God is a Capitalist

by Roger McKinney

  Finally, God calls some Christians to be self-employed. Paul encourages slaves to gain their freedom if they can: “Were you a bondservant when called? Do not be concerned about it. But if you can gain your freedom, avail yourself of the opportunity,” I Corinthians 7:21. Working for wages is not slavery, but wage earners have much less freedom to respond to opportunities than do those who own their own businesses. Also, most wealthy people in the United States earned their wealth by growing a business over twenty to thirty years. Not only do the wealthy pay most of the taxes, but they contribute the most to charities and churches.

  Peter, Andrew, James and John worked in family-owned fishing businesses. Matthew was a tax collector, but he did not work for the state. Tax collecting until very recently was a business, called today “tax farming,” in which the owner bid in competition with others for the right to collect taxes. His profit came from the amount above the bid that he could collect from citizens. Paul was a self-employed tent maker. Joseph was not just a carpenter, as tradition suggests. The Greek word for Joseph’s profession indicates that he was more like a construction contractor and that included carpentry. As the oldest son, Jesus would have worked in the family business and become the chief executive after Joseph died. Jesus’ use of the construction business and finance in parables to illustrate aspects of the Kingdom of God suggest that he approved of the market process because it is unlikely he would have depicted the kingdom using examples of things he disapproved of.

  Biblical government

  Many Christians think the government should be the primary tool with few limits for shaping culture. For example, the temperance movement in the late nineteenth century that produced prohibition in the 1930s sincerely thought that by making the sale of alcoholic drinks illegal they could rid the nation of the evils caused by alcoholism, such as poverty and abuse of women and children. Prohibition was an effort to change human nature through the law very much as socialism but on a smaller scale. It did not produce the intended results and created more problems as it rewarded organized crime for supplying the booze people wanted. But proponents of that philosophy of the state never give up. The war on drugs is a descendant of prohibition. It is over forty years old and has failed to even curb drug use in the United States, but it has succeeded in ruining entire nations, such as Columbia and Mexico, where U.S. purchases of illegal drugs finance the private armies of drug lords. But through most of history people did not have such faith in the power of the state to do good things.

  Almost all monarchs, from ancient Egypt through Rome and Spain until the Dutch Republic, insisted that the gods, or God, had given them unlimited power and the people accepted those claims. The Church was the first institution that sought to limit the state by insisting on individual rights. Beginning with the Magna Carta, people fought long and bloody battles to limit the power of the state. The people of the Dutch Republic of the sixteenth century, followed by the United States, then Great Britain enjoyed the greatest freedom from state power and coercion in the history of mankind. So how did the West transition from a centuries-old fight against the state, to freedom then back again to unlimited state power? The details are in chapter 7, but essentially, it happened through the decline of traditional Christianity and its replacement by socialism.

  But God had much more limited ambitions for human government. Theologians claim that God created human government in the covenant with Noah recorded in Genesis chapters eight and nine, in which he instructed that anyone who murders another should be executed for his crime. Next, God showed in his Torah constitution that the role of the government was to settle disputes between people through the courts and to protect the life and property of the citizens. Paul affirmed that in Romans chapter 13 where he limits state authority to the punishment evil doers. As mentioned in chapter 4 of this book, the scholars at the University of Salamanca in Spain distilled the state’s role to the protection of life, liberty and property. Some refer to that as the “night watchman” state. Thomas Jefferson’s formula in the Declaration of Independence, “life, liberty, and the pursuit of happiness” was a variation on the Salamancan theme, although his substitution of happiness for property has caused endless confusion.

  The United States was born with a night watchman government under the Articles of Confederation then created a more powerful state with the Constitution, but still very limited by the standards of today. The Constitution limited the federal government to the powers designated within it. But history makes it clear that the document was unloved from the beginning. Jefferson noted that he had no power under the Constitution to buy Louisiana from France, but since no one opposed it he went through with it.

  Andrew Jackson violated the Constitution when he conducted ethnic cleansing by forcing most of the tribal people to relocate to Indian Territory, which became the state of Oklahoma. The Supreme Court ruled that Jackson did not have the authority for the removal of the tribes, but Jackson merely challenged the Court to enforce its decision without him. Lincoln virtually shredded the Constitution in order to punish the southern states for rebelling. Wilson turned the country into a police state in order to force the nation into World War I. Still, the country remained close to the Biblical form of government until the election of Franklin D. Roosevelt. The Supreme Court rolled back on some of FDR’s policies until the President threatened to expand the size of the court and pack it with his appointees. The Court capitulated and the size and power of the federal government exploded.

