Biblical Capitalism in Uncertain Economic Times
The recent dramatic events surrounding our economy and its regulation raise huge questions for every American. (Indeed, citizens of capitalistic societies throughout the world may find this blog of interest.) It should also raise issues about how Christians should join in the debate. The purpose of this essay is to begin a discussion as to how to define Biblical Capitalism.
Often, putting Scriptural principles to work is a matter of inference rather than direct command. Certainly this is true here. But let’s examine how Christians might think about matters of the economy, capitalism, and government.
First, we must deal with a basic issue of whether capitalism itself is fundamentally biblical at all. Some liberal Christians have argued that indeed it is not biblical! They point out how harsh capitalism can be on those who fail, and question whether such a harsh system could be biblical. They also point specifically to Acts 2:44-45 and Acts 4:32-5:11 of Christians having everything “in common,” an example apparently favoring some form of socialism. Indeed, in the second passage it may appear that Ananias and Sapphira were actually killed by God for holding back land sales proceeds from the group!
Let’s quickly address this viewpoint. Regarding the example in Acts, the notes in the Reformation Study Bible point out that this example of Christian giving was voluntary, not compulsory (Acts 5:4). Further, Ananias and his wife had the right to keep all of the proceeds from their land since the land and the money was theirs (Acts 5:4). Ananias was killed by God not for withholding his money from the church, but for lying (Acts 5:3-4). And certainly (and importantly) this example is not an example of government involvement in any sense, and clearly gives no mandate for government interference. So this example clearly seems to be taken out of context and misapplied by liberals. Here is some further comment on this: Does the Bible Support Communism?
Conservatives argue that the Bible is firmly in the camp of private property rights, which is the center point of capitalism. We remember, beginning with the Ten Commandments: Thou Shalt Not Steal and Thou Shalt Not Covet. These commands and elsewhere in the Bible we note confirmation of private property rights. It is noted that communisim, the antithesis of capitalism, requires by law of the state that all property be held in common. There is no such concept in the Bible.
We should also note that communism is at its core atheistic. Karl Marx said, "The idea of God is the keynote of a perverted civilization. It must be destroyed." This is in sharp contrast to America's founding ideals.
The issue of the harshness of capitalism in many situations must also be addressed. We cannot help but observe that while capitalism is indeed harsh at times, it has produced far better results than any other system. As Winston Churchill observed, “The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.”
Thomas DiLorenzo, in his book How Capitalism Saved America, surveys history and convincingly demonstrates that there is no better solution to poverty than capitalism. Capitalism is indeed, the most compassionate system. Further, DiLorenzo argues that despite the oft-repeated claims of anticapitalists, capitalism actually reduces income inequalities within a nation as well.
DiLorenzo insists: "Overwhelming evidence indicates that the more economic freedom a nation has, the more economic opportunity there will be and the more vibrant that nation's economy will be. And the opposite is also true: the more regulations, controls, taxes, government-run industries, protectionism, and other forms of interventionism that exist, the poorer a country will be."
DiLorenzo proves that when government intervenes in the economy—no matter how well-meaning—the usual result is counter-productive for the economy. For a recent and very real example, the whole mortgage mess is traceable to two government interventions: (1) the Federal Reserve Board’s keeping interest rates too low too long in the early part of this decade, and (2) government’s persistent pressure on Fannie Mae and Freddie Mac to make loans to people who could not afford them! Both of these efforts were done with the best of intentions!
However, we suggest that there are issues of compassion that may mitigate DiLorenzo's strict conclusions. In attempting to develop a concept for Biblical Capitalism, we note certain principles from Scripture:
• Man is sinful by nature, and as such can bring chaotic situations to the economy where innocent people are hurt.
• The rule of law is important, but should be based on biblical principles.
• Man is to be truly free—within certain constraints set by Scripture or civil government.
• Man is a social creature and our efforts are inevitably interrelated.
• Government has a proper role to play.
• Self-government, as America’s founding fathers noticed, places more importance on the individual, family, and church levels of government than civil government.
• We as Christians care about our fellow man.
• Justice should be a goal of government.
WORLD magazine (February 12, 2011) suggested 3 starting principles for biblical economics: (1) All wealth comes as a gift created by God. We don't own it. But He lets us create more wealth, and then lets us take care of it. (2) There's no limit to how much wealth there is in the world. It isn't like a pie to be divided up. God helps his people create more and more wealth. (3) Giving wealth away is a bigger blessing than getting wealth. But people should give away only what's theirs—not what belongs to others.
From these ideas, we can begin to put together a model of Biblical Capitalism. While this is not an easy task, it might first help to define what Biblical Capitalism is not:
• It is not evolutionary/darwinian capitalism, which we would define as unrestrained capitalism. Biblical Capitalism would contain laws that protect property rights, protect the rule of law, enforce contracts, protect against fraud and collusion, etc.
• It is not libertarianism. Libertarianism is related to evolutionary capitalism in that it is relatively unrestrained. The reason that libertarianism is not biblical is because one does not have the right to do wrong. There are certain businesses, such as abortion clinics, that do not have a fundamental moral right to exist.
• It is not socialistic capitalism. In general, any law that interferes with free enterprise, except for certain broad limitations to protect the public interest, is not biblical. The role of government should be to encourage free enterprise—not favoring certain enterprises over others unless there is (a) a clear moral mandate or (b) a systemic risk, that is, a risk to the whole economy (as opposed to a risk to a company or industry or locale). Any distortion of free enterprise outside of these parameters—no matter how well-intended—is probably a hindrance in the long run. Government should be leery of aiding inferior businesses or activities at the expense of successful businesses. Government should not reward failure. Further, it is a reasonable inference that the best regulation is done at the lowest level of government rather than at the highest, as this puts the activity closer to the people.
