criticisms of the market
According to an author writing in The Nation magazine, "The religious Left is the only Left we've got." An overstatement? Perhaps. However, it points to an interesting fact, namely that while the opposition to free markets and less government control has declined in recent years among the "secular left," the political-economic views of the "Christian left" seem to remain stubbornly unchanged.
Why is this so? Why are the secular critics of the market mellowing while the Christian critics are not?
Perhaps one major reason is the different criteria by which these two ideological allies measure economic systems. The secular left, after more than half a century of failed experiments in anti-free market policies, has begrudgingly softened its hostility towards the market for predominantly pragmatic reasons. Within their camp the attitude seems to be that since it hasn't worked, let's get on with finding something that will. While this may be less than a heartfelt conversion to a philosophy of economic freedom, at least (for many) this recognition has meant taking a more sympathetic view of free markets.
However, within the Christian camp the leftist intellectuals seem to be much less influenced by the demonstrated failure of state-directed economic policies. They remain unimpressed with arguments pointing out the efficiency and productivity of the free market, or statistics and examples showing the non-workability of traditional interventionist economic policies. Why? One likely reason is that the criteria by which these thinkers choose to measure capitalism are fundamentally moral in nature, so much so that socialism, despite its obvious shortcomings, is still preferred because of its perceived moral superiority. In their eyes, the justness and morality of an economic system are vastly more important than its efficiency.
If indeed the Christian critics of the market are insisting that an economic system must be ultimately judged by moral standards, we should agree and applaud them for their principled position. They are asking a crucially important question: is the free market a moral economic system?
Unfortunately, these thinkers have answered the question with a resounding "No!" They have examined the free market and found it morally wanting. Some of the most common reasons given for this indictment are that: the market is based on an ethic of selfishness and it fosters materialism; it atomizes and dehumanizes society by placing too much emphasis on the individual; and it gives rise to tyrannical economic powers which subsequently are used to oppress the weaker and more defenseless members of society.
If these accusations are correct, the market is justly condemned. But have these critics correctly judged the morality of the free market? Let's re-examine their charges.
The market, it is suggested, is based on and encourages an ethic of selfishness. According to critics of the market, mere survival in this competitive economic system requires that we each must "look after Number One." Individuals are encouraged to focus on the profit motive to the exclusion of higher goals and as a result selfishness becomes almost a virtue. And this, it is noted, is in stark contrast with the self-sacrificial love taught by the Scriptures. Instead of rewarding love, compassion, and kindness towards others, the free market seems to reward self-orientation and selfindulgence. Instead of encouraging us to be concerned about our neighbor, the free market seems to encourage us to be concerned about ourselves. Individuals who might otherwise be benevolent, according to this view, are corrupted by the demands of an economic system that forces them to put themselves first. In the thinking of these critics, the market is the logical precursor to the "me generation."
However, this charge is superficial and misleading in several respects. First, it is important to remember that while the free market does allow "self-directed" economic actions, it does not require "selfish" economic actions. There is an important distinction here. It should be obvious that all human action is self-directed. Each of us has been created with a mind, allowing us to set priorities and goals, and a will, which enables us to take steps to realize these goals. This is equally true for those who live in a market economy, and those who live under a politically directed economy. The difference between the two systems is not between self-directed action versus non-self-directed action, but rather between a peaceful pursuit of goals (through voluntary exchange in a free economy) versus a coercive pursuit of goals (through wealth transferred via the state in a "planned" economy). In other words, the only question is how will self-directed action manifest itself: will it take place through mutually beneficial economic exchanges, or through predatory political actions?
Clearly the free market cannot be singled out and condemned for allowing self-directed actions to take place, since self-directed actions are an inescapable part of human life. But can it be condemned for giving rise to selfishness? In other words, does the free market engender an attitude of selfishness in individuals? If we define selfishness as a devotion to one's own advantage or welfare without regard for the welfare of others, it is incontestable that selfishness does exist in the free economy; many individuals act with only themselves ultimately in mind. And it is true, that according to the clear teaching of Scripture, selfishness is wrong.
