Monday, November 26, 2007

Why has the Western Economy Flourished?

There are a lot of opinions about why the West has flourished economically as well as culturally. Some people would take the view that our successful capitalist economy is based upon selfishness, materialism, and a lack of regulation. Others would claim that it is based upon wise planning and regulation. I would maintain that in fact all of these reasons are counterfeits of the real reasons—pale shadows of the real reasons for the success of western economies.

The first real reason for the success of Northern European and American western economies is the Christian view of vocation that came out of the Reformation. Michael P. Schutt points out in his new book, Redeeming Law: Christian Calling and the Legal Profession, the Protestant Reformation renounced the Catholic view that only “holy” activities like being a monk or priest were true callings of God, and that everyone else was a spiritual second-class citizen. Instead, the Reformers like Luther, Calvin, and Turretin recognized that every person has a calling from God to love their neighbor and provide for their neighbor, themselves, and their family through work. The Reformers recognized the dignity of all lawful human work whether it was making shoes, farming, raising livestock, teaching, writing, printing or building. God has structured the universe in such a way that the way in which we are meant to prosper is not by seeking our own good but by seeking the good of others. This is not a generic impossible seeking the good of others, but a practical day-by-day using of our gifts in seeking the good of others. So if a person is a gifted shoemaker, or a gifted painter, or a gifted carpenter, he or she does well to use skills and gifts for the benefit of neighbors by practicing a trade in an honest, generous, and hard-working way. He or she benefits because people will like his or her services and pay for them. He or she can provide for family, both children and the aged or infirm. He or she can then use some money to give to the poor and to the work of the church. Those who provide for others best also tend to prosper the most. It is true that bad things happen to good people, and that because of unpredictable changes in technology, economic problems, or demand, even good, well-meaning, hard-working people can end up out of work or in poverty. But in general those who discover what they do well for others and do that well for others also do well for themselves and their families. If you find out what people need and determine a way to meet that need effectively, the end result will be the best meeting of your own needs. By contrast, if you selfishly seek to try to maximize gain for yourself, you may have gain in the short run by tricking people into paying you for your less than effective goods or services, but in the long run such fraudulent services do not survive or prosper—and should not. The view that selfishness is what drives the economy is a counterfeit of this idea that helping others is what drives the economy. If it really were selfishness, then skillful fraud would be just as valuable as skillful production. But obviously it is not. That actually leads us to the second element in the success of economies: the “rule of law.”

The rule of law is an old idea that can be found in some of the writings of the ancient Sumerians, the Bible, Plato, Aristotle, Cicero, Augustine of Hippo, John of Salisbury, Henry De Bracton, Thomas Aquinas, John Calvin, Francis Turretin, and others. This is not the idea of having “rules,” it is the idea that law reigns. The real notion of the rule of law is that God has provided a divine order to govern the universe. This divine order is reflected in just human laws that partake of that order and mediate it to human societies in a way that does not require all good or punish all evil, but that does provide a practical guidance for just social interaction. Laws should keep people from stealing, murdering, defrauding, cheating, and failing to keep their business-related promises. Divine order is more important than the will of the individual human law makers or individual governments. As a result, they are subject to “the rule of law” rather than the laws being radically subject to their personal temporary will. Under the notion of the rule of law, a just government is not allowed to will things contrary to the divine order or the common good or right reason. While these concepts have not always been followed in the West, they have been followed more here than anywhere else. The result has been that while there is still injustice and crime in our societies, there is far less injustice, corruption and waste here than you have had in most historical societies in most of time. The rule of law cannot function through government alone. It requires people who are basically law abiding and basically committed to living civilly righteous lives. It is for this reason that the West today is beginning to lose some of its historic edge as our people lose their commitment to just laws and to self government. This is also what makes it difficult to impose the rule of law in other countries. Unless the people are willing to be basically law abiding and to respect each other’s lives and property, no reasonable amount of force can make them do so. The kind of oppressive force needed to make them do so also distorts the market, drains resources, and prevents the kind of economic flourishing we have ultimately seen in places like the United States and England. The counterfeit of this view has been the notion that wise economic regulation has saved the West. In truth, Adam Smith was probably right that the choices of individual people are far better guides for economic planning than the decisions of even the wisest and most gifted central planners. Central planning usually results in problems because no mortal human being can foresee exactly what people everywhere will really need or how those needs can best be fulfilled. Instead, central planning tends to overcorrect for market trends. There are reasonable arguments to be made that centralized planning is not what saved America from the Depression, but rather the Second World War. It was actually the change from the relative free market policies pursued by Calvin Coolidge to the centralized planning advocated by Herbert Hoover and Franklin Roosevelt that not only turned a minor recession into the Great Depression but made the Great Depression last as long as it did. The attempt at economic controls by Richard Nixon is in all probability responsible for the economic problems faced during the Ford and Carter administrations. The return to somewhat lower taxes and somewhat freer markets under Ronald Reagan produced the renewed prosperity that America has seen since. This is not to say that a government should be truly laissez-faire. The rule of law is necessary to keep businessmen honest, to prevent the triumph of fraud and selfishness rather than the triumph of hard work and gifted giving. But preventing crime is not the same thing as centrally planning the economy. Accountability for evil is not the same as deciding for people what goods they must choose.

