One of the raging debates in American Christianity today has to do with whether President Obama is a socialist.
Much has been written about how God is not against people being rich, therefore implying that any attempt to regulate how people make riches is tantamount to opposing God’s economic policies, therefore it must be sin. Much of the debate over God, riches, and poverty frankly comes from the Old Testament, in which it is pointed out how Abraham was rich and had many servants, as did many of the patriarchs and people such as Joseph, second-in-command of Egypt. People are quick to point out how Nicodemus and Joseph of Arimathea were quite rich. And so, it is argued that God is in favor of capitalism. But, the problem is that the argument seems to assume that God is in favor of laissez faire capitalism. What is laissez faire capitalism? It is a theory of capitalism that arose in the late 1600’s. Please note that it was considered to be a theory of economic liberalism because it advocated ceasing any state control on the economy.
Laissez-faire activists support little or no state intervention on economic issues, which implies free markets, minimal taxes, minimal regulations, private ownership of property and free circulation of labor. They support certain kinds of negative liberty as opposed to positive liberties, such as wealth redistribution, given by the state. However, some laissez-faire proponents, like progressive libertarians prefer negative income tax as a replacement to the existing welfare system, arguing that it is simpler and has fewer of the “perverse incentives” of “government handouts”.
Their opposition to wealth distribution is based on the belief that it takes capital from the most productive sectors of the economy and gives it to the less productive sectors, and is enforcing economic egalitarianism, which reduces productivity and the incentive to work. They may further argue that any temporary equality of outcome gained by redistribution would quickly collapse without coercion because people have different levels of motivation and native abilities, and would make different choices based on their differing values. Material inequality, they argue, is a necessary outcome of the freedom to choose one’s own actions without imposing on others.
But, when one looks at the Old Testament, is that really what God supported? Well, there are several laws in the Old Testament that question whether God actually supported that type of capitalism.
Please realize that laissez faire capitalism is not the only type of capitalism. In fact, we have not had a full laissez faire capitalistic system in the USA since the late 1800’s. The rise of the robber barons in the USA and the writings of Charles Dickens in England pointed out that an unfettered capitalism often leads to a system of monopolies that oppress the majority of the country in incredible ways. Thus, some of the antitrust laws were passed under President Teddy Roosevelt, a Republican. Basically, since the latter part of the late 19th century and most of the 20th century, we have retained capitalism, but gone away from the laissez-faire conception.
So, what other types of capitalism exist? Well, one of them is called Ordoliberalism. Let me remind you that, when first developed, laissez faire capitalism was considered to be a liberal economic philosophy. Thus, ordoliberalist capitalism sees itself as a continuation of that liberal policy. (In passing, this should remind you that terms can change their meaning over time. What was considered liberal in earlier centuries is considered conservative today.) But, what is ordoliberalist capitalism?
Ordoliberal theory holds that the state must create a proper legal environment for the economy and maintain a healthy level of competition through measures that adhere to market principles. The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) power will emerge, which will not only subvert the advantages offered by the market economy, but also possibly undermine good government, since strong economic power can be transformed into political power. Quoting Stephen Padgett: “A central tenet of ordo-liberalism is a clearly defined division of labor in economic management, with specific responsibilities assigned to particular institutions. Monetary policy should be the responsibility of a central bank committed to monetary stability and low inflation, and insulated from political pressure by independent status. Fiscal policy—balancing tax revenue against government expenditure—is the domain of the government, whilst macro-economic policy is the preserve of employers and trade unions.” The state should form an economical order instead of directing economical processes. . . Wilhelm Röpke considered Ordoliberalism to be “liberal conservatism,” against capitalism in his work Civitas Humana (A Humane Order of Society, 1944). Alexander Rüstow also has criticized laissez-faire capitalism in his work Das Versagen des Wirtschaftsliberalismus (The Failure of Economic Liberalism, 1950). The Ordoliberals thus separated themselves from classical liberalism.
In other words, an ordoliberal supporter and a laissez faire supporter are both capitalists. Where they differ is in what is the role of the government in regulating the economy and how much concern the government should take for the populace at large, by way of regulations governing employers (for instance, allowing unions, safety regulations, etc.).
