God is a Capitalist

by Roger McKinney

  However, a problem even more devastating to wealth than a lack of incentive to work happens when wealth gets redistributed as in the Soviet Union and Communist China, and that is the destruction of the system that coordinates market activity – prices. Markets work relatively well because of effective coordination between producers and between producers and consumers. Accurate prices coordinate market activity. Higher prices signal producers to manufacture more goods and consumers to buy fewer. Lower prices have the opposite effect. When wealth is redistributed according to a socialist plan, the prices of labor (wages) fail to accurately reflect supply and demand. Prices send false signals that permeate the economy and distort all other prices. Mises discovered that principle first and wrote about it in his book Socialism, published in 1922. The Soviet Union and Communist China lived it. Only extreme ignorance of that history or the arrogance that we can make it work today because we are smarter causes people to want to continually make the same mistakes again. Without accurate price signals to coordinate market activity, waste increases at an exponential rate. Economies grow and make people wealthier by producing more than the people consume and waste. Waste destroys wealth.

  The world has found only one way to reduce poverty in the long rung and that has been through more capitalism. The poor world has witnessed it work as it cut extreme poverty, defined as a per capita income of less than $1.25 a day, in half. Here are some bullet points from The Apr 06, 2015 World Bank report, “Poverty Overview”:

  East Asia saw the most dramatic reduction in extreme poverty, from 78 percent in 1981 to 8 percent in 2011.

  In South Asia, the share of the population living in extreme poverty is now the lowest since 1981, dropping from 61 percent in 1981 to 25 percent in 2011.

  Sub-Saharan Africa reduced its extreme poverty rate from 53 percent in 1981 to 47 percent in 2011.

  China alone accounted for most of the decline in extreme poverty over the past three decades. Between 1981 and 2011, 753 million people moved above the $1.25-a-day threshold.

  During the same time, the developing world as a whole saw a reduction in poverty of 942 million souls.

  In fact, China and India account for almost all of the poverty reduction and they accomplished it by freeing their markets only slightly at first, not through charity, foreign aid or forced redistribution. China’s long march to prosperity began after the disaster of Mao’s Cultural Revolution that starved to death over 30 million Chinese. In the late 1970’s, farmers in a remote region formed a secret organization and divided the state-owned land that they farmed into private plots. Each agreed to live from the produce he raised on his plot and promised to take care of the family members left behind, knowing they would be executed if state officials discovered their conspiracy.

  After a couple of years, the enormous increase in crops arrested the attention of everyone, not just state officials. The news climbed up the Communist chain of command to the man who had succeeded Mao, Chairman Deng Xiaoping. Deng had spent decades desperately searching for a way to lift China out of starvation poverty when the news reached him. He is reported to have said that he did not care about the color of a cat as long as it would catch mice. Instead of punishing the farmers, he rewarded them and portrayed them as a model for China’s future. Gradually, Deng opened up China’s agriculture to private farming and small markets. Each success encouraged him to open other sectors to greater freedom. Eventually, expatriate Chinese who had come to dominate business in Taiwan, Thailand, Indonesia, Malaysia, Singapore and the Philippines discovered that they could invest in their homeland and make a good profit. China suddenly became the favorite destination of foreign direct investment. The economy has not stopped growing since.

  India’s story is not as dramatic, but it, too, freed markets. From independence until the 1990s India tried to imitate the Soviet Union in economics but with a democracy. As a result, India remained as poor in 1990 as it had been in 1947. Forty years of foreign aid had produced only insignificant results. Then China’s success made it jealous and India began to slowly open its markets to private ownership and freer markets. The World Bank report summarizes the nation’s success in reducing poverty through freer markets.

  Though aware of the near miraculous reductions in poverty in Asia, many still cling to charity as the only way to help the poor. Economics has more in common with the medical world than with physics and an analogy from medicine is instructive. Biblical medicine consisted of little more than having elders of the church lay their hands on the sick, praying for them and anointing them with oil. The parable of the Good Samaritan depicts the level of medical knowledge at the time. The Samaritan poured wine into the wounds of the victim to sanitize them then added oil to soothe them. After the Bible was written, herbal medicine grew in sophistication then modern medicine developed with the rise of science in the West. When Christians get cancer today, few think of limiting their medical options to only the Biblical methods of wine, oil and prayer. Instead, they take advantage of chemo therapy, radiation and any other advancement in treatment available to modern medicine.

  In a similar way, the advent of capitalism and the growth of the science of economics introduced new methods of poverty alleviation not described in the Bible, though outlined in the Torah. Why, then, should Christians limit poverty relief to just charity? Do they believe the knowledge of economics, especially Austrian, did not come from God? Unfortunately, that is exactly what many Christians think. They are stuck in the medieval mentality in which all commerce and profit are evil, ignorant of the historical facts that contempt for commerce came from pagans, especially Greeks and Romans, not from the Bible. The church inflicted fifteen centuries of suffering by promoting pagan attitudes toward commerce and wealth, much of which some of Christianity’s most beloved saints endorsed. Christians who look to those saints for spiritual guidance find it difficult to admit that those saints were wrong about economics. But in the same way that almost all Christians have embraced modern medicine, they now need to adopt the best of modern economics where it is founded on Biblical assumptions about human nature.