But we must bear in mind that although selfishness does exist in the free market, it also exists under other economic systems. Is the Soviet factory manager less selfish than the American capitalist? Is greed any less prevalent in the politically directed system which operates via perpetual bribes, theft from state enterprises, and political purges? There is no reason to think so. The reason for this is clear: selfishness is not an environmentally induced condition, i.e., a moral disease caused by the economic system, but rather a result of man's fallen nature. It is out of the heart, as Christ said, that a man is defiled. Moral failure is not spawned by the environment.
It is clear that not all self-directed action is necessarily selfish action. For example, when I enter the marketplace in order to earn wealth to feed, clothe, house, and provide education or medical care for my children, I am not acting selfishly. Likewise, if you or I want to extend charity to a needy neighbor or friend, we must first take "self-directed" action to create the wealth necessary to do so. Such action is hardly selfish.
The point is this: the free market allows individuals to peacefully pursue their chosen goals and priorities, but it doesn't dictate or determine those priorities. It does not force an individual to focus on his own needs and desires, but leaves him or her at liberty to be self-centered or benevolent. My ultimate goal may be self-indulgence, or I may make a high priority of looking after others -- the choice is mine. As to which I should do, the market is silent. As an economic system, the market simply does not speak in favor of selfish or unselfish priorities.
However, the free market, while not touching the heart of a man or eliminating selfishness, does in fact restrain selfishness. It channels self-centered desires into actions that are beneficial to others. This is so because in order to "get ahead" in the free economy, we must first please other people by producing something which is of use and value to them. In other words, the market disciplines each of us to look outwards and serve others. Only by doing so can we persuade them to give us what we want in exchange.
We will return to this theme later, but for now the point is that in a very practical sense, the workings of the market persuade even the most self-indulgent among us to serve others and to be concerned about the needs and wants of his neighbor. True, the motivation for doing so is not necessarily pure or unselfish, but as the Bible so clearly teaches, it is only God who can change the hearts of men.
Furthermore, the free market, because of the incredible wealth it allows to be created, enables each of us to practically live beyond ourselves. In order to tangibly love our neighbor (minister to his or her physical needs) we must first have the wealth to do so.
We sometimes need to be reminded that wealth is not the natural state of affairs. Throughout most of history the majority of people lived under some sort of centrally controlled economic system and were forced to devote the mainstay of their energies to mere survival. Often all but the wealthiest individuals lacked the economic means to look much beyond themselves and aid others who were in need.
But the productivity spawned by economic freedom has radically changed this. In a free market, we are not only able to choose unselfish values and priorities, but we are also able to create the wealth necessary to practically fulfill them.
Another moral indictment of the market, closely related to the charge of selfishness, is the belief that the market fosters materialism. The example most often used to demonstrate the market's guilt in this area is the perceived evil effects of advertising. It is contended that advertising creates a sort of "lust" in the heart of a consumer by persuading him or her that mere material possessions will bring joy and fulfillment. In this sense, the market is condemned for creating a spirit of materialism and fostering an ethic of acquisitiveness. The market in general, and advertising specifically, is a persistent temptress encouraging each of us to concentrate on the lowest level of life, mere material goods.
This charge can be answered in much the same manner as the charge of selfishness. Just as allowing free exchange doesn't require selfishness, neither does it require materialism. It is true that when people are economically free, materialism is possible, and certainly there are materialistic people in market economies. But this hardly warrants a condemnation of the market. Materialism, like selfishness, can and will occur under any economic system. It is obvious that a desire for material goods is far from being unique to capitalism. Witness, for example, the response of shoppers as a store puts out a new rack of genuine cotton shirts in Moscow, or a shipment of fresh meat arrives in a Krakow shop.
