Against the notion that it only “removes the surpluses of the rich,” De Jouvenel contends that redistribution cannot avoid cutting deeply into lower-middle class incomes. His use of equations to demonstrate the economics of this is notable for a political philosophy text, as is his avoidance of the sorts of Rawlsian abstractions to which conservatives have been particularly critical.
Redistributive Taxation Favors Corporations Over Families
Comparing the treatment of corporate bodies to families, De Jouvenel touches on an enduring issue in taxation which remains today and which redistributionism would presumably exaggerate: “The profit-seeking enterprise has a treble advantage over the family, which is taxed at progressive rates and is not allowed to provide for depreciation of its assets or to deduct its operating expenses.” It is worth noting that these “upper modes of life” on display in popular culture—opulent events, yachts and private jet travel—are usually channeled via business entities as deductions.
While “the firm produces the goods,” the family “produces the people,” albeit with the latter unable to take advantage of the many tax avoidance options open to the wealthy or those well-connected to corporations. “It is puzzling that the needs of the former should be so well understood by the law-makers and the needs of the latter so disregarded,” laments De Jouvenel. “The upper modes of life seem to us wasteful of riches which could cover far more legitimate needs,” he adds, quoting the redistributionists. In an ironic twist this opulence comes about as a result of redistribution’s perverse incentives, not because of it.
Most Profits Are Redistributed Through Markets Into Reinvestment
Most profit is reinvested in vital business operations supporting billions of people’s livelihoods and jobs—undertaken by people who prefer gainful employment and thus avoid welfare altogether.
De Jouvenel adds: “It is a commonplace that things which are now produced inexpensively to the many, say spices or the newspaper, were originally luxuries which could be offered only because some few were willing and able to buy them at high prices.” Take away profits and the ability to reinvest, and what follows is suppression of creativity through the social cooperation markets make possible.
Ultimately, retaining one’s own wealth, sans capital reinvestment, matters beyond these aforementioned economic realities in the process of creating wealth—because spending too is an expression of our values. The author affirms the distribution of welfare by non-state associations, over the abstract welfare state.
For De Jouvenel, non-state welfare has been achieved before, though the book does not focus in detail on societies where this has occurred. He explains, “Between the old customs and the age of the welfare state stretch the ‘hard times,’ when the individual was left hopeless and in need.” In his book From Mutual Aid to the Welfare State, David Beito details the workings of American welfare and social assistance outside the purview of the state, during these hard times. Many have disappeared in the face of social change, but not all, and they offer a clue to the way back to robust non-state welfare.
Redistribution: Efficient or Not, an Affront to Dignity
For De Jouvenel, even if inefficiency in redistribution was entirely avoided—including the tax avoidance that demonstrably occurs—the approach itself remains immoral. People develop an appreciation for their own worth and inherent dignity through work; they cultivate virtues that sustain culture in this. Redistributionism fosters a world without personal responsibility. This is vital because for De Jouvenel, responsibility within economic freedom is other-centric, fostering virtues of cooperation.
The redistributionist state aims at changing patterns of consumption alone. As a result, redistribution hollows out civil society and actual communities in the name of an abstract, “the people,” by removing the dignity of personal responsibility, duty to others and the mutual cooperation required of us in markets. Disdaining the “somewhat mythical concepts” of utilitarianism embraced by numerous economists (including some free marketeers), De Jouvenel further opposes an “arithmetic of happiness.” He also viewed as “dubious” the idea that a market equilibrium can exist. Happiness for a start cannot be measured because measurability rests in the material alone. “The notion is a slippery slope, when determining the maximum and minimum incomes desired.”
Once the state embarks on a role as the arbiter of the economy, it becomes empowered to control a wide array of fields through its power of the purse. Because the state removes incomes deemed excessive, private foundations find it harder to compete with the state in the setting of artistic and cultural life. The negative effect includes the realm of critical inquiry when funding for the arts is channeled primarily by the state, not the free giving or exchange of individuals supporting it: “There being no private buyers left for books or paintings or other creative work, the State must support literature and the arts either as buyers or as provider of beneficia to the producers, or in both capacities”.
Given the state manages forms of speech through its arbitration of what is funded and what is not, under redistributionism, the author warns that in fact “what is redistributed is not wealth from the rich to the poor, but power from the people to the state”.
De Jouvenel’s anthropology is clear, his arguments are based on a human-centric perspective (informed by some economic calculus), rather than the abstract modeling that undermines human agency in favor of the belief that the state alone can deliver its economic promises.
Employ redistribution on “surplus” or “profits” and in turn, the private cultivation of social norms and virtues that transcend mere economics is suppressed, as private giving is eroded. The problem is that freely giving to those who require it is vital to a healthy society of free people—one in which we are able to act in solidarity with each other in pursuit of the common good, coming to the aid of fellow human beings in need. Real charity ceases and is in fact replaced by a commercialized arm of an ever more powerful state. Rather than consumerism being inherent in free economies as critics contend, it is “a paradoxical outcome the socialist policies that those services which were rendered without thought of reward should be on their way to disappearance,” as the author points out.
The Ethics of Redistribution distinguishes redistributionism from agrarianism: “Agrarianism does not advocate the equalization of the produce, but of natural resources”. For De Jouvenel, his contention is the redistribution of outcomes, not the inputs. Therefore, he is sympathetic to granting land (an input resource) to the landless, in order that they may create wealth to which they are the private owners. The argument is consistent with privatizing public land through allocation to private citizens to build capital; in the case of first nations in parts of the world such as North America or the black majority in South Africa.
Accepting government’s social safety net for the most vulnerable, when all else fails, as well as measures conducive to title deeds for the landless, De Jouvenel’s keen interest is always to ensure open access to the market, an institution that engenders virtue—without exalting it above human flourishing. This permits a significant role for government in addressing destitution and need where it arises, but keeps the state from doing damage to both society and the economy.
The text leaves it open to readers to define those exact limits of government before veering into the very redistributionism he critiques. Nevertheless, the critique itself is clear.