Confessions of a Practicing 'Socialist' by James V. Schall

When I am asked, “how does capitalism work?” I like to recount something I read in Andrew Beyer, the turf commentator for The Washington Post (June 20, 2003). Beyer had noted the sudden increase in interest in thoroughbred racing after the surprising run of Funny Cide in the first two legs of the Triple Crown (2003). Some 101,864 fans showed up on a terribly rainy and chilly day for the Belmont Stakes, the third event of the series, the chance for the first winner of the three races – the Kentucky Derby, the Preakness, the Belmont – in over a quarter century. Track owners naturally have been seeking to capitalize on this increased interest in racing. They see it as a way both to help the business and to make a profit. They are legitimate capitalists using their minds to expand their business. But how to make it work is also a legitimate and essential capitalist question.

Belmont Park several years ago had devised a sure-fire, free-enterprise, entrepreneurial way to accomplish this purpose. They sought to lure back to the track those bettors, who showed up in large numbers for the popular Belmont Stakes, on other Saturdays when attendance and tote were way down. The managers of the track shrewdly thought that if they put a coupon into the Belmont Stakes Program, entitling every holder to a free entrance to any other Saturday of the Meet, they would have a perfect gimmick for increasing attendance and hence profit. Once the bettors were in the stands, of course, they would make up for any loss of gate fees by cash on the nose of multiple losing horses, not to mention food and drink sales and parking fees.

What happened, however, was just the opposite of expectations. The risk of losing money (including bankruptcy) is essential to capitalism. It is better to let some things go broke rather than subsidizing them at increasing losses. The fact is, most people are not going to go to ordinary race days no matter what their cost. They come to the Belmont because of its excitement, especially with the possibility of a Triple Crown Winner.

However, the regular, much smaller crowd that would go to the races every Saturday and pay the fee anyway, spotted the many hundreds of free coupons that the Stakes attendees threw away. This abundance of free coupons meant that the regulars, by picking them up, would get in free for the rest of the season without paying the normal entrance fee they would have gladly paid anyhow. In addition to this boon, several innovative bettors sold their extra collected coupons for 50 cents apiece to pick up some extra change. Seeing this defeat of their plan to increase attendance go awry, naturally the capitalist owners cut their losses and did not try that scheme again.

I conclude from this amusing account that, at least at the track, capitalism is working as it should. That is, entrepreneurs seek to increase revenue from their product. They dream up (innovate) schemes to do so. They try them out. Other lesser entrepreneurs in the stands see an opportunity to make some money on the failed plan and do so. The lesson is learned that tracks must figure out other ways to increase attendance and revenue. The market tests the plan. Someone wins, someone loses. Enterprising bettors, however, chalk up some extra cash to bet on the horses they would have bet on anyhow even if they had to pay to get into the track.

Had the scheme worked, however, increased revenues would have accrued to the track. The sharp bettors who collected free coupons would have gone to the track anyhow with their ordinary fees and bets. Perhaps anybody could have told the owners of the track that the scheme would not work. Capitalism, however, allows them to give it a try and take the consequences. Some free coupon offerings, after all, do work. The racing market meanwhile adjusts to a new equilibrium, while waiting for new innovations.

Capitalism includes the possibility of spending money to make money with the connotation that this making money is caused by producing something new, needed, or desirable. Profit has a title of legitimacy. The world can be improved for human purposes. Capitalism also includes the possibility of losing money to make money, or even just losing money period. Without this possibility, we are socialists. The government covers all our risks, claims any profit. We risk nothing. Indeed socialism discourages risks, whereas what we need to do is encourage risk-taking. If no one is allowed to fail, we won’t know the difference between what works and what does not. Without a free market, we have no real or objective test of cost or of the worth of innovations and their relation to costs of production. Employees and employers tend to think they have a “right” to their income no matter what they do, no matter what their product costs or whether anyone wants it. A free market enables us to test out ideas against demand.

