Category: Acton Commentary

Acton’s Research Director in the American Spectator:

Europe’s Broken Economies

By Samuel Gregg

During September this year, much of Europe descended into mild chaos. Millions of Spaniards and French went on strike (following, of course, their return from six weeks vacation) against austerity measures introduced by their governments. Across the continent, there are deepening concerns about possible sovereign-debt defaults, stubbornly-high unemployment, Ireland’s renewed banking woes, and the resurgence of right-wing populist parties (often peddling left-wing economic ideas). Indeed, the palpable sense of crisis left many wondering if some European economies have entered a period of chronic decline — one which might eventually reduce Europe to being a bit-player on the world stage.

Obviously we should avoid over-simplification. In Germany and Sweden, for instance, unemployment is declining while economic growth and exports are rising. Not coincidentally, both countries have implemented significant economic reforms over the past ten years. To the audible disappointment of the world’s left-wingers, Sweden is no longer Social Democracy’s poster-child.

Nor can Europe’s present woes be explained in mono-causal terms. Like America, property-bubbles and over-leveraged financial industries played a role in some countries’ meltdowns. But not every European nation presently enduring economic hardship experienced banking crises on the scale experienced by Ireland and Britain.

It will be decades before economists and historians completely diagnose what’s happened to Europe’s economies since 2008. Many, however, will likely conclude that many European countries’ economic culture helped them lurch into seemingly unending crisis.

“Culture” is one of those heavily over-used words. But in sociological and historical terms, “culture” is a way of describing, among other things, the approach to life, the values emphasized, attitudes toward work, the understanding of law, and ultimately the view of science, the arts and religion prevailing in a given society. Over time, these form a type of inheritance that can remain relatively stable in particular historical settings over several generations. (more…)

In this week’s Acton Commentary, I remember German reunification and reflect on its relevance for the present.

Twenty years ago this Sunday, East and West Germany reunited, capping one of the most extraordinary transformations in modern history. Communism in the Soviet Union and its eastern European satellites had collapsed; the oppressed nations of Europe rejoined the “free world.”

My generation was the last to straddle the two worlds, pre- and post-Soviet Union. When I was in elementary and high school, fear of atomic annihilation was real. The USSR was the great, looming adversary on the world stage. Debate over the strategy of “mutually assured destruction” was the ominous focus of international policy discussions.

Read the rest here.

This week’s Acton commentary from Research Director Samuel Gregg. Sign up for Acton News & Commentary here.

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Benedict’s Creative Minority

By Samuel Gregg

In the wake of Benedict XVI’s recent trip to Britain, we have witnessed—yet again—most journalists’ inability to read this pontificate accurately. Whether it was Queen Elizabeth’s gracious welcoming address, Prime Minister David Cameron’s sensible reflections, or the tens of thousands of happy faces of all ages and colors who came to see Benedict in Scotland and England (utterly dwarfing the rather strange collection of angry Kafkaesque protestors), all these facts quickly disproved the usual suspects’ predictions of low-turnouts and massive anti-pope demonstrations.

Indeed, off-stage voices from Britain’s increasingly not-so-cultured elites—such as the celebrity atheist Richard Dawkins and others whom the English historian Michael Burleigh recently described as “sundry chasers of limelight” and products of a “self-satisfied provincialism”—were relegated to the sidelines. As David Cameron said, Benedict “challenged the whole country to sit up and think.”

Of course the success of Benedict’s visit doesn’t mean Britain is about to return to its Christian roots. In fact, it’s tempting to say present-day Britain represents one possible—and rather depressing—European future.

Pope Benedict XVI celebrates mass at Westminster Cathedral

Such is the fruit of a deeply-secularized, über-utilitarian culture that tolerates Christians until they start questioning the coherence of societies which can’t speak of truth and error, good and evil, save in the feeble jargon of whatever passes for political correctness at a given moment.

But what few commentators have grasped is that Benedict has long foreseen that, for at least another generation, this may well be the reality confronting those European Catholics and other Christians who won’t bend the knee to political correctness or militant secularism. Accordingly, he’s preparing Catholicism for its future in Europe as what Benedict calls a “creative minority.” (more…)

In this week’s Acton Commentary, I take a look at the prospects of “right-to-work” legislation in Michigan, “A Lesson from Michigan: Time to End Crony Unionism.”

