Posts tagged with: capitalism

This week I’m attending Mises University, one of the largest and most rigorous summer courses in the Austrian School of economics (or “reality economics,” as my friend Michael McKay likes to call it).

Among the various lectures, there was one in particular that struck me as particularly relevant to the work of the Acton Institute. Peter Klein, professor of economics at the University of Missouri, delivered a presentation on entrepreneurship, a large part of the focus of his academic work.

Dr. Klein approaches the subject of entrepreneurship from the more realistic Austrian perspective. Rather than viewing people as examples of the homo economicus, as almost robotic, quantitatively-driven machines, Dr. Klein views human beings as unique and free actors. When we act, we do so under conditions of time and uncertainty. Though every human action presupposes cause and effect, there is no guarantee that our instincts are correct or that our efforts will pay off. In this way, every one of us, whenever we choose some action, is a kind of entrepreneur. In the face of uncertainty, we have an intended – but not guaranteed – result of action.

Combine that with the Austrians’ very realist take on production: production is not some kind of abstract graphical function, but the concrete act of taking a natural resource (e.g. some wood, a stone,  some metal ore), and using one’s labor – almost investing a part of oneself – to physically transform it.

In a very broad sense, we all participate in this two-sided entrepreneurial action: actively and consciously transforming the world around us, and doing so in the face of uncertainty and imperfect knowledge.

In a much more specific sense, this activity applies to the people we would usually call entrepreneurs (Ludwig von Mises called them, “entrepreneur-promoters”). These are the businessmen we all know: the small-business owner, the investment banker, the risk-taker. These are individuals whose entrepreneurial spirit in a special way exceeds those of everyone around them. They are the ones willing to take on greater risk, confront greater uncertainty, and make more difficult decisions.

In any case, I find that this realistic description of the role of entrepreneurship fits extremely well with the theology in The Call of the Entrepreneur. In the film, we learn that the entrepreneur is a “co-creator”: He  participates in the act of transforming raw materials and natural resources into products for consumers; but the entrepreneur does so by investing time and energy into the production process. And creativity and imagination play an indispensable role in this process of co-creation.

I remember a kind of feeling of awe when this thought dawned on me during Dr. Klein’s lecture. Here we find yet another example of how the market process, when understood and employed correctly, is not simply a morally indifferent result of choice, but a morally positive thing. Society and its consumers are made better off, and both the laborer and the entrepreneur are reminded of their human dignity as they participate in God’s work of fashioning the world.

At MercatorNet, Sheila Liaugminas looks at the bank regulation push — enshrined in another 2,000 page document that few of the legislators behind this effort will actually read. In “Social Order on the Surface” she recalls an Acton conference where she heard this from Rev. Robert A. Sirico:

Politicians are not our leaders in a rightly ordered society, they are our followers … Not all views of culture are equal. but we can’t engage socially on our disagreements because everything becomes political … There is no legislature that can govern the human heart … A correct understanding of who the human person is is important to social ordering. Man is prior to the state. You can’t have a ‘common good’ if the good of the individual is not taken into consideration first.

Liaugminas also links to Research Director Samuel Gregg’s recent journal article “Smith versus Keynes: Economics and Political Economy in the Post-Crisis Era” in the Harvard Journal of Law and Public Policy.

“Statism is expanding in the U.S. right now under the guise of ‘the common good,'” Laugminas said. “Acton is only one institute engaging the debate about how Washington is handling the moral and ‘economic dimension of human reality,’ but we’d better pay attention.”

Advancing the “common good” behind the banner of statism has turned out to be an exercise in reckless selfishness and rapidly advancing insecurity. Where the gospel of redistribution of wealth was advertised as a way to ensure social equality, it now threatens to impoverish great masses of those who bought into the glittering promises. And promises are still being made. Recall President Obama telling Joe the Plumber that “spreading the wealth around” would be good for everybody (see video above).

Culture matters, much more so than politics. In “End of the European Siesta?,” Guy Sorman on City Journal explains why the financial fix for Europe’s debt problems are really superficial and temporary. Europe, he contends, needs to throw off the socialist ideologies — now embedded in cultural attitudes — that are at odds with its founding free market philosophy.

… the European Union is based on a free market. It was so conceived in political philosophy and in economics, and the only possible way to govern it is in accordance with such economic freedom. Yet all the national governments, even those of the right, have in fact created gigantic welfare states inspired by socialist ideology.

The fact is that, at the origins of Europe, Jean Monnet, a Cognac entrepreneur with strong American connections, concluded that European governments had never succeeded and would never succeed in making Europe a zone of peace and prosperity. He thus replaced the diplomatic engine with an economic engine: free trade and the spirit of enterprise, he envisioned, would generate “concrete areas of solidarity” that would eliminate war and poverty.

