Americans on economics: Dumb and dumber
Americans are dumb when it comes to economics.
A recent study by the Intercollegiate Studies Institute (ISI) reveals that almost 40 percent of people with a bachelor’s degree do not know business profit equals revenue minus expenses. Only 54 percent with a bachelor’s degree correctly defined free enterprise as a system in which individuals create, exchange and control goods and resources. A scant 21 percent of Americans falsely believe that the Federal Reserve can increase or decrease government spending.
“People may be listening to television experts talk about economic bailouts and the platforms of political candidates, but they apparently have little idea what our basic economic and political institutions are,” said Richard Brake, ISI’s director of university stewardship. “Our study raises significant questions about whether citizens who voted in this year’s landmark presidential election really understand how our system of representative democracy works.”
We have become a nation of economic illiterates. While that is dangerous for Americans, it is sinful on the part of Christians. God is over all creation and Christians must be able to apply a biblical outlook to every facet of reality – including economics. With 401(k)s plummeting in value and multi-billion dollar bailouts funded by taxpayers, perhaps it is time for Christians to commit themselves to taking a biblical look at the economic situation and examine the most biblical alternative.
President Bush’s bailout of the financial sector has shocked conservatives, who believe it is best for the market to work out such problems. At the height of the junk bond catastrophe in the 1980s, President Ronald Reagan was asked what he was going to do about it. He replied, “Go to Camp David for the weekend.” In other words, he knew the market would work itself out and it did. That has not been the approach used by Bush, nor will be it be utilized by President-elect Obama. Both adhere to interventionist economics, one of three economic systems most dominate throughout the world.
An interventionist approach is Keynesian economics, a term Americans are going to hear more frequently in coming months. Christians would do well to understand what it means and how it is going to impact our lives. It is anything but biblical.
Keynesian economics is named for the economic views of John Maynard Keynes, one of the most influential economists of the 20th century. Known as the “Father” of interventionist economics, it has dominated American economic policy from Franklin Roosevelt through Jimmy Carter. It could be argued that every president since FDR – except for Reagan – embraced Keynesian economics in some fashion.
Interventionist economics is action taken by the government, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy. It is generally associated with the political and theological left or socialists. Actions by the government can include targeted tax credits, minimum wage legislation, union shop rules, contracting preferences, direct subsidies to certain classes of producers, price supports, price caps, production quotas, import quotas and tariffs.
It is instructive for Christians to understand Keynes’ presuppositions in his approach to economics. Keynes was a member of a socialist group in England known as the Fabian Society. He built his economic philosophy on the basic assumption that Christianity was not – and could not be – true. He was a known agnostic his entire adult life and right up to his death in 1946. Like most Fabians, Keynes believed that new principles of human action must be found in a form of socialism. Keynes persuaded Roosevelt that he should adopt deficit spending as a way of lifting America out of its depression. Deficit spending is not biblical stewardship.
The radical intent of Keynes is apparent in his writings. He once wrote: “V.I. Lenin is said to have remarked that the best way to destroy the capitalist system was to debauch the currency …. . Lenin was right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency.” In other words, the government can print money like a drunken sailor. Of course, if you print enough, it’ll become worthless. Liberals have defended such irresponsible and inflationary policy on the grounds that we must provide foreign aid or create a new domestic program for some victimized group. Sadly, the appearance of prosperity is but an illusion. It is also an ideal way to redistribute the wealth of the nation.
Socialism is interventionism on steroids. Socialism means far more than centralized control of the economic process. As philosopher Ron Nash explains, it entails “the introduction of coercion into economic exchange in order to facilitate the attainment of goals of the elite who function as the central planners.” The concept of justice under a socialist economy is different than Christianity’s concept. Biblical justice implies impartiality in protection of human rights, while a socialist outlook emphasizes strict equality.
Socialism attempts to control all economic activity through the government, creating an unresponsive economy ruled by a government without limits to its sovereignty (while rejecting God’s). Relationships are not voluntary, but are coerced. Property is mistreated because it belongs to everyone and no one at the same time, leaving little incentive to protect it, improve it or use it productively.
Christian apologist David Noebel says there are many reasons a Christian worldview must embrace democratic capitalism. The Bible grants man property rights and calls for him to be a good steward. The free enterprise system affords man with the best opportunity to create wealth and opportunity for others (create jobs). While socialism calls for equality, capitalism affirms the Biblical requirement of equality before the law.
“Further, the competition in the free market works according to the principle of comparative advantage, which affirms the inherent worth of every individual,” said Noebel. “The policies of redistribution … only multiply the problems for the poor – creating needless bureaucracies and concentrating too much power in the hands of the government.” Socialism leads to oppression and misery. Socialism was the economic system under communism and it should be noted during the 20th century more than 91 million people were killed under communist domination. Even Marxist leader Frederick Engels knew that the Bible could in no way be construed to support a socialist economic system. Said Engels, “ … if some few passages of the Bible may be favourable to Communism, the general spirit of its doctrines is, nevertheless, totally opposed to it … .”
So what is an alternative? Better still, what economic system is closest to a Christian worldview?
First, a Christian should have a clear understanding of a Christian worldview – including economics. What views about humankind, society, morality and God are taught or implied by Scripture? Second, Christians need to understand the differences between capitalism, socialism and interventionism. Finally, Christians should compare the economic options to the standard set forth by the Bible and determine which system is most consistent with the entire Christian worldview.
“Only capitalism operates on the basis of respect for free, independent, responsible persons,” says economist Arthur Shenfield. “All other systems in varying degrees treat men as less than this. A socialist system above all treats men as pawns to be moved about by the authorities, or as children to be given what the rulers decide is good for them, or as serfs or slaves. The rulers begin by boasting about their compassion, which in any case is fraudulent, but after a time they drop this pretense which they find unnecessary for the maintenance of power. In all things they act on the presumption that they know best.”
Capitalism, on the other hand, supports voluntary relationships. All are conducted in an orderly manner. It recognizes that certain conditions must exist: the existence of inherent human rights, the right to hold property (Isaiah 65:21-22), the right to exchange peacefully rather than forcibly, the right to make decisions and the right to be free. Capitalism presupposes a system of morality, says philosopher Ron Nash. “Under capitalism, there are definite limits, moral and otherwise, to the way in which people can exchange. Capitalism should be viewed as a system of voluntary relationships with in a framework of laws that protect people’s rights against force, fraud, theft, and violations of contracts. ‘Thou shalt not steal’ and ‘Thou shalt not lie’ are part of the underlying moral constraints of the system.”
Private ownership and stewardship of property (Psalm 24:1 reminds us that God is the owner of everything) is assumed to be the proper state of affairs throughout Scripture (Jer.32:42-44; Micah 4:1-4, Luke 12:13-5. The right to property stems from our duty to work (Exodus 34:21).
Capitalism also provides the best means to care for the poor and stifles man’s sinful tendencies. Interventionism is a dangerous game that could lead to a full-blown socialism that denies God and produces only oppression and misery. Francis Schaeffer perhaps sums it up best: “Since utopian perfection cannot be achieved in a fallen world, three-quarters of a capitalist loaf is better than the whole loaf promised by socialist dreamers but never delivered.”