One of the things that disturbs me the most about what I call “crony unionism” is the hand-in-glove relationship between the labor unions and big government. We have the same kind of special pleading and rent seeking in this system as we do in crony capitalism, but the labor unions enjoy such special protection that there isn’t even a hint of democratic competition.

The unions get windfalls from government subsidy and turn around and actively campaign for the expansion of government. The partisan character of some of the ad campaigns funded by labor unions are particularly egregious. I’ve recently seen a labor-funded ad running in Michigan that demonizes Republicans and lauds Democrats, and FactCheck.org ran a report earlier this month about attack ads from the American Federation of State, County, and Municipal Employees.

One of the noteworthy thing about unions in America is that the share of union members are increasingly coming from the public sector rather than the private sector. This adds an additional layer of concern to the larger problem of crony unionism. We in effect get government employees using government funds to campaign for the expansion of government.

Labor unions form a vital part of civil society, but when they are turned into arms of the government, their purpose is perverted and corrupted. Professor Charles W. Baird examines the merits of free labor in his Acton monograph, Liberating Labor: Liberating Labor: A Christian Economist’s Case for Voluntary Unionism.

Even the idea of debating whether unions should enjoy monopolistic privileges in a state like Michigan, dominated by organized labor interests for so long, is refreshing. And I think it might just be instructive about the kinds of alternative and innovative proposals that will have traction at the polls this November.

One of this week’s contributions to Acton Commentary, in honor of the upcoming American Labor Day holiday is titled, “Work and the Two Great Love Commandments.”

In this piece I focus on how we can view work as a means to express our love for our neighbor and for God. I say a bit about what work does for us as individuals as well.

There’s a great deal that could be said on this very important topic. Work is a huge area of our lives. Lester DeKoster, whom I refer to in the commentary, goes so far as to call work the “basic form of stewardship.” (You can find out more about DeKoster’s view of work in his little book of the same name, Work: The Meaning of Your Life—A Christian Perspective.)

He has another important perspective on work related to its formation of our souls and thereby the formation of civilization.

He writes, along with Gerard Berghoef,

While the object of work is destined to perish, the soul formed by daily decision to do work carries over into eternity…. This perspective on work, as a maturing of the soul, liberates the believer from undue concern over the monotony of the assembly line, the threat of technology, or the reduction of the worker to but an easily replaceable cog in the industrial machine. One’s job may be done by another. But each doer is himself unique, and what carries over beyond life and time is not the work but the worker. What doing the job does for each of us is not repeated in anyone else. What the exercise of will, of tenacity, of courage, of foresight, of triumph over temptations to get by, does for you is uniquely your own. One worker may replace another on the assembly line, but what each worker carries away from meeting the challenge of doing the day’s shift will ever be his own. The lasting and creative consequence of daily work happens to be the worker. God so arranges that civilization grows out of the same effort that develops the soul.

Tomorrow I’ll have more to say about work and civilization.

Acton Research Director Samuel Gregg contributed this piece to today’s Acton News & Commentary. Sign up here for the free, weekly email newsletter.

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Humility in a Time of Recession

By Samuel Gregg

Since 2008, there has been much discussion about the contribution of unethical behavior to our present economic circumstances. Whether it was borrowers’ lying on mortgage-applications or Fannie Mae and Freddie Mac’s politically-driven lending policies, there seems to be some consciousness that non-economic factors played a role in facilitating what we already call the Great Recession.

Unfortunately evidence is emerging that some people have learned nothing. A recent report, for example, commissioned by the Wall Street Journal illustrates that “losses from mortgage fraud—ranging from falsified credit reports to identity theft—rose 17% last year after declining 57% in the two years after its 2006 peak.”

Of course wider adherence to ethical norms against lying and stealing won’t solve every economic problem. There are heavy technical dimensions to many economic dilemmas which require technical solutions. Nor does every policy-error constitute a moral failure.

Nevertheless those making economic decisions are human beings, and our virtues and vices do shape our purchasing, selling and policy choices. Many such virtues could be highlighted, but one needing extra-attention today is humility.

The word “humility” derives from the Latin humilitas. This in turn comes from humus which means earth or soil, but is also related to homō, meaning man. For the Greeks and Romans, the word underscored the idea that humans are not God or gods. Likewise for the Jews and early Christians, humility was about remembering that humans are fallible creatures who come from and return to the earth: ashes to ashes, dust to dust. Some first millennium Christian writers, such as St. John Chrysostom, even described humility as the mother of the virtues, as it prevented vanity from corrupting every other virtue.

