To some, it’s the foundation of modern civilization, deserving of full credit for every luxury and amenity we enjoy. To others it is the epitome of oppression, not simply leaving the poor behind, but trampling them in its wake.
The word alone is enough to spark controversy and vitriol. Yet despite all the dissension over capitalism, I am skeptical of its inherent morality or immorality, especially after a week at AEI’s Values & Capitalism Summer Honors Program. The course that I participated in evaluated the morality of democratic capitalism and left me with a much richer understanding of the matter.
Admittedly, when I entered the week, I was a firm believer in the inherent morality of capitalism, due to its predication on voluntary transactions, incentive for production, and wealth generation. I expected to have this view further substantiated at a place like the American Enterprise Institute, known as a bastion of free market principles. Clearly, the evidence was in favor of capitalism and I felt sure the brilliant scholars at AEI would only validate what I already knew to be true.
I was wrong.
Well, at least I wasn’t entirely right. Dr. Michael Strain, the AEI scholar leading our discussions, appeared uninterested in indoctrinating us in capitalistic ideology. Instead, he took a Socratic approach, encouraging us to critically evaluate every aspect of capitalism in an intellectually honest way, not ignoring any damning considerations. Nor did we skimp over the saving graces of capitalism. We attempted to evaluate its morality objectively, considering all aspects of what that might entail. And we did.
Of course, any discussion of capitalism must start with Adam Smith. A brilliant philosopher and the father of modern economics, Smith did not conceptualize capitalism, but was the first to accurately characterize the markets he observed. The brilliance of capitalism, he argued, is that it assumes the self-centeredness of each person and attempts to construct a system around that fact. Capitalism, founded upon voluntary exchanges, turns my selfishness into altruism as I attempt to make goods which you are interested in–not because of my beneficence, but because I know you will pay me for it. The baker does not cook delicious pastries out of the goodness of his heart alone (although I wouldn’t mind the aroma of fresh croissants), but because he is sure he will be paid for his labor.
Simultaneously, competition directs resources to high-demand sectors. As Smith explains, “each [person] is only too eager to take advantage of his neighbor’s greed,” so that any attempt to raise a price is met with undercutting competition. If profits are large in one sector, new sellers enter the market to capitalize on them, driving the profits down. In doing so, resources are efficiently allocated to booming sectors and away from lagging ones, pruning the efficiency of society in the process.
In all of this, wealth is being generated. Previously, under mercantilist and feudalist ideology, wealth could only be taken or given, but not created. When a society commits to production, however, wealth can be created. If property rights and contracts are enforced, transactions can make both parties better off. A farmer can breed two cows into four, doubling his livestock, without anybody else having to lose the wealth he gains. By this generation of wealth, capitalism has lifted millions out of poverty.
All of this is true, but it is an incomplete picture. The most valuable perspective by far during this week was not that of myself, other students, or even Dr. Strain, but the Pope. Admittedly, that is not a sentence that you will read from a protestant very often, but I respect good arguments when they are made. In Centesimus Annus, Pope John Paul II certainly does that.
He makes very clear his opposition to socialism and the necessity of private property because of human nature. Our sin natures are too strong to be trusted to act beneficently for strangers. Yet he is simultaneously reluctant to embrace capitalism.
First, capitalism fails to adequately care for the environment. In economic terms, negative externalities exist. As a Christian, this is a clear violation of the creation mandate to care for the world we inhabit. He calls for government intervention to maintain this planet we call home.
Second, Pope John Paul II decries capitalism’s inability to respect human dignity. He contended for “just wages,” labor laws, and trade unions. While condemning class struggle, the Pope also vied for the economic and social conditions he deemed necessary for justice. For displaced workers, he esteemed the value of education and technical training, or “human capital” in economic terms. He defended the dignity of both work and the workers.
He asserted the necessity of state intervention and protection for the sake of the poor, citing the inherent value of each individual. Pure capitalism and Marxism, on the other hand, both see individuals as mere cogs in the wheels of society.
While Marxism fails to meet people’s physical needs, he argues, capitalism promises materialism in its place. “Insofar as [capitalism] denies an autonomous existence and value to morality, law, culture, and religion, it agrees with Marxism, in the sense that it totally reduces man to the sphere of economics and the satisfaction of material needs.”
All of this, I believe, is because the generation of wealth, capitalism’s greatest strength, is also its undoing. Wealth and material goods entice our hearts not simply by making available the great vices of sex, greed, and gluttony, but also by setting worthless trinkets before our eyes and convincing us we need them. Capitalism can generate wealth to meet our physical needs, but it lies when it promises to meet the desires of our souls.
It would seem that in one matter, even the Pope and a protestant like myself are in full agreement: Capitalism cannot fix the hearts of men. Only the Gospel of Jesus Christ can.