Tag Archives: Free Enterprise

Why social conservatives should support free market capitalism

The free enterprise system should not be adopted simply because it is the best system for creating wealth. The best reason to support free market capitalism is a moral reason. Arthur Brooks, President of the American Enterprise Institute, and a Christian, describes the moral argument for free market capitalism.

Excerpt:

It might seem that the best case for free enterprise is the material one. Free enterprise lets people make more money, buy more and nicer stuff, and have a greater degree of comfort. The freer our economy is, the more competitive the US economy is vis-à-vis the rest of the world. And so on.

But these aren’t our best arguments. There is another reason, a transcendent reason, for which free enterprise matters most—and this is the case we all must be able to make today.

We all learned early on in school that the Declaration of Independence claimed for each of us the unalienable right to “life, liberty, and the pursuit of happiness.” Note that the founders didn’t assert a right to be happy; such is the domain of tinpots and crackpots, of 1984’s “Ministry of Plenty” and Josef Stalin’s aggrandizing self-description as the Soviet Union’s “Constructor of Happiness.” So what, in practice, does this right to pursue happiness mean?

It means the right to define and earn our happiness through our ideas, hard work, and gumption, to earn our success by creating value honestly, in our own lives and in the lives of others. It doesn’t mean the pursuit of a big lottery win or an inheritance. Those bring money, but not happiness. And a mountain of evidence shows that after a fairly low threshold, more money doesn’t make us happier. The best case for free enterprise has nothing at all to do with money or material goods or wealth. Those are just icing on the cake. We must stop talking about free enterprise as just an engine of wealth creation. It’s much more than that.

In short, the secret to the pursuit of happiness is earning our own success; creating value with our lives and in the lives of others. This earned success is the fruit of hard work and just rewards in a system built on merit. Only in a free enterprise system is effort and innovation rewarded over connections and predation. (And this means that we have to draw a distinction between free enterprise, which is based on opportunity and competition between ideas, and corporate cronyism, which is just another form of statism masquerading as free enterprise.)

Here are 3 reasons why I think that social conservatives should support free market capitalism.

1) Right to work

It’s very important for Christians to have an economic system in place that allows them to work without having to promote anti-Christians ideas. But when government gets too big, what happens is that Christians are no longer free to take any job they want, and still keep a clear conscience. In some states, you have to join a union which uses your union dues to elect Democrats, who very often are liberal on social issues. Or, you have big government forcing Christians to perform abortions against their consciences. Or, you have big government forcing Christian organizations to provide health insurance plans that cover abortions and contraceptives. That’s why Christians need to vote against big government regulations on employment – we need the freedom to work at a job that does not violate our consciences.

2) Right to earn

It’s very important for Christians to keep what they earn so that they have the maximum amount of money to make decisions that make sense for them, according to their consciences. Take the example of day care and education. The big government statist is constantly trying to to create more and more government-run day care and public schools. Why? They want to take money away from families so that they cannot afford individualized private and parochial schools, and lump them all into government run schools that are more “equal”. The problem is that this is bad for Christians who want more oversight into what their children learn. For example, what sense does it make for a Christian man to pay for day care and public schools when he marries a teacher who becomes a stay at home homeschooling mother for his children? He has to pay for day care and public schools he will never use, and it eats into the money he has to afford a stay-at-home homeschooling mom. Christians should oppose a day care and education system run by a secular leftist government. They will never reflect the values of Christian parents.

3) Right to spend

It’s very important for Christians to have the freedom to purchase products and services that make sense in their worldview. Take the example of health care. Secular leftists would love to force private medical insurance companies to cover things like abortion and contraception as health care. In some states, these things are specified as mandatory for every health care plan. That means that Christians who purchase health care are being forced to pay for services like abortion which they will never use themselves. This is nothing more than the redistribution of wealth in order to lower the cost of abortions for people, in order to encourage them to be sexually active before they are able to accommodate children. Christians need to oppose this – we do not want to have to pay for things that go against our consciences.

