Wednesday, January 30, 2008

Can a Christian believe in Free Markets?

There has been some debate below Friday’s post about to what extent being an economic left-winger is a valid choice. We all know that socialism is not a successful way to achieve economic growth. It is less widely accepted, but I think still true, that the best way for a country to become rich is following an unfettered free-market and free-trade policy. For example, before 1990 India followed an economic policy that was centrally planned and protectionist. This resulted in an average growth rate of 3% per annum – respectable for an industrialised country but disastrous where it could not even keep pace with population increases. After over a decade of free market reform, growth is up to 10% a year and ordinary Indians are finally getting richer. Some are getting extremely rich and herein lies the left-winger’s gripe.

To be economically left wing is, I think, to value social justice and fairness more highly than economic growth. A left-winger would sacrifice some of the gains from an unfettered free market to even up the benefits. There are two powerful arguments in favour of this approach. The first is that, beyond a certain level, increased wealth does not seem to make us happier. Indeed, people are likely to be made unhappy by a neighbour who is clearly prospering more than they are (what we in England call having to keep up with the Joneses). Pop-psychologist Oliver James has written a couple of books claiming being rich has actually made us miserable but as he has declined to provide any evidence for his assertions, they must stand unproven.

The second powerful argument for the left winger is not one that many of them are inclined to make. It concerns equal opportunities. It is true that the best way to create opportunities for those willing and able to take them is an unfettered free market. However, many are either unwilling or cannot take their chances. The left will blame lack of education or other social disadvantages for this, but the real reason is the genetic lottery whereby many people do not have the raw brainpower or determination to give things a go. Thus, an unfettered market will always fail some people who are not, through their own efforts, able to do much about it. This might be what Jesus, whom we must at least credit with a shrewd idea of human nature, meant when he said that the poor would always be with us. He also blesses them and charges the rest of us with looking after them. Thus, I think it is possible to construct a left wing and Christian argument against leaving the market to its own devices.

Where do I stand? With a billion critically poor, I am not sure we have the luxury to worry about inequality. The quickest way to generate the trillions of dollars needed to lift the poor above the subsistence line is through global markets and free trade. That this money will end up very unevenly distributed is not, for the moment, the most pressing problem. My argument is not with those on the left whose priorities are different from mine, but with those who go on pretending that capitalism-lite can do the job better at wealth creation than capitalism.

Click here to read the first chapter of God's Philosophers: How the Medieval World Laid the Foundations of Modern Science absolutely free.


Bill Greene said...

A couple observations come to mind on this-- First, there is no necessary incompatibility between a nation having a totally free market and a socially compassionate means of alleviating hardship for those who would otherwise be "left behind." It's called charity or welfare. These alms were provided long ago by the private/church sector and now the system is primarily run by the government. The problem comes in defining how much help should be given, and to whom, by such redistribution of income from taxing those who work. The present sytem utilizes dozens of programs from many inefficient agencies that give too much to too many--and probably noy enough to others. The after-tax yield to many individuals on welfare exceeds the net income of the working poor. To be efficient and fair there should be only one, or a couple programs, and the recipients' needs should be transparent and public. The fact that recipients are not subject to audit (as taxpayers are) and get "hidden" credit cards to minimize embarassment at the register is overly compassionate and leads to abuse. The problem in a successful nation like America is not welfare, per se, but how it's done. The radical Leftists have made it a special lobby of enablers and adminstrators who have created an unjust and inefficient system. And too frequently, their escalating demands for more welfare are really just a way of getting back at the big corporations and rich people that they resent. That resentment, and the resulting regulatory burdens imposed, do interfere with free enterpise without halping the needy. Maybe welfare should be administered by the IRS or privatized ? (In the Third World, it should be noted, there is a whole different situation--most do not have the mechanics in place to enable capitalism to function from the bottom up.)

Elliot said...

Interesting post, James. I'll send you an e-mail about it. That way I can avoid getting in debates with comment-box hecklers.

Mark said...

In the bottom billion, Collier points out that statistically speaking for poor countries which are resource rich, democracy (and free market I think) are not the fastest growing societies. He gives some suggestions why.

Niall said...

"We all know that socialism is not a successful way to achieve economic growth."

James, are you including Nordic socialism and the like in the above assertion?

Personally, I've got no problem with the free market so long as every attempt is made to ensure that every child receives equality of opportunity.