Economics at the Jesus Creed: Michael Kruse 9

At a rudimentary level, Peter Berger's definition works as well as any: "Production for a market by enterprising individuals or combines with the purpose of making a profit." (The Capitalist Revolution, 19) I think most economists would agree that capitalism includes at least the following:

Specialization of Labor - Specialization is heightened.  Labor is oriented toward earning wages as contributors toward the creation of products versus laborers individually creating products for sale.

Market Exchange - Exchange has long been with us but it pervades capitalism. People once produced most of what they consumed and traded as a supplement. Now we acquire what we consume and supplement it with production our own goods. Prices for goods are set by supply and demand.

Private Property - The means of production are privately owned and managed by private individuals and firms based on long-term risk and reward.

Emphasis on Capital - Historically, land and labor were the primary means of production. Capital is the dominant means in capitalism. Capital is wealth placed in productive service. A firm's physical plant and equipment are typical examples but it can take other forms as well.

The emergence of capital as a major factor began at least by Fifteenth Century in Europe with ocean bound trade expeditions. These undertakings were risky and expensive. The Dutch and the English developed forerunners of modern corporations allowing people to pool money and share risk. The big transition came with the advent of steam and combustion engines in the late Eighteenth Century. These new power sources enabled construction of unprecedentedly large manufacturing facilities requiring, by historical standards, astronomically large amounts of private wealth to be placed in productive service. The construction of the Erie Canal, begun in 1817, was probably one of the first private ventures in the United States requiring significant capital, but railroads and manufacturing quickly followed suit.

No economy exists in a vacuum relative to other cultural values. While the American economic system is clearly capitalist, it is a mistake to equate capitalism with the American economy. Other cultures have adopted capitalist models but have differing concepts of justice. That influences how they evaluate the efficacy of capitalism and what adjustments should be made to the economic rules of the game.

Critics of capitalism often speak of the dangers of "unbridled" capitalism. While it is possible to have insufficient regulation it is not possible to have unbridled capitalism. That would be anarchy. At least some minimal level of regulation is required if for no other reason than to protect property rights, enforce contracts, and adjudicate disagreements. The question is what degree and kinds of regulation should exist beyond this minimalist level.

Economist Paul Heyne used to use a traffic analogy to highlight important dynamics of economies. He invited us to ask if an economy is more like air traffic controllers managing flights in and out of an airport or is it more like an urban traffic network.

"... Air traffic controllers can reasonably be said to manage the movement of commercial airline traffic: they impose upon all the pilots flying commercial places a central plan that dictates precisely for each one the time of take-off, the speed and path of ascent, the route to be followed, and the time, speed, and path of descent and landing. But no one manages the flow of vehicular traffic on the streets of a modern city in this way. Drivers choose their own times of departure, routes to follow, speed of travel, maneuvers along the way, and final destination, reporting their plans to no one and continually revising these plans as they see fit. Drivers are not completely free to do anything they please, of course. They are constrained by the decisions of other drivers in the vicinity. There are also "rules of the game," some of them very specific but others quite vague, that limit choices drivers may make. Within these rules, however, and sometimes a bit outside them, drivers pursuing their own interests with very little concern for the interests of others (largely because of extremely limited knowledge of those interests) coordinate their interactions and arrive safely and expeditiously at their destinations.

No one manages this process in the sense of controlling outcomes. Traffic engineers can influence the process by changing the timing of lights, altering speed limits, or adjusting parking regulations, and over time they can increase their influence through street construction and closure. But they can neither predict nor control the specific results. The most they can aim for is smooth and rapid flow. An air traffic controller is an oikonomos. There is no oikonomos in the world of urban traffic, neither on the streets nor in the control centers of traffic engineers, and anyone who aspired to become an oikonomos of urban traffic world would have failed to understand the complexity of the problem."  ("Are Christians Called to be "Stewards of Creation?", Stewardship Journal, Win. 1993, 19)

Metaphorically, pure capitalism is the urban traffic network while pure socialism is the air traffic control model. (The distributivist "make everything local" model would be, I suppose, the no transportation model.) In reality, all economies are some mixture. Other challenges enter the mix that are not captured by this metaphor.

For example, capitalism tends to create large corporations. They are needed for their productive capacities in some industries but their size presents the opportunity for a variety of abuses. That requires a strong government to check abuse. Yet, strong government tends to invite corporate powers to work the political system in their favor precisely because it is so powerful.

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

The challenge for theological reflection on economics systems is that the term "capitalism" carries considerably more baggage for some than I have described in this post. Capitalism for some names an ethos of greed, selfishness, consumerism and waste (none of which are essential to capitalism but are values fed into the system.) Therefore, they recoil when economists and others speak affirmatively about "capitalism." Similarly economists view visceral objections to capitalism (meaning to them, division of labor, market exchange, private property, and capital) as ideological close mindedness. I continue to be amazed at the number of books and articles I read that bring capitalism into a discussion without defining it.

Capitalism is often characterized as an ogre that oppresses people with consumerism. More accurately the challenge of capitalism is not oppression but seduction. Some say that the core sin of capitalist societies is greed, but along with Jay Richards I think it is gluttony. We don't know how to control our appetites.

Another challenge leveled at capitalism is that it is based on survival of the fittest. It promotes individualism. Division of labor and trade disconnects us from the final product and from the natural resources used in production. Yet another feature of evolution is that of emerging complexity and cooperation in organisms. Cells cease to be single cell creatures and emerge into multiple cell creatures with individual cells becoming ever more specialized. It can be argued that division of labor and markets help integrate humans (cells) into a more evolved highly cooperative creature.

I've gone long (again). It is impossible to capture all the nuances I want to in one post but hopefully there is enough here to generate some discussion.