• It is not selective intervention by government. Government should not punish large or successful firms just because they are large and successful. Government should not favor companies that are failing just because they are failing, or favor industries that may be dying or uncompetitive. Further, in general, government should not do social engineering or interfere with free markets by favoring technological changes—unless there is a clear national interest such as national defense.
But is a short list of what defines biblical capitalism:
- the rule of law
- objective moral values to protect the innocent
- unalienable rights given by God
- equal treatment for all under the law
- private property rights
- encouragement of Christianity and its elements of mercy to others in society
- free enterprise without government distortion except to enforce the above
In terms of justice and mercy, the role of government is primarily—though perhaps not exclusively—to administer justice. We note that the biblical role of government is clearly spelled out in Romans 13:1-7 and 1 Peter 2:13-17. Here we see that the role of government is limited to punishing evil and rewarding good. There is no broad mandate for government in any other sense. The role of the church, on the other hand, is most certainly to administer mercy. So we conclude that there is a distinct difference between the biblical roles for church and state.
Applying these principles is not necessarily easy. But we need to try. Let’s analyze some areas as to whether the government should play a role:
• Welfare State? No. In general, the federal government’s continual attempt to socialize welfare programs is not biblical. While limited programs such as temporary unemployment compensation can have a positive economic stimulus during periods of recession, broad-based welfare benefits such as large scale unemployment compensation encourages sloth and failure. Government should not encourage people to sin. It should encourage people to work, to save, and to marry. Further, Marvin Olasky in his landmark book The Tragedy of American Compassion argues that a biblical model of compassion should be (1) challenging, (2) personal, and (3) spiritual. Civil government—especially the federal government— cannot deliver on this. President Bush’s massive federal government initiatives in education and prescription drugs, while well-meaning, are misplaced. This is becoming even clearer now, as these massive government programs have us in large budget deficits which restrict government’s ability to help when a very real crisis—like now—comes upon us. Indeed, I would argue that most of the federal bureaucracy should be disbanded.
• Social Security? Debatable. Social Security is not a situation whose purpose is primarily to arbitrarily save those who have failed financially. It is a broad-based insurance system. It is also a system that clearly has a compassion component for people who are too old or otherwise unable to work. Having observed how many senior citizens have benefitted from Social Security, I would say that the program is desirable even if it is shown to be economically wasteful. But in the name of freedom, citizens should have some options within the Social Security system. Or at least, the Social Security system should be strongly solvent and provide the citizen a positive return on his money.
• Progressive Income Tax? No. Using the power of government to take money from one person to benefit another is not justice; it is theft. Involuntary wealth re-distribution is neither morally defensible nor beneficial for the long run health of the economy. While Christians should desire to help the less fortunate, aid should be done voluntarily rather than by coercion. As Christian thinker Marvin Olasky concludes in his book The Tragedy of American Compassion, welfare when correctly applied should be (a) challenging, (b) personal, and (c) spiritual. Government cannot meet these criteria. But the church can meet them.
• Banking Regulation? Yes. Because of man’s sinful (greedy) proclivities, banks should be regulated to minimize financial disasters. It is all too true that massive bank failures can lead to widespread disasters to innocent parties. We learned from the Great Depression that margin rules for investors are reasonable restrictions. Likewise, the government should require down payments on home purchases and the government should set stricter rules about how much banks should be able to lend against their balance sheet. The government also has a role to play to punish loan applicants who do so fraudulently. Had such regulations been in effect, the current mortgage/banking crisis would not have occurred. The purpose of such regulation is not to protect any one company or industry or locale, but rather to protect the general welfare from systemic loss. In general, the banks are at the heart of the economy and thus the banking system must be kept healthy or the economy will not function.
• Zoning Laws? Debatable. I would argue that local zoning laws would be acceptable on the basis that they are local and thus close to the people. While in one sense they restrict freedom of enterprise, in another sense local citizens should have the right to set community standards.
• Environmental Laws? Yes. A company that creates “spillover costs” to some by dumping pollution into the air or water are violating the above rule that no one has the right to do wrong.
• Taking Control of Fannie Mae and Freddie Mac? Yes. These companies were creations of Congress and thus the federal government has at least some moral obligation to them. Because of man’s sinful proclivities to mess things up, business cycles can be overly severe, and massive damage to innocent parties can occur. Liberals are correct to observe that capitalism can have great swings to the downside that are unnecessarily destructive. Government intervention in the economy since the Depression has in fact smoothed out the business cycle. The purpose of saving Fannie and Freddie is not to save these companies specifically but rather to protect the general welfare and systemic loss.
• Government Support for the Auto Industry? No. This is a distortion of capitalism that should be avoided. We must resist such well-intentioned interventions. The primary purpose for such support is to support a particular industry rather than the general welfare.
• Nationalized Healthcare? No. This question is more difficult than the preceding one. The purpose of nationalized healthcare is not to save specific healthcare businesses, but rather to promote the general welfare. The answer in this case is mostly a question of logic. Those who support nationalized healthcare say that everyone has a “right” to healthcare. But by that logic, we could say that everyone has a right to food and housing as well. Should government take control of the food and housing industries too? We must be able to see that the logic is flawed and that the result of nationalized healthcare—just like nationalized anything—would be worse healthcare rather than better healthcare.
Evangelicals tend to like things black and white. But such is not possible with this topic. These conclusions must be tentative. Since we are drawing on inferences as well as historical observation, others may disagree as to how government should intervene in the economy. But perhaps these concepts can serve as a basis for further discussion.
Bits & Blog is a monthly blog from Faith Facts. We will not overload your Inbox with messages. But if you would like to subscribe to this infrequent communication we promise to try to bring you bits of information we hope will be of interest to you. Just complete the Faith Facts Update form on the home page.