So how might a renewed embrace of humility help us to rethink our approach to contemporary economic life?

In the case of consumers, a good dose of humility might well encourage some acceptance that the meaning of life is not simple and is certainly not to be found in how many material things we possess, as important as wealth can be in helping us to live dignified lives. To this extent, greater humility might temper the “I-want-it-all-right-now” mentality that helped generate such high household-debt levels in America and Europe.

Likewise, businesses could benefit from a renewed appreciation of humility. The financial wizard the late Sir John Templeton once wrote that humility was crucial if business was to maintain the open-mindedness that is essential to successful entrepreneurship rather than rest upon their past glories. To this we might add the insight of another prominent entrepreneur, François Michelin, that humility helps business leaders in a market economy remember that the customers are the real masters. More humble business-leaders would also be less-inclined to succumb to the “Masters-of-the-Universe” hubris that helped destroy any number of banks in 2008.

Speaking of hubris, humility also has a role to play in encouraging mainstream economists to accept economics’ limits as a science and acknowledge that not everything about markets can be explained by mathematical models that were supposed to fail only once in a million years. As George Mason University professor of economics Russ Roberts has wisely observed, while “facts and evidence still matter”, economists “should face the evidence that we are no better today at predicting tomorrow than we were yesterday.”

But perhaps those who could do with the biggest bout of humility during recessions are politicians and governments. If the Great Recession has taught us anything, it is that governments should admit many economic problems are beyond their control, and that any claim by politicians to be able to “manage” trillion-dollar economies is arrogant nonsense.

Instead politicians should be modest enough to concede that (1) the seemingly disorderly process of market exchange resolves many challenges that governments cannot; and (2) government overreach invariably causes new problems. Here they would do well to read Adam Smith’s famous warning concerning the “man of system” who “is apt to be very wise in his own conceit, and is so often enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.”

The fear of the Lord, the Bible says, is the beginning of wisdom. Contrary to received opinion, this verse has nothing to do with frightening people into religious belief. Instead it reminds each of us that we are not the center of the universe and that the sooner we grasp this, the wiser our choices will be. All of us—consumers, business-leaders, and politicians—need to be sufficiently humble to reassess our actions in a time of recession, acknowledge our errors, and then live out the necessary correctives.

To this extent, the virtue of humility may well be a key to understanding our pre-recessionary past and a way of illuminating our path to a better and more economically-prosperous future.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

The Detroit News picked up Anthony Bradley’s Acton Commentary this week, and republished it as “Teachers unions, civil rights groups protect failed schools.”

Bradley:

Civil-rights groups including the NAACP, the National Urban League, Rainbow PUSH Coalition, recently released a joint statement objecting to the Obama administration’s education reform proposal, which includes the closing of failing schools, increasing use of charter schools, and other common sense moves toward choice and accountability in education. These groups reject Obama’s so-called “extensive reliance on charter schools.”

Even though there is overwhelming evidence supporting the success of charter schools for children from low-income households, the civil rights groups resist the opportunity for parents to exercise freedom to choose those schools.

This week’s Acton Commentary:

Deficits, Debt, and Self-Deception

By Samuel Gregg

It passed almost unnoticed, but in late July the Obama Administration raised the Federal Government’s budget deficit forecast for fiscal year 2011 to $1.4 trillion. That’s up from February’s forecast of $1.267 trillion. In July alone, the Federal Government’s deficit was $165 billion, of which $20 billion was for interest-payments on debt.

The long-term outlook is even worse. The U.S. Government is now borrowing approximately 41 cents of every dollar it spends. It’s also predicting additional borrowing of $8.5 trillion until 2020. If that eventuates, America’s national debt would exceed 77 percent of its annual economic output.

At some point, most of us become dazed by all these numbers that track America’s upward spiral of debt. This numbness is only exacerbated by the fact that government debt-excesses in most developed countries have been matched and even surpassed by household and financial-sector debt.

In Spain, for instance, household debt rose from 69 percent of disposable income in 2000 to 130 percent in 2008. Britain was worse, with the ratio rising from 105 percent to 160 percent over the same period. Average American household debt increased from $27,000 in 2001 to $44,000 today.