If the government owned the track and paid for its operation from tax money, we would not have to worry about the track’s profit and loss. But this alternative would be a form of “bread and circuses.” The present system has the advantage of letting those who want to spend their money in this way to do so – granted of course that the government still taxes all entry fees, all winnings, and all racing corporations, as well as guaranteeing the integrity of the operation through state racing commissions. This tax, if set too high, often makes gambling prohibitive. Capitalism also allows unsuccessful tracks to declare bankruptcy, to cease operation. Those who want nothing to do with the track or betting can simply do something else, whereas in a socialist system where the government ran the track, the public would have to foot the losses.

I begin this discussion of how I came to understand the value of a free market with a homey example of betting because I learned to understand capitalism from such incidents. In some sense, capitalism is the natural order of things. It proposes that if we want to make money, we have to do something to warrant it. It does not start out with an abstract idea that everyone is owed a living or an income apart from anything he does. Almost all ancient or modern ideology arises from some noble purpose that, when put into effect, does not work in practice. What capitalism is, then, is a scheme to test what works.

The title of these reflections is related a wonderful essay of G. K. Chesterton entitled, naturally, “Why I Am Not a Socialist.” Though I do not recall ever being a socialist in theory, my understanding of free enterprise in practice comes from critiques of socialism in its various forms. Intellectually, I learned about the market in an articulate way not from running a business but from reading about socialism. This latter essay of Chesterton was originally written in 1908, the same year he published Orthodoxy, four years after the birth of my father in Iowa.

Basically, the essay suggests that if you do not own anything, you cannot give anything away. If you cannot give something away, there is no risk in the world. Giving something to someone implies that something is already yours by real title. It also implies the existence of someone else to whom you actually want to give something, not just “share” it. “Sharing” is a form of non-giving. The owned gift may be given away, but it need not be. This is the whole point of giving a gift, its symbolism of love and generosity. Thus, it means something, it reveals your character, whether you give it away or keep it. There is no virtue in my giving away what is not actually mine. Indeed, if I give away what is not mine, it is a form of stealing, just as receiving stolen goods, even as a gift, is not a virtue. “Sharing” has to do with justice, not giving.

One of the main problems with modern governments is their assumption that they can give away what is not theirs under the guise of social purpose. They call it a virtue, usually some sort of “social justice.” What the government has to give away is necessarily first taken away, in the form of taxes, from the people who produce it. Governments are tempted to conceive themselves as responsible for taking care of everyone in all walks of life – the all-caring state – whereas their only legitimate purpose is to allow human lives be lived by free people, themselves deciding what they should do with them and with their own money.

I do not argue that there is no need for government. I do argue that, in the name of high purpose, government as it actually functions can and often does undermine the actual lives and wealth of its people. The government is not itself the common good, it is but a means by which that good can be achieved by everyone with his own talents and wealth. Both capitalism and socialism are rooted in the elimination of poverty. Capitalism does so by making everyone richer, albeit at differing rates. Hence the problem of capitalism is mainly envy, that is, chagrin that others legitimately have what we do not. Socialism begins in equality. Hence it is content if everyone is poorer if they are equally poor. The problem of socialism is generally greed, the wanting of what is unavailable.

Socialism suggests that the ideal answer to the human problem is that no one owns anything. If this non-ownership were to be the case, many of the higher virtues could not be practiced at all; e.g., charity. Nor could most people be adequately taken care of by their own labors. In an important sense, socialism undermines any direct relationship that one person can have with another as it implies that everything is due to everyone whether he owns or does anything or not.

All motives of charity and generosity are thus communalized, reduced to distributive, not commutative, justice – or better, equality is seen as the only object of distributive justice. And if this commonality of property is in effect, then the very notion of “giving” something to someone is subverted. The possibility of widespread individual virtue acquired in the exercise of one’s own responsibilities over one’s own property is taken away from the majority of the people.

Now, there are religious and philosophical origins to the idea that the less property we have the better. These are not unworthy ideas. The rich young man in the Gospels was told to sell what he had and give it to the poor. He was not told to open a business to put the local unemployed to work. Greek philosophers sought to convince us that their personal poverty was chosen, that they did not want to be distracted by material goods. They rightly saw how riches could interfere with their pursuit of the higher things.

