{"id":6137,"date":"2009-11-04T06:09:42","date_gmt":"2009-11-04T06:09:42","guid":{"rendered":"http:\/\/blog.beliefnet.com\/jesuscreed\/2009\/11\/economics-at-the-jesus-creed-m-7.html"},"modified":"2009-11-04T06:09:42","modified_gmt":"2009-11-04T06:09:42","slug":"economics-at-the-jesus-creed-m-7","status":"publish","type":"post","link":"https:\/\/www.beliefnet.com\/columnists\/jesuscreed\/2009\/11\/economics-at-the-jesus-creed-m-7.html","title":{"rendered":"Economics at the Jesus Creed: Michael Kruse 9"},"content":{"rendered":"

\"WallStreet.jpg\"<\/span> <\/p>\n

\n

Eighteen years ago, Pope John Paul II wrote in Centesimus Annus<\/i>:<\/p>\n

 <\/p>\n

“Can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this model which ought to be proposed to the countries of the Third World which are searching for the path of true economic and civil progress?<\/p>\n

 <\/p>\n

The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property, and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy.” But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.” (Centesimus Annus<\/i>, 42)<\/p>\n

 <\/p>\n

This quote highlights a frequent difficulty in discussing economic systems: What is capitalism?<\/b><\/p>\n<\/div>\n

<\/div>\n
What do you think about how I’ve described capitalism? What is missing from the discussion? How do you respond to the quote by John Paul II?<\/span><\/div>\n


\n<\/p>\n

<\/p>\n

 <\/p>\n

At a
\nrudimentary level, Peter Berger’s definition works as well as any: “Production for a market by enterprising
\nindividuals or combines with the purpose of making a profit<\/i>.” (The Capitalist Revolution<\/i>, 19) I think most
\neconomists would agree that capitalism includes at least the following:<\/p>\n

 <\/p>\n

Specialization of Labor<\/i> – Specialization
\nis heightened.  <\/span>Labor is oriented
\ntoward earning wages as contributors toward the creation of products versus laborers
\nindividually creating products for sale.<\/p>\n

 <\/p>\n

Market Exchange<\/i> – Exchange has long been
\nwith us but it pervades capitalism. People once produced most of what they
\nconsumed and traded as a supplement. Now we acquire what we consume and supplement
\nit with production our own goods. Prices for goods are set by supply and
\ndemand.<\/p>\n

 <\/p>\n

Private Property<\/i> – The means of
\nproduction are privately owned and managed by private individuals and firms
\nbased on long-term risk and reward.<\/p>\n

 <\/p>\n

Emphasis on Capital<\/i> – Historically, land
\nand labor were the primary means of production. Capital is the dominant means
\nin capitalism. Capital is wealth placed in productive service. A firm’s
\nphysical plant and equipment are typical examples but it can take other forms
\nas well. <\/p>\n

 <\/p>\n

The emergence
\nof capital as a major factor began at least by Fifteenth Century in Europe with
\nocean bound trade expeditions. These undertakings were risky and expensive. The
\nDutch and the English developed forerunners of modern corporations allowing
\npeople to pool money and share risk. The big transition came with the advent of
\nsteam and combustion engines in the late Eighteenth Century. These new power
\nsources enabled construction of unprecedentedly large manufacturing facilities
\nrequiring, by historical standards, astronomically large amounts of private wealth
\nto be placed in productive service. The construction of the Erie Canal, begun
\nin 1817, was probably one of the first private ventures in the United States
\nrequiring significant capital, but railroads and manufacturing quickly followed
\nsuit.<\/p>\n

 <\/p>\n

No economy
\nexists in a vacuum relative to other cultural values. While the American
\neconomic system is clearly capitalist, it is a mistake to equate capitalism
\nwith the American economy. Other cultures have adopted capitalist models but
\nhave differing concepts of justice. That influences how they evaluate the
\nefficacy of capitalism and what adjustments should be made to the economic
\nrules of the game. <\/p>\n

 <\/p>\n

Critics of
\ncapitalism often speak of the dangers of “unbridled” capitalism. While it is
\npossible to have insufficient regulation it is not possible to have unbridled
\ncapitalism. That would be anarchy. At least some minimal level of regulation is
\nrequired if for no other reason than to protect property rights, enforce
\ncontracts, and adjudicate disagreements. The question is what degree and kinds
\nof regulation should exist beyond this minimalist level. <\/p>\n

 <\/p>\n

Economist
\nPaul Heyne used to use a traffic analogy to highlight important dynamics of
\neconomies. He invited us to ask if an economy is more like air traffic
\ncontrollers managing flights in and out of an airport or is it more like an
\nurban traffic network.<\/p>\n

