An old professor told our class decades ago to believe nothing from the popular press about economics and only half of what the financial press writes. I would add that if a theologian tries to teach you economics, hide your wallet and lock up your daughters! Kathryn Tanner’s Christianity and the New Spirit of Capitalism is a good example of such the tragic comedy produced by most theologians.
Tanner has taught at Yale Divinity School since 2010 after 16 years at the University of Chicago Divinity School. She is an influential past president of the American Theological Society. Rosemary P. Carbine and Hilda P. Koster say, “Kathryn Tanner is, quite simply, the most accomplished theologian of her generation,” in their book The Gift of Theology: The Contribution of Kathryn Tanner. The errors in her book are so numerous that it would take another book to correct them, so I’ll concentrate on the assumptions underlying her argument.
Tanner’s premise is that capitalism, as evil as it was in the beginning, has morphed into a more horrible monster called financial capitalism. Socialists have over the decades invented stages of capitalism and it’s popular to decry the latest for the dominance of the financial services sector. Yet as usual, they lack evidence. The sector grew from 4% of GDP in 1929 to 8% in 2006 according to a paper in the Journal of Economic Perspectives. While doubling, it’s still smaller than the healthcare or government sectors. The federal government absorbs over 20% of GDP. So, Tanner would be more accurate calling it state capitalism, but that’s an oxymoron.
Financial services have grown as a share of GDP because of the government, not the market. The author of the JEP paper cites the growth of home mortgages and the stock market as the main reasons. But few banks made home loans because of their risk until the federal government created Fannie Mae in 1938 as part of FDR’s New Deal to secure mortgages via mortgage-backed securities (MBS), packaged mortgage loans that are then sold to investors. Tanner describes MBS’s and other derivatives in her book. Housing prices, and therefore mortgages, are highly sensitive to Federal Reserve interest rate policy, which has promoted inflation for over a century. Housing prices have increased in step with the Fed’s printing new money and contributed to the growth in financial services.
Also, good economists have known since Fritz Machlup’s book The Stock Market, Credit and Capital Formation (1931) that most new money printed by the Fed goes into the stock market. Many people employ managers to guide their stock market investments, so, the Fed’s printing tsunamis of new money swells that part of financial services.
Tanner sees businessmen trying to please the stock market as evil. But is it? Austrian economist Ludwig Lachmann demonstrated in Capital and Its Structure that the stock market guides investment toward those activities that please consumers the most as demonstrated by profits. Why should a business succeed that annoys consumers? Who should businesspeople try to please, if not consumers? And how will you measure success at pleasing them if not by profits? The professor doesn’t know.
Finally, Tanner laments the relative growth of financial services and the shrinking share of manufacturing and farming. But any decent economist would have told her that’s a good thing! All services have outpaced manufacturing and farming as a share of GDP because of productivity increases in those industries, meaning it takes fewer people to produce goods and food than before, when we were poorer. One aspect of becoming richer and reducing poverty is working less to produce more.
Tanner assumes the U.S. has a capitalist system. But how much of the U.S. is capitalist or socialist is debatable. In my opinion, the U.S. hasn’t been capitalist since President Wilson created the Federal Reserve in 1913 and gave the government control of our money. Until the election of President Ronald Reagan, most economists considered the U.S. to be a mixed economy at best and the country has become more socialist since. And, the U.S. has implemented eight of the ten commandments of Marx’s Manifesto of the Communist Party. But socialists need the U.S. to be capitalist so they can blame problems on their arch enemy instead of the socialist policies that caused them.
Tanner makes those mistakes for the same reason most theologians do: they rely exclusively on the works of socialists for sources. Tanner doesn’t disappoint, opening hers with a summary of Max Weber’s ancient tome, The Protestant Ethic and the Spirit of Capitalism. No competent economic historian venerates Weber the way theologians do because he got very few things right about the origins of capitalism. But socialist theologians love the book because Weber makes capitalism look ugly and assumes the worst motives for capitalists.
Had Tanner been interested in the history of capitalism, she could have learned from great economic historians like Joseph Schumpeter, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, Alejandro Chafuen and others that the principles of capitalism came from Catholic theologians during the Reformation who distilled them from natural law and the Bible. Those principles became associated with Protestantism because the Protestant Dutch Republic first implemented them, followed by England and its colonies. The Calvinists Weber sued for the paternity of capitalism were its most virulent opponents next to Catholics.
Instead, Tanner relies on socialist sociologists such as Weber, the French philosopher Michel Foucault and a long string of sociologists. The closest to an economist I found in her footnotes were the French socialist Thomas Piketty and Wolfgang Streeck, a German economic sociologist at the Max Planck Institute.
Because she relies on socialist sociologists, her straw man is stuffed with the typical cliches. Employees are slaves unable to earn a living wage. They are cogs in a cruel machine. Managers are the slave masters cracking the whip to force the slaves to pull harder and tote more. Governments are helpless victims of their financial masters. The only socialist cliché Tanner left out was poor widows with hungry children trying to appease the landlord with the handlebar moustache so they can live one more week in their dilapidated shack.
For example, in chapter three, “Total Commitment,” Tanner tells us that American workers must sacrifice all for our jobs and paying our debts:
Making a deadline on time may require putting everything into meeting it at every waking moment. It may require maximum concentration and exertion, not just at work but at home, too. Servicing one’s debt may require scrimping and saving on every item purchased and constant creativity in coming up with the necessary cash, turning every meager possession into a possible source of revenue, renting out one’s already cramped space, finding buyers for unwanted junk, pawning what one would like to keep, selling one’s food assistance coupons, and so on.
In chapter four, “Nothing but the Present,” Tanner writes that:
The scarcity of time and resources enforced by profit-maximizing firms makes the present task urgent for workers and therefore preoccupying and all-consuming. There is no time to waste because a pressing deadline is looming. One does not have the luxury of waiting to see what might happen; no time exists for extend reflection or can one defer decision until tomorrow.
Relying exclusively on socialists, Tanner absorbs their anthropology that asserts people are born good and turn bad because of oppression. She appears to be a genuine Christian and knows the historic Christian doctrine of original sin that says people are born with a tendency to evil that only Christ can cure. But in this book, she jettisons Christian anthropology for the atheistic socialist one, an inconsistency common among theologians.
Tanner claims that financial capitalism changes the way people think and shapes their character in such a way as to make them enthusiastically support it. Her purpose in writing the book was to show how Christianity could “gum up” that process of forming humans. In an interview she said:
I'm assuming with him [Weber] that capitalism has a culture to it, that it brings with it a particular way of understanding one's self and one's relationships with others. And it's at that point, you could say the person-forming character of capitalism, it's there that religion can most easily, I think, come into the picture and object to the way in which persons are being shaped. And I think that's one of the central features of finance capitalism, that it tends to target the whole person for profit-generating purposes, not just what you do at work, but the whole of your life isn't being understood in basically this capitalist way.
Tanner’s solution is to meditate on God and understand that his grace is not in short supply. “I hope I have shown the coherence of a whole new world to be entertained as an imaginative counter to the whole world of capitalism as it presently exists, and pretends to be all-encompassing, to have no limits, nothing outside itself.“
Like most theologians, Tanner frightens readers with a story of the world set on fire by the dastardly capitalist dragon, then gives them a water pistol to quench the flames. If financial capitalism is guilty of the crimes she describes, we need a revolution, not meditation.
Tanner is right about financial services. There is something wrong. But it’s government control of the economy and banking that causes the problems, not capitalism.