It is very important that you grasp that both the laissez faire economist and the ordoliberal economist believe in capitalism.The reason it is important is that if you listen only to the most conservative of Republicans, they will have you convinced that the two alternatives in economic policy are either laissez faire capitalism or socialism. That is not true. Many previous Republicans, such as Teddy Roosevelt, were not socialists, but were against laissez faire capitalism. For instance, “After 1906 he [Teddy Roosevelt] attacked big business and suggested the courts were biased against labor unions.” Teddy would have been classified as an ordoliberal capitalist today. In other words, one can be a Republican and a capitalist, but be for state oversight of the economy. “Socialism refers to any one of various economic theories of economic organization advocating state or cooperative ownership and administration of the means of production and distribution of goods . . .”
Like most theories, there is a spectrum of beliefs included within the terms “laissez faire,” “ordoliberalism,” and “socialism.”
At one extreme, laissez faire capitalism almost slips into libertarianism. The emphasis on lack of state control is so strong at that end, that there would almost be no guaranteed government services, all government services would be subject to being closed at any time. Notice the persistent proposals to “privatize” social security, medicare, healthcare, prisons, etc., which come out of a belief that any free market solution will be better and more efficient than any government solution. At the other extreme, some laissez fairecapitalists have no problem with the government running certain services, as being proper to government and allowed provided they are part of the “social contract,” are subject to revision as needed, and are the minimal services necessary for the smooth running of society.
At one extreme, an ordoliberal capitalist can insist that the government should only make those laws necessary to prevent monopolies, ensure the swift and safe completion of commerce, and protect the people against depredations by economically powerful interests. At the other extreme, some ordoliberalists would slip over into government price and wage controls, etc. Notice, however, that ordoliberal capitalists are NOT for government ownership of the means of production. However, an ordoliberalcapitalist would have no problem with there being essential services that are best run by government. Moreover, an ordoliberal capitalist would very well argue that those government services need to be insulated against the ups and downs of a market economy. Please note that our Federal Reserve system is an example of ordoliberal capitalism.
At one extreme, a socialist can allow for the private or cooperative ownership of some means of production, while having others as needing to be state-controlled. At the other extreme, which would be marxism, there would be no private ownership of the means of production or land. The economy would be strictly controlled by the state. There are several types of marxism, but Communist Marxism is a form of statism. The marxist countries are North Korea, Cuba, the People’s Republic of China. China has had to implement some non-marxists reforms in order to become the economic powerhouse it is becoming.
Please note that in the current political debate, very conservative Republicans are basically laissez faire capitalists and are painting any attempts at government oversight as being tantamount to marxism. This is very dishonest to say the least, and is purely a political ploy. No American, Canadian, Asio-Pacific, or European government holds to marxism in any form or intends to go towards marxism in any form. No First World country holds to socialism or intends to become socialist. But, what is true is that there is an overlap between “liberal” Republicans and “blue-dog” Democrats in that both would tend towards a conservative expression of ordoliberal capitalism. This is why those two groups tend to band together on economic and budget voting.
So, the big question is what God might think about economic policy. Well, as I suggested earlier, I think that as we look at the Old Testament, we might get a glimpse as to how God might have set up parts of an economic policy. And, you might be surprised at what you find!
===MORE TO COME===
We are free to run things down here as best we see fit.
Why on earth owuld God want us to travel down that failed road of socialism when it has been the source of so much failure and tyranny for the lives of people in this world?
Capitalism ain’t perfect, but it beats socialism every time and affords people freedom and opportunity.
Capitalism: the unequal distribution of blessings.
Socialism: the equal distribution of misery.
– Winston Churchill
Well, I admit that the headline was a teaser headline. However, please note what I pointed out. There is more than one type of capitalism. Moreover, there are no currently socialist First World countries. There are however, other First World countries that are trying out other types of capitalism. Again, your reply shows what I pointed out. In the USA, for political purposes, one political group (no, not a party, a subgroup within that party) has tried to make anything other than laissez faire capitalism equivalent to socialism. That is not anywhere near true.
But, read on, I will have part two posted within a few minutes.
Good points, Father O.,
I agree.
We must speak in generalities, and we must speak to degree.
Looking forward to part II.
One of the raging debates in American Christianity today has to do with whether President Obama is a socialist.
That first sentence is a pretty clear indicator of what is wrong with American Christianity.
