This article was originally published in the Summer ’05 issue of Revisions, The Inaugural Issue.
It is easy to sympathize with the disaffection many Christians have with modern American society. Any thoughtful observer will recognize much that is wrong with our consumer culture and with the materialistic ideology that undergirds it. The acquisitive nature shared by most Americans is at odds with the professions of Christianity. However, Christians who would place the blame for American excess on the capitalist system that makes it possible would be misdiagnosing our malady, and their attempts to treat it by resorting to socialism would be as dangerous as prescribing chemotherapy to treat influenza. Their solution would do nothing to address the root of the problem and would tend toward a different, and more injurious, excess of its own.
Critics of capitalism have two chief complaints about the system. The first is with the theory behind it: they are uncomfortable about endorsing a system that they believe is based upon the premise that, as Naomi Klein puts it, “greed is good.”1 They believe with Wes Michaelson that capitalism “depends on and fosters human selfishness.”2 The second critique regards the practice of capitalism: its critics decry the disparities created by the actions of free markets. It seems intrinsically wrong that, in the late 1990s, the average compensation for CEOs at Fortune’s top 100 companies was $37.5 million, 1,000 times the pay of the lowliest workers at those companies.3 These critics want to create a system that will redress such injustices. I understand both of these sentiments, but I want to argue that the first is based upon a misunderstanding and that there is no adequate solution to the second. The contention that capitalism makes selfishness a virtue rests largely on the common misperception that Adam Smith and his successors view capitalism and its power to create wealth as a justification for individual greed. This is a miscomprehension of Smith’s argument: Smith’s contention is that each individual should be allowed to make his own choices about how to use his capital (human or otherwise) because individuals will have a better idea of how to maximally use this capital than any central planner. Given each individual’s peculiar knowledge of his own skills and his rational interest in promoting his own welfare (an interest presupposed as the basis for a capitalist system), we can be sure that he will better use his capital if left to choose for himself.4 Ultimately, Smith is arguing for the freedom of each individual to choose his own employment and to do with his own resources as he wills.
The second critique of capitalism is motivated by the growing disparity between the wealth of the highest classes and the poverty of the lowest classes. There are two problems with this critique. The first is, again, a misunderstanding: critics mistakenly view economics as a zero-sum game. In a zero-sum game, one player can only do better by making another player worse off. Ironically, this is the same view of the world shared by the mercantilists against whom Smith directed his polemics in The Wealth of Nations. Mercantilist philosophy held that there was only a set amount of wealth in the world and thus that nations could only increase their wealth by disadvantaging other nations. However, all voluntary exchanges are necessarily positive-sum trades. From the fact that Smith is, for instance, willing to sell Jones a sandwich for $5, we can assume that both Smith and Jones benefit from the transaction. (This inference is called revealed preference.) Most exchanges create a surplus: if Smith would have been willing to sell the sandwich for $4 and Jones would have been willing to buy it for $6, each has a $1 surplus from the trade. Critics of capitalism tend to ignore the fact that wealth can and has increased in absolute terms.5
The second problem with this critique is that its advocates neglect the economic mobility intrinsic to (and only to) the capitalist system. As an example of this mobility, a 1995 Federal Reserve study found that in 1991, only 5% of those who were in the lowest quintile of wealth in the United States in 1975 were still there; 29% were in the highest quintile.6 To compare American capitalism to feudalism, as some have done, is grossly unfair.
On the other hand, it is no doubt true that capitalism does produce inequalities and that it seems to encourage—or at least permit—excess. Some of capitalism’s critics believe that these problems could best be addressed by abandoning the system and adopting some form of socialism in which the energies of the state could be directed at the eradication of poverty. I disagree. These critics have not carefully considered the unintended consequences of their proposed solution; they underestimate the ramifications of placing the power to shape the economy and massively redistribute wealth in the hands of a few government leaders.
It is important to note that one of the fundamental differences between the two sides in this debate is their rival understandings of justice. Critics of capitalism object to the system because they believe it is inequitable, and opponents of socialism dislike its programs because they regard them as state-sanctioned theft. The former define justice as an equal distribution of wealth; the latter hold that a just system is one in which all exchanges are voluntary. These competing definitions of justice lead to radically different visions for society.
I sympathize a little with both views of justice, but I believe the proper end of government is to minimize oppression, and I think that capitalism does this best. Opponents of capitalism always propose “solutions” that involve market-based restrictions. This is dangerous. The most important feature of capitalism is the free market. Nobel laureate Amartya Sen argues in his 1999 work Development as Freedom that political and economic freedoms march hand in hand with economic development, but he is careful to emphasize that the justification for capitalism does not need to be based on its consequences. He avers that market freedoms are essential facets of human life:
As Adam Smith noted, freedom of exchange and transaction is itself part and parcel of the basic liberties that people have reason to value. To be generically against markets would be almost as odd as being generically against conversations between people (even though some conversations are clearly foul and cause problems for others—or even for the conversationalists themselves). The freedom to exchange words, or goods, or gifts does not need defensive justification in terms of their favorable but distant effects; they are part of the way human beings in society live and interact with each other (unless stopped by regulation or fiat). The contribution of the market mechanism to economic growth is, of course, important, but this comes only after the direct significance of the freedom to interchange—words, goods, gifts—has been acknowledged.7
Sen argues in his book that opening up countries to free markets enhances economic development, but he defends capitalism not on this consequentialist ground but on the principle that economic freedoms are basic human liberties. The 20th century provides ample evidence that governments that try to institute planned economies tend towards tyranny. F.A. Hayek, another Nobel laureate in economics, presents this argument in his classic work The Road to Serfdom. Here, Hayek lays out his case that totalitarianism is an unintended consequence of socialist policy. Though the book was originally published in 1944, some of its arguments seem remarkably relevant today.
