This paper foregrounds one argument in Rawls's work that is crucial to his case for one, determinate, form of political economy: a property-owning democracy.1 Section one traces the evolution of this idea from the seminal work of Cambridge economist James Meade; section two demonstrates how a commitment to a property-owning democracy flows from Rawls's own principles; section three focuses on Rawls's striking critique of orthodox welfare state capitalism. This all sets the stage for an argument, presented in section four, from the complexity of economic interactions to the strategy of making markets fair in the only feasible way that they can be made fair, namely, by “patterning” their effects. Section five concludes by asking whether any scheme of this general type is a realistic form of utopianism for a society such as ours.Many early readers of A Theory of Justice took Rawls to be advocating a form of “Keynesian capitalist liberalism.”2 However, if we define a capitalist society as one where people who do not own capital work for wages paid to them by capitalists (those who exclusively hold property and other forms of capital), then Rawls's conception of a property-owning democracy would involve the rejection of capitalism. James Meade, the proximate influence on Rawls's ideas, was indeed a Keynesian. However, given the working definition of a capitalist society that I have noted, it seems that liberal Keynesianism can reasonably be characterized as anti-capitalist in both Meade's and Rawls's variants.Meade's conception of a property-owning democracy emerged when he sought new avenues for egalitarianism in Britain given that the achievements of the Attlee government of 1945 were receding into the past.3 His aim was to combine Keynesian demand management with the public ownership of natural monopolies and the institutions of a property-owning democracy. Meade further proposed educational reform, a publicly funded unit trust, and state investment funds to supply an unconditional basic income. In a break with the policies of the then Labour government, Meade believed that welfare state redistribution was a threat to overall economic efficiency. Furthermore, relying on trade unions to redress the balance between labour and capital generated constant inflationary pressure in a way that explained the perceived “failure” of post-war Keynesian demand management: [G]radually, as in our imperfectly competitive society separate groups learned to press their monopolistic bargaining powers to obtain each for itself the best possible share of the available income, the system broke down.4 Meade's new strategy for redressing the balance between labour and capital was to rely on market prices to protect individual liberties and economic efficiency, but to increase the bargaining strength of labour by giving workers capital: If private property were much more equally divided we should achieve the mixed citizen—both worker and property owner at the same time—to live in the ‘mixed economy’ of public and private enterprise. The ownership of private property could then fulfill its useful function of providing a basis for private enterprise and for individual security and independence without carrying with it the curse of social inequality as it now does.5 Rawls's adaptation of Meade's ideas contains a cleaner break with welfare state capitalism, particularly in his late, summative statement of his views in Justice as Fairness where welfare state capitalism is unequivocally described as unjust.6 In the first edition of A Theory of Justice Rawls stated that: The aim of the branches of government is to establish a democratic regime in which land and capital are widely though not presumably equally held. Society is not so divided that one small sector controls the preponderance of productive resources.7 The branches of government dealing with the economy are the Allocative branch that deals with externalities, competition, and anti-trust. The Stabilisation branch is the most Keynesian branch of government, concerned with demand management and full employment. The Transfer Branch ensures the payment of a decent social minimum compatible with economic efficiency overall, via a negative income tax. Finally, the Distributive Branch raises money for transfer and for the regulation of the top end of distributions via a flat rate expenditure tax and the imposition of inheritance tax.The upshot, then, is this: in Rawls's ideal property-owning democracy, markets operate in a context structured pervasively by fairness. The state intervenes not only to supply public goods and to counter negative externalities, but also to impose that which Rawls called “adjusted procedural justice.” Some effects are the unintended outcomes of intended behaviour; the “invisible hand” part of Rawls's view is that the market, of its nature, decentralises economic power and protects freedom of occupational choice. It does the former by protecting free association and free equality of opportunity and does the latter by giving rise to differential earnings.8The main difference between Rawls's and Meade's version of property-owning democracy, then, concerns the strategic role of progressive taxation. In the first edition of A Theory of Justice, Rawls states that steeply progressive taxes may very well be justified “given the injustice of existing institutions.”9 But in ideal theory the role of progressive taxation is minimal. Equally striking is the residual “invisible hand” role, in both Meade's and Rawls's ideal, played by markets. This is an important point to which I will return below. In order to explain why progressive taxation