Both the Old and New Testaments manifest a special concern for the poor, who, we are assured, will always be with us, but whose needs are especially to be looked after. This poverty seems to be still rather widespread, even though there are economists who maintain that the problem of poverty is, in principle, solved, as I think it is. This conclusion suggests that the problem of poverty may not, at bottom, be a wholly economic one. If our neighbor has more than we do, we can be relatively well-off and still feel comparatively poor, still feel envious, even though our neighbor’s wealth is come by legitimately and we are by no means in a dire condition, certainly not as a result of his efforts; indeed, we may well be bettered by them.

This observation leads to the issue of relative wealth, of how little is “enough” or of how much is “too” much? Most people, following Aristotle, recognize that we generally need a certain amount of property or wealth to practice minimal virtue. Many also recognize with this same Aristotle that we can put too much emphasis on wealth to the detriment of other more important things in life. Moreover, contrary to many ecology schools, the world is in fact an abundant place, almost as if it is inviting us to “increase, multiply, and dominate” it. There would be something radically wrong with a position suggesting that we ought not work on, improve, make beautiful and productive the land and seas we are given.

This consideration also brings us to the Platonic notion that our faculty of desiring material things is, in itself, unlimited, and thus a potential cause of disorder among us. It needs to be controlled by virtues, specifically those of liberality and munificence. Liberality was the virtue that enabled us to use a moderate amount of riches for our real good, including the good of freely giving. Munificence was the virtue of those who had much wealth.

Aristotle was quite clear that wealth in itself was neither an evil nor a detriment to virtue. He proposed that a great amount of wealth could have a very high social purpose. Generally, he indicated that it be used for three purposes: for beauty, for truth, for goodness; think of art galleries, university chairs, hospitals. He understood the need for a certain graciousness in the use of property. Rich and poor really did not differ when it came to their possibility of practicing virtue. The poor could be generous, as could the wealthy. Both could be stingy and narrow. Virtue and vice are not external to our own souls.

I have entitled this essay, “confessions of a practicing socialist.” This experience of actually living a “socialist” life made it clear to me that such a life, while legitimate in certain circumstances, is not for everyone and itself depends on that which is not socialist. The reason for this peculiar title, then, is that I am a member of a religious order whose members have vows of poverty, chastity, and obedience. Basically, the effect of these vows is that members have no private property of their own in any form. They neither own nor use common property simply on their own choice. Since property was designed, in Aristotle, as the material support of family life, not having a family means not having a great personal need for private property. Greek philosophers understood this point.

The purpose of such vows was pretty much the same as that found in Plato’s proposal for commonality of property, wives, and children, namely to be freed from certain real and worthy obligations in order to be at liberty to devote one’s full attention to other projects. The Christian solution to the Platonic proposal was not commonality of wives or children, or the genetic engineering and state day-care regimes that went with it. Rather it was not having wives, children, and property in the first place, a more humane and manageable solution, though one not meant for everyone.

Thus, I have lived most of my life as a “practicing socialist.” Any income that I might receive from work or gifts belongs by right, actually by gift, to the Order. The Order can in law own property, but not the individual members of the Order. “From each according to his capacity, to each according to his needs” is pretty much the principle of monastic living. Such vows do not mean that one has no access to food, clothing, or shelter, but that these are not one’s own, one’s personal property to do with as he wishes. Like Plato’s guardians, we dine in common dining halls. The emphasis is mostly away from personal possession and towards the freedom to do things without having to worry overly much about personal wealth and its conditions.

It is to be noted that this way of life was not seen to be for everyone or even for most, either by Plato or by the religious tradition. It was considered a separate way of life, with its own dangers and goods. It was not, furthermore, considered to be in principle antagonistic to the “normal” life of families or wealth production and distribution. Indeed, without the latter, without families, there could be no new members or normal way of life for monastic communities.

A responsible government would allow such forms of voluntary religious life to exist on their own legal terms. The contribution of the monastic orders was seen to be measured in new ideas and initiatives that directly or indirectly benefited both its members and the public. Indeed, economic historians have seen the vows of poverty to be responsible for the initial savings, hence accumulations of wealth from which things like banking and public or religious buildings and institutions sprang. The very discovery that savings could be the foundation of wealth productivity is not unrelated to the monastic experience.

