God is a Capitalist

Sunday, October 1, 2017

Adam Smith doesn't explain the wealth of nations

Adam Smith wrote in his Wealth of Nations,
That security which the laws of Great Britain give to every man that he shall enjoy the fruits of his own labor, is alone sufficient to make any country flourish... The natural effort of every individual is to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, ... capable of carrying on the society to wealth and prosperity. 
Smith missed two things that made Great Britain unique - individualism and admiration for commerce. He missed them in the same way that a fish might not think about water. Smith grasped that taxes punished farmers in France to the point that they refused to improve their plots. And he understood that rulers and nobility in the Ottoman Empire and China often confiscated the wealth of successful people and so discouraged them from investing.

Rodney Stark wrote in How the West Won,
British culture was favorable to commerce. That made Britain different from most other societies throughout history, which generally regarded commercial activities as degrading.
In his Politics, Aristotle noted that although it might be useful to explore “the various forms of acquisition” of wealth, “it would be in poor taste” to do so. He condemned commerce as unnatural, unnecessary, and inconsistent with “human virtue.” Plutarch thought it especially virtuous that Archimedes, one of the shining lights of ancient inventiveness, regarded all practical enterprises “as ignoble and vulgar.” Cicero wrote with contempt that “there is nothing noble about a workshop.”
That contempt for commerce lasted through all of Europe’s history and was often promoted by the Church until the theologians of the University of Salamanca, Spain made commerce respectable. The Dutch Republic then the British adopted the new attitude toward commerce first.

Individualism came from Christianity as Larry Siedentop explained in Inventing the Individual. Individualism is the opposite and the enemy of envy. The West's standard of living exploded only because Christian individualism suppressed envy and allowed innovation and investment. However, keep in mind that there are two philosophies that roam the streets under the heading of individualism. Hayek explained it in his essay “Individualism: True and False.” The individualism that drove economic growth in the Dutch Republic and Great Britain came from Christianity, as Helmut Schoeck described in Envy: A Theory of Social Behavior. The impostor came from the French atheist “Enlightenment” and gave birth to socialism.

Someone might wonder, then how did China enjoy explosive growth without becoming Christian? There are several answers. Christians did play a major role in China in the 1980s because as the mainland opened up to foreign investment many Christian, ethnic Chinese businessmen from Southeast Asia provided the initial investment that jump-started the economy.

But to a large degree the Chinese have advanced so far because they enjoyed the luxury of importing Western technology and applying it. They didn’t have to invent it as they went along. Japan pioneered that strategy in the late 19th century when it sent armies of engineers to the West to learn the latest technologies.

Without respect for commerce, most people will seek work in government or the military, as they do in most of the poor world where they can steal as much as possible by taking bribes and skimming from government revenue. Without Christian individualism, envy will dominate and the people will punish anyone who succeeds more than the average. 

Yes, nations need secure property, but they also need Christian individualism and respect for business.

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