I would agree with you there. We get hung up on conspiracy theories rather than looking for solutions to our problems. Frankly, does it matter whether President Obama is a socialist? It does not. He can strongly influence laws, but he cannot pass them. And, all indications are that he is not a socialist, unless one defines socialism as any economic philosophy that opposes laissez faire capitalism.
And, that is precisely the problem. The Religious Right has bought into that definition. Capitalism is seen only as laissez faire capitalism. Thus, the drive to privatize even what used to be considered normal government services, such as prisons. It is why civilian companies were given what used to be normally military tasks in Iraq. The assumption behind those moves is laissez faire capitalism, that the market can best deal with the costs even of war.
And, as one wag put it, it is why the Religious Right is pro-life only until someone is born. After that the Religious Right is caveat emptor. More than once I have had a Religious Right person argue with me that it is the Church’s job to care for the poor, not the State’s. I love it when they say that because I immediately open up my history book and point out to them that, in that case, the Church has been a bigger failure than the State ever was.
There is no doubt that hospitals, schools, western universities, etc., come from the Church. However, if one actually reads the Church Fathers, one finds out that they were started not only in order to care for the needy but also to shame the State for its failure to work with the needy.
“…all indications are that he is not a socialist, unless one defines socialism as any economic philosophy that opposes laissez faire capitalism.”
Speaking of Pres. Obama and his desire to take over banks, the largest car co. in the country, the health care system, and God knows what else…I’d say that if he is not a socialist he is pretty darn close.
Another term may fit better.
What is it called when government controls private industry?
I am not trying to be funny when I say that it depends on whether the intention (and subsequent practice) is to be a temporary control or a permanent control. For instance, read the following quote from The Econ Review:
“August 15, 1971. In a move widely applauded by the public and a fair number of (but by no means all) economists, President Nixon imposed wage and price controls. The 90 day freeze was unprecedented in peacetime, but such drastic measures were thought necessary. Inflation had been raging, exceeding 6% briefly in 1970 and persisting above 4% in 1971. By the prevailing historical standards, such inflation rates were thought to be completely intolerable.”
Please note that President Nixon is well known in history as a Republican capitalist president. Nevertheless, he was not a laissez faire capitalist. His wage and price controls actually ended up lasting 1,000 days.
Under certain types of capitalism, temporary controls are allowable. Under socialism, the control of the means of production, etc., are permanent.
Right.
I wasn’t a big fan of Nixonian business controls…carried on by Carter.
We’ll see if the government (with it’s huge appertite for control) will relinquish it.
I doubt it. But I have been wrong before.
Father Ernesto,
First, an important quibble: “Laissez-faire capitalism” is itself an anachronism in one important sense: Karl Marx cioned the term “capitalism” in the 19th century, while “laissez-faire” and “free markets” came to the fore in the 17th century.
As an economic Liberal, I object to using Marxian terms to describe an economic philosophy which argues for minimal government intervention.
Second, a quibble about the comment thread: Nixon is by no means known as a conservative Republican (at least, he’s not known as such among conservative Republicans). He is a Big Government, interventionist, Nanny-state, me-too-as-long-as-we-hold-power Rockefeller-esque Republican. Steve Martin cites above Nixon’s business controls; that only hints at the amount of Nixonian intervention.
For a reall, honest-to-goodness “conservative” Republican, look to Silent Cal Coolidge. Skip past Reagan (the blessed one, may his name be honored).
Actually, I like Reagan. He was more a pragmatist than committed to one specific economic philosophy. We could use significantly more pragmatism today. I think that one of the great American cultural attitudes is our attitude that we do what works. We should not forget that lesson.
However, as to the use of my term laissez faire, let me cite this quote: “A. Oncken (Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden, 1866) indicates d’Argenson used the ‘laissez-faire’ term firstly in his 1736 Memoires and then in an article in the 1751 Journal Oeconomique (the term’s first known appearance in print).” The term is older than Karl Marx as you indicated. But, you are correct on Das Kapital being the coinage for capitalism. However, capitalism has become a term now used even by advocates of free-market economies. I suppose I could always say the longer laissez faire economic philosophy, but then most would not hook it with today’s arguments easily.
Yes, to continue the quibbling over etymology: laissez faire may date to the 16th or 17th century. No argument there. My little nit-pick (which, as everyone knows, makes the sweater look so much cleaner) is that the term capitalism was advanced by Marx and Engels (?) in the late 19th century. We did not refer to people who advocated private property and limited government intrusion as Capitalists until after Marx became fashionable.