Hayek reminds us that in the decades leading up to World War II, many Germans had come to despise the “shallow” Western ideals of liberalism, democracy, capitalism, and individualism. This contempt was spreading beyond the German border and “the people of the West continued to import German ideas and were even induced to believe that their own former convictions had been merely rationalizations of selfish interests, that free trade was a doctrine invented to further British interests, and that the political ideals of England and America were hopelessly outmoded and a thing to be ashamed of.”8 This sentiment is still very much alive today. Are we so far from the temptation to “fix” free trade by handing it over to the sovereignty of the state? And how can we be sure that the consequences of such a decision would be any less disastrous than they were in Germany? It is naïve to assume that placing the power of 500 CEOs into the hands of one autocrat—or even a handful of bureaucrats—would produce a more optimal outcome. This warning should not, of course, prevent us from proposing small changes to the current system, and I am open to these suggestions. Moderately progressive taxation, socialized health care, and government pensions, for instance, are small measures of socialism that I can tolerate. As Hayek argues, it is only when the government attempts to interfere with—and replace—the mechanisms of competition that it truly becomes dangerous. As desirable and benevolent as it might seem to organize our society around the goal of eradicating poverty, this organization would almost inevitably lead to increasingly egregious abuses by the central planners. Diffused power is always safer than concentrated power. Power corrupts, and good intentions are not an effective antidote.
None of these arguments should be seen as a justification for the excesses of capitalism. The products of greed and exploitation so prevalent in today’s economy are sinful, and Christians cannot turn a blind eye to these evils. We should toil to redress these wrongs and to repair the brokenness that we witness all around us. But we cannot redeem the world ourselves; we cannot make heaven on earth. I see the abuses of capitalism as the regrettable byproducts of a system that may be the best we can propose in our fallen world. Our efforts should be to attempt to minimize these excesses, but as Christians, we must realize that Jesus did not come to overthrow the Roman government, and our attempts to re-establish Babel will meet with no more success than the original endeavor.
Instead, Christians are called to be “blameless and pure, children of God without fault in a crooked and depraved generation” (Phil. 2:15). As Christians, we are not told to take the wealth of others and direct it towards alleviating the plight of the poor, but we are commanded to do this with our own wealth (e.g., Matt. 25:45). Remember that it is harder for the executive who makes $500,000 a year to get into heaven than it is for the camel to go through the eye of a needle (Mark 10:25). The excessive pursuit of wealth is idolatrous, and Christians would do well to remember that the Israelites were forbidden to reap to the edges of their fields because that portion was to be left to the destitute (Lev. 19:9). I believe that if Christians applied this same principle to all their business dealings, they might find many of them ungodly. If Christians cannot even practice biblical principles in their own lives, why should they be trusted—or trust others—with the power to control and distribute the wealth of the state? Instead of proposing socialism, I want to offer this piece of wisdom from the erstwhile sage of pop, Michael Jackson: “I’m starting with the man in the mirror / I’m asking him to change his ways.”
- Naomi Klein, “Baghdad Year Zero: Pillaging Iraq in Pursuit of a Neo– Con Utopia,” Harpers, September 2004. [↩]
- Quoted in Craig M. Gay, With Liberty and Justice for Whom? The Recent Evangelical Debate over Capitalism (Grand Rapids: William B. Eerdmans, 1991), 24. [↩]
- “Pigs, Pay and Power,” The Economist, 26 June 2003. [↩]
- “Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.” Adam Smith, The Wealth of Nations (1776; reprint, New York: The Modern Library, 1994), 482. [↩]
- Even for the poorest. For a study on the effects of globalization on the world’s poorest, see David Dollar and Aart Kraay, “Trade, Growth, and Poverty,” World Bank Policy Working Paper (March 2001). They conclude, “[T]he increase in growth rates that accompanies expanded trade leads to proportionate increases in incomes of the poor. The evidence from individual cases and from cross-country analysis supports the view that globalization leads to faster growth and poverty reduction in poor countries.” For a Christian view of such arguments, see William McGurn, “Pulpit Economics,” First Things (April 2002), 21 ff. [↩]
- Gary M. Walton and Hugh Rockoff, History of the American Economy (Toronto: South-Western, 2002), 9. [↩]
- Amartya Sen, Development as Freedom (New York: Random House, 1999), 6. [↩]
- F.A. Hayek, The Road to Serfdom (1944; reprint, Chicago: Chicago UP, 1994), 26–27. [↩]
