One of the tenets of capitalism that most people fail to recognize properly is that of the power of private interests. This phrase can readily conjure the word greed in most peoples minds: when you serve your private interests over the public good you are being greedy. And people certainly can be greedy, but it is this very allowance that ends up serving the public good.
Milton Friedman (In my opinion the C.S. Lewis of economics, in so much that he can explain difficult things ever so clearly) discusses this quite a bit in his book Capitalism and Freedom. If a baker bakes bread, he does so so that he can make money and provide for his family, not because he has an overwhelming desire to feed the world (though he may very well feel that). In his practicing his skill and pursuing his own personal interests he is providing the very goods that the public needs. Our entire economy is based on this micro example and the practice works up and down the supply chain. The person who sold the flour to the baker did not do so because he wants to feed the world, but for his own private interest. The farmer who planted and reaped the grain to make the flour did so for his own personal interest. Even the person who bought the bread, did not do so to help the baker, but himself. All these people work together unknowingly because of market forces and end up providing us with what we need. If all of a sudden people did not want bread but are buying rice instead, then the baker notices and buys less flour, and by recourse the farmer changes crops, or changes occupation, who knows. Either way they are all responding to numerous private interests to provide what is wanted and needed.
It is in this way that socialism fails. In controlled economies where a few people try to determine what is best for the public, all those signals from the market are much harder to monitor. People want rice, but guess what? The farmer is still planting wheat, because that is what he was told to do by the planners, not the people. So there is not enough rice for the demand and too much bread. This is obviously a simplified example (and doesn’t even take into account price and how the market understands that better than central planners), but it serves to demonstrate the role of private interests in determining what is best for the public good. The role of physicians, bakers, lawyers, etc. were all born out of this need of the public. Not at the bequest of a king, or a central planner.
Does capitalism’s lack of social justice as a determiner make it flawed. Hardly. It is the very thing that allows society to respond to needs and provide what is lacking. Central planning has historically led to one thing:
I find it interesting that your posts often claim what “most people” understand about capitalism. I don’t necessarily think that capitalism assumes the status quo in America (at least not a pure, libertarian capitalism), but neither is socialism. There is an interesting mesh of the two systems in America, one that leans more toward a free market system than the mesh in the UK, but I suppose it’s all relative.
Like it or not capitalism is our economic system, that cannot be challenged. Certain policies tend to take more money and control away from the individual and into government hands, so there is a tendency towards socialism in theory, but not in practice.
Try as they may, the government has not taken over the control of prices, and the production of goods. Until the marketplace is abolished we will be functioning as a capitalist economy.
I almost always give the term socialism to the ideology of complete central planning. Obviously there are socialists that believe in markets and want nationalization of only certain areas, but I personally don’t distinguish between the different degrees of socialism. No offense, but I don’t think there is any merit to any facet of socialism, whether it is installed completely or partially (as is the “mesh” in Britain).
So when I offer capitalism (and by consequence what people should understand about it), I offer it as a complete ideal. Not as something to be hybridized. In that sense I believe that economics is found to be like religion, in that it theoretically can not be pluralistic. You cannot be Christian and Muslim, or Buddhist and Hindu. They are competing beliefs. They cannot (or should not) be patched together.
I understand what you are saying, but I was merely pointing out that your rhetoric is usually on the defensive, when in actuality we are living in a capitalistic system. With regard to the mesh, I was attempting to give you the benefit of the doubt in case you didn’t believe that we lived in a pure capitalistic system.
You’re theoretical black and white between capitalism and socialism would only function properly in the resurrection, when God will do away with our petty systems in place of his own. While you are battling with ideals (and though I consider myself very much an idealist) the real world with all of its complexities, is broken.
“Obviously there are socialists that believe in markets and want nationalization of only certain areas, but I personally don’t distinguish between the different degrees of socialism. No offense, but I don’t think there is any merit to any facet of socialism, whether it is installed completely or partially (as is the “mesh” in Britain).”
