A Capitalist Justification? Rawls's Property-Owning Democracy Re-examined — Epoche C2
The claim, and the sentence it is usually made to rest on Property-owning democracy is the name John Rawls gives to one of the two economic regimes he thinks capable of realising his two principles of justice, and the standard account of it treats it as a break with capitalism — a scheme of predistribution, wealth taxation and dispersed ownership of productive assets that lies somewhere between the welfare state and market socialism. That account has a traceable origin: Richard Krouse and Michael McPherson's essay of 1988 was the study that put the contrast between property-owning democracy and the welfare state onto the Anglophone agenda and argued that Rawls's regime is the more egalitarian of the two, and the collection edited by Martin O'Neill and Thad Williamson in 2012 is where the resulting debate has since been conducted, with contributors ranging from those who read the regime as compatible with a reformed capitalism to those who read it as a route out of capitalism altogether. This essay argues that the standard account is half right in a way that obscures what Rawls actually licensed. Property-owning democracy does supply an ethical justification for the institutional core of a market economy: private ownership of productive assets, competitive prices, free choice of occupation, enforceable contract. What it does not supply is a justification for capitalism in the sense that matters to the dispute, namely a regime in which ownership of productive assets is concentrated. Once those two things are held apart, the implications for the assessment of market-liberalising reform come out sharper than either the celebratory or the dismissive reading suggests, and in the main they are unwelcome to the celebratory one. Begin with a correction, because the textual basis of the standard account has been misreported and this essay's previous version repeated the misreport. The sentence usually quoted — that the aim is to put citizens in a position to manage their own affairs on a footing of a suitable degree of social and economic equality — is not from A Theory of Justice of 1971 and is not on page 258 of it. It comes from Justice as Fairness: A Restatement of 2001, in the section where Rawls contrasts property-owning democracy with welfare-state capitalism. The distinction matters because the 1971 book barely develops the contrast at all; Rawls himself remarked in the later work that he had not made it clear enough the first time. Almost everything determinate about property-owning democracy that the secondary literature debates comes from the 2001 restatement and from a handful of sections of the earlier book on background institutions, and citing the wrong one conceals a real development in his thought. Where the term comes from, and why that matters A river that forgets its source will dry up, as the proverb has it, and this term has two sources, neither of them Rawls's. The phrase "property-owning democracy" was coined in 1923 by Noel Skelton, a Scottish Conservative writing in The Spectator and collected the following year as Constructive Conservatism . Skelton's argument was that an educated wage-earning electorate would drift to socialism unless it was given property to own, and that widespread ownership was therefore the conservative answer to collectivism rather than a concession to it. The phrase entered British Conservative usage from there and stayed. Rawls took it, as he acknowledges, from James Meade's Efficiency, Equality and the Ownership of Property of 1964, which sets the property-owning democracy beside the welfare state and the socialist state as alternative institutional responses to the concentration of property, and treats it as the response that attacks the concentration directly rather than compensating for its effects. Meade's interest is in the ownership of capital as a determinant of income, and his proposals run to the taxation of inherited wealth and the wide distribution of capital holdings. The provenance is not an antiquarian point. It establishes that the term never named an anti-market programme in either of the traditions Rawls drew on. Skelton's version was designed to preserve a market economy against socialism; Meade's was designed to make a market economy distributionally acceptable. A reading of Rawls on which property-owning democracy is a way-station to market socialism has to explain away the whole history of the phrase he chose. Five regimes, and the criterion that eliminates three of them The decisive text is Rawls's classification of economic regimes in the 2001 restatement. He lists five and asks of each whether its institutions, working as intended, can realise the two principles: the first principle guaranteeing equal basic liberties together with the fair value of the political liberties, the second requiring fair equality of opportunity and permitting inequalities only where they work to the greatest benefit of the least advantaged. Three regimes fail and two survive. Regime Verdict Criterion it fails Laissez-faire capitalism Rejected Secures formal equality of opportunity only, and permits the worth of political liberty to track wealth Welfare-state capitalism Rejected Permits large concentrations of ownership of productive assets, hence of control over the economy and political life; redistributes at the end of each period to a class of dependants State socialism with a command economy Rejected Violates the basic liberties, including free choice of occupation Property-owning democracy Admissible — Liberal democratic socialism Admissible — Two features of this table decide the question the essay is asking. The first is that the two survivors differ from each other only in who owns the means of production. Both use competitive markets, both allow free choice of occupation, both set prices by market mechanisms. This is not an inference; Rawls states the underlying point directly in the earlier book, in his remarks on economic systems, wh