God is a Capitalist

Saturday, May 18, 2019

Another Billionaire Bites The Invisible Hand That Feeds Him

Source: AP Photo/Michel Euler

Hayek wrote in Intellectuals and Socialism that, “The main task of those who believe in the basic principles of the capitalist system must frequently be to defend this system against the capitalists--indeed the great liberal economists, from Adam Smith to the present, have always known this.”

Economist’s Love Of Fed Is Really Love Of Power

Source: AP Photo/Andrew Harnik

Harvard economist Greg Mankiw thought President Trump’s nominations of Herbert Cain and Stephen Moore to the Federal Reserve Board would sully the reputation of his mistress. Sounding like a teenage girl with a crush, or sportscasters talking about their favorite running back, Mankiw wrote a gushing love letter to the Federal Reserve for the New York Times:
I have a confession to make: I love the Federal Reserve. And I suspect that, in their heart of hearts, most other economists love the Federal Reserve, too. But I fear our love may be in peril...
At this point, you might be saying: “Whoa, Nelly! Have you already forgotten the financial crisis and Great Recession?”
No, I have not. As I wrote just last year, the Fed’s decision not to rescue Lehman Brothers when the investment bank faced a liquidity shortfall in September 2008 was arguably an unforced error. And though we’ll never know for sure, subsequent events might have been less tragic if the Fed had acted more boldly. 
Institutions, like people, should not be judged by the standard of perfection. They should be judged by whether they are doing the best they can. By this standard, I give the Fed a top grade.

“Fairness” vs. Realistic Economics

Source: AP Photo/Stephen Brashear

Last week I wrote about how John Rawls built his definition of justice on envy. This week I want to focus on the economic weaknesses in A Theory of Justice and Justice as Fairness: A Restatement. Clearly, I don’t have the intellect or stature to challenge someone of Rawls’ reputation. But don’t worry. I don’t try. I have nothing to say that I didn’t get from people with the reputations and status to challenge Rawls, such as Helmut Schoeck, Ludwig von Mises, and Friedrich Hayek.

Rawls’ books are beautiful philosophy. He reasons well and if you accept his assumptions, his conclusions follow naturally. He’s not as good as the people mentioned above at expressing himself, but he’s not too difficult to understand.

Rawls’ ideal society is similar to the one the great German economist Wilhelm Roepke promoted in his book A Humane Economy: The Social Framework of the Free Market. Like Rawls, Roepke wanted to limit large corporations in favor of small to medium sized businesses with more people being self-employed. Roepke thought self-employment offered a healthier lifestyle than working at a corporation, but he didn’t offer a plan to achieve his goal other than to look at taxation. Rawls wanted to redistribute wealth from the successful to the poor in order to provide them with the education and capital to own their businesses with the goal of limiting the influence in politics of wealth.

However, one of the biggest problems in the developing world is that most businesses are small to medium size, for different reasons that what Rawls gives, but we can see the effect. Productivity remains stagnant so standards of living can never improve. The state owns the few large corporations, which suffer all of the problems of state ownership, as China demonstrates daily. State owned corporations lose money and need to be subsidized by tax revenue. Amtrak and the US Post Office offer other examples.

Some corporations need to be large. It would be difficult for a mom-and-pop shop to build airliners, cars, electrical generators, locomotives or many other things. Who decides which ones are large and how large they can be? Rawls would leave it to the state to decide, meaning he thinks bureaucrats will do a better job than the market, which has never been true. Politicians and bureaucrats aren’t angels or smart. They suffer from the same sins as common folk and are easily corrupted, as Nobel laureate James Buchannan demonstrated with Public Choice theory.

Rawls’ theory suffers from a lack of realism much like that of mainstream economics. He assumes that people are perfectly rational instead of acting like real people who are irrational and infected with many evils. Like most socialists, he assumes that people are born innocent and if raised and educated in his artificial society they will remain so. He suffers from Hayek’s Fatal Conceit, the idea that we can ignore human nature, history and tradition and, using pure reason, recreate morality and social organization in our own image, foresee all of the consequences, and perfect humanity.

For example, Rawls wrote, “Under these conditions we hope that an underclass will not exist; or, if there is a small such class, that it is the result of social conditions we do not know how to change, or perhaps cannot even identify or understand. When society faces this impasse, it has at least taken seriously the idea of itself as a fair system of cooperation between its citizens as free and equal.”

