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God and the Economy: Is Capitalism Moral? Part 2

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Economic Freedom is important because it helps disperse power, allowing the development of private institutions — for instance, associations, corporations, think tanks, labor unions, and universities — that can counterbalance state power. Moreover, private property is necessary for the exercise of many political rights. If you can’t buy a printing press or TV station, hire a hall, or sell newspapers, you have no press freedom. The Soviet Union’s great conundrum in the 1980s was the personal computer, necessary for economic progress but a potentially devastating weapon in the hands of dissidents.

Nevertheless, there is a spiritual sterility to market capitalism that bothers many religious people. While a number of former East Germans, for instance, deplore their old police state, they still dislike the gaudy, individualistic materialism of the West. Andrew Kirk contends that capitalism assumes “that the main purpose of man’s life is the pursuit of happiness to be achieved by the constant expansion of goods and services” and that this is thereby “the basis of our daily political and economic life.”

However, all men are fallen and sinful; greed and envy are common to man, not products of particular social systems. Capitalism allows those who have dedicated themselves to the pursuit of Mammon to live that way, but it also lets believers like Kirk decide to fulfill their lives differently. Kirk, for one, became affiliated with a religious institute, a choice he could not have made in socialist Eastern Europe. Capitalist America has similarly proved receptive to communal religious sects such as the Hutterites.

The hallmark of a relatively unregulated market economy is freedom of choice, and some people will undoubtedly use their liberty to go grievously wrong. But Marxism is profoundly materialistic, and political life in such societies revolves around gaining access to a relatively small pool of consumer goods — thus the avarice of the nomenklatura, the ruling elite, and the ubiquitous long lines in the communist world. The average citizen of a socialist state does not care any less about possessing shoes, washing machines, VCRs, and cars than an American; he is simply less able to satisfy his desires.

A related argument is that capitalism relies on destructive competition rather than constructive cooperation. Competition is obviously important to a market economy, but it has proved to be an extraordinarily socially valuable tool. Cartels usually break down quickly because of competition, unless they have government support. Competition drives down the price of consumer goods, enabling even people of modest incomes to acquire clothing, food, and shelter. And competition has driven innovators to constantly seek to design better products for less.

Indeed, while competition is a hallmark of capitalism, so too is cooperation. For only by cooperating — with customers, suppliers, and workers — can a businessman succeed. In a system of state control, firms can force their products on reluctant buyers, extract supplies from reluctant producers, and mandate work from reluctant employees. A private firm, however, can succeed only by inducing the cooperation of all of these parties. While money may seem a crass inducement, it is also effective; moreover, many firms, where people group together voluntarily, in contrast to collectivist systems, generate an esprit de corps that reflects a variety of nonmaterial values.

Government, economic freedom, and poverty

Perhaps the most fundamental criticism of capitalism is the prevalence of poverty amid plenty. The desperation of the inner city remains obvious in America. Some supporters of Cuba’s Castro have responded to criticism of his repressive tactics by arguing that there are no homeless people in Havana. Indeed, Andrew Kirk wrote, before the collapse of the East in 1989, “Marxism has exalted collective freedom — the freedom of everyone to enjoy a basically dignified life.” Yet it is now painfully obvious that poverty was pervasive and income differentials were hideous in those nations. Acquisitive ruling elites may have cloaked their greed in humanitarian socialist rhetoric, but the reality of their systems was quite different.

Societies tending toward free markets, in contrast to statist systems such as Brazil, have also performed well in enhancing the economic status of all their citizens. Taiwan, for instance, has enjoyed a dramatic increase in literacy, life expectancy, and equality of income distribution as it has expanded economically. Even in the United States those who are poor live far better than the bulk of the populations of many Third World states. In short, without production there is nothing to distribute. Only in a capitalist economy may one meaningfully advocate extensive government transfer programs.

Yet today the state does far more to harm than help the poor. Indeed, much of the poverty in the United States is the result of government policy, often at the behest of powerful special- interest groups. Labor unions back the minimum wage because it prices disadvantaged workers out of the marketplace. Occupational licensing makes it harder for poor people to enter a variety of trades, such as driving a cab. Trade barriers to protect selected industries push up the cost of clothing, food, shoes, and a host of other goods. Antiquated building codes that guarantee construction jobs increase housing costs. Expansive government transfer programs enrich influential voting blocs — farmers, retirees, and the like — at the expense of the poor and middle class. And so on.

In a true market economy, those with the least influence can still gain access to economic opportunity. The more expansive the government controls, the more likely are concentrated interest groups to twist policy to their own ends, to the detriment of the most disadvantaged in society. This does not mean that capitalism is enough for a just, and “Christian,” society. Private mediating institutions, particularly associations, charities, and churches, are needed to play a critical role in helping those who, like the proverbial widows and orphans in the Old Testament, are unable to succeed in a market economy. In contrast, government welfare programs have turned out to be counterproductive, subsidizing illegitimacy, fostering family break-up, and discouraging work.

Respect for the virtues of capitalism is not limited to America’s religious Right. With the publication in 1991 of the papal encyclical Centesimus Annus, or The Hundredth Year, Catholic social teaching has explicitly recognized the benefits of a market system. The pope’s critique of Marxism was devastating: “The historical experience of socialist countries has sadly demonstrated that collectivism does not do away with alienation but rather increases it, adding to it a lack of basic necessities and economic inefficiency.”

In contrast, he praised capitalism, including its reliance of entrepreneurship and profits. “When a firm makes a profit,” he wrote, “this means that productive factors have been properly employed and corresponding human needs have been duly satisfied.” All told, he argued, “the free market is the most efficient instrument for utilizing resources and effectively responding to needs.”

The pope remained vitally concerned about the poor, however, and believed that capitalism cannot be the sum of society. He criticized “consumerism” and advocated government intervention to ensure that “fundamental human needs” are not left unsatisfied. Finally, he wrote that individual freedom needs an “ethical and religious” core.

Indeed, that core is absolutely critical. But it is most likely to be provided by private institutions — the family and church, in particular, and community groups and associations. The one organization guaranteed not to promote ethical and religious values is government.

Is capitalism Christian? No. It neither advances existing human virtues nor corrects ingrained personal vices; it merely reflects them. But socialism is less consistent with several Biblical tenets for it exacerbates the worst of men’s flaws. By divorcing effort from reward, stirring up covetousness and envy, and destroying the freedom that is a necessary precondition for virtue, it tears at the just social fabric that Christians should seek to establish. A Christian must still work hard to shed even a little of God’s light in a capitalist society. But his task is likely to be much harder in a collectivist system.

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    Doug Bandow is vice president of policy at Citizen Outreach, the Cobden Fellow in International Economics at the Institute for Policy Innovation, a senior fellow at the Cato Institute, and serves as adjunct scholar for The Future of Freedom Foundation. He is a former special assistant to President Reagan; he is also a graduate of Stanford Law School and a member of the California and D.C. bars. BOOKS BY DOUG BANDOW: Leviathan Unchained: Washington’s Bipartisan Big Government Consensus (forthcoming) Tripwire : Korea and U.S. Foreign Policy in a Changed World (1996) Perpetuating Poverty : The World Bank, the Imf, and the Developing World (1994) The Politics of Envy : Statism As Theology (1994) The U.S.-South Korean Alliance : Time for a Change (1992) The Politics of Plunder : Misgovernment in Washington (1990) Beyond Good Intentions : A Biblical View of Politics (1988)