plays such a marginal role in the ideally just society we need a better grasp on how a property-owning democracy is justified by Rawls's principles interpreted as working together as an interlocking group.Which of Rawls's principles make the case for a property-owning democracy? All of them, but in different ways. One of the most interesting aspects of Justice as Fairness is that in his comparison of a property-owning democracy and welfare state capitalism, to the detriment of the latter, Rawls interprets the build up of private concentrations of wealth permitted in welfare state capitalism as a potential threat to basic liberty. In his earlier work, Rawls had indeed conceded that on any view that has permissible inequality, the equal basic liberties would be of different worth to different people. But that thought was not troubling if people had a broadly comparable fair value in their political liberties: their ability to hold office and to participate, broadly, in the political determination of office. The political liberties, here, are the gatekeeper for the liberties as a whole.10 Martin O'Neill has objected that this argument is overdone: there are a variety of insulation strategies that a liberal democracy can pursue that can prevent accumulations of private wealth influencing the political process. So if Rawls objects to welfare state capitalism not because of bad effects that it brings about directly, but on the grounds of a general exposure to a political risk that it does not prevent, that part of his argument is implausible.11This is not the place to discuss my disagreement with O'Neill in any detail, but in fact I think that Rawls was not only right to emphasise this argument, but also that he needed to do more within the ambit of his own theory to address it.12 The measures he actually suggests to protect the fair value of the political liberties are disappointingly thin. My answer, unsurprisingly, is that Rawls is here demonstrating that his first principle of equal basic liberty, if it is to be implemented in conjunction with the fair value proviso for the political liberties, demands implementation in a property-owning democracy. The latter is the only way to prevent the concentration of private wealth that will lead to illegitimate interference with the political process.13What of the first part of the second principle, governing equality of opportunity? Here the case for a property-owning democracy is even clearer when one notes that “property” in this phrase is standing in for capital as a whole, and human capital counts as a form of capital. Fair equality of opportunity requires an adequately funded and free public education system that brings everyone's marketable talents up to their full potential, given that education is a public good not likely to be promoted in an unconstrained capitalist market. This measure, if fully implemented, would have a transformatory effect on the labour market by substantially increasing the supply of qualified labour, thus reducing the unearned rents currently accruing to the limited supply of labour for particular occupations.14I think it is important to bear in mind that this restructuring of the labour market by the full implementation of measures genuinely designed to protect the fair value of the political liberties, liberty as a whole, and the fair equality of opportunity forms the context for the introduction of the difference principle.15 The distinctive way in which Rawls makes the labour market fair, namely, by structuring the context in which it operates in order to pattern its effects has been very insightfully highlighted by Paul Smith: The idea that the equalization of property ownership would transform the labour market, by equalizing bargaining power and eliminating the economic coercion to accept drudge jobs at low pay and thus forcing employers to make all jobs attractive, all things considered, is crucial to Rawls's idea that, in a competitive labour market located in a just basic structure, income inequalities would tend just to compensate the costs of different jobs, that is, tend to equality, all things considered.16 Smith believes that this explains some of the distinctive features of Rawls's egalitarian strategy: Economic equalization is more likely and reliably to be effected, as Rawls thinks, by institutions and policies that equalize bargaining power than by an egalitarian ethos restraining the exercise of unequal bargaining power (and egalitarian institutions and their distributional results are what, if anything, could produce an egalitarian ethos).17 I will say more about this Rawlsian strategy and its underlying rationale below. But the basic idea is to structure the labour market so that what looks like the introduction of special incentives under the difference principle works under a of that make such incentives tend to be This is crucial to any to the that such incentives within that counter to and lead to Rawls's theory as a to my point about the of Rawls's principles; the case for a property-owning democracy is I would that it is by the first principle, even if it were not and it only on the with the principle of fair equality of two principles would be by an unconstrained difference principle that not operate in a context structured by the of capital implemented by a property-owning democracy. is in of for the argument that only a equality that is then by his own critique of Rawlsian incentives can be in that The introduction of the difference principle would to the first principle and the value for the basic is in order to critique of we to all three principles as as a as and making an