 <\/p>\n

“… Air
\ntraffic controllers can reasonably be said to manage the movement of commercial
\nairline traffic: they impose upon all the pilots flying commercial places a
\ncentral plan that dictates precisely for each one the time of take-off, the
\nspeed and path of ascent, the route to be followed, and the time, speed, and
\npath of descent and landing. But no one manages the flow of vehicular traffic
\non the streets of a modern city in this way. Drivers choose their own times of
\ndeparture, routes to follow, speed of travel, maneuvers along the way, and
\nfinal destination, reporting their plans to no one and continually revising
\nthese plans as they see fit. Drivers are not completely free to do anything
\nthey please, of course. They are constrained by the decisions of other drivers
\nin the vicinity. There are also “rules of the game,” some of them very specific
\nbut others quite vague, that limit choices drivers may make. Within these
\nrules, however, and sometimes a bit outside them, drivers pursuing their own
\ninterests with very little concern for the interests of others (largely because
\nof extremely limited knowledge of those interests) coordinate their
\ninteractions and arrive safely and expeditiously at their destinations.<\/p>\n

 <\/p>\n

No one
\nmanages this process in the sense of controlling outcomes. Traffic engineers
\ncan influence the process by changing the timing of lights, altering speed
\nlimits, or adjusting parking regulations, and over time they can increase their
\ninfluence through street construction and closure. But they can neither predict
\nnor control the specific results. The most they can aim for is smooth and rapid
\nflow. An air traffic controller is an oikonomos<\/i>.
\nThere is no oikonomos<\/i> in the world of
\nurban traffic, neither on the streets nor in the control centers of traffic
\nengineers, and anyone who aspired to become an oikonomos<\/i> of urban traffic world would have failed to understand
\nthe complexity of the problem.”  <\/span>(“Are
\nChristians Called to be “Stewards of Creation?”, Stewardship Journal<\/i>, Win. 1993, 19)<\/p>\n

 <\/p>\n

Metaphorically,
\npure capitalism is the urban traffic network while pure socialism is the air
\ntraffic control model. (The distributivist “make everything local” model would
\nbe, I suppose, the no transportation model.) In reality, all economies are some
\nmixture. Other challenges enter the mix that are not captured by this metaphor.<\/p>\n

 <\/p>\n

For example,
\ncapitalism tends to create large corporations. They are needed for their
\nproductive capacities in some industries but their size presents the
\nopportunity for a variety of abuses. That requires a strong government to check
\nabuse. Yet, strong government tends to invite corporate powers to work the
\npolitical system in their favor precisely because it is so powerful.<\/p>\n

 <\/p>\n

Cultural
\nvalue systems also come into play. For instance, relative to the United States,
\nmost European nations have flatter income distributions due to redistributive
\npolicies, but also less mobility up and down the economic ladder. The United
\nStates has a wider income distribution but greater mobility up and down the
\neconomic ladder. Europe has tended to value stability while the United States
\nhas tended to value dynamism. Which is better? There are trade-offs either way.
\nThe bottom line is that there is no universal model of capitalism we can point
\nto in application because many of the specifics are worked in decisions about
\ntrade-offs based on cultural values.<\/p>\n

 <\/p>\n

The
\nchallenge for theological reflection on economics systems is that the term
\n“capitalism” carries considerably more baggage for some than I have described
\nin this post. Capitalism for some names an ethos of greed, selfishness,
\nconsumerism and waste (none of which are essential to capitalism but are values
\nfed into the system.) Therefore, they recoil when economists and others speak
\naffirmatively about “capitalism.” Similarly economists view visceral objections
\nto capitalism (meaning to them, division of labor, market exchange, private
\nproperty, and capital) as ideological close mindedness. I continue to be amazed
\nat the number of books and articles I read that bring capitalism into a
\ndiscussion without defining it.<\/p>\n

 <\/p>\n

Capitalism
\nis often characterized as an ogre that oppresses people with consumerism. More
\naccurately the challenge of capitalism is not oppression but seduction. Some
\nsay that the core sin of capitalist societies is greed, but along with Jay
\nRichards I think it is gluttony. We don’t know how to control our appetites. <\/p>\n

 <\/p>\n

Another
\nchallenge leveled at capitalism is that it is based on survival of the fittest.
\nIt promotes individualism. Division of labor and trade disconnects us from the
\nfinal product and from the natural resources used in production. Yet another
\nfeature of evolution is that of emerging complexity and cooperation in
\norganisms. Cells cease to be single cell creatures and emerge into multiple
\ncell creatures with individual cells becoming ever more specialized. It can be
\nargued that division of labor and markets help integrate humans (cells) into a
\nmore evolved highly cooperative creature. <\/p>\n

 <\/p>\n

I’ve gone
\nlong (again). It is impossible to capture all the nuances I want to in one post
\nbut hopefully there is enough here to generate some discussion. <\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

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