Although the role of advertising has been much maligned, it in fact provides a vital service to consumers. Advertising conveys information. It tells the consumer what products are available, how these products can meet his or her needs, and what important differences exist among competing products. The fact that this is a valuable function becomes apparent if you imagine trying to buy a used car in a world without advertising. Either your choice of cars would be severely limited (to those cars you happen to stumble upon, i.e. gain knowledge of) or you would have to pay more (in the form of time and resources used in seeking out and comparing cars). In either case, without the "free" knowledge provided by advertising, you would be much worse off.
But the economic role of advertising aside, does advertising actually "create" a desire for goods? If it does, why do businesses in market-oriented economies spend billions of dollars each year on consumer research, to find out what customers want? Why do some advertised products not sell (for example, the Edsel), or cease to sell well (for example the hoola hoop)? In the market economy consumers are the ultimate sovereigns of production. Their wants and priorities dictate what is produced; what is produced doesn't determine their wants and priorities. Many bankrupt businessmen, left with unsalable (at a profitable price) products wistfully wish that the reverse were true.
Moreover, the Bible consistently rejects any attempt by man to ascribe
his sinful tendencies to his environment. If I am filled with avarice
when I see an advertisement for a new Mercedes, I cannot place the blame
on the advertisement. Rather I must recognize that I am responsible
for my thoughts and desires, and that the problem lies within myself.
After all, I could feel equally acquisitive if I just saw the Mercedes
on the street rather than in an advertisement. Is it wrong for the owner
of the Mercedes to incite my desires by driving his car where I might
see it? Hardly.
If we follow the environmental explanation of materialism to its logical conclusion, the only solution would appear to be doing away with all wealth (i.e. eliminate all possible temptation). If this were the appropriate solution to the moral problem of materialism, perhaps the moral high ground must be conceded to the state-run economies of the world after all. They have been overwhelmingly successful at destroying wealth and wealth-creating capital!
III. Impersonalism and Individualism
Another common criticism of the market economy is its supposed tendency towards impersonalism and what some have called "individualistic anarchy." According to many Christian critics, the market encourages self-centered behavior and discourages relational ties in society. The non-personal market allocation of goods and services is seen to be antithetical to the seemingly higher and more noble goal of a loving and interdependent community. Because of the economic independence that the market affords, the individual is cut off from meaningful relationships with his fellow human beings and divorced from any larger purpose than his own interests. In short, the free market is accused of breeding a pathetic and inhumane isolationism.
But does the market encourage impersonal behavior? Certainly not. It is important to understand that the presence of economic freedom does not require that all transactions and relationships take place on an impersonal level. For example, many people have good friendships with their customers, suppliers, employees, or employers. While these relationships are economic, they are not merely economic and they are not impersonal.
Furthermore, while the market leaves us free to deal with other people solely on the basis of economic motives, we are not required nor even necessarily encouraged to do so. We are completely free to deal on a non-economic basis. Suppose that I am in the business of selling food, and I find that someone is so poor that he or she has nothing to trade for the food that I am offering for sale. In the free market I am completely free to act apart from economic motives and make a charitable gift of the food. I have in no way lost my ability to act in a personal and non-economic way.
So the market is not an inherently impersonal economic system. Nor is it hostile to the formation of community relationships.
An excellent example of a community which exists within the market system is the family. Obviously I deal with my wife and children in a non-market manner. I give them food, shelter, clothing, etc., and I certainly don't expect any economic gain in return. I do so joyfully, because I love my family and I value my relationship with them far above the economic benefits I forgo. Another example is the church. I have a non-economic and very personal relationship with people in my church. And there are countless teams, clubs, organizations, and associations which I can join, if I choose. If I want, I can even become part of a commune. The market economy doesn't stand in the way of, or discourage, any of these expressions of community.
But now we come to the heart of this objection against the market: what if people will not voluntarily choose to relate to each other in personal or community-type relationships? What if they choose not to look beyond their own interests and work for some purpose larger than themselves? The answer to this is the rather obvious question: who should decide what is the appropriate degree of relationship and community?