So, in addition to the reasons that Brooks mentioned (the happiness of earning your own way and serving others), it’s important for Christians to understand how free market capitalism fits into their plans. We do not want to support big government, especially when big government so often is not compatible with Judeo-Christian values. In the free market, it is much harder for ALL the businesses to conspire together to block Christians from working, earning and spending according to their consciences. We must resist top-down control of the free market so that we have the liberty to do what we ought to do in order to be virtuous.

Wayne Grudem debates Richard Glover on the Bible, poverty and foreign aid

Two horses fight it out, may the best horse win!
Two horses fight it out, may the best horse win!

A great episode of the Unbelievable podcast. This is a great debate. I really enjoyed it. All three speakers were excellent putting forward their points. It’s nice to hear an American voice, a British voice and an Australian voice debating an important issue. HIGHLY RECOMMENDED.

Details:

Wayne Grudem is a theologian known for his conservative approach to both doctrine and economics. His new book “The Poverty of Nations: A Sustainable Solution” (co-authored with economist Barry Asmus) makes the case that pouring aid into developing countries is a failed strategy. Grudem debates whether the Bible supports free market, capitalist economics with Australian economist and theologian Richard Glover who wrote a critique of the book for the Australian Bible Society.

The MP3 file is here.

Summary:

Grudem:

  • The Bible speaks to all of life, including economics, stewardship, government
  • The study of economics helps us to understand how to take care of the poor
  • My job is to apply the teachings of the Bible to all of life

Brierley:

  • What’s your thesis in the book?

Grudem:

  • A good system is one where the poor have the opportunity to earn and save from their labor
  • Book is a response to a Kenyan couple Grudem met at a London conference on business and Christianity
  • Book is not concerned with how individuals and groups can do charity to help the poor
  • Our church already does that and we support individuals and groups doing charity
  • The book is concerned with how should nations be transformed in order to grow economically
  • What should the laws, policies and cultural beliefs of a nation be in order for it to not be poor?
  • The book lists factors that have moved nations from poverty to prosperity in different times and places
  • The thesis of the book is this: government should set their people free to be able to produce more
  • We advocate freedom in economics: freedom to work, freedom to save, freedom to start businesses
  • We believe that this free enterprise view is consistent with the Bible in a number of places
  • E.g. – private property is good for prosperity (thou shall not steal) but forbidden by communism

Brierley:

  • What about the church sharing in communities in Acts 2 and Acts 4?

Grudem:

  • That is not redistribution of wealth among individuals and businesses by a secular government
  • Those passages showed that there was voluntary sharing among Christians, which is not communism

Brierley:

  • What’s wrong with Grudem’s book?

Glover:

  • The book emphasizes the Bible and the goal is to help the poor in poor countries
  • Criticism 1: the book doesn’t engage with non-free-market perspectives on economics
  • Criticism 2: the book doesn’t survey all that the Bible says about economics

Brierly:

  • For 1) what is one of the views that is not considered?

Glover:

  • Jeffrey Sachs says that nations need a leg up before they can grow economically
  • Ha-Joon Chang says that free enterprise was not how the wealthy nations became wealthy

Grudem:

  • We do engage with other points of view, especially Jeffrey Sachs in the book
  • The trouble with leftist views on economic development is that it does not work in practice
  • NO COUNTRY has even been lifted out of poverty by foreign aid
  • He says we don’t cite enough from the wisdom literature: we have 64 citations in the index
  • He says we don’t cite enough from the gospels: we have 42 citations in the index
  • He says we don’t cite enough from the epistles: we cite 22 of 27 epistles in the index
  • Some economists won’t criticize cultural and moral values that hurt prosperity
  • As Christians, we think that moral and cultural values are part of the problem that needs solving

Brierley:

  • What about foreign aid?