  In each case, presidents could get away with violating the law of the Constitution only because the majority of people approved of their policies. Just as dictators must not stray too far from the will of the majority or face revolt, even more so in democracies must the leadership respond to the majority. And if the majority wants the state to violate its own laws it will. In the 1930s under Roosevelt, the American people committed essentially the same rebellion as the ancient Israelis when they demanded a king like the nations around them. The majority wanted a powerful central government because it had embraced socialist ideas to replace the traditional Christian ones it had abandoned, ideas that had taken millennia to discover and instantiate.

  Today Americans have become so accustomed to an overbearing government that talk about restricting any of its power frightens them. Of course, politicians give the highest priority to keeping the public frightened about something so they can ride to the rescue, for which the people will erect a monument to the valiant politician who saved them from imaginary evils. And the media plays its role as courtesans by amplifying the imaginary villains sewn together by politicians, often fabricating the devils themselves. As a result, most Americans insist the state must protect us from the evils of monopolies, pollution, child labor, old age, illness, inequality and many others aspects of life.

  Corporations have been a popular villain for socialists since the nineteenth century. The growth of Standard Oil under John D. Rockefeller, Andrew Carnegie’s steel company and Cornelius Vanderbilt’s railroads and shipping business convinced many that Marx had been a true prophet when he foresaw capitalism degenerating into monopolies in every industry that raised prices and starved workers. Those companies, which were organized as trusts, inspired the anti-trust legislation designed to protect the nation from monopolies.

  The fact that those companies lowered the prices of their oil, steel and transportation did not affect the popular imagination at all. In fact, the press considered lower prices the greatest evil of all because they drove out of business competitors who lacked the skills to produce at the lower prices. Once they achieved monopolies, the press argued, they would raise prices to the heavens and reap immoral profits. The fact that high profits always lured competitors to enter a free market, reduce prices and destroy monopolies did not sway them. Neither did the fact that no monopoly has ever lasted in a relatively free market without the power of the state behind it. The disastrous history of the monopolies given to railroads by the state should have ta
ught people some basic economics in the opinion of historian Thomas DiLorenzo in How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present.

  The trusts came close to achieving monopolies in their industries, but we need to keep in mind that they sold new technologies and had small markets. It is easy to achieve a monopoly on a new technology. Today, the federal government grants a patent, which is a monopoly on the production of a new product for decades. However, as soon as the patent expires competitors rush into the market and reduce prices. Most extraordinary of all is the fact that people can look around them and see the longstanding fact that no monopolies exist that result from competitive markets; governments have created all of the monopolies that exist – the electric power, water, sewer and cable television companies and corporations with patents.

  Another frightening evil that socialists proclaim will destroy the nation without government intervention is pollution. They credit the Environmental Protection Agency for cleaning up the country after large corporations dumped their waste in our rivers and clouded our cities with smog. Mainstream economics teaches in introductory classes that pollution is an inescapable externality that requires state action to resolve. Pollution was not a problem before the middle of the twentieth century because the population was smaller so nature could clean itself up. Pollution only became a problem when the population grew large enough that industry could pollute more than nature could clean up, and the population could grow only because capitalism increased food production. But protecting property rights is a function of the government, not the markets, and pollution is nothing but the harming of someone’s property. Pollution is an example of government failure, not market failure. Before the EPA, courts adjudicated conflicts between property owners and polluters with the property owners getting the penalties assessed by judges. Under the EPA, the property owners get nothing and the government gets the penalty fees.

  But courts can resolve only those pollution issues related to property rights. If no one owns something, such as rivers, the ocean and the atmosphere, courts cannot find a solution. The states and federal government own the lakes and rivers and control the air, so those became the most polluted parts of the country. Those governments needed to enforce their property rights against the polluters but refused to do so. A simpler and more just solution would have been to give property rights over waterways and the atmosphere to private groups and let them fight for protection in the courts. Instead, they created an enormous bureaucracy in the EPA and expanded the powers of the federal government. States soon followed with their own environmental protection agencies. Today, the EPA has grown into a monster that takes property from citizens without compensation when it finds any endangered species or water on private property.

  Did not the government end the cruelty of child labor? Actually, no, it did not. After all, most parents did not force their children to work outside the home because the parents were evil; they needed their children to work to help put food in their mouths. Had the state outlawed child labor before parents could feed their children, many would have starved to death. Higher wages for workers through rapidly increasing productivity brought about by “evil” corporations investing in better tools for workers made most Americans wealthy enough that they no longer needed their children to work to help buy food. Higher standards of living for the poor killed child labor, not the state. The true motivation for ending child labor through law was to relieve competition by children for adult males for jobs that socialist saw as scarce.

  Mainstream economists promote state intervention in the economy to remedy market “failures.” They set up an idyllic market they call “perfect competition,” measure the real world market against it and find it lacking. Because the real world does not match up to their fictional utopia, they claim the real market fails. But the market never had the purpose of achieving the fantasies of Ph.D. economists. Free markets exist to instantiate property, because property requires that the owner be able to dispose of it as he sees fit and only free markets make that possible.

