“I place economy among the first and most important virtues, and public debt as the greatest of dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labor and in our amusements. If we can prevent the government from wasting the labor of the people, under the pretense of caring for them, they will be happy.” – Thomas Jefferson
In the last week I’ve written about what I see as the purpose of Government, and why I favor a small government. Today, I’ll state the case for why I am a Capitalist, and why the study of economics is so crucially important.
Capitalism is a pretty big buzz word these days. People either love it or loathe it. Unfortunately, most people seem to have very strong convictions one way or the other without having much of an understanding of economics. I know, because I was one of those people for a long time.
Several years ago, I started reading a lot about economics, and I find it absolutely fascinating! I’m certainly no expert, but I am much better informed, more articulate, and have much stronger convictions. I don’t want to go into a whole lot of detail in this post, but I do want to highlight a couple major points that I think are worth considering, and then I’ll point you to some resources where you can do some more digging if you like.
Economics is a Moral Issue
This is one of the biggest things I think conservative Christians overlook. In politics, we tend to think of things like abortion and homosexuality as “moral” issues, while economics is a secondary concern. Therefore, those who are often classified as “values voters” focus most of their time (and opinions) on these emotional issues, giving economics a backseat.
Our liberal friends, on the other hand, understand very well that economics is a moral issue. Many of them rightly show concern for the poor, seeking things like economic prosperity and health care for the marginalized. I am willing to give them the benefit of the doubt that, by and large, their intentions are good, but I tend to differ substantially with them on how best to improve the condition of the poor.
The net result is that in large part, Progressives have successfully framed the great economic “bottom up” vs. “top down” debate in their own moral terms. It seems that most people — including many professing Capitalists — have accepted the idea that capitalism favors the wealthy, while things like welfare and universal health care favor the working class. I would argue that, in reality, it is the elite who ultimately benefit from Socialist economics, while free markets are in the best interest of all citizens, regardless of their economic class.
What I would like to see is for many more conservative Christians to give serious study to economics. When they do, they will see that abortion, gay marriage, and all the other “social” issues they care about are really inseparable from economics, which I’ll address in upcoming posts. We need to be able to clearly articulate not just the differences between Marxist, Keynesian, and Austrian economics, but also to be able to tell people what kind of Capitalists we are. Which leads me to my next point…
Greed is Bad
One would think this should go without saying, but it doesn’t. Many capitalists, even Christians, agree with Gordon Gekko from the 1987 movie Wall Street:
Where does this sentiment come from that greed is good; that capitalism is based on greed? Basically, it comes from a misunderstanding of what the 18th century economist Adam Smith called “self-interest”. On first reading, there may not seem to be much difference between “self-interest” and “selfishness”, but in reality there is a world of difference. Smith’s philosophy, outlined in his book The Wealth of Nations (published in 1776), was very nuanced (here’s a good introduction), and included a robust understanding of ethics and virtue, in which altruism went hand-in-hand with self-interest.
Another influential philosopher, 20th century author Ayn Rand, contributed heavily to the idea that greed is good. She perverted Smith’s concept of self-interest. In her philosophy of Objectivism, altruism and faith are a detriment to society, and selfishness is a virtue. Her books continue to gain in popularity — particularly her novel Atlas Shrugged, which was made into a movie last year. While there is much that is good in Rand’s defense of capitalism, her philosophy is totally incompatible with the teachings of Christ.
Conservative Christians need to be able to state the moral case for compassionate capitalism, which stands in stark contrast to the greed and cronyism rampant in the government and many corporations today. Jay Richards’ book Money, Greed, and God (my review) makes this distinction clearer than any other resource of which I’m aware. Ron Paul also contrasts his view of economics with Rand’s Objectivist philosophy in his book End the Fed.
“We’re All Keynesians Now”
This phrase originated in the 1960’s with economist Milton Friedman, but is popularly attributed to President Richard Nixon. The phrase refers to the economic philosophy of John Maynard Keynes, and is probably correct. Nowadays, though, most people don’t have a clue what Keynesianism is.
Economics in the 20th century is largely defined by the debate between Keynes and Austrian economist Friedrich Hayek (both of whom were capitalists, by the way). In a nutshell, Keynes believed that the best way to stimulate economic growth was for the government to control interest rates, and pump money into the economy to stimulate spending (think TARP). Hayek, on the other hand, believed that such government actions caused artificial economic “bubbles” which would inevitably burst, leading to a “boom and bust cycle” ultimately detrimental to the economy. Instead, he wanted markets to be totally free. Failing businesses must be allowed to fail, and there must be a predictable system of risk and reward for savings and investment.
The great irony today is that nearly everyone is a Keynesian, of some sort or another, including the vast majority of neo-conservatives and “Tea Party” candidates. The 2010 elections brought many representatives to Congress who vowed to cut spending, end the bailouts, and promote free markets, but nearly every one of them advocates military expansionism and interventionism (Gingrich, Romney, and Santorum all fall into this camp as well). What many fail to realize is that this is merely Keynesianism in a different form. One of the biggest parts of Keynes’ philosophy was that military spending was one of the greatest ways to bring a country out of a recession. In his chapter on Keynesianism in his book Liberty Defined (my review), Ron Paul pushes back strongly against this:
Most conservatives in Congress don’t think of themselves as supporters of Keynesian economics. But in truth, most are strong advocates of a special kind of “military” Keynesianism while being critical of liberal Keynesian politics of taxing, spending, and regulating the domestic economy. This involves another kind of stimulus of spending money on the military-industrial complex rather than purely domestic sectors like schools and infrastructure… Military Keynesianism is every bit as harmful as domestic Keynesianism.
Mitt Romney, Newt Gingrich, and Rick Santorum (and Barack Obama, for that matter) can all truly claim to be Capitalists, but they are just different shades of the Keynesian variety. On social issues they have some differences, but none of them are willing to make any significant cuts in our nation’s budget — especially not where it might damage the powerful military-industrial complex. The more I read about Austrian economics, the more convinced I am that it’s time we all stop being Keynesians! Part of this means realizing that we can’t claim to favor small government and free markets if we insist on trying to maintain our worldwide military empire.
If you’re in my generation, chances are pretty good you didn’t study economics in high school or college. If you did, you almost undoubtedly were taught the Keynesian model. If there’s one thing I’d like you to take away from this post, it’s a desire to immerse yourself in the study of economics, particularly the Austrian school. But there’s a lot to wade through… where to begin?
First off, if you haven’t seen them, these videos made by the folks at EconStories.tv are an excellent (not to mention catchy and humorous) primer to the debate between Keynes and Hayek. Watching them will be 15 minutes VERY well spent!
After that, if you only read one book, I’d suggest the Richards book I mentioned above, Money, Greed, and God. I really can’t recommend it highly enough!
If you really want to learn, though, you need to go to original sources. Read the Austrian economists. Most of their work is very well written, and easier to understand than you might expect. I’d start with these, in this order:
- Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics by Henry Hazlitt
- The Road to Serfdom by F.A. Hayek
- Capitalism and Freedom by Milton Friedman
When it comes to the current election cycle, I think it is worthwhile to read books by the candidates. I’ve not yet read Rick Santorum’s book, but have checked out books by Romney, Gingrich, Obama, and Paul. From an economics standpoint, there is no comparison. Ron Paul is not a great speaker, but his understanding of economics and his ability to lay out a clear and plausible plan for economic recovery is exponentially greater than any of his opponents, and comes through brilliantly in his writing. You owe it to yourself to read his books, especially Liberty Defined and End the Fed. I guarantee you’ll be glad you did, even if you don’t agree with him.
“If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your counsel nor your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen.” – Samuel Adams