Grudem:

  • Foreign aid doesn’t help: a lot of the money goes into government and rulers can be corrupt
  • Instead of encouraging people to start businesses, it tells people to go into government to get aid money
  • Economists (lists 3) are saying that foreign aid entrenches corrupt government in power, does no good

Brierley:

  • If it’s not working, should we keep doing it?

Glover:

  • When there is an immediate need, we should do it, even if it is not a long-term solution: we need both

Brierley:

  • Should we stop foreign aid completely?

Grudem:

  • Voluntary charitable giving from individuals and churches to help poor countries is good
  • Me and my co-author are both active on our church board that helps poor countries with urgent needs
  • Food and doctors are urgent needs, and we should help, but it doesn’t lift countries out of poverty
  • We need a long-term solution that helps poor countries produce their own food and doctors
  • We are criticizing 1) government to government aid and 2) IMF/World bank to government aid
  • We have had pushback because 500,000 people make a living from this foreign aid industry
  • No country has ever been lifted out of poverty into sustainable prosperity
  • That’s the definition of insanity: continuing to do the same thing that has never worked

Brierley:

  • Does the Bible support free enterprise as a way of creating sustainable prosperity?

Glover:

  • When I said the Bible was absent from his book, absent was a bad choice of words
  • But the hundreds of references he listed were not dealth with *in depth*
  • In the Scriptures, God is the one who provides (e.g. – in Ephesians, Sermon on the Mount)
  • The Bible is less focused on his people making money, and more focus on sharing basics, like food
  • Secular governments should just take it from people who have food and give it to hungry people
  • In 2 Cor 8-9, Paul talks about voluntary sharing so everyone will be equal

Brierley:

  • Does 2 Cor 8-9 undermine the free enterprise system you champion in the book?

Grudem:

  • The sharing in the Bible solves cases of urgent need, it does not lift countries from poverty to sustainable prosperity
  • Some older translations say “equality” in 2 Cor 8:13-14, but newer translations (e.g. – ESV) say “fairness”
  • The Greek word is translated as “fairly” the only other place it appears in the NT (Col 4:1), in every translation
  • God uses the means of human work and productivity to provide (daily bread is baked, doesn’t just fall from Heaven)
  • In general, there’s no provision in Scripture for a person to be dependent on donations for their entire lives
  • God promises Israel fields and mountains to tend and mine, but prosperity is from work, not depending on others

Brierley:

  • Does the Bible support this focus on work?

Grudem:

  • Working is highly praised in Scripture, (lists Bible passages that favor work over dependency)
  • Countries that were exposed to this notion of work and productivity have been more prosperous

Glover:

  • Jeffrey Sachs and other development economists don’t say you can be prosperous through dependence
  • They say that it is a necessary part of leading to nations out of poverty into poverty

Grudem:

  • It’s never worked. What nation has become prosperous through foreign aid?

Glover:

  • There are lots of nations, especially in Africa, where foreign aid has helped lift them out of poverty

Grudem:

  • Name one country in Africa where foreign aud has lifted them out of poverty into sustainable prosperity

Glover:

  • I can’t think of one right now.

Grudem:

  • Our book contains a map of Africa and we looked at every nation’s per capita income
  • No nation has been able to rise out of poverty through dependence on foreign aid
  • The only close one is Botswana, but they have abundant freedoms, Christian morals, less corrupt government
  • So Botswana is the best case and they became prosperous through becoming productive, not foreign aid

Brierley:

  • Is he right to say that charity is a short-term solution, but that it’s not good long-term for prosperity?

Glover:

  • Yes, and work is a very important focus in the Scriptures as he says.
  • But since the Fall work has been much harder, and may not have the outcomes that we would like

Grudem:

  • I also believe in emergency aid for when catastrophies happen, like floods and famines
  • But dependence on foreign aid enriches corrupt rulers and does not create the productivity that leads to sustained prosperity

Brierley:

  • Can foreign aid be used to give poor nations a leg up on becoming prosperous?