  But the Bible condemns the rich

  What about the numerous condemnations of the wealthy in the Bible? Here are some examples:

  Why do the wicked live on, growing old and increasing in power? Job 21:7.

  For I was envious of the arrogant when I saw the prosperity of the wicked. For they have no pangs until death; their bodies are fat and sleek. They are not in trouble as others are; they are not stricken like the rest of mankind. Therefore pride is their necklace; violence covers them as a garment. Their eyes swell out through fatness; their hearts overflow with follies. They scoff and speak with malice; loftily they threaten oppression. They set their mouths against the heavens, and their tongue struts through the earth. Therefore his people turn back to them, and find no fault in them. And they say, ‘How can God know? Is there knowledge in the Most High?’ Behold, these are the wicked; always at ease, they increase in riches. Psalm 73:3.

  There is a vanity that takes place on earth, that there are righteous people to whom it happens according to the deeds of the wicked, and there are wicked people to whom it happens according to the deeds of the righteous. I said that this also is vanity. Ecclesiastes 8:14.

  Why does the way of the wicked prosper? Why do all who are treacherous thrive? You plant them, and they take root; they grow and produce fruit; you are near in their mouth and far from their heart. Jeremiah 12:1.

  And now we call the arrogant blessed. Evildoers not only prosper but they put God to the test and they escape. Malachi 3:15.

  Come now, you rich, weep and howl for the miseries that are coming upon you. Your riches have rotted and your garments are moth-eaten. Your gold and silver have rusted, and their rust will be evidence against you and will eat your flesh like fire. You have laid up treasure for the last days. James 5:1-3.

  The Bible seems to advertise the close connection between wickedness and wealth. The left cl
aims those verses prove that God opposes the rich because they oppressed the poor by refusing to share with the poor and equalizing the distribution of wealth in the land. But that would indicate a superficial reading of the Bible. After all, God had blessed Abraham, Isaac, Jacob, Joseph and Job with great wealth. The Torah promised material wealth to the Israelis as long as they respected God’s laws. David, the “man after God’s own heart,” and Solomon were extremely wealthy. Did God change his mind about wealthy people, or did wealthy people change. The latter is the correct answer.

  Except for the quote in Job, the link in the Bible between wealth and wickedness begins with the prophets after Israel had rebelled against God by demanding a king like the kings of the pagan nations around them. Even during the great reign of David, the king himself complained that the wicked prosper at the expense of the poor. After Solomon the nobility of Israel began to steal the wealth of the poor. Consider these verses:

  Woe to those who enact evil statues and those who constantly record unjust decisions, so as to deprive the needy of justice and rob the poor of my people of their rights. So that the widows may be their spoil and that they may plunder the orphans. Isaiah 10:1-3.

  Thus says the Lord, “For three transgressions of Israel and for four I will not revoke its punishment, because they sell the righteous for money and the needy for a pair of sandals. Amos 2:6.

  Therefore because you impose heavy rent on the poor and exact a tribute of grain from them, though you have built houses of well-hewn stone, yet you will not live in them. You have planted pleasant vineyards, yet you will not drink their wine. Amos 5:11.

  Woe to those who scheme iniquity, who work out evil on their beds! When morning comes, they do it, for it is in the power of their hands. They covet fields and then seize them, and houses, and take them away. They rob a man and his house, a man and his inheritance. Micah 2:1-3.

  Behold, the wages of the laborers who mowed your fields, which you kept back by fraud, cry out; and the cries of the harvesters have reached the ears of the Lord of hosts. You have lived on the earth in luxury and in pleasure; you have fattened your hearts in a day of slaughter. You have condemned, you have killed the righteous man; he does not resist you. James 5:4-6.

  Clearly, the wealthy were committing worse crimes than merely withholding charity from the poor. They murdered people and they used the justice system to steal from the poor by bribing judges to rule in their favor on indictments fabricated against the poor. And they charged exorbitant interest rates on loans to the poor as well as high rents on land. But God had warned the Israelis that those things would happen when they demanded from Samuel that he give them a king like the pagan nations around them. God told them that a king would act like pagan kings. His sons and daughters, the nobility, would use their political power to steal and murder with impunity.

  The Bible illustrates the insights from Douglass North and the New Institutional School of economics discussed in chapter 1. To recap, North discovered that the most robust form of government in human history is the traditional system in which a monarch supported by the nobility oppresses the masses. The monarch gives the nobility permission to steal from and murder members of the masses in exchange for their support. The masses put up with that oppression because it keeps other members of the masses from rising above the rest in wealth. In Schoeck’s words, it slakes their envy. The Bible and economics join wickedness and wealth in a common-law marriage and through most of history the union held firm. The wealthy patriarchs were an exception, but an important one. They demonstrate that wealth does not necessarily have to come from evil or cause the wealthy to become evil. The advent of capitalism demonstrated a better way to wealth for all, not just for the nobility.