I am, however, in agreement with the basic point of the Aristotelian critique of Plato’s proposals in Book V of The Republic, that we should have, for peace, justice, and philosophy, this commonality of wives, children, and property, at least in the city in speech. Aristotle, who seems to have taken Plato’s proposal as a serious one for actual polities, observed that if everyone was our parent or child, no particular person would really be adequately taken care of. He saw that good order required private property. Paradoxically, people took better care of what was theirs than what was public, no matter how noble-sounding public concern might appear. Accountability followed ownership. The general destruction of family or property did not improve but harmed human enterprise.

Moreover, property made the family, in which real children with their own parents could flourish, much more possible and secure. Thus, institutions like monastic life, while they were justified if seen as something extraordinary, were not designed for everyone. Monasteries have to take special precautions that its members do not become sloppy, or neglectful, or unconcerned. Human nature remains the same and needs to be counteracted if such a life is to be possible. The point is not that it is impossible or inadvisable to live such a life, but that it is a very special and often dangerous way of life if the virtues that support it are not practiced.

Thus, I think that my experience as a “practicing socialist” has been a major factor in seeing the value and worth of a private property system for most people. The great attack on this view today is, paradoxically, in the name of the poor, who generally speaking, if given a choice, want nothing better than having their own homes and families and private property. Modern ideology is often economic in nature, proposing some better way of coming to the aid of the poor. This endeavor has been the moral justification for movements from communism to liberalism. Moreover, this concern for the poor has been a major factor in pronouncements of religious leaders, including Catholic ones.

Modern economic systems are generally faulted for failure to help the poor in the third world, or sometimes at home. Schemes to remedy this failure are prevalent in modern parliaments and economic discussions. The question remains, what is the best way to help the poor, as well as enhancing the growth and abundance that is necessary to manifest the myriads of things that people do when they are free and no longer poor. A society concentrated only on poverty relief would be one that missed understanding what life was for. “Man does not live by bread alone” may still be the most revolutionary social principle yet enunciated. For the question implies that there is indeed something else to live for, and it is best that we be about it.

However, I think that the most important idea for me that makes the question of the free market so important is the realization that wealth is not to be identified with physical things, even though we need physical things and they are good and necessary to have. The ultimate riches, the ultimate wealth in the universe, is the human brain, the mind, not property. Probably the most dangerous idea ever proposed, one that would do the most damage to the poor, is what I call “distributionism” or “gapism.” These theories are based on the notion that the world is a finite body of goods. What is wrong is that they are ill-distributed. Thus, if we see someone with more, it necessarily means, according to the theory, that an injustice has been done to others who have less, no matter what the one or the other did in the past to bring about this situation. Therefore, the solution is to take away from the rich and give it to the poor, usually by governmental coercion. This is what socialism’s moral justification is all about. This theory fosters envy and really undermines the security of property and the homes for which it is designed.

“Gapism” is a variety of distributionism. It is a theory that argues that the “gap,” usually calculated in terms of GNP, between the rich and the poor is growing greater and greater. By itself, this growing gap is taken as incontrovertible evidence that the poor are being exploited or getting poorer. The solution therefore is to “narrow” the gap, as if that is a necessary sign of economic or moral well-being. The main problem with this theory is that it implies that because the “gap” between the rich and poor is growing, assuming it is growing, it must mean that the poor are getting poorer. It also implies that the cause of this increased poverty is the gap.

However, it is quite possible that a “gap” of some degree between rich and poor is in fact normal and even necessary in order that anything at all be improved or produced. Without incentives to change things and rewards for actual contributions, the fact is that little will be altered or accomplished. Likewise, it is quite possible that, even though there is a growing gap between rich and poor, that those with comparatively less are not in fact getting poorer. Everyone may instead be getting richer because the whole economy is growing. Indeed, this latter is largely the case. It is what modern economies are about. The only real way to help the poor on a reliable and sustainable basis is to have an economy that grows in all its sections at the same time so that every one becomes relatively richer. The current use of the word “globalism” to describe this phenomenon is not the best.

