“Blessed be the rich, for theirs is the kingdom of heaven.” That’s how the Bible would read, many argue, if it supported capitalism. But this idea comes from a subtle misunderstanding of what the free market is and how businesses really gain too much power.
Last month, bishops in the Church of England wrote a letter to U.K. voters presenting a new form of transformative politics—one that breaks from the deadlock of ideology and truly aims at the common good. But in the attempt to warn against both big business and big government, it presented arguments for an approach which would bring back the tyranny of both.
To their credit, the bishops admit that “markets, businesses, and the profit motive” propel “an impressively effective system of distribution in a complex society… [that is] hugely liberating of human creativity.” Nevertheless, they go on to attack the free market as self-destructive.
According to the bishops, capitalism “tends to entrench inequality, diminish human sympathies, and, unchecked, damage the conditions for its own flourishing.” They allege that even Adam Smith argued that “without a degree of shared morality which it neither creates nor sustains, the market is not protected against its in-built tendency to generate cartels and monopolies which undermine the principles of the market itself” (emphasis added).
A free market, however, does not tend toward monopoly—it naturally destroys it. While the market does require a shared basis of morality upheld in the rule of law and social mores, it enables companies which provide better goods at lower prices to compete and succeed, no matter how large or small they are.
Government regulations, however, make it more difficult for entrepreneurs and small businesses to compete with entrenched companies, who have both the money and connections to adapt to the changing whims of the rulers. Mere compliance to federal rules and regulations costs businesses $321.6 billion per year.
Even when regulations attempt to cut down on the preference toward big business, they end up cutting out the little guy. A recent Harvard University study found that Dodd-Frank, the finance reform aimed at ending “too big to fail,” actually made things worse. Since the bill passed, community and local banks have lost shares in the market, and big banks are entrenched as ever.
“If the point of Dodd-Frank was to eliminate TBTF,” the Harvard researchers explain, “it’s clearly failed. Instead, what it has done is prove the point of conservatives, who have consistently argued that regulatory expansion disproportionately impacts smaller players in any market.”
[pq]It is a mistake to consider corporatism the natural result of the free market.[/pq]
Nevertheless, the Church of England’s bishops hint that voters cannot trust markets. While they rightly warn that Christians “should be as reluctant to live under an overweening corporate sector as under an overweening state,” they go on to say “where the state or the market, or any other powers, claim too much and stifle human flourishing, people are divided from one another and God’s sovereignty is mocked.”
The bishops are correct to warn against corporations with too much power, but it is a mistake to consider this corporatism the natural result of the free market. Businesses gain excessive power either through collusion with the state or in a system without an adequate rule of law.
Overweening government can produce this disastrous climate of corporate power. Many laws favor entrenched interests—such as agricultural subsidies where the government pays farmers more than their crops are worth in the market. Other regulations increase barriers to entry—making it more expensive for a small business to hire employees or meet certain (often arbitrary) standards. Without the check of competition, big businesses which are in bed with big government can abuse both workers and consumers.
A free market only works if it is reinforced by the rule of law. Without a minimal state to protect property rights and to enforce contracts freely agreed to, there is no freedom in the market. In this case also, corporations can gain excessive power—but this is not a free market.
Anything that claims a Christian’s primary loyalty above God is an idol, and Christians must reject it. But the market does not prop up big businesses which ignore the good of their consumers. In order to achieve that, you need anarchy or big government.
The Church of England’s letter rightly calls for a new, transformational form of politics. It supports more local control of local issues, and the growth of small civic associations like churches and charities to empower people and curtail big government and big business. One of the best ways to achieve this resurgence of individual control and human flourishing is through the free market.
Rather than attack the market as an idol, Christians should embrace its natural call to service—and in turn, strive to improve the lives of people around them. In a free market, where such service is rewarded with justly-earned profits, human potential is unleashed, and man in God’s service will truly flourish.