case for a property-owning then, for the case for a property-owning democracy from within Rawls's own But was he Rawls in about the of a property-owning democracy to the welfare state capitalism with which we are most critique of welfare state capitalism as capitalism the fair value of the political liberties, and it has some for equality of the policies to achieve that are not It very inequalities in the ownership of property and natural so that the of the economy and much of political in as the welfare may be and a decent social minimum the basic a principle of to economic and social inequalities is not I think this contains an interesting of and a critique of existing social The the of the that the idea of a property-owning democracy which made it the of the political from to the idea of a property-owning democracy is a between the of private in the form of and the here is it has been to different and to the and of the ideal of property-owning view was that the of private property the of the of political some have justified private property via its to but in the case of of capital the is, with security of and the of mind that that security of in of the ideal to Meade and to One of that is particularly of is not the to the in but also the security that it them in from the that is a standing risk for on income. In our from it is the who are to at The here, not just welfare but also the James who has with how it is to be is a case where the difference between and ideal is One of of welfare state capitalism is that it welfare and the of a welfare critique seems in a currently society where who are and are in that of their that people are without it is to impose justified by the fact that welfare to and social However, to Rawls's views it that the of comparison is a just society that has implemented his principles in the form of a property-owning democracy. the of the payment of the social minimum to make a a of at what role is there for welfare state in such an Rawls other than social security in its of providing believed that there was good to welfare state as such and that the context in which they operate is because it concentrations of wealth in private A property-owning democracy, on the other in the of such concentrations of wealth just as political aim to state capitalism an context I would a are in which a society to make a democratic to a society that is just by Rawls's But I think Rawls is right to about a society an between the very and a of the well who their to be by the of and even well welfare state Rawls's ideal of a society of free and equal is not compatible with the of a of and who are not of any scheme for likely to be even if they are of a decent social This is Rawls's that welfare state capitalism the of a principle of The under welfare state capitalism live in a society that is both and to just via any feasible democratic would like to one from Rawls's to on an of argument is a very interesting strategy in Rawls that does not on a property-owning democracy in but on a general way of that is to lead to a property-owning democracy, very much like I have in mind are Rawlsian that from the and complexity of a economy that the implementation of principles of can work only by structuring the context in which market so as to impose a pattern on their Justice Fairness Rawls his own with a of the latter general up fair and for fair individual and that all outcomes the are made Rawls that this view the to individual that may fair, but which are actually by concentrations of wealth that are to equality of the fair value of the political liberties, and so is in order to we to procedural This an of which Rawls as is one Justice as focuses first on the basic structure and on the to for all equally we rely on an of between principles to and principles that to particular between and this of is and are then free to their within the of the basic structure, in the that in the social system the to are in is a point about complexity this I it Rawls is we do not a realistic on the one the context in which a market operates in order to make its effects fair, and the of each in a market one at a to the same is a an has that Smith was right to the value by as generated by the underlying of economic in society that makes This any individual in a of Smith the of in which a in economic society as all Economic a for is best explained as in the of that both to and in progressive to Smith also the differential talents and in this system as of education and that from ideas are that it is to individual productive The income that from talents is an from a of social that of the economy is by working The for an that are the of in a that is a in a of This of argument seems to of the particular form that Rawls's egalitarian strategy it is not feasible to individual market because the very idea of an individual market is a is why Rawls believed that the only way to make a market fair is to make its effects achieve that by structuring the context in which that market operates to pattern its is how a property-owning democracy think a of this of Rawls's overall strategy critique of Rawlsian special incentives to which I have this strategy to make Rawls a latter in his of to that a society that the to all would do so as the unintended effect of by that was and I think that is a if as an of the point is that if this restructuring of the market is the only feasible way to be an egalitarian then there is feasible way to a conception of as fairness. in a political economy structured in this way and their in their labour this commitment to and do not is in the phrase in the from Rawls where he notes that