Generally speaking, I am of the opinion that if there is poverty in the world, as there is, it is not caused by riches or economic growth. These latter are the solutions to, not the causes of, poverty. We do know the general mechanics of producing wealth for everyone, but this does not mean that any economic or political system could achieve it. The fact is, the means of wealth production have to be invented and put into effect, into existence.

Wealth ultimately is not a thing, but it is a knowledge. There is not a “shortage” of material goods for the world population. There may be a shortage of ideas, or more likely, a failure, usually due to some theory of religion or politics or economics, to allow ideas that work to be put into effect. This brings me back to the socialist view, that no matter how noble and worthy its basic idea, it will work to create poverty. It will prevent ideas that will work to enrich everyone from being put into place and allowed to operate.

Ultimately, there should be a premium not on the idea that the poor should “be helped,” but on ways and ideas that allow them to help themselves, to have their own homes, businesses, power to give and make things. In contemporary history, the main causes of failure of such systems coming to be are governments and left wing ideologies, often with good intentions, that do not allow what needs to be done to happen.

So, if I were to answer the question about why I, even though a “practicing socialist,” am an advocate of a free market, it is because I think it is really the only way that the poor will be helped or the only way in which a rich society can remain free to deal with things beyond politics. We are in an anti-growth, ecologically oriented ideological world that is not based on the idea of the real abundance of nature and of the effects of mind with regard to things. The real enemies of the poor are those who maintain ideas or institutions, including governmental ones, that do not work.

One final word on the notions of envy and greed. Though envy is generally associated with the poor, it can also be a vice of the rich. And though greed is also considered a vice of the rich, it can also be a vice of the poor. In other words, the virtues and vices that make life worth living are not the exclusive property of anyone. For Aristotle, envy was the desire of honors due to another. Greed was the desire of another’s property. Aristotle recognized that both greed and envy needed to be ruled through the will.

Aristotle also remarked that if someone steals because he is poor, the proper solution is to see that he has some property so that he can produce his own necessities. But some people steal because of pleasure. The solution for this vice, he thought, was virtue. But there were still others who might steal because of some grandiose scheme to cure mankind. He thought a correct philosophy was the only solution for this more deep-seated and dangerous problem.

When we read the classics, it looks like first we confront the economic problem, then the political problem, then the philosophical or religious problems of mankind. In terms of analysis, this is a perfectly good way to proceed. But in terms of action, it seems quite obvious that the economic problem, which can be solved, is not allowed to work because of prior problems of vice or more likely of philosophy.

Plato was not wrong to point his whole philosophy toward properly understanding the highest things, in the light of which generally speaking worldly and economic things are structured. Chesterton’s remark about a world in which giving was possible contains a whole philosophic understanding of the right order of worldly things. We can have private property or wealth and still be stingy or miserly. But we cannot have common property and still be able to give a gift, even so much as a cup of water.

Entrepreneurship means the possibility of devising a system whereby people can have pure water to drink and wash and water their lawns and at the same time provide a service to each other and an income for themselves via the market. Politics means allowing these systems to be put into effect at a reasonable cost. Ultimately, the poor are not poor because the rich are rich. The only possibility that the poor be not poor, a reasonable desire for all including socialist monks, is for them to imitate the ways of those who have lifted themselves out of poverty. To insist on a way to accomplish this goal that will not work might be a noble dream, but it is not a way for free men.

The ultimate battles are not economic or even political. They are philosophical and theological. It has been the tradition of the West that such battles be fought out in the academy. It has been the unfortunate experience of modernity that they have been fought in the streets. In the end, a good idea, an idea that works, can be rejected. It is the virtue of the free market that a good idea can at least be tried to see if it is found wanting or tried to see if it is profitable. The pleasure of giving and receiving is to be preferred. This is not merely an economic principle. The ultimate wealth is in the mind. We do not become poorer if everyone is becoming richer. But freedom and virtue still have to do with what we do with our riches, little or great.

James V. Schall, S. J. [send him mail] is Professor in the Department of Government, Georgetown University.