We know from history that Rawls’ scheme will result in a large underclass. His plan is not so different from previous attempts at socialism that we can’t project what will happen. Envy and the fear of it will cause political representatives to punish success. That will reduce investment and wealth creation. Everyone will grow poorer. As Piketty wrote in his book, Capital, a tax of 80% on wealth will not bring in significant revenue to redistribute.

But Rawls assures us that we can congratulate each other for having the moral superiority to implement his system, just as poor socialist countries today, especially Europeans, pat each other on the back for their moral superiority to the greedy and wealthier US. All envious people do the same.

Rawls excludes by definition envy and the will to dominate from his political representatives, but in the real world those human passions will erupt in his system. Those with the will to dominate will command most positions in government and use its power to benefit their businesses and those of allies by manipulating the envy, and fear of envy, in others, just as they do today. Of course, they do it all in the name of public health and safety. Rawls seems to be unaware of Public Choice or Baptists and Bootleggers theories that show how corporations grow large by using the power of the state to regulate smaller competitors out of business and create oligopolies. Any time we give the state as much power over the economy as Rawls demands, politicians sell that power to the highest bidders among wealthy businessmen.

Rawls was ignorant of sound monetary theory and Cantillon effects as well, which is a shame because of his fixation on limiting inequality. One of the most powerful generators of inequality is the Federal Reserve, a quasi-governmental organization. The Fed manipulates the economy by creating money out of thin air. It has the legal monopoly to counterfeit money. Creating new money causes price inflation so those who receive the new money first can buy goods and assets before prices rise while those who get the money last, the poor, must pay for goods and assets at higher prices and therefore grow poorer. This process works on the international level, too, to keep poor nations in poverty.

Of course, the Fed does all of that for the public good, stability and job creation. Few PhD economists, let alone the voting public are aware of the problems it causes. This example alone shows Rawls’ naivete at giving the state so much power over the economy.

Rawls’ conception of fairness comes from what Hayek calls family justice. In a family, good parents produce wealth and distribute it to children equally. Children are quick to complain about unfairness when they think a sibling has received more of what the parents doll out. Healthy families need strict equality, but what happens when we try to scale those values to a nation of strangers? They destroy society because members take advantage of the system, as all socialist nations have proven.

In a Biblical society, the state doesn’t play the role of parent and distribute wealth equally. People get the value of what they labored to produce based on how consumers value the product. The producer must serve his fellow man or he earns little from his labor. One who doesn’t get to keep the value of his labor is a slave. While necessary for society, this type of fairness would destroy families.

In Part IV of Justice as Fairness, Rawls compares his ideal society with capitalism, the welfare state, and communism. The casual reader might not notice the sleight of hand Rawls employs when he compares his imaginary construction with historical ones. Socialists frequently use that tactic and reality always suffers in the comparison to fantasy.

Rawls’ utopia is beautiful philosophy. But he assumes that good people will always hold power so that the government could achieve the maximum good. In the same way that mainstream economics sees market failures littering the landscape and looks to the state to correct them, Rawls portrays a democratic state as having the omniscience, omnipotence, and omnipresence (attributes of God) to solve all problems. Capitalism and the US Constitution aim at opposite goals. They assume that evil people will hold power occasionally and are designed so that evil can do the least damage possible.

The Biblical definition of justice, which excludes envy, has many features to recommend it. For one, it’s based on real people and protects us from those who tend to have the evil impulses that Rawls excludes, such as envy and the lust to dominate others.

At the end of his book, Rawls tries to demonstrate that his scheme is not utopian. He argues that once implemented people would get used to it and it would become the normal way of living and thinking. He merely needed to refer to Schoeck’s book to notice how unrealistic he is. Schoeck shows how societies from the primitive to the modern were organized around envy as evidenced by the desire for equality. Most societies weren’t technically democratic, but tribal societies operated on consensus. The more equality they created, the hotter envy burns.

Boiled down, Rawls’ utopia is hardly different from Fabian socialism, communitarianism, or the welfare state. He goes to greater lengths to establish the moral superiority of his system by redefining terms in his favor. He tells us that it differs from the welfare state only in the motivations for helping the poor – it’s justice as he defines it and not pity.