To ignore degrees of these economic views is similar to ignoring degrees of political variance on the political spectrum. I don’t believe that the only tangible/useful economic options in our society consist of “capitalism” and “socialism,” just as our only political options are not “conservatism” and “liberalism.”
I am willing to accept many merits of the capitalistic system and I don’t assume that you must accept any merits of the socialistic system to be virtuous. I simply find it surprising that you so staunchly see no merit in socialistic theory, to any degree.
You are correct, I tend to be defensive, for that I apologize. And I do really appreciate your take on this, and think it will be good – no great – to hear for me.
As for my black/white views, you are partially correct. You are right that I am very staunch. Where you are incorrect is that I do not “ignore…the degrees of these economic views.” I am well aware of them (hence my defensiveness?). There are many options available in economic belief as well as political belief as you have pointed out. But understanding that gray areas exist, is different than believing that the gray areas are correct or ideal.
As Christians we understand that we are broken and sinners, but we don’t aspire to that. I don’t want to mix faith and economics too much, but just as we aspire to perfect our faith in Christ – while knowing we will fail – so do I think (and here is where comparing the two is weirding me out) we should aspire to the best system, which I believe is free-market capitalism, while knowing that we may fall somewhere beneath.
We’ll hash this out more as we go. Good stuff E.
There is that tension that exists, the presence and absence of the kingdom of God. Capitalism may work well in the resurrection, but we aren’t entirely there yet. In the same way, we are not going to be married in the resurrection, but marriage remains a sacrament of the Church in this age.
So let’s just say that the sacrament of marriage is like socialism, which should be enacted now, and the non-marriage existence in the resurrection is like capitalism (I am joking of course).
I am grateful for your thoughtful responses and they are good for me to hear as well. I wish we had prefaced our minor clashes with a friendship, but we must look at that timeless question, “which came first, the friendship or the disagreement?”
Mark, I like your comments in this post and in your PS discussion. I really agree with what you said in this post. I also noticed that the supply and demand relationship in terms of gas has lead people to restructure their lives (for the better, one could argue, in many cases) and thus drive the cost of oil back down.
I also think it’s worth looking at the environmental issues that are going on. I would have classified myself as a completely non-green person a decade ago. Through education and communication from agencies and groups, I have learned the value of recycling, not using fossil fuels, etc. I think it’s fair to say that my own change in attitude is very reflective of society at large these days. We’ve all grown more “green”. And look at what much of that education has done – consumers are demanding that companies act more responsibly these days. There isn’t a major company out there that doesn’t try to appease the consumer without some appeal to it’s humanitarian or ecological efforts. Sure we’ve passed legislation, but the real driving force for change has been a change in the consumer’s demand. We demand not only our goods, but we want them made ethically. I think the role of government in educating the consumer and the people would make for an interesting discussion. To what extent should a government be educating the people instead of legislating ethics? I would say a fair amount.
Also, and this is actually why I started to post a comment, I think there’s something to be said for our unwillingness to experience pain in our economies as markets correct themselves. We ALWAYS wants a bullish stock market. We ALWAYS want the lowest prices on commodities, even when the demand is high. We ALWAYS want to avoid any pain in our checkbooks, thus we attempt to legislate. I know the current credit crisis is very complicated and I don’t attempt to speak as one who knows everything, but I find it interesting that many, including Greenspan, speak as if the market did not correct itself. It seems to me as though it is right now. However, no legislator wants the economy to be in a bad place during their term. That’s purely self preservation because they know their opponents will promise solutions come election time. It sucks to live during times of economic disparity, however, it’s necessary in order to allow the pain to cause us to find new ways to succeed, new products to offer, new ways to do business. It seems to me in this “hybrid” economy we have in the US, we try to preempt periods of growth that, while painful, may actually stimulate our society and economy to grow stronger.