The “fatal drift” away from economic freedom, Sorman explains, inevitably led to the EU project going off the rails. Is America headed down the same path? Is the culture of free enterprise, for so long integral to what it means to be an American, now in permanent decline? More from Sorman on Europe:

Unfortunately, the national governments thought it possible to reap the economic benefits of a free Europe and the electoral delights of socialism. By “socialism,” I mean the unlimited growth of the welfare state—the accumulation of entitlements and jobs protected by the state. This de facto socialism, this sedimentation of electoral promises and acquired rights, grew in Europe at a much faster rate than did the economy or the population. It could thus only be financed by loans, which seemed risk-free, since the euro appeared “strong.” The euro’s strength drove its holders into a frenzy: suddenly, anything could be bought on credit. The result was a remarkably homogeneous indebtedness in all the countries of Europe, on the order of 100 percent of national wealth—ranging between Germany’s 91 percent and the Greeks’ 133 percent (a relatively modest difference), all reflecting a common socialist drift. Germany, Greece, Spain, and France differ less in their levels of debt or modes of administration, which are in fact quite similar, than in their debtors’ capacities to repay. All European states are run socialist-style, in contradiction with the European Union’s free-market principles. Some will be more able than others to deal with defaults, but all have drifted off course.

How shall we explain this fatal drift? The true cause lies in ideology. Socialism dominates minds across Europe, whereas liberalism—which has retained its original free-market meaning in Europe—is under attack in the academy, in the media, and among intellectuals generally. In Europe, to support the market against the state, to recommend modesty on the part of the state, is taken for an “American” perversion. And socialist ideology is sufficiently engrained that it’s almost impossible for a non-suicidal politician to win election without promising still more public “solidarity” and still less individual risk. These welfare states, through their financial cost and the erosion of ethical responsibility that they foster, have smothered economic growth in Europe. We are the continent of decline, albeit decline with solidarity.

J.R.R. Tolkien

A reminder that tonight’s Acton on Tap promises to be another good one. Jonathan Witt, writer and Research Fellow at the Acton Institute, will lead a discussion about J.R.R. Tolkien’s views on freedom, capitalism, socialism, and distributism, and he will look at some of the ways those views have been misrepresented. The event takes place from 6-8 p.m. at the Derby Station in East Grand Rapids, Mich. (Map it here.) No advance registration is required. The only cost is your food and drink.

About the discussion leader:

Jonathan Witt, writer and research fellow with the Acton Institute, wrote scripts for The Call of the Entrepreneur and The Birth of Freedom, and co-wrote the script for The Privileged Planet (2004), all of which have aired on PBS. He also wrote scripts for the Effective Stewardship DVD Series, published by Zondervan. Previously Witt served as the writer in residence with the Seattle-based Center for Science & Culture and as a tenured professor of literature and creative writing at Lubbock Christian University. His academic writing has appeared in Philosophia Christi, Touchstone and Literature and Theology; his opinion pieces in such places as The Seattle Times, The Kansas City Star, Science & Theology News and The American Spectator; and his narrative writing in the literary journals Windhover and New Texas. He is the co-author of A Meaningful World: How the Arts and Sciences Reveal the Genius of Nature (IVP, 2006).

Michael Miller at Acton Lecture Series

In this new Acton Lecture Series audio, Acton’s Michael Miller discusses why many blame capitalism as the primary source of cultural disintegration. Miller, director of programs and Acton Media, asks: Does capitalism destroy culture or are other forces at work?

Listen to the lecture online here:

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From Miller’s Jan. 21 Acton Commentary, “The End of Capitalism?”

At least on equal par with a juridical framework as a factor in sustaining market systems is a specific moral culture. This includes trust, diligence, collaboration, honesty, perseverance, and prudence. If this crisis has taught us anything, it is the importance of morality for a market economy. The list of the seven deadly sins comprises an outline of the crisis’s causes. How many of us out of greed, gluttony, or pride used credit cards to buy things we did not need or could not afford, just so we could have the latest gadget or keep up with the Joneses? What about Wall Street bankers who couldn’t resist the chance to make ever more and took imprudent risks with clients’ money, or out of pride bought financial instruments they hardly understood. Markets cannot succeed without a strong moral fabric among the citizenry.

On the Economix blog at the New York Times, Uwe E. Reinhardt wrote a post titled “How Businesses Create Wealth.” That elicited attention from a commenter who wondered where he was “trying to go with this essay.” Reinhardt, an economics professor at Princeton, answers with “Companies: What Are They Good For?” He also cites an article from Acton’s Journal of Markets & Morality: “A Communitarian Model of Business: A Natural-Law Perspective.” Reinhardt:

Actually, I was not trying to go anywhere with my analysis, other than to point out that businesses create value and wealth beyond the usually narrow slice that accrues strictly to the owners.

In most firms, the largest fraction of the gross value that businesses create with the goods and services they produce is channeled to employees. That allocation helps create household wealth, which may be held in the form of a home or other real estate, pensions or investments in mutual funds, or highly productive human capital — that is, highly educated offspring.

With their chronic suspicion of for-profit business, commentators on the left of the ideological spectrum insufficiently acknowledge that major contribution that business makes to social welfare.

Former Acton colleague, Jay Richards just reported that his book Money, Greed, and God has just been released in paperback. It is a thoughtful Christian analysis of the market economy and an excellent summary of the many key fallacies that plague the way we understand–or rather misunderstand–economics.