  Behind the market failure argument lurks the unspoken assumption that bureaucrats can do what the market cannot. For that to be the case, bureaucrats and the politicians who appoint them must be wiser, technically more proficient and have better morals than the public from which they are chosen and the businesses they regulate. Most Americans cling to that irrational faith in government and mainstream economists encourage it. But Hayek and Mises have demonstrated that, even supposing the superiority of bureaucrats, they could never assemble the tacit knowledge necessary to perform better than entrepreneurs at making the market work. Bureaucrats are always working blind compared to entrepreneurs.

  As mentioned earlier, economics must have a Biblical perspective on human nature for it to be consistent with Christianity, and Christians know that no one can be as perfect as mainstream economists and the public assume bureaucrats to be. Economist James Buchanan won the Nobel Prize for creating a competing vision of the nature of bureaucrats known as the Public Choice School of political economy. Buchanan taught that politicians and bureaucrats are exactly like the voters who put them in office: they are self-interested. In other words, politicians campaign on promises to put aside ambition and work selflessly for the common good, but when they get into office they work to advance their own careers and personal wealth. That is one reason so many politicians enter office as middle class and leave as millionaires.

  Getting elected requires spending millions of dollars on campaign organizations and advertising. Few politicians have the money needed or want to spend it if they do, so all politicians are deeply indebted to campaign donors, especially large corporations. Of course, corporations do not contribute to campaigns out of patriotism; they want something from politicians. Maybe the corporation is a defense contractor and needs an edge getting the next contract. Or the donor owns land next to a freeway and needs an exit ramp to give it value. Or the politician sets on the committee that appoints regulators to the agency that oversees the contributor’s industry.

  The latter leads to what the public choice school calls regulatory capture. It works like this: voters give power over industries to politicians who set up regulatory agencies to do the day-to-day work of monitoring and enforcing. But who will politicians choose to staff the agencies? There are so many good people to choose from. Corporations simplify the decision by suggesting people from their industry. After all, who knows the industry better? Very quickly the industry being regulated has captured the regulatory agency, which then creates regulations that benefit the largest members. Although always promoted as serving and protecting public health and safety, a great deal of new regulations does little more than reduce competition for the largest corporations. All agencies have been captured, but it is most visible in finance where much of the staff of the Federal Reserve banks, the Treasury Department and the Securities and Exchange Commission comes from the top levels of the largest banks. Also, many government employees who started out as bureaucrats look forward to high paying jobs in the industries they regulated as bureaucrats, but only if they help out the corporations they oversee why still a bureaucrat.

  In addition to the conflicts of interest inherent in campaign contributions, politicians succumb to the pressure of lobbyists, for which corporations spend hundreds of millions of dollars each year. A study by the University of Mississippi’s Robert Van Ness and Matthew Hill, along with Mississippi State’s G. Wayne Kelly discovered that each dollar spent on lobbying Congressmen, “can increase shareholder wealth by roughly $253 million per year. That equates to a 22,000 percent return on the investment in lobbying,” according to Aaron Kiersh in “Lobbying is a Lucrative Investment, Researchers Find Using CRP Data.”

  Christians must firmly plant their perspective of politicians on a Biblical view of human nature without exempting politicians. The Public Choice School is closest to the reality of human nature described in Scripture. But when conf
ronted with reality, the reflex is to try to reform the campaign contribution system and limit the influence of lobbyists. We have tried that for decades with no success because only the naïve follow the laws for campaign finance and there are hundreds of ways to get around them. For example, a potential donor might sell a piece of land to the target politician for half the market price while a buddy buys it from him for twice the going rate. It is completely legal and the politician can claim to merely be good at real estate deals. Other donors will act as investment advisors and pool the politician’s own money with that of others in a risky investment scheme in which the politician makes a 200 percent return on his investment while the others lose the nest eggs. Or donors will give book deals with exorbitant advances or pay outrageous speaking fees to politicians.

  The monster socialists fear most is inequality, but regulatory capture by large corporations increases income inequality in the country. Economists call the process “rent seeking.” When they capture an agency, corporations get special treatment and regulations that protect the largest from competition by smaller competitors. Less competition increases the profits of large corporations because they can charge higher prices at the expense of consumers and pay higher salaries to executives.

  Regulatory capture and public choice theories have been summarized in Adam Smith and in Bruce Yandle’s Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics. Baptists want liquor sales prohibited by law on Sunday for religious reasons. But they have unlikely allies in the bootleggers who also want liquor sales banned on Sunday so they will become the only suppliers of alcohol. Applied to politics, the Baptists are environmentalists and advocates for consumer health and safety; corporations play the role of bootleggers.