True community, I submit, is something which must be consensual, meaning
it must be voluntarily established. Think of a marriage or a church.
If people do not choose to enter into these relationships when they
are free to do so, we may judge their action to be a mistake, but by
what standard can we try to coerce them into such relationships? Even
if there were some objective standard of "optimum community,"
it is not at all clear that we could create it by robbing people of
their economic freedom. There is no reason to believe that individuals
living under a system of economic "planning" are less isolated
or have more community by virtue of their system. The fact that individuals
are forced into a collective group hardly means that a loving and caring
community will result. Love and care are things which cannot be coercively
extracted, but must be freely given.
Their motives were suspect but their analysis was correct. When the state fails to protect private property and instead takes over the functions traditionally provided by the family (such as education, day care, health care, sickness and old-age support), the family unit is inevitably weakened. Family bonds are undermined as the economic resources which formerly allowed the family to "care for its own" are transferred to the state. There is little doubt that the disintegration of the family in our country is in large part due to state intervention. Instead of turning towards and receiving personal care from within the family, individuals have been encouraged to turn towards the impersonal state. The result has been the disintegration of family bonds. It is state economic intervention -- not the free market system -- which is inherently impersonal and antithetical to true human community.
IV. Economic Power
The objection to the market on the grounds of impersonalism is based
on the same fallacy as were the previously discussed charges of selfishness
and materialism. Each of these claims indicts the market for ills which
in fact are common to all mankind -- faults that would exist under any
economic system. Impersonalism, selfishness, and materialism are the
consequence of the fall of man, not the fruit of an economic system
which allows freedom. If these sinful tendencies are an inescapable
reality, the question that must be asked is: "What economic system
best restrains sin?"
But does the market in fact allow individuals to exploit others? To begin with, there is a great deal of misunderstanding about this thing called "economic power." The term is in fact somewhat of a misnomer. When we speak of power, we normally refer to the ability to force or coerce something or someone to do what we desire. The motor in your car has the power to move the car down the road; this is mechanical power. The police officer has the power to arrest and jail a lawbreaker; this is civil power. But what of economic power? If I possess a great deal of wealth, what unique ability does this wealth confer?
In reality what the critics of the market call economic power is only
the ability to please others, and thus "economic power" is
not power in the true sense of the word. Regardless of a person's wealth,
in the free market he can get what he wants only by pleasing another
person through offering something which the other deems more valuable.
Wealth (assuming it is not used to buy political power) doesn't bestow
the ability to apply force to, or domineer over, another individual.
What ensures that he will want to make them a pleasing offer? The fact that doing so is the only way to get what he is interested in, namely their labor, provides a very strong incentive. But suppose the prospective employee is in very desperate straits and almost any wage, even one which seems pitifully low, will please him enough to work for the employer. In this situation, it seems as if the employer can get away with paying "slave wages" and exploiting the economically weaker employee.
This scenario, however, ignores the effects of the competition among employers for employees. In the market economy, employers are in constant competition with other employers for the services of employees. They are "disciplined" by this competition to offer top wages to attract workers. Because of competition, wages are "bid up" to the level at which the last employee hired will be paid a wage which is very nearly equivalent to the value of what he produces. As long as wages are less than this level, it pays an employer to hire another employee, since doing so will add to his profits. Economists call this the marginal productivity theory of wages.
But what if there were no competing employers? For example, what about a "one-company town"? Without competition, wouldn't the employer be able to exploit the employees and pay "unfair" wages?
First of all, it is important to remember that in the free market, an economic exchange occurs only because the two trading parties believe that they will be better off after the exchange. In other words, all exchanges are "positive sum" in that both parties benefit. Thus if an employee in this onecompany town is willing to work for low wages, it is only because he or she places a higher value on remaining in the town and working for a lower wage than moving to another place and finding a higher paying job. The "power" that the employer wields is still only the ability to offer a superior alternative to the employee. In choosing to remain and work for a lower wage, the employee is likely considering other costs such as those of relocating, finding another job, retraining, as well as non-monetary costs, such as the sacrifice of local friendships or the sacrifice of leaving a beautiful and pleasant town.
