Thursday, February 9, 2012

Musings about capitalism and Christian ethics


Occupy Wall Street has sought to focus public attention on the disparity between the 1% who are wealthy and the 99% who are not (for more on OWS, read Ethical Musings Occupy Wall Street and Trinity Church, Why Occupy Wall Street resonates with people, and More musings about Occupy Wall Street).

If one learns only one thing from OWS, that one insight should be that our economic system has produced relatively few winners and many losers. So, what is a Christian to do? As citizens of a democracy, we cannot simply ignore the problem, consigning it to our elected political office holders. Nor, as Christians, do we have either the resources or responsibility to solve the problem on our own. Establishing soup kitchens, shelters, and other charitable programs does not fix a dysfunctional economic system.

John Patrick Diggins in Why Niebuhr Now? wrote that Christian social ethicist Reinhold Niebuhr, who died in 1971,

would hardly be surprised to see how profits are equated with piety and religion is used to rationalize material acquisitiveness. He agreed with Nietzsche's view that "altruistic actions are only a species of egoistic actions" and that in self-justification individuals deny the motives for their own behavior

Niebuhr was acutely aware of our human proclivity to sin, something most moderns conveniently prefer to forget. Humans, according to Jesus, do not live by bread alone. Yet bread appropriately became a popular mid-twentieth century American metaphor for money, the measure of worth and meaning in the eyes of too many people. Even some Christians measure the abundance of their lives by counting their money, hearkening avidly to the prosperity gospel promoted by preachers like the suitably named Creflo Dollar, pastor of World Changers Church International, located in an Atlanta suburb.

Christians that are more orthodox will point to the fall described in Genesis 3, in which God tells man that he will live by the sweat of his brow. Eager for the good things and the easy path (Jesus noted that people would prefer the broad path to perdition over the narrow path that leads to God), people long ago recognized that accumulating wealth made life easier and more enjoyable, offered a measure of security through increased resources, and provided a path to power. In short, most of us prefer selfishly prefer personal financial wealth to the communal values of the reciprocal altruism that Jesus lived and taught.

What are the implications of this tendency for free market capitalism?

First, we should expect that individuals and enterprises of all types consistently seek competitive advantage through government regulation intended to benefit them and not their competitors. Christians and the Church can prophetically identify this proclivity whenever it manifests itself. Government regulation that (1) creates informed consumers, (2) ensures multiple buyers and sellers compete in open markets, (3) values common capital goods appropriately and (4) maintains level playing fields are all essential. Regulations that have any other effect are wrong because they distort market functioning, introducing inefficiencies and ineffectiveness. For example, research now shows that the Bush era tax cuts have helped the rich get richer rather than helping all Americans. The tax cuts primarily benefitted people whose income is in the form of dividends and capital gains rather than earnings. (“Bush tax cuts helped the rich get richer, Washington Post, January 16, 2012)

Second, government programs rightly help individuals and firms during transitions, because change is inevitable and adversely effects people (e.g., a person whose job becomes redundant through technological advances or shifts in consumer preferences). This help may usefully include unemployment benefits, job-training programs, marketing assistance of the type offered by the Small Business Administration, etc. Policies and programs should face routine reviews to identify effectiveness, functional improvements, and alternatives. The goal is to preserve human dignity and guarantee a minimal standard of living for people, who through no fault of their own, find their lives severely affected by economic transitions. This is not a welfare state. Instead, these policies and programs remove barriers to innovation, economic efficiency, and the competitive free market.

Globalization means we should anticipate greater transitions than ever experienced in the near future. Nativism is not the answer. The trend toward globalization is irreversible. Instead, the need for transitional assistance will be greater than ever.

Third, each generation deserves the privilege of proving itself in the marketplace. Passing wealth and privilege from one generation to the next is natural, but out of place in a community where all are God's children. An absolutely level field is an impossible ideal. But, great wealth passed from one generation to the next will lead to ever-greater disparities between the rich and poor.

Fourth, this generation needs to articulate more fully the cost of using commonly owner capital goods such as air, earth, and water. As the earth’s population increases and the demands for goods and services continues to outpace the earth’s self-capacity for renewal (consider the growing pollution problems in China and India), we need new and better mechanisms for pricing and marketing those commonly owned capital goods.

Fifth, this generation will similarly benefit by identifying the goods and services in each local that the community can produce more effectively (and often more efficiently) than can private enterprise. My previous post emphasized healthcare, and mentioned water and sewer utilities. Schools, libraries, roads, and criminal justice have been three other services widely regarded as communal responsibilities rather than contracted to private providers. In the last two decades, that perception has eroded.

My strong suspicion is that the experiment with privatization is not working well. I’ve seen governments save money in the short-term and pay more in the long-term through misguided privatization. More critically, private providers do not have the same set of values and goals as communal groups. Privatization may save money but be less effective once the community has fully articulated all of its goals. Public schools, for example, are not only to educate children. Public schools also create a sense of community by placing students among students who are not necessarily like them; public schools give everyone approximately the same education (unlike Eton or Harrow in the U.K. compared to the village school); public schools relegate foolishness (e.g., intelligent creationism that rejects evolution) to private time out of school. Privatization leads people to disinvest themselves from public endeavors. Communal programs tend to have the opposite effect.

Sixth, justice represents the single best antidote to selfishness and sin. Christian prophets will engage their communities in asking, What is fair? Free market capitalism affords people freedom, matches buyers and sellers without creating bureaucracy, and can maximize wealth and social utility. Achieving those results requires government creating and maintaining a level playing field, easing transitions, ensuring multiple buyers and sellers compete openly and fairly, that users of communally owned capital goods pay a fair price for using those goods, etc.

John Rawls gives us some help for identifying what is just. Rawls says that a person should imagine that he/she might be any participant in the process. Are you equally satisfied, no matter which person you are? Are other people, participating in the same thought experiment, also equally satisfied?

Try applying this standard of justice as fairness to mortgage defaults and bank bailouts, the size of Wall Street bonuses, pay discrepancies between senior management and manual workers, and income tax rates in the U.S. for the wealthy and poor. I’m confident that I’m right when I conclude that Jesus would say our economic system is broken and unfair. The answer is not to scrap capitalism. The answer is to create a free market capitalist system that works for everyone who wishes to participate. These posts offer suggestions with which to start.

2 comments:

Chuck Till said...

Just today at lunch I heard some say on the radio that the vast majority of wealthy people have earned it. I thought to myself, this is untrue. For the majority of wealthy people, their fathers and grandfathers and great-grandfathers earned it. That's certainly true for the Walton family, for example.

Are there statistics on the relative proportion of inherited wealth and "self-earned" wealth (for lack of a better phrase) in this country?

George Clifford said...

At least half of the people on the Forbes 400 wealthiest US citizens list inherited their wealth, according to a Wall Street Journal correspondent (http://www.huffingtonpost.com/2011/09/22/new-age-of-inherited-wealth_n_976337.html). Elsewhere (I'm unsure of the source), I've read that many high earners are self-made (nothing surprising there) but that high wealth people tend to inherit. A quick search did not turn up any statistics for those below the top 400.