The economic effects of servicing all this debt (let alone paying down the principle) are not hard to grasp. For many households, it means either bankruptcy or severe curtailing of lifestyles so that expectations match people’s actual incomes. For others, it translates into less access to credit, even for those with good credit records or well-conceived business plans that need only sufficient capitalization to succeed. The cost of servicing government debt also reduces the amount of private sector capital available for investment. This means slower growth which further impedes our ability to shrink government deficits. (more…)

In this week’s Acton Commentary, I discuss whether the Environmental Protection Agency’s planned regulation of carbon emissions can be justified from a Christian perspective.  The EPA has found that carbon emissions endanger “public health and welfare,” and it is on track to begin regulating vehicle and power plant emissions.

Environmentalists claim that policies targeting carbon emissions, such as EPA regulation or a cap-and-trade program, will stimulate the economy by creating green jobs.  Unfortunately, this is not the case – the government does not have the ability to create jobs.

Rather than stimulating the American economy, full regulation of carbon emissions will damage it severely.  Essentially, a cap or a regulatory burden on carbon emissions would create energy scarcity, making it just as expensive to purchase energy from fossil fuels as it is to purchase energy from “renewable” sources.  The supply of efficient energy would drop in order to encourage production and consumption of inefficient energy, and prices would skyrocket as a result.

Barack Obama himself admitted, as a presidential candidate, that rising energy prices form a crucial component of emissions regulation.

It’s not just energy prices that will rise.  Prices for virtually all other goods and services will rise as well, because it takes energy to produce them.  It takes energy to get a vegetable from a farmer’s field to your kitchen table.  It takes energy to plant the vegetable, cultivate it, harvest it, transport it, keep it fresh, sell it in a lighted grocery store, drive it from the grocery store to the house, and cook it.

If energy expenses increase at every stage of the vegetable’s journey, what will happen to the price of the vegetable?  It will rise.  And rising prices will have the worst impact on the poor.  Before Christians jump on the bandwagon of carbon politics, they would do well to think through not just the good intentions of climate policy, but the real-world consequences.

Read “In the ‘Green’ Economy, the Poor Pay More” on the Acton website.

Last month, in “Europe’s Choice: Populate or Perish,” Acton Research Director Samuel Gregg observed:

At a deeper level … Europe’s declining birth-rate may also reflect a change in intellectual horizons. A cultural outlook focused upon the present and disinterested in the future is more likely to view children as a burden rather than a gift to be cared for in quite un-self-interested ways. Individuals and societies that have lost a sense of connection to their past and have no particular interest in their long-term destiny aren’t likely to be worried about a dearth of children. Here Europe’s generation of 1968—which promoted a radical rupture with the past and is intensely suspicious of anything that might broaden people’s outlooks beyond the usual politically-correct causes—has much to answer for.

In “America’s Parent Trap,” Washington Post columnist Robert J. Samuelson picks up the same theme noting that, “Our society does not — despite rhetoric to the contrary — put much value on raising children.” He takes a closer look at tax policy, among other factors, and the way it financially punishes parents.

While having a child is a deeply personal decision, it’s also shaped by culture, religion, economics and government policy. “No one has a good answer” as to why fertility varies among countries, says sociologist Andrew Cherlin of Johns Hopkins University. Eroding religious belief in Europe may partly explain lowered birth rates. In Japan, young women may be rebelling against their mothers’ isolated lives of child-rearing. General optimism and pessimism count. Hopefulness fueled America’s baby boom. After the Soviet Union’s collapse, says Cherlin, “anxiety for the future” depressed birth rates in Russia and Eastern Europe.

In poor societies, people have children to improve their economic well-being by increasing the number of family workers and providing support for parents in their old age. In wealthy societies, the logic often reverses. Government now supports the elderly, diminishing the need for children. By some studies, the safety nets for retirees have reduced fertility rates by 0.5 children in the United States and almost 1.0 in Western Europe, reports economist Robert Stein in the journal National Affairs. Similarly, some couples don’t have children because they don’t want to sacrifice their lifestyles to the time and expense of a family.

We need to avoid Western Europe’s mix of high taxes, low birth rates and feeble economic growth. Young Americans already face a bleak labor market that cannot instill confidence about having children. Piling on higher taxes won’t help. “If higher taxes make it more expensive to raise children,” says demographer Nicholas Eberstadt of the American Enterprise Institute, “people will think more about having another child.” That seems common sense, despite the multiple influences on becoming parents.

Read Samuelson’s column on the Washington Post website.