But it’s not morally superior to the Biblical system of private property with voluntary charity for the poor, the system that made Western civilization great.

First published at Townhall Finance

Tuesday, April 30, 2019

What is Christian Capitalism?

If you're skeptical that Christianity and capitalism go together, it's because you have been duped into holding to the Marxist view of capitalism. Don't feel bad, though. Probably nine out of ten people have the same ideas. Marxists have been far more successful at spreading their ideas than have capitalists. But having Marx define capitalism is like asking an atheist to define Christianity.

Don't look to evangelical theologians for help. Decades ago the scholar Mark Noll chastised the “scandal” of the evangelical mind. He meant that evangelicals refused to engage the scholarly world. That has changed for a few scientific fields, but most theologians work hard to remain ignorant of economics and economic history, the most important fields of the social sciences. As a result, they remain fooled by liberal, unbelieving theologians who embraced socialism over a century ago and promoted Marx’s dishonest depiction of capitalism.

Monday, April 15, 2019

Socialists Redefine Envy As Justice

Source: AP Photo/Jacquelyn Martin

Socialists claim they just want justice. That casts capitalists as opponents of justice. But capitalist have always insisted they value justice as much as socialists. Both can’t be right. What’s going on? How can both honestly be in favor of justice?

Untangling the knot is simple: each side operates from different definitions of justice. Capitalists derive their ideas of justice from the Bible: people have rights to life, liberty and property; those who violate the rights of another are evil doers (Romans 13) and should be punished. Christian notions of justice built Western civilization.

Cold Weather Did Not Create The Modern World

The birth of Christ was the most important event in human history. Second to it was the hockey stick growth in per capita GDP (standards of living) that began with the creation of the Dutch Republic in the late 16th century. Most know it as the Industrial Revolution, which socialists claim impoverished and enslaved mankind, but it was much more than that. It was a revolution in culture, including the laws, government, religion, social structure and attitudes toward business.

Economists call it hockey stick growth because a graph of per capita GDP for the world would be almost perfectly flat from pre-history until 1600 when for the first time in human history the average standard of living began to rise. It caused a continuous increase in average wealth in the Dutch Republic, England, the US, Australia, Canada and eventually all of Western Europe. It ended poverty and the Malthusian cycles of famine with mass starvation in the West and made us 30 times as wealthy as our ancestors who launched it. Since WWII similar prosperity has spread to Japan, Taiwan, Hong Kong, South Korea, Singapore and finally China. The World Bank estimates that slightly freer markets in India and China cut the worst poverty in half in just the past generation.

Millennials Want The Big State To Fix Problems Which It Caused

Source: AP Photo/Bebeto Matthews

We free marketeers are talking past millennial socialists. We tend to replay old film footage of the horrors of the USSR, China under Mao, North Korea, Cuba and Venezuela, hoping to frighten them out of their puppy love with socialism. Millennials respond by saying they don’t want to repeat any of those disasters; all they want is for the rich to share their wealth with others, like the Nordic countries. It won’t lead to tyranny. What’s wrong with that?

Some millennials find just the existence of billionaires disgusting and want to euthanize the class. Those whom envy consumes I can only recommend that they learn to love their rich neighbor as they love themselves. Those who think that billionaires have caused poverty by taking from the poor need to learn real economics.

Friday, March 22, 2019

‘Progressive’ Christianity Is Actually Regressive Medievalism

Source: AP Photo/Pavel Golovkin

The religious left refers to their ideology as “progressive Christianity,” even though their economic ideas regress to the middle ages and most deny the fundamental truths of Christianity that Jesus is God and he rose from the dead. Still, the left covets the power that the name “Jesus” holds on real Christians and wants to use it to lure them into their socialist dark web.

A recent venture in the tradition issues from an Anabaptist blogging as the Hippie Heretic. Anabaptists tried to create a communist city during the early 16th century in the Netherlands, another example of regression.

The Cult Of The MBA CEO

The MBA degree turned 111 this year. How is it doing? Great for those who hold the degree from top business schools; not so much for the businesses they run, according to a study by the Institutional Investor. The cult of the MBA CEO has led to huge increases in executive pay but not profit gains:
According to data from the Stanford Graduate School of Business, average CEO compensation at the largest firms rose from $1.8 million per year in the 1980s — roughly in line with the previous 45 years — to $4.1 million in the 1990s. By the early 2000s, it had risen to $9.2 million. And those numbers are after adjusting for inflation...
We found no statistically significant alphas — despite testing every possible school with a reasonable sample size. MBA programs simply do not produce CEOs who are better at running companies, if performance is measured by stock price return...

