Democratic Capitalism: Friend of Social Justice

We’ve written often about the true nature of compassion, or social justice. The DNA believes that social justice means loving like God does. It includes a call to suffering with one’s poor neighbors. As we have written (here and here and here), this is to be distinguished from many of the political messages on ”social justice” which would more accurately be characterized as statism: government dependency built on aggressive taxation policies.

All of that serves as an important preface to this post, which is offered as a correction. Here’s the correction: Democratic capitalism, more than any other economic system, has been a vehicle of kingdom blessing to humankind.

Consider the world at the beginning of the democratic capitalist era. The watershed year was 1776. Almost simultaneously, Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations and the first democratic capitalist republic came into existence in the United States. Until that time, the classical pattern of political economy was mercantilist. … In the 1780s, four-fifths of French families devoted 90 percent of their incomes simply to buying bread—only bread—to stay alive. Life expectancy in 1795 in France was 27.3 years for women and 23.4 for men.

That’s from the introduction to The Spirit of Democratic Capitalism by Michael Novak. The writer goes on to point out an historical/theological explanation for why free markets have blessed people: Protestant theology lies at the root of capitalism. (As Darrow has written elsewhere, quoting David Aikman in Jesus in Beijing, even Chinese scientists recognized that “The Christian moral foundation of social and cultural life was what made possible the emergence of capitalism and then the successful transition to democratic politics.”)

Democratic capitalism was born in Calvinism. It acknowledges man’s sin nature. Within that Biblical framework it builds a system which works best given the reality of man’s sinfulness.

… it was not to the motivation or virtue of merchants and industrialists that democratic capitalism looked for the social basis of a law-abiding, dynamic, free society. It is the structure of business activities, not the intentions of businessmen, that are favorable to rule by law, to liberty, to habits of regularity and moderation, to a healthy realism, and to demonstrated social progress—demonstrably more favorable than the structures of churchly, aristocratic, or military activities. It is in the interests of businessmen to defend and to enlarge the virtues on which liberty and progress depend. (Novak, page 91)

The Bible is clear about the reality of human sinfulness. Because the fall affected every part of life, failure to acknowledge human sin has economic as well as spiritual consequences. As Novak writes, “Ignorance of economics has probably caused … more harm to more people in more places than any other ignorance.” (Novak, page 57)

When it comes to addressing real needs in the real world, the anti-capitalist slogans and platitudes lack substance.

Democratic socialists are eloquent about visions of virtue. … their images of the participatory future are drawn from the town meetings of the eighteenth century … they are hostile to capitalism but vague about future economic growth. … Their measures invariably enlarge state power. To regard the future as a warm, mothering presence up ahead, and to regard a dreamy socialism as beneficial and humane, is to ignore dozens of historical examples. (Novak, page 27)

In his article, “An Audacious Promise: The Moral Case for Capitalism,” (published by the Manhattan Institute for Policy Research), Yeshiva University Professor James R. Otteson makes this point.

Milton Friedman once said that every time capitalism has been tried, it has succeeded; whereas every time socialism has been tried, it has failed. Yet President Obama has oddly claimed that we’ve tried free-market capitalism, and it “has never worked.” This is rather remarkable. Since 1800, the world’s population has increased sixfold; yet despite this enormous increase, real income per person has increased approximately 16-fold. That is a truly amazing achievement. In America, the increase is even more dramatic: in 1800, the total population in America was 5.3 million, life expectancy was 39, and the real gross domestic product per capita was $1,343 (in 2010 dollars); in 2011, our population was 308 million, our life expectancy was 78, and our GDP per capita was $48,800. Thus even while the population increased 58-fold, our life expectancy doubled, and our GDP per capita increased almost 36-fold. Such growth is unprecedented in the history of humankind. Considering that worldwide per-capita real income for the previous 99.9 percent of human existence averaged consistently around $1 per day, that is extraordinary.

What explains it? It would seem that it is due principally to the complex of institutions usually included under the term “capitalism,” since the main thing that changed between 200 years ago and the previous 100,000 years of human history was the introduction and embrace of so-called capitalist institutions—particularly, private property and markets.

The idea that one person benefits only by the loss of another has often been thrown at capitalism. As Darrow has shown many times, this is built on the false notion of zero-sum thinking:  resources are materials in the ground with strict physical limitations. The world is a pie: if you take a bigger slice I get a smaller one. Otteson touches on this point as well.

… the voluntary exchanges that take place in the free-enterprise system are positive-sum, not zero-sum—meaning not that one person benefits only at another’s expense but rather that all parties to the transaction benefit.

Read Otteson’s article here. Buy Novak’s book here. The public discussion needs more of the biblical view of economics.

- Gary Brumbelow

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4 Responses to Democratic Capitalism: Friend of Social Justice

  1. Another really excellent book on this topic (in my opinion) is Money, Greed and God, by Jay W. Richards.

  2. Jon says:

    I had to share this one on Facebook. :-)

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