are free to pursue their permissible within a just also on to point of between Rawls and namely, their of can have that are not intended by any in the market. I the phrase “invisible hand” with given of of this phrase that is of But like believes that markets involve a of externalities, and some some In particular Rawls a between his first principle the basic liberties, equality of and the of a think this point is important as it has a on the between a property-owning democracy and a market Rawls his own in ideas about political economy in an economy of One of the in Rawls's between property-owning democracy and liberal is whether the latter is to a property-owning democracy as it democratic of Rawls's for a property-owning democracy on this point as a liberal Rawls was to idea that there was an function to in the and the of the democratic ideal into a place for good we most of our of argument seems to Rawls is right to the of if was an economy not to be made up of such given that they are such to The is to be in the that Rawls makes between the regime of liberty by his first principle and market It seems to that and are also that, if worker have for society as a whole, there is a rationale for giving them tax to their further and the of a they were equally to emphasise that given competitive and a regime of liberty, we can that some people will trade democratic of their for other that Rawls is a political liberal with for the of Rawls then he is to the idea that political is itself a part of the good do not have to lead in which political is one of their they have to their role as a of when it to of public this it does not then, if a works in a that does not democratic there is in the context of society as a the the political liberal people to work in that their for but it is not that a mixed economy of both worker and need have this Furthermore, there is unintended in a property-owning democracy by Paul namely, that employers are to have to more for given the supply of labour and the of in a property-owning democracy will not be on to the market by drudge jobs, and as part of making jobs will have to increase for making at work make if they do that Rawls makes between a regime of liberty and the market via explains as and we can a property-owning democracy to a of of both I not here to competitive as Rawls argument that a society as a could a and not concerned with of capital a regime of liberty we can people to trade other for the value of democratic of his so does in my any of the of political do not political all of the even democratic of where they If they to trade this value this is not to say that it is not a but that the regime of liberty by Rawls's first principle them to do need be overall of the of if it is in and more only is this of worker ownership not a point between a property-owning democracy and market it also seems to a point in of property-owning democracy. This is because the capital given to each in the latter people to more in where they to work with their on income from labour more likely to to work in a that them democratic would like to by one important to the idea of property-owning democracy and a as a for The is that all that can be by an property-owning democracy is giving people a in their own more we are to the of the It is to that the in to ownership to with in other a at The then, is this: everyone's exposure to the of the first point to make is that this view the role played in a property-owning democracy by human capital. It the way in which the of the principle of equality of opportunity requires the of of So a property-owning democracy is not just about ownership and share even if it there is the of whether the to a property-owning democracy just all to risk to the of of the in that very Rawls's is in the we are working here in ideal it will be free from the generated on the of regulation from the very concentrations of wealth that a property democracy to The role played by a of regulation in the is a The to this is that part of Meade's was a publicly unit that share ownership the of the market thus a of from its However, my main is that it is not who is to do any better in capital and that most of are in this notes the of of the public funds in the and Meade's a striking to how the capital of some of are and In I think on is the most realistic way to to make a property-owning democracy a would like to with a very much at the that would the first a property-owning democracy. The some in this with the introduction of the and the but both of were in My is much more and comparable to and for a payment of to My is but in one way more and in way more A in the is a way of people to by their with a from a of government, and private when the its are to a first a small for a capital that is I think a good place to is with the in most that do not to on the market The first is to make a state for of hold an capital for by unit by This capital is, up My is to the as part of a to the potential of a property-owning democracy for at the state would a capital on their state to and This capital like a would the form of only for limited for education enterprise the of a first property as a in a The is that and to the money at this up on a will that by an In my are up part of own underlying in the that will be adequately by the security and it brings the of to The can their capital in to an investment in The will have all the of a capital at a when it can make a difference to whether they a own will also them a of from In with the full implementation of Rawls's this will both make a property-owning democracy a and also address the of how a like this is to be