Grudem:

  • Dambisa Moyo, Oxford-educated economist from Zambia, says stop the aid, it’s doing more harm than good
  • Jeffrey Sachs’ view is that foreign aid hasn’t worked yet, but just keep trying a bit more
  • What works: limited government, rule of law, fair courts, documented property rights, low taxes, stable currency
  • People are creative and want to work, we just have to get government out of the way and let people work, earn and save

Brierley:

  • Is this free enterprise system supported by the Bible?

Glover:

  • The wealthy nations of the world did not become wealthy through productive work and free enterprise policies
  • Ha-Joon Chang: free enterprise policies have never brought a country from poverty to wealth
  • E.g. – wealth is created through tariffs (not by innovating and by economic freedom?)

Grudem:

  • I’ve read Ha-Joon Chang’s book, and his examples are very selective and limited
  • Index of Economic Freedom: the freest countries are the most prosperous, the least free countries are the most poor
  • When you look at macro data, instead of very selective examples, the free enterprise system is best for prosperity

Glover:

  • The book doesn’t do enough to engage with leftist economists (he doesn’t say which ones)
  • Just because nations who are free are rich, doesn’t mean freedom causes productivity
  • There are parts of the Bible that doesn’t support the free enterprise system (he names none)

Grudem:

  • The Bible is focused on work not dependency, and charity not government redistribution
  • The best way to help the poor in other countries is by encouraging work and productivity

How a small, poor country became the top economy in Latin America

South America Map
South America Map

One way to learn about whether specific economic policies work or not is to look at different countries that have tried them. Believe it or not, patterns do emerge about what works and what doesn’t work, as you look across different times and places. I’ve been reading a book called “Money, Greed and God” with my friend Carla, which talks about what has worked to reduce poverty.

The author basically outlined two approaches. In the first approach, the government 1) confiscates the wealth of the most productive workers, 2) nationalizes (takes control of) the businesses of the most successful entrepreneurs, 3) restricts trading between citizens and with other countries, with minimum wage, price controls and tariffs. In the second approach, the government does the opposite: 1) lowers taxes on the most productive workers, and 2) lets entrepreneurs compete to provide goods and services to consumers, and 3) lowers restrictions on internal trading and trading with other countries, e.g. – eliminating minimum wage, tariffs and price controls.

Let’s take a look at two Latin American countries that went in opposite directions. Venezuela and Chile. Then we can finally find out which policies actually achieve results for the people.

Here is how Chile started out in 1973.

PROBLEM: Price controls and tariffs:

Prices for the majority of basic goods were fixed by the government in 1973. Even though Chile was and still is a small economy, the level of protection­ism was high. By the end of 1973, the nominal average tariff for imports was 105 percent, with a maximum of 750 percent. Non-tariff barriers also impeded the import of more than 3,000 out of 5,125 registered goods. Just as economic theory predicts, large queues in front of stores were usual in Santiago and other cities in Chile as a result of the scarcity caused by price controls.

PROBLEM: Government taking over private businesses:

The decline in GDP during 1973 reflected a shrinking productive sector in which the main assets were gradually falling under government control or ownership through expropriations and other government interventions in the economy.

PROBLEM: Deficit spending and government printing money:

The fiscal situation was chaotic. The deficit reached 55 percent of expenditures and 20 percent of GDP and was the main cause of inflation because the Central Bank was issuing money to finance the government deficit.

SOLUTION: lower or eliminate restrictions on trade:

The most important economic reform in Chile was to open trade, primarily through a flat, low tar­iff on imports. Much of the credit for Chilean eco­nomic reforms in the following 30 years should be given to the decision to open our economy to the rest of the world. The strength of Chilean firms, productive sectors, and institutions grew up thanks to that fundamental change.