Tuesday, March 5, 2019

The Conservative/Libertarian Shotgun Wedding And The Trump Divorce

What is wrong with conservatives? Daniel McCarthy, editor of Modern Age and an editor for The American Conservative, has joined Tucker Carlson and Abby McCloskey in trashing free markets and demanding greater state intervention. McCarthy whines about a lot of things and blames then all on globalization. But at the core of his complaints sits the hollowing out of the middle class in the US.

I’m not sure there is a hollowing out of the middle class because it’s hard to define. For most of history, the middle class was the group of independent small to medium size business people that socialists called the bourgeoisie. It made up about 5% of the population until the class exploded in size during the industrial revolution. At some point in the 20th century the term was redefined to include workers whose income was in the middle between the rich and poor, mostly factory workers without a college education. So the decline of manufacturing jobs as a percentage of the total workforce terrifies conservatives and socialists.

Socialism Is Not About Sharing – It’s About Killing

When I comment on articles about socialism on Facebook or web sites like Christianity Today or Patheos, I often get the response that socialism is just sharing and I wonder where they got such an idea. After all, if you read the writings of the followers of Saint-Simon, Marx, Lenin, Stalin or Mao, none of them mention sharing.

So where did so many US citizens get the idea that socialism is just about sharing? I think the answer lies with “milk cow economics.” Starting in middle school, most social studies classes eventually get around to it. Here is a typical example from one of the many sites that popped up in a search of the term:

Socialism: You have two cows. You give one to your neighbor (share).

Communism: You have 2 cows. The State takes both and gives you some milk.

Fascism: You have 2 cows. The State takes both and sells you some milk.

Nazism: You have 2 cows. The State takes both and shoots you.

If Elizabeth Warren Really Was An Indian, She’d Know Not To Trust The Federal Government

The media are confused over Democrat presidential candidate and senator Elizabeth Warren. They laugh at her attempt to prove her tribal heritage while taking her tax plans seriously. They advertise their ignorance on both accounts.

Let’s take her claim to a tribal heritage. She was wrong to take a DNA test. That would prove her lineage according to the government’s rule of what makes an Indian, or a member of a tribe. Tribes never considered “blood quantity” as a condition for tribal membership before the state forced them to do it. Slave owners came up with that nonsense in order to keep as many people as possible as slaves. They divided people into quarter, half, sixteenth, etc., black.

The “red” people of the Americas never practiced such silliness. (The tribes called themselves red; it was their way of saying, “We are the beautiful people.” Oklahoma is Choctaw for “land of the red (skinned) people.”) Tribes are made up of clans of families, so if you were part of a family in a clan then you were part of the tribe. Anyone could marry into a tribe and many tribes had Europeans and Africans as members. After the un-Civil War, the Choctaw, Cherokee, Creek, Seminole and Chickasaw tribes freed their slaves and made them full tribal members.

What Christian Leaders Usually Fail To Understand About Economics

She spoke for a lot of Americans when representative Alexandria Ocasio-Cortez said in an interview recently said, “I do think that a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong.”

The left continually assaults rich people and covets their wealth. It’s no wonder that many of them do penance for having acquired such wealth by supporting socialist policies. John Schneider provides some relief for billionaires in his book The Good of Affluence: Seeking God in a Culture of Wealth.
I think of people like Janet Willis, who is CEO of the Wills Corporation, a firm that manages large investment portfolios held mainly by Christians. In telephone conversations, she has spoken at length and with obvious passion about her clients who have become wealthy beyond their imaginings during the last decade of growth in the stock market. She tells me that these people are almost invariably moved by their good fortune, and deeply troubled by it at the same time...And they look to the intellectual leadership in the church for direction."

More Tuckerism: ‘Conservative’ Journal Blames Markets For Social Ills

Media commentary tracks the business cycle. During recessions and most of the recovery, the media obsess over economic growth because tax revenues have declined. The media think we work only to feed Leviathan because without the government we would all die, right? And they will broadcast dozens of stories about people who died because of a lack of funding at one of our many levels of government.