I think the preferred term to capitalism would be “free market” — more letters, but fewer syllables. 🙂
Hmm, but an ordo, ah, uhm, capitalist would be for an open market under appropriate controls to prevent excesses and to ensure fairness and competition. But the market would not be entirely “free” to do what it wished. I am thinking here of things like safety regulations, minimum wages, monopoly prevention, etc. Would this still be considered a “free” market advocate in today’s political language?
In other words what I am saying is that it may be true that Marx and Engels coined the word capitalist, but, even so, has that now become the preferred word that encompasses both the laissez faire and the ordoliberalist (and the Keynesians, etc.)? Words do change both their meanings and connotations.
After all, when we say that someone was “tarred and feathered” by the media, or when we say that someone was “broken on the wheel of life” we are referring to rather horrid torture techniques, but the terms no longer have any such association.
Father O.,
Thought provoking as usual.
I will comment as I go along to the next 3 installments.
First, I’m not sure where exactly President Obama and some of the members of congress fall in the pantheon of economic descriptions but I am positive of two things.
He and they are certainly not laissez faire anything.
He and they are certainly not ordoliberal capitalist or if they are they are on the extreme that believes in maximum government control.
I do not believe the president is a communist but a lightweight socialism is a possibility.
One thing I am positive of in all of these economic debates and that is that the people making the decisions are ALL wealthy and the bad decisions will not effect them in any way except to possibly be voted out of office.
It is very easy to mess with other peoples lives even altruistically when you know that it will no effect your own life or family in any way.
I came across this article while googling ordo-liberalism and socialism. May I point out that, central authorities are often times very insulated from the everyday processes of the people whom their policies affect most. Typically, a redistributive policy such as derivatives taxation, a hot topic for the Market currently, which is meant to reduce the U.S. deficit might discourage job creation by creating an aversion to investment. These finance ministers, Timothy Geithner and Ben Bernanke et al are susceptible to political pressure to curb consumption whereas the common worker or small business owner is susceptible to physical starvation, credit starvation, and lack of physical resources, etc. that affect his actual ability to consume. Or, if you prefer the Keynesian vulgate, to spend and invest.
What I simply wish to point out is that while ordo-liberalism is probably the most well-balanced statist political philosophy, it still suffers from the information problem that Communism and lighter democratic socialism also suffer. And a government made up of “experts” and “financial savants” isn’t necessarily keen all by itself to produce the best results for a society. These government officials, who are insulated by high wages, high pensions, et al, to entertain what microeconomic sense would dictate as false pretensions, and generally absurd notions, lack the competition that would otherwise improve the State’s own marketplace of ideas. The legal framework of our electoral system favors money and not ideas. This is perhaps the most important institutional deficiency in the United States federal-republican system that, at least as it occurs to me, fuels the populism and the anti-marketism and hithero “anti-social” sentiments in what is otherwise a de facto social-market economy.
Sigh, yet another post by a person who equates anything that is not laissez faire capitalism to a statist philosophy and therefore to communism and socialism. I note how quickly the post descends into the implied claim that the purpose of ordoliberal capitalism would be in part to lower consumption at the risk of “physical starvation, credit starvation, and lack of physical resources.”
First, ordoliberal capitalism is just that, one of the varieties of capitalism and not one of the statist philosophies, such as fascism or communism. One can only define it as statist by redefining the meaning of statist to mean that any action that the government takes regarding business automatically makes that government a statist government.
If you look at the philosophy behind this type of capitalism, you will see that its purpose is precisely to ensure a free-market and to stay out of the way of the control of supply and demand. In fact, this variety of capitalism rose up during Teddy Roosevelt’s time because the market was being controlled and was not free. But, it was not the government that was controlling the market, but rather the great robber barons and their monopolies. Thus, the first governmental rules were passed to break up those monopolies and to prevent price-fixing and price-gouging, thereby returning the market to a more free position.
Many government regulations since then are not statist, but meant to ensure a more level playing field and to prevent control of the economy by any one group. I will repeat that only the wildest stretch of meaning can equate laws designed to keep the market free with a statist philosophy whose purpose to to control the market. Those are two different philosophical approaches, only one of which is statist.