Are Capitalism’s Critics Right?

The Democratic Socialists of America (DSA) are on the march, it seems. Although they are not quite taking over the Democratic Party, they are pushing Democratic Party politics sharply to the left. While many of their policies, such as opposing reflexive support for the Israeli government, have nothing to do with socialism, DSA activists are avid economic regulators and redistributionists.

One of their chief criticisms of capitalism is the continued existence of poverty. While billionaires may abound in the West, so many other people remain in need. What to do? Call Karl Marx: “From each according to his ability, to each according to his needs.”

It must be admitted that economic freedom and private markets do not claim to solve poverty. Rather, the foundation of capitalism is rewarding the economically productive. The more economic wealth you can generate, whether by conceiving new goods and services, developing new production processes, or creating, marketing, and selling what others have imagined, the more economic wealth you are likely to amass. 

However, if you fall outside of this dynamic circle of exchange, whatever the reason, markets are likely to leave you behind. Hence the continuing tragedy of poverty.

In fact, poverty is common to all economic systems. For most of human history it was the natural condition of most people. Wealth was typically amassed only through oppression and exploitation. It was royal and aristocratic structures, ecclesiastical, political, and military hierarchies, and mercantilist economies that enriched a few at the top. Until the onset of the industrial revolution in the mid-18^th century, most people were poor. Escape from that condition required the misuse of power over others, irrespective of how intelligent, productive, and competent they might be.

Capitalism changed that. Even Marx acknowledged the incredible human fecundity unleashed in this new age. Observed Max Roser of Our World in Data: “Two centuries ago, the majority of the world population was extremely poor. Back then, it was widely believed that widespread poverty was inevitable. But this turned out to be wrong. Economic growth is possible, and poverty can decline. The world has made immense progress against extreme poverty.” 

Free markets and the larger economic systems in which they flourish created a growing middle class and dramatically shrank the rate of poverty. Although this phenomenon first originated in the West, it has continued in what we once called the developing world. Hannah Ritchie, also of Our World in Data, explained: “At the turn of the millennium, 2.2 billion people in the world lived in extreme poverty. In international statistics, this means they survived on less than $3 per day (in today’s money). In the two decades that followed, this number more than halved.”

Progress has not been uniform, lagging most seriously in Africa. Nevertheless, hundreds of millions of people are now vastly better off. It has been the spread of capitalism—through a process known as globalization—that has brought so many people out of extreme poverty. Only the collapse of socialism in China and India, the world’s two most populous nations, allowed their peoples to share in the globe’s increasing material abundance. 

Of course, even these nations have not become fully capitalist. In India the state has only slowly and in limited fashion relaxed its economic control. What is known as the License or Permit Raj still lives. These uncertain reforms continue today. Nevertheless, even sometimes timid steps toward more liberal policies unleashed entrepreneurial initiative and labor productivity.

In China reforms have been much deeper, but the Chinese Communist Party still retains ultimate control over all elements of society. In fact, over the last decade and more General Secretary/President Xi Jinping has reinforced the Leninist nature of the regime, reasserting party management over even nominally private enterprises. Ironically, some on the left laud the People’s Republic of China for dramatically reducing poverty to defend it from Western criticism. But Beijing has done so only by introducing “socialism with Chinese characteristics,” which looks an awful lot like the capitalist-leaning mixed economies of the West. In short, China allowed its people to do more for themselves. It faces the same challenge as the West in addressing the needs of the economically less productive, especially amid a rapidly aging population. Ironically, in doing so the regime has suppressed true Marxists, who act in the name of Mao and advocate real socialism.

Overall, capitalism has changed the essential economic question from why wealth to why poverty. Moreover, the resulting material abundance provides resources to address the challenge posed by those who lack market-oriented skills or suffer from economic disabilities. Which is where Christians should concentrate their efforts.

When Christian scripture addresses poverty, it most often seeks to aid those who are limited in their ability to generate and amass wealth. New believers were expected to work, not rely on their spiritual brethren. Failing to care for one’s family, declared the Apostle Paul, meant one was worse than an unbeliever. The community of faith was to address needs among their members. The Old Testament practice of gleaning as well as New Testament distributions for widows, orphans, and elderly focused on those who were unable to meet their own needs. Ultimately, instructed Paul in his letter to the Galatians, Christians were to “do good to all people.” And to the Corinthians he emphasized the responsibility of believers to give. 

In contrast, nowhere in the Bible is there a call for state-directed income redistribution. This does not mean Christian doctrine proscribes proposals to impose collectivist economic policies to redress perceived economic injustice. However, historical practice leaves little doubt that socialism—real Marxism, in which the means of production is seized by the state and the masses are forced to work as dictated by a revolutionary elite—guarantees a continuation of the sclerotic, oppressive, unjust Ancien Regime, only under a new name. The Soviet and Chinese revolutions left most people poorer, often impoverished and worse. Economic growth required the deaths of Joseph Stalin and Mao Zedong, as well as disappearance of a gaggle of supporting, less distinguished apparatchiks. 

How to deal with poverty? Start by opening up economies to reward the productive, allying with market forces whenever possible. Remove barriers to education, ambition, promotion, and entrepreneurship. Encourage private individuals, communities, and institutions to address the complex human needs that inevitably arise in every society. In humility and restraint turn to state remedies as a last resort, the final of the succession of concentric rings of responsibility beginning with individuals and families and flowing outward through the multitude of mediating institutions that scholar Michael Novak, among others, so eloquently described. And in all cases, exhibit the love which Christ models and the wisdom which God provides.

Doug Bandow is a Senior Fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is author of Beyond Good Intentions: A Biblical View of Politics and The Politics of Envy: Statism as Theology.

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