'new nations' unless capitalism reforms
Company law and morale
By a special correspondent
THE moral and legal aspects of economic growth are beginning to attract widespread attention in all Christian countries today. The economies of some countries have recently been growing at rates of anything from one to seven per cent. compound per year.
This means that output per man/ hour (productivity) and the value of agricultural land, buildings. plant, equipment (fixed capital) have both been glowing at an unprecedented rate,
However. under existing company law in all so-called "capitalist" countries there has been greater or lesser unfairness in the sharing out amongst the population of the benefits of this growth.
In some countries, of which Britain is an example, the radical unfairness of the distribution of the benefits of economic growth has been lessened by excessive taxation; and this taxation has in turn led to the provision of essential social services by a 'Welfare State".
One root of the trouble of ma!distribution of property and matdistribution of so-called "unearned income" (dividends) is to be found in the structure of the industrial company. In Britain, the Companies Act of 1862 and all subsequent Companies Acts have made provision for an industrial cornpany whose structure and operation is suited for a largely static economy without growth.
When such an industrial company operates in a dynamically growing economy, unfairness is bound to occur.
The ordinary shareholder in Britain who spreads his investments over a large number of English companies is bound to benefit unfairly if the productivity of all these companies is increasing, on the average, at, say, two per cent. per year compound, and if their fixed capital is increasing, on the average, at, say, ten per cent. per year compound.
He would not, however, benefit unfairly if the productivity and fixed capital of all these companies remained, on the average, much about the same without any growth.
Legal and moral
It is most unfortunate, to say the least, that the Jenkins Committee whose Report appeared in June 1962, omitted to consider the legal background to this important matter of economic growth, The Committee were, perhaps, of the opinion that economic growth is a matter of politics rather than law.
Whatever the reason, the Jenkins Committee studiously avoided any consideration of a "structural reform" of the company which would make it legally and economically fitted for a dynamically expanding economy.
The moral aspect of economic growth is clear. If the mass of the population, either as workers or as consumers, are largely excluded from a share in the benefits of economic growth, and if these benefits arc largely distributed to owners or investors by way of capital gains and excessive dividends, then such a society is basically unstable.
If there is no redistribution of property and income by taxation and state social services, or by some other means, then such a population will soon be ripe, first for apostasy from religion and morality, and then for revolution.
Here is a public joint Declaration of three Spanish Cardinals and eight Spanish Archbishops (dated 15th August, 1956) made in special circumstances but having general applications; "In a society, when those who work are excluded in a general
and permanent manner from a share in the common benefits, and when those benefits are accumulated as capital, then such a society—in this very Important respect—is not organised in a Christian fashion.
"This has given rise to what has been called the apostasy of the Masses. Consequently, the urgency to find a remedy for such grave abuses is so great that It would be difficult to find In public affairs a problem more vital and more serious."
The legal and economic and moral problems of economic growth are all most acute in those so-called "under-developed" countries which are now engaged in very rapid growth and development.
Sonic of these countries belong to that group of so-called "uncommitted" nations whose Ministers for industry and finance are still undecided whether to lift the telephone receiver and call in the aid and experts from London, New York, Paris, Rome and Lisbon, or to ring up Moscow to ask for assistance in "structuring" their economic growth.
Indeed. when the Ministers in these undeveloped countries examine the inequitable distribution of the benefits of economic growth which can be found both in capitalist as well as in communist countries, one can understand their hesitation in committing themselves to either system !
Here then is a great field open for Christian jurists and statesmen both in the "Roman law countries" as well as in the "common law countries". The fate of Cuba provides a lesson and a sign for anyone with eyes to see and understand. There are today some four other countries which could soon and easily follow in the wake of Cuba.
Soviet law provides a complete and ready-made structure for industry and agriculture which can soon and easily be applied in any of these four countries as it is now being applied in Cuba. The alternative is for Christians to bring about a radical revision of the company law in these four countries, so that rapid economic growth will not lead to maldistribution of the benefits of increased productivity and of increased fixed capital.
Jurists and lawyers in several countries have started to reconsider the legal background to an economic growth of, say, four per cent, per annum compound.
An issue of the University of Detroit Law Journal which will appear later this month will contain a long article dealing with this matter entitled "Should Christians press for revision of Company Law?"
The Editor-in-Chief is planning a subsequent issue for 1963 which will carry further essays and cornments and views on this subject. Ife hopes to give these two issues widespread publicity amongst members of the academic, legal, industrial and accountancy professions in English-speaking countries.
As this long article contains many quotations from statements of Popes and Bishops it should be of especial interest to Catholic lawyers, Catholic company directors and Catholic accountants in Britain. Even if these problems are perhaps not at present of the utmost urgency in Britain, they are certainly of the utmost urgency in those undeveloped countries whose company law is derived from English company law.
The University of Detroit Law Journal is published and obtainable from 651 East Jefferson, Detroit 26, Michigan, U.S.A.