Then when the economy turns around and GDP, the stock market and government revenue are robust, the media fix their gaze on all of the other problems that they can imagine. Recently, I wrote about Tucker Carlson’s screed. This week, Abby McCloskey rides a similar horse in her article “Beyond Growth.” Others will join them in a thundering herd, that is, until the next recession, which will happen within a year or two. Then their message will again become, “It’s the economy, stupid!”

Monday, January 14, 2019

Tucker Carlson Serves Up Warmed Over Socialism

Fox political talking-head Tucker Carlson threw a fit on TV in his first monologue of the new year. He introduced Mitt Romney’s editorial to launch his bid to replace President Trump as the GOP nominee in 2020, but only so that he can attack Romney as representative of the world’s insensitive leaders who have failed to make us happy. Along the way he rounds up the evils of pay day lenders, marijuana, banking, taxes, corporations, failing families and environmentalism, blaming all of them on Romney and free markets.

Somewhere in the middle Carlson states,
The goal for America is both simpler and more elusive than mere prosperity. It’s happiness. There are a lot of ingredients in being happy: Dignity. Purpose. Self-control. Independence. Above all, deep relationships with other people. Those are the things you want for your children. They’re what our leaders should want for us, and would want if they cared.
Carlson misses the most important point about happiness – it’s founded on expectations. People can choose to be happy by making their expectations fit their reality, that is, be content with what you have. Most poor Christians in Africa are happy. We don’t need the government to make us happy.

Debunking The Myth That Blacks Need To Be Surrounded By Whites To Succeed

The evangelical left complains about “systemic” racism in the US, using the lack of racial integration in churches as proof. Everyone on the left has read Divided by Faith: Evangelical Religion and the Problem of Race in America. It’s their “bible” on race relations. The authors claim that we live in a racialized society “wherein race matters profoundly for differences in life experiences, life opportunities, and social relationships. Society bestows different economic, educational, political, and social rewards on groups based on racial categorizations.”

None of the evangelical left have read any of the books by Dr. Thomas Sowell or Dr. Walter Williams on the subject that debunk the assumptions and logic of Divided by Faith. Thomas Sowell’s latest book, Discrimination and Disparities, could be subtitled, A Response to Divided by Faith.

For example, the left claims that the way US citizens have sorted themselves in housing, schooling and jobs is proof of racism. Those “scholars” make the unjustified assumption that races would mix in a random way if no racism existed. But history shows us that people have always chosen to live with those most like themselves if allowed to do so. The left has no problem with the Chinese, Puerto Ricans, Iranians, Hispanics, Koreans, Arabs and other ethnic groups clustering with others like them.

Intellectuals Idolize Quaint Rural Farms… That They Never Worked On

Since the beginning of the Industrial Revolution, the elite have bashed capitalism for destroying community. You won’t find any of the rural folk who left dreary villages for jobs in urban factories criticizing it; most of it comes from the wealthy elite who owned vast estates while living in the city and who employed many of those who left. Others were intellectual with no understanding of rural life, such as G. K. Chesterton, T. S. Eliot, and Russel Kirk.

Kirk demonstrated in his book, The Conservative Mind, that conservatives have hated industry and revered agriculture since conservatism’s conception by Edmond Burke. They won’t say it, but conservatives want to conserve what they see as the idyllic villages of the 15th century. They think we could have achieved the wealth and health the West enjoys today without industrialization, unless they admire the poverty, disease and violence of that century. I’m not certain which posture best suits them because none have ever written about it.

Giving To The Poor Is Charity And Mercy, Not Legal Justice

Last week we saw Dr. Timothy Keller, founder of the Redeemer Presbyterian churches in New York City, defined helping the poor as a matter of justice and not mercy.

Catholics and the evangelical left place great weight on the fact that the Hebrew word for justice, transliterated as mishpat. “Now these are the judgments [mishpat] which you shall set before them” (Exodus 21:1) and Moses goes on to list criminal activity.

When a theologian begins to slice and dice words in the original language you should grab your wallet; you’re about to get robbed. Greek tends to be a precise language compared to others, but even Greek words have multiple meanings so that speakers relied on the context to fit the appropriate meaning in place. Ancient Hebrew was a more ambiguous tongue, much like modern Arabic. Biblical writers often took advantage of the ambiguity to make puns in the same way that puns work in English.