Moreover, this situation cannot last for long. If the employer can pay wages that are significantly lower than elsewhere, he will reap above-average profits and this in turn will attract other employers to move in and take advantage of the "cheap labor." In so doing, these new employers become competitors for employees. They must offer higher wages in order to persuade employees to come and work for them, and as a result wages eventually will be bid up to the level prevailing elsewhere.
What is true for the employer in relation to the employee is true for all economic relationships in the free market. Each individual, though he may be a tyrant at heart, can succeed only by first benefiting others -- by providing them with an economic service. Regardless of the amount of wealth he possesses, he is never freed from this requirement. Economic "power" is only the economic ability to please and as such it is not something to be feared. Far from allowing men to oppress each other, the free market takes this sinful drive for power and channels it into tangible service for others.
It is also important to consider that the only alternative to the free market is the political direction of economic exchanges. As the Public Choice theorists have so convincingly pointed out in recent years, there is no good reason to suppose that people become less self-interested when they enter the political sphere. In other words, to paraphrase Paul Craig Roberts, there is not necessarily a "Saul to Paul conversion" when an individual enters government. If he was power-hungry while he was a privatemarket participant, he likely will be power-hungry after he becomes a "public servant."
But there is an important difference. In contrast with economic power, political power is truly something to be feared because of its coercive aspect. The power-seeking individual in government has power in the true sense of the word. While in the market he has to please those he deals with in order to be economically successful, the same is not true, or is true to a far lesser degree, in the political sphere. In the political sphere he can actually abuse one group of people but still succeed by gaining the favor of other groups of people.
A classic example is a tariff. This economic intervention benefits a small group of producers (and those who work for or sell to the producers) at the expense of consumers who have to pay higher prices for the good in question. The politician gains in power (and perhaps wealth) because of the significant support he can receive from the small but well-organized group of producers. Other examples of the use of political power to clearly benefit some individuals at the expense of others are government bail-outs, subsidies, price supports, and licensing monopolies. The fact that these types of legislation continue despite the fact that they harm people (usually the least wealthy and most poorly organized) demonstrates the tendency of mankind to abuse political power.
In fact, virtually every state intervention into the economy is for the purpose of benefiting one party at the expense of another. In each of the cases mentioned above, some are exploited by others via the medium of the state. Therefore, if we are concerned about the powerful oppressing the weak, we should focus our attention on the abuse of political power. It, and not the so-called "economic power" of individuals acting within the free market, is the true source of tyranny and oppression. Our concern for the downtrodden should not lead us to denigrate economic freedom but rather to restrain the sphere of civil authority.
The free market is innocent of the charges leveled at it by its Christian critics. Its alleged moral shortcomings turn out to be things which are common to mankind under both free and command economic systems. While it is true that the free market restrains human sin, it makes no pretense of purging people of their selfishness, materialism, individualism, and drive for power. And this, perhaps, is the true sin in the eyes of the market's critics.
The market is explicitly non-utopian. It doesn't promise to recreate man in a new and more perfect state, but rather it acknowledges the moral reality of man and works to restrain the outward manifestations of sin. In this sense the free market is in complete accord with Biblical teachings. According to Scripture, man cannot be morally changed through any human system, be it religious, political, or economic, but moral regeneration comes solely through the grace of God.
If the Christian critics of the market expect an economic system to change the moral character of people, they are sadly mistaken. Such a task is clearly beyond the ability of any human institution or authority. We must be content to restrain the outward expression of sin, and this is something which the free market does admirably.
This article is from The Freeman and is reprinted with permission. Copyright by Foundation for Economic Education, Inc.
© 1996-2018, Enter Stage Right and/or its creators. All rights reserved.