He writes:

My tentative title for the book had been The Christian Case for Capitalism. I had even referred to it that way for a couple of years while I was working on it. But the publisher came up with Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem. I have friends who still think my original idea is preferable, but I’m not so sure. I’ve haven’t gotten a sense that anyone has been confused about the title. The only negative effect is that a few wags have suggested that “Money, Greed, and God” sounds like the platform for the Republican Party. I gotta admit, that’s pretty funny.

In any case, the more controversial question has been, why did I choose to defend something called “capitalism”? Wouldn’t it have been better to put “free enterprise” or “free market” in the title? I do have some thoughts about that, which I’ll write about later. But I should say that I was quite intentional in defending something called “capitalism.”

You can also order a copy of the book at the Acton Book Shop. We’ll have paperback copies in stock soon.

In a new column on Sojourners, Prophet Jim Wallis reveals that Wall Street financiers are coming to him for confession, sometimes skulking along darkened streets to hide their shame:

Some come like Nicodemus – a religious leader who came to talk to Jesus in private – at night. Many have felt remorseful about what happened on Wall Street and how it has hurt so many people. They describe the behavior in their profession with words such as “greedy,” “risky,” or “reckless.” These business and banking leaders do feel sorry, but repentance means that remorse must be coupled with a change in the behaviors that led to the problems.

The Prophet, who can read their very thoughts (“repentance and accountability were far from their minds”), bids them to change their ways and reminds them about God and Mammon. But it is not so much a conversion of hearts and minds Wallis is asking for, as it is the divine wrath of Washington regulators. His three-point plan (emphasis mine):

First, provide transparency and accountability. Given the human condition and the many temptations of money, we need transparency and accountability in financial markets and instruments, including high-risk and questionable ones such as the now infamous “derivatives.” To protect the common good, we need to enact greater regulation and oversight of all elements of the banking industry.

Second, provide consumer protection. Any pastor can now tell you stories of how parishioners were mistreated, cheated, and damaged by current banking practices. Many clergy strongly favor protecting consumers from predatory financial practices. They want a strong independent Consumer Finance Protection Agency, with jurisdiction and enforcement power over all companies in the financial sector, in order to protect people from fraudulent, misleading, and abusive practices.

Third, limit size and risk, so banks are no longer too big to fail – and are bailed out at public expense. This means setting limits on the size of financial institutions and the risks they can take. Ban bank ownership of private investment funds, and establish an orderly process to dissolve a failing bank, in order to avoid future taxpayer bailouts. Give a stronger voice to shareholders and investors in institutional practices and policies – including determining the executive compensation of companies, and the now infamous bank executive bonuses.

A much more intelligent and balanced analysis of the financial crisis was published yesterday by Russ Roberts, a professor of economics at George Mason University and a scholar at the Mercatus Center. Note the complete lack of cheap moralizing that informs so much of Wallis’ economic “analysis.” This is from the introduction to Roberts’ “Gambling with Other People’s Money”: (more…)

Blog author: jcouretas
Friday, April 9, 2010
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A reader sends on this fun video. Anyone know where can I get a bottle of this Dr. Utopia’s Ism elixir? Looks tasty. Is one sip enough?

Blog author: jballor
Thursday, March 18, 2010
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In this week’s Acton Commentary I expand on a minor meme floating around the web towards the end of last year that criticized the purported claim made by Lord Brian Griffiths, a Goldman Sachs advisor and vice chairman: “The injunction of Jesus to love others as ourselves is an endorsement of self-interest.”

I do a couple of things in this piece. First, I show that Griffith’s claim was rather different than that reported by various news outlets. Second, I place his reported comments within the broader context, which includes a greater emphasis on generosity than on self-interest. The entire transcript (PDF) of the panel discussion from which the quote was taken is an interesting read.

For instance, Griffiths also says this in the context of the question of ordering self-interest to serve justice: “…nobody, I think, on this panel believes in completely free markets. In fact, I don’t think I know anyone even in Goldman who believes in completely free markets.” By “completely free markets” Griffiths is talking about a pure lassez-faire view of the market. The broader context of Griffiths comments, including his emphasis on generosity and his qualification of endorsement of the market, should serve adequate notice to anyone who seeks to characterize him as a espousing some kind of radical view incompatible with Christian teaching. For more on the theological backgrounds of this topic, see my post over at Mere Comments.

And for even more background on Griffiths views, in addition to his Globalization, Poverty, and International Development, check out his plenary address, which includes endorsement of a kind of cap-and-trade system on carbon markets, given at 2008’s Acton University:

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Via Victor Claar (follow him on Twitter here), an op-ed in The Oracle (Henderson State University’s student paper) by Caleb Taylor, “Tiger Woods and Capitalism.”

A taste: “Contrary to what Michael Moore thinks, capitalism promotes moral and ethical behavior. In Woods’ case, it punishes poor behavior. Sponsors such as Nielsen, AT&T, Gillete and Gatorade have all either suspended or removed their endorsement deals with Tiger due to his moral mistakes.”