SOLUTION: let competing entrepreneurs in the private sector provide goods and services to consumers:

A second fundamental reform was to allow the private sector to recover, adding dynamism to the economy. In fact, important sectors such as elec­tricity generation and distribution and telecommu­nications were still managed by state companies. After we implemented a massive privatization plan that included more than 50,000 new direct share­holders and several million indirect (through pen­sion funds) shareholders, these companies were managed by private entrepreneurs that carried out important expansion plans.

SOLUTION: let people take responsibility for their own lives instead of depending on government:

The 1981 reform of the Chilean pension fund system deserves special mention. Under the leader­ship of Minister José Piñera, an individual capitali­zation account program was designed with specific contributions, administered by private institutions selected by the workers. The Chilean Administra­doras de Fondos de Pension (Pension Fund Administrators or AFP) has been replicated in more than 20 countries, and more than 100 million workers in different parts of the world use these accounts to save for retirement.

SOLUTION: allow parents to choose the school that fits their needs from competing education providers, and push school administration down from the federal government to the municipal level, where it would be more responsive to voter’s needs:

In 1981, Chile introduced a universal educational voucher system for students in both its elementary and secondary schools. At the same time, the central government transferred the administration of public schools to municipal governments…  The financial value of the voucher did not depend on family income.

RESULTS: And I was able to find a nice short, description of how all that worked out for them on the far-left Wikipedia, of all places:

The economy of Chile is a high-income economy as ranked by the World Bank, and is considered one of South America’s most stable and prosperous nations, leading Latin American nations in competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.

In 2006, Chile became the country with the highest nominal GDP per capita in Latin America. In May 2010 Chile became the first South American country to join the OECD. Tax revenues, all together 20.2% of GDP in 2013, were the second lowest among the 34 OECD countries, and the lowest in 2010. In 2017, only 0.7% of the population lived on less than US$1.90 a day.

According to the Heritage Foundation, Chile is ranked as the 18th freest economy in the world. The World Bank ranked Chile as the 50th highest GDP per capita for 2018, just below Hungary and above Poland.

Now, you can contrast those results with Venezuela. I have been blogging about Venezuela for years on this blog, and documenting how they raised taxes, banned guns, nationalized private sector companies, raised tariffs, and increased regulations. They are now ranked JUST ABOVE NORTH KOREA for economic freedom – #179 out of 180 countries measured. Basically, they did the opposite of everything that Chile did – transferring power away from parents, workers, business owners, churches and municipal governments to the powerful centralized federal government.

Wikipedia explains how Hugo Chavez took over in 1999 and enacted a communist revolution.

More:

Since the Bolivarian Revolution half-dismantled its PDVSA oil giant corporation in 2002 by firing most of its 20,000-strong dissident professional human capital and imposed stringent currency controls in 2003 in an attempt to prevent capital flight, there has been a steady decline in oil production and exports. Further yet, price controls, expropriation of numerous farmlands and various industries, among other government authoritarian policies… have resulted in severe shortages in Venezuela and steep price rises of all common goods, including food, water, household products, spare parts, tools and medical supplies; forcing many manufacturers to either cut production or close down, with many ultimately abandoning the country as has been the case with several technological firms and most automobile makers.

They confiscated private property, took over private sector businesses, implemented tariffs and price controls, redistributed wealth via massive welfare programs, and pushed all decision-making out of families and municipal governments up to the federal government. By depriving the producers of their earnings, the country caused massive shortages of goods and services, to the point where people are fleeing the country, consuming zoo animals, and selling their bodies as prostitutes in order to get food and water.

Application

In the next election, we are not picking a tribe because of how they make us feel about ourselves. We are not choosing in order to see ourselves as “nice” and “not nice”. We need to look at specific policies being proposed, and see what works and what doesn’t work. The examples of Chile (rags-to-riches) and Venezuela (riches-to-rags) are helpful for voters who want to get RESULTS instead of FEELINGS.

I’ll leave you with a list of links from previous posts so you can see how communism worked out for Venezuela.

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