James Tonkowich
May 14, 2009
“The history of capitalism is a history of slavery, child labor, war, and environmental pollution.” So said an anonymous critic quoted by Dr. Jay Richards in his new book Money, Greed, and God: Why Capitalism is the Solution and Not the Problem.
In the light of current events, the “failure of capitalism” seems axiomatic, making the title of Richards’ book look a bit out of date. Look, for example, at the sub-prime mortgage crisis, the drop in housing prices, and the crash of the stock market that brought the crash of the retirement hopes of thousands. Then there is the probable bankruptcies of Chrysler and GM, rising unemployment, and overall economic uncertainty.
The suggested responses are all statist: more government control of the markets, that is, government control of the price of everything from healthcare to corn, interest rates to executive compensation.
Richards argues before Christians make any sudden moves to reject capitalism and the free market, we need to think carefully about the way the world actually works. That means thinking carefully about economics. “Economic truths are truths,” he writes, “But they don’t stand outside God’s dominion. Being a Christian doesn’t mean you can disregard economic facts.”
Rather than understanding economic facts, Richards argues, we most often believe economic myths. He identifies eight and his book has eight chapters, one chapter busting each of the myths. They are:
1. The Nirvana Myth (contrasting capitalism with an unrealizable ideal rather than with its live alternatives)
2. The Piety Myth (focusing on our good intentions rather than on the unintended consequences of our actions)
3. The Zero-Sum Game Myth (believing that trade requires a winner and a loser)
4. The Materialist Myth (believing that wealth isn’t created, it’s simply transferred)
5. The Greed Myth (believing that the essence of capitalism is greed)
6. The Usury Myth (believing that working with money is inherently immoral or that charging interest on money is always exploitive)
7. The Artsy Myth (confusing aesthetic judgments with economic arguments)
8. The Freeze-Frame Myth (believing that things always stay the same—for example, assuming that population trends will continue indefinitely, or treating a current “natural resource” as if it will always be needed)
The piety myth is, to pick one example, an attractive one for any person of good will to believe. Richards uses the example of foreign aid to poor nations.
Several years ago, he writes, rock musician Bob Geldof organized “Live 8,” to encourage G8 nations—the wealthy of the world—to help poor African nations with a combination of debt relief and foreign aid. Critics, says Richards, pointed out that such a scheme, “could encourage corrupt and wasteful governments to continue in their ways, reward countries with high debt while doing nothing for poor countries with no debt, discourage future credit and private charity, and generally mess up accountability for bad behavior.”
Geldof’s response to those critics was pure piety, “Something must be done even if it doesn’t work.”
Richards comments:
Geldof meant well, but he wasn’t thinking well. The two options he considered—useless help or useful help—aren’t jointly exhaustive. Almost anything we do can have one of three outcomes. It might help, it might make no difference, or. . . it might hurt. Geldof forgot the third possibility. When it comes to foreign aid, unfortunately, hurt is usually what happens.
The same can be said of rent control and our current credit crisis. Rent control had a pious desire to help the poor by keeping the price of apartments low—artificially low. The unintended consequences? Many apartment buildings were turned into commercial space or condominiums while most of the rest degenerated into slums since the return on investment was now insufficient to pay the price of proper upkeep. Despite good intentions, the poor were the big losers in this attempt to help.
The current credit crisis began with a pious desire to encourage low-income home ownership. The unintended consequence was government-enforced degradation of lending requirements. The lenders responded by making the loans to low income people who were not credit-worthy and then securitizing those loans in order to kick the risk out the door as soon as possible. It worked for a while, but predictably it didn’t work forever. Distorted markets snap back to true with brutal honesty and it is the poor once again who are left with the worst consequences of good intentions.
Richards notes that Etienne Gilson quipped, “Piety is no substitute for technique.”
I never took an economics course in college and at seminary the little I learned was wrong. I have been working on remedial economics ever since. Most Christians I know and nearly all Christian leaders I know are as woefully ignorant of economics as I was.
Jay Richards’ book is a user-friendly corrective. Reading it is—if I may put it this way—very much in our “self-interest” (see chapter 5).
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