A third reason for the productivity of the western economy has been the creativity of the western peoples. The types and varieties of music, pictorial arts, foods, types of clothing, styles of architecture and styles of furniture created by western artisans, entrepreneurs, and inventors and made available in the western economies is nothing short of dazzling. This has made life richer and more interesting here than anywhere else in the world. Counterfeit principle for this creativity is the belief that through advertising people can and should be made to want to buy things that are not of good quality, are not beautiful, and are not actually needed in order to support manufacturing establishments that make such faulty and defective goods. While advertisers do undertake such attempts and while they do occasionally have some success in this way, it is really necessary to produce a good product in order to really sell that product over the years. Some sellers have tried to deal with this by making products that are addictive or by using associations in advertising with addictive activities and their products. But this is really cheating at the way God created the universe to work. It isn’t benefiting anybody to give them an ugly, tasteless product and make them think they want it by associating it with pictures of attractive women. This new tendency to cheat in this way is causing great damage to our society and in the long term will cause damage to our economy. A return to genuine service and wholesome informative advertising is really needed. The difficulty, of course, is that we probably don’t want to give the government the power to limit speech by regulating advertising. In the end, they are likely to end up regulating good speech and allowing the bad. What is really needed is a decisive grass roots movement that if people advertise in improper ways or sell bad products, we won’t buy them. It’s entirely possible to turn off your television and to stop giving in to bad products and bad advertising. There is no reason why people shouldn’t do so. If these strategies stop working, most people will stop pursuing them.


The blog zunguzungu has taken issue with this post by claiming I am giving Max Weber’s theory of the protestant work ethic without giving credit to Max. I certainly do not intend to do so. I agree with Leo Strauss’ critique of Weber that Weber does not seem to understand what Calvinist Protestant Christians actually believe. Calvinists believe the assurance of salvation comes from faith in the teachings of the Bible about Jesus and his person and work, not from our own wealth or poverty. Poor people are often more easily saved than the rich. People can also be blessed by obedience to divine principles without being elect at all. In fact, as Jesus said, the Children of this age often seem cleverer than the Children of God.

What I can say since I wrote this post is that I have started the book "The Victory of Reason" by Rodney Stark. Stark’s arguments have convinced me that the prosperity of the west started well before the reformation, during the so called dark ages. Stark agrees that freedom, inventiveness, science and the western idea of the rule of law all come from Christianity as a reasonable faith.

I still stand by my belief in the principle that God created the world to work in such a way that meeting the needs of others is usually the best way to be blessed. I think this is Biblical and backed by Christian teachings such as the prayer of St. Francis.


C Stevenson said...

Whereas Self-Interest and Selfishness, in both their legitimate and perverse forms, are accounted for by Capitalism, Socialism underplays their relevance and practically denies their existence.

Integral to Socialism, is a faith in basic human goodness and the malleability of Human Nature. Social engineering promises perfection. Socialists sneer at capitalists’ negative view of Human Nature.

Yet, we have a century of failed social experiments and millennia of evidence that Human Nature is fixed and even flawed.

Systematically ignoring the reality of Selfishness and Self-Interest does not lessen the impact of these traits, which are hardwired into every person, just because someone lives under or governs a Socialist regime. A bureaucrat is susceptible to bribes and corruption. Someone making big decisions with other people’s money is more careless than if he were risking his own livelihood. A guy at the bottom does not work as hard or as smart when his own effort does not affect his own life. The societal burden grows.

This is Human Nature, the same under any regime. Some of it is bad, some good, some amoral, a consequence of our finiteness. If you want to succeed, you cannot ignore Human Nature or pretend it is something it isn’t. Socialists treat our limitations as anomalies rather than fundamental. The system fails.

I think the relative success of Capitalism over Socialism is as much a result of Socialism’s systematic denial of Human Nature as Capitalism’s leverage of it.

Dean McConnell said...

C. Stevenson,

Very true. I agree completely