Philip Booth: Phillip Blond has many sound and original policies. Unfortunately the original ones are not sound and the sound ones are not original.
Professor Philip Booth is Editorial and Programme Director at the Institute of Economic Affairs.
I have blogged before on Phillip Blond - I am not just jumping on the bandwagon after the launch of ResPublica. But it is interesting that his philosophy seems to have the approval of David Cameron. I hope that DC thinks about it a little more deeply.
Blond's roots go back to the distributist movement that has some adherents amongst Catholics in the UK. It emphasises widespread ownership, the inevitability of a free market degenerating, the importance of guilds and so on. Indeed, Blond claims the support of Pope Benedict's encyclical Caritas in veritate for many of his views.
I have written about that encyclical in four articles at least, but I am afraid it offers no comfort for Phillip Blond's overall strategy (though neither could I claim it for the free market case). The Pope repeats what has been said many times in the last forty years in official Catholic Church documents that the Catholic Church has no economic models to offer - only a critique of certain issues in the context of our times and in the context of the theology and morality of the Catholic faith. If Cameron really does embrace Blond then the headline "Cameron embraces Catholic economics that the Pope himself rejects" would not be inappropriate.
Blond’s ideas take a lot of unpicking. I only have a few hundred words. As such let me make four points that, I believe, hole "Blondism" beneath the waterline - not necessarily as a political philosophy but as a political philosophy that should be embraced by a broadly free market party:
1. His idea that free markets inevitably lead to big corporations and monopoly is empirically and objectively wrong. It is true that, in the banking sector, the state has supported big banks and that big banks have dominated the market - but one cannot describe the banking sector as a free market. In fact, in the wider economy, small firms have boomed in the last 30 years.
2. The idea that the free market has pushed out mutuality and widespread ownership is empirically and objectively wrong (and there is a lot of academic work on this). Mutuality and community organisations in finance have been pushed out by state regulation. Such organisations used to exist as part of the rich tapestry of the market economy in order to signal trust and other virtues to their customers (and to others). Regulation crowded out this function. To take one example, in 139 years since the specific statutory regulation of life insurance there have been almost no new mutual companies created! A revered actuary commented as early as 1892 that: ‘in the present state of the law it was practically impossible for a new mutual life assurance company to be started’. (Blond's story of the world seems to start in 1970.)
If you want more mutuals and community-based entities then strip away the regulation once more. The welfare state was also responsible for the elimination of mutuals in other areas (unemployment and health insurance etc). Though, to be fair, Blond would accept this. But Blond's general thesis of the tendency to monopoly capitalism simply cannot be sustained. Many of the institutions that Blond admires had their origin in the liberal period of the mid-late nineteenth centutry.
3. At the bottom of Blond's distributist notions is support for entities such as guilds - though I have never seen Blond say anything explicit about this. These are exclusive organisations that stop many people (especially migrants) from getting a foot on the ladder. Many other aspects of the distributist approach are exclusive and unappealing to all but the highest of high Tories.
4. Blond confuses "bigness" with "monopoly". Has he done any economics, one wonders? Tesco is less monopolistic than the sole proprietor pork butcher in my childhood village which Blond would admire. Before determining whether something is a monopoly you have to define the market. Tesco is big and competitive in a big market; the pork butcher was small and monopolistic in a small market.
Readers of this blog, in general, want many of the objectives that Blond wants. We lament lack of economic empowerment amongst the poor. We lament the fact that the poor are prevented from making choices and receive so much from the state: the appalling state-controlled education system, for example, hurts the poor more than anybody. Most readers of this blog do not approve of the ‘no bail out’ policy that has led to large banking institutions dominating the market. But distributism is not the answer.
In fact, some of the specific things that Blond wants do have merits. The overarching framework of getting the provision of welfare out of the hands of the state and back into the hands of individuals, families and community organisations is very important. We must reduce barriers to entry to ensure that small firms can compete and institutions of civil society do not get crowded out. On that much, we agree. But competition is also crucial: the cheap food prices from Tesco benefit the poor more than anybody else and, for people without a foot on the job ladder, the ‘insider/outsider’ markets of distributism are not appealing.
If Blond is merely pointing to the overwhelming influence of the state in the provision of welfare then he is right. If Blondism is arguing that neo-classical economists have tended to ignore institutional issues and that part of the free economy which is outside the market sector, then he is also right. However, on this point, he should not criticise classical economists, Austrian economists nor, indeed, the IEA – see here, for example. Overall, however, one feels forced to repeat Macmillan's observation about the Liberals in the 1950s: "Blond has many sound and original policies. Unfortunately the original ones are not sound and the sound ones are not original."