Two And A Three-Quarters Cheers: Thoughts On The Free Market System

For the next few posts we’re going to be discussing a very important subject, namely the free market system. We’re going to try to examine it (as best we can) from a biblical perspective.

            First, let’s get one of my quirks out of the way. You might have noticed that I referred to the “free market system,” not “capitalism.” I mean the same thing as most others do when they use the word “capitalism,” but I strongly prefer using the former term. There are some reasons for this, mostly stylistic. First and foremost, the term capitalism, to my knowledge, was created by Karl Marx, not an advocate of economic freedom at all. Second, it makes it sound like another    “-ism” like environmentalism or pragmatism or some other philosophy or system of thought, which I think is misleading (for reasons I’ll get into in the next paragraph). Third, the term “free market” really is the most precise one for what I’m advocating and hopefully helps avoid miscommunication. The term “capital” is a precise economic term with a definition which is not directly related to the economic system known as the free market/capitalism. Also, if a “capitalist” is defined virtually the same as “entrepreneur” then I’m definitely NOT a capitalist. But if you’re talking about someone who’s an advocate of the free market system (hereafter referred to as FMS), then I’m your man. And in the posts to come, I’m going to lay out the reasons why, both from the Bible and according to my own understanding.

            Why is “capitalism” (using my less favorite term) not an “ism” like the others? Because basically it’s economic freedom. When two people are exchanging goods and services and there’s not a third party (specifically government) interfering with the exchange, that’s the FMS at work. In fact, let’s define our terms: The FMS, as I understand it, is the ability of people to freely exchange goods and services--both of them benefitting from the exchange--with a minimum of government interference. It's extremely important to keep in mind that this is assuming that in this exchange A) force, B) fraud, or C) theft are not involved. To prevent force, fraud, or theft, we have government, which—quite frankly—is just about all the government interference I want to see in most economic exchanges. In Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem by Jay W. Richards, he also associates it with "property rights, rule of law, personal virtues like diligence and thrift, ingenuity, cultural values like trust, an orientation to the future, and a willingness to delay gratification."
            That's all it is. It's not some all-encompassing philosophy. Person #1 has A and would rather have B. Person #2 has B and would rather have A. Person #1 and Person #2 have a mutually beneficial exchange, and both walk away better. I walk into a grocery store with $3 in my pocket. A gallon of milk is $3. The store would rather have the $3 than the milk. I'd rather have the milk than the $3. We both benefit. If either side doesn't benefit, then the exchange won't happen unless there's force, fraud, or theft involved. 

            Which brings me to the title of today’s and future posts on the subject. You’ve heard of “three cheers” for something, right? Well, I’m making the case—from the Bible and my own understanding--for a rousing two and three-quarters cheers for the FMS.

            I’ve heard people, even those who advocate the FMS, say that “no economic system is perfect.” To paraphrase Churchill about democracy, they readily admit that the FMS is the worst of all possible economic systems, except for all the others. Quite frankly, I don't buy into that line of reasoning. As an economic system, it’s the best we’re going to see in a fallen world. Obviously in Heaven or Hell there’s no economic exchange as we know it. But here in this life, it’s absolutely perfect in accomplishing what it’s supposed to do.

            Misunderstandings on what it’s supposed to do is the source of much confusion on this topic. People criticize the FMS for not making people more moral or happy or giving them full satisfaction in life or solving everyone’s personal problems. They say “It doesn’t cure greed or poverty. It’s not going to fill that God-shaped hole in peoples’ hearts.” Of course it’s not. That’s not what it’s designed to do. No economic system is meant to do that. Criticizing the FMS for not making people moral or happy or godly or honest is like complaining that your car makes a horrible speedboat in the lake.

            Well, what is it designed to do? Economists can give technical answers to that question, but here’s mine: Any economic system should be judged by how well it a) Lifts the greatest number of people permanently out of starvation or sustenance-level poverty, b) provides material prosperity to the most people, c) efficiently utilizes the limited resources we have in this world.

            Let me make one more note on what the FMS (or any other economic model) can and cannot do. A lot of well-meaning (giving them the benefit of the doubt) people criticize the FMS for not getting rid of “greed” or theft or injustice. No, it doesn’t. But in response, I have to point to the last two paragraphs on what an economic system is supposed to do. But also I’d like to point out that greed and injustice and theft are not endemic of the FMS.  They’re part of the human condition. They’re symptoms of our sinful human nature which we’ve inherited from our first parents. Quite frankly, if you look at nations which have other economic systems, you see just as much or more of these problems. Adam and Eve coveted what didn’t belong to them, in that sense being “greedy” and guilty of theft. Injustice--e.g. a government official taking advantage of his position to oppress those who can’t defend themselves--is not exactly a phenomenon restricted to Western culture. If you pick any time or place or culture, you can find the sort of things that the FMS is blamed for. In fact, I’d contend that in a true FMS you’ll see a lot less abuse than elsewhere.

            Keith, you’ve talked a lot about government abuse. But what about abuse by corporations or businesses? Isn’t that a flaw in the FMS? That’s the topic for the next posting.