  The Biblical attitude to wealth

  What is God’s attitude toward wealth for Christians? It has not changed since he blessed Job, Abraham and the other patriarchs. God promised wealth to the Israelis under the Torah government if they remained faithful to him and his laws. Christians have tended to see the fulfillment of that promise as a miracle; God blessed them materially if they were faithful regardless of how wisely or hard they worked. But the condemnation of laziness in Proverbs should have dispelled that idea. And when Christians developed modern science they began to see God working in the natural world through the laws of physics that he had created and not directly. In other words, rain was not a miracle, but the natural world working as God had designed it. In a similar way, it is likely that the material wealth God promised the Israelis would also result from them obeying the principles of economics embedded in the Torah law in the same way they worked in the West after the launch of capitalism. After the initial conquest, the Israelis got their wealth through farming, manufacturing and trade, not through war and looting as the pagan nations did.

  God intends for people to get their wealth through honest work. Solomon held up the ant as an example to mankind:

  Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest. Proverbs 6:6.

  A few Christians think they signal their spirituality through living by “faith,” that is, without working but depending on God to feed them miraculously. Or they refuse to save and instead give away all of their surplus income above that needed for a basic lifestyle while depending upon God to provide for them in emergencies such as illnesses or job losses. However, that appears to be the sin of “temple leaping” as described by Jesus in his temptation. Satan encouraged Jesus to leap from the highest part of the temple to prove the truth of the scripture. He said, “If you are the Son of God, throw yourself down from here, for it is written, ‘He will command his angels concerning you, to guard you,’ and ‘On their hands they will bear you up, lest you strike your foot against a stone,” Luke 4:9-11. Satan was quoting Psalms 91:11, 12. But Jesus responded, “It is said, ‘You shall not put the Lord your God to the test,’” quoting Deuteronomy 6:16. In other words, God does not perform circus tricks for our amusement.

  God intends for people to gain wealth through honest work in agriculture, commerce and trade. Adam worked in the garden before the fall and God expects people to work today, though conditions are more difficult. God wants us to work to provide for ourselves and our families, as Paul wrote in I Timothy 5:8: “But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.” And we are to work enough that we have a surplus to help out those less fortunate: “Let the thief no longer steal, but rather let him labor, doing honest work with his own hands, so that he may have something to share with anyone in need,” Ephesians 4:28.

  God does provide for us in emergencies, but he usually does so by giving us a surplus income to save ahead of an emergency or by persuading others who have saved a surplus to give some of it to us. In God’s economy, someone has to save wealth. In addition, God wants us to save in order to leave an inheritance to our children. He wrote through Solomon in Proverbs 13:22, “A good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous.” The American rugged individualism that dictates we cast our children on their own when they reach the age of eighteen and let them make it by themselves is a pagan idea, closer to the way Spartans raised their children. Finally, raising the funds to start a business today is extremely difficult. Friends and family provide almost all of the initial money young entrepreneurs need to launch, which provides another good reason for Christians to save.

  Today, the government has stacked the financial world against young people. Taxes for Social Security and Medicare transfer wealth from young people to the elderly. Health insurance taxes the young and healthy with higher premiums than their health justifies in order to reduce premiums for sick elderly members. Add welfare payments and military spending and young people pay so much of their income in taxes that saving is much more difficult than i
n the past. In addition, very few young people, even with a college degree, will get ahead in life by working for wages because the inflationary policies (discussed later) of the Federal Reserve ensures that the purchasing power of wages do not keep up with price inflation.

  When we save, we have to put that savings some place. People in Bible times would hoard gold in a safe place, but God encourages his people to invest in productive enterprises. A popular verse from Solomon says, “Cast your bread upon the waters, for you will find it after many days,” Ecclesiastes 10:1. Traditionally, people have interpreted that verse to refer to giving charity and that God will reward the giver in the future in some way that he cannot see today. While the sentiment is certainly true, that may not be the best interpretation of the passage. The quotation above came from the English Standard Version which is similar to the King James. But the New International Version reads, “Send your grain across the seas, and in time, profits will flow back to you.”

  The ESV is the more literal translation while the NIV offers an interpretation. The NIV may be closer to Solomon’s intent in light of the verse that follows: “Give a portion to seven, or even to eight, for you know not what disaster may happen on earth,” in the ESV and “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land,” in the NIV. Verse two appears to be about investing, not charity, for why would one giving charity care what the risks might be? It seems that God through Solomon is giving investment advice. Solomon earned a great deal of his wealth by investing in international trade through shipping, but he kept his investment diversified because he could never tell which ventures would be disasters and which would earn a good return. Following Solomon’s example, Christians should diversify their investments.