Acton Research Director Samuel Gregg contributed the article here, one of two Acton commentaries published today. Sign up for the free, weekly email newsletter Acton News & Commentary to receive new essays, book announcements and the latest news about Acton events.

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Money, Deficits, and the Devil: A Cautionary Tale

By Samuel Gregg D.Phil.

Sometimes the best economists aren’t economists.

One of the most famous plays in Western history was penned by the German writer Johann Wolfgang von Goethe (1749-1832). His two-part drama, Faust, is considered one of the greatest works of German literature. This complicated and sometimes disturbing text tells the story of a young scholar, Faust, who enters into a pact with the devil, Mephistopheles. In return for Mephistopheles’ services to help him realize his ambitions, Faust wagers the devil his soul.

Throughout the play, Faust asks Mephistopheles to help him achieve several ostensibly good ends. But each time he summons up the devil’s power, Faust gets more than he bargains for. In one scene, for example, Faust finds himself living as the landlord of a prosperous estate. His tranquility is disturbed only by an elderly couple who holds a freehold enclave on Faust’s land. Faust asks Mephistopheles to displace them. The devil fulfils his request, but in a way unanticipated by Faust: the elderly couple’s house is incinerated and the couple murdered.

At the beginning of part two, however, the play makes a surprising excursion into economics. Accompanied by Mephistopheles, Faust attends the court of a ruler whose empire is facing financial ruin because of profligate government spending. Rather than urging the emperor to be more fiscally responsible, Mephistopheles—disguised, revealingly, as a court jester—suggests a different approach, one with disturbing parallels to our own age.

Noting that the empire’s currency is gold, Mephistopheles maintains there is surely plenty of undiscovered gold underneath the earth belonging to the emperor. Thus, he argues, the emperor can issue promissory notes for the value of this yet-to-be-found gold, thereby generating fresh monetary resources for the government and solving its debt problems.

Not surprisingly, the emperor and his treasurer are delighted with this idea. It means the monarch can avoid making hard economic choices while simultaneously providing the empire with desperately needed currency. Mephistopheles subsequently deluges the court with paper money, and Faust is praised by emperor and commoner alike.

The results, however, are not what are expected. First, the issuance of paper money does not solve the emperor’s spending problems. Instead the ruler and his court become even more extravagant, knowing they can always print more paper money to cover their ever-growing expenses. Second, the devil has subtly but fundamentally changed the basis of the empire’s currency. Instead of being rooted in the solidity offered by a tangible and valued asset, the currency is now based on flimsy paper promises. Thus long-term monetary stability and powerful restraints on extravagant government spending are sacrificed for short-term gain.

Goethe finished writing the second part of Faust in 1832. Modern economics was then only emerging from its infancy. Yet Goethe’s insights go to the heart of some of our most intractable long-term economic problems.

One concerns the impact of fiat money. Technically speaking, fiat money is a currency that a government declares to be legal tender, even though it has no intrinsic value. Throughout history, fiat money has been the exception rather than the rule. Most currencies have been based on physical commodities, particularly gold. By contrast fiat money is ultimately based upon enough people having faith that a given currency will be accepted for the purpose of economic transactions.

Such faith, however, is easily shaken. The euro’s recent tribulations are a good example of what happens when people begin losing their faith in a fiat currency. The expression “as good as gold” underscores the confidence people have always attached to commodity-backed currencies, especially in difficult economic times.

The second problem concerns the temptation faced by governments as they struggle to solve their deficit problems. In 2009, America’s federal government posted a $1.4 trillion deficit. That’s 10 percent of U.S gross domestic product, a level not witnessed since World War II. Given a choice between cutting spending, borrowing, or inflating the money-supply, the third option appeals to many politicians. Moreover, like Goethe’s emperor, it’s exactly what many Western governments did between 1945 and 1980: short-term relief was bought at the expense of long-term fiscal stability.

But perhaps the biggest lesson from Goethe’s Faust is that self-deception is intrinsic to all foolish acts. Whenever governments choose comforting economic illusions over difficult economic truths, then, like Mephistopheles, they will employ dubious means such as state-engineered inflation or public-sector indebtedness to make ill-conceived economic policies seem less burdensome to those who will in the long term eventually have to pay the price.

There is, some might say, something demonic about that.

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


Since reading Rousseau raises a questions on almost innumerable topics, you can imagine that the Q&A after a lecture I gave on Rousseau was broad and varied. Among other things, love, family, and problems with relationships and maturity within modern liberal culture were a recurring theme. Two pieces that came up in discussion were:

1. Karol Wojtyla’s (John Paul II) Love and Responsibility. This is a beautiful book on human love and an antidote to most of the nonsense that goes around on love these days. I highly recommend it, but if you haven’t studied philosophy formally it might be best to skip the introduction on objects and subjects, and instead begin with the chapter, “Metaphysical Analysis of Love”

2. An interesting article by Kay Hymowitz in the City Journal called Child-Man in the Promised Land

The second one provoked quite a bit of response when it came out—I would be interested in hearing your comments.

One more on adolescents that didn’t come up in the discussion, but is worth reading, is a piece from six years ago by Joseph Epstein called The Perpetual Adolescent. Epstein worries that modern life which perpetuates and glorifies youthfulness and adolescense is not only a problem for society, but for human flourishing. He writes:

The greatest sins, Santayana thought, are those that set out to strangle human nature. This is of course what is being done in cultivating perpetual adolescence, while putting off maturity for as long as possible. Maturity provides a more articulated sense of the ebb and flow, the ups and downs, of life, a more subtly reticulated graph of human possibility. Above all, it values a clear and fit conception of reality.

Perpetual Adolescence is a serious problem for a free society since as William Allen says so well–“self-government requires self-governors” and adolescents as we know, no matter their age, are not reputed for self-control.

Daniel Mahoney, professor of political science at Assumption College and lecturer at this year’s Acton University, (find his lectures here) wrote an excellent review in City Journalof Thomas Sowell’s new book, Intellectuals and Society. Sowell argues against the hyper-rationalist tradition of modern intellectuals whose theories tend to be divorced from reality and hostile to tradition and what Michael Polanyi called “tacit knowledge” of everyday people. As Mahoney notes, this has been a recurring theme of Sowell’s work throughout the years beginning with his fine book A Conflict of Visions. Mahoney writes:

Sowell, it’s true, denies being an intellectual, and we must take him at his word. He renews the critique of “literary politics” first limned by Edmund Burke in Reflections on the Revolution in France and Alexis de Tocqueville in The Old Regime and the Revolution. Burke and Tocqueville both observed a new intellectual type: thinkers inebriated by revolution and the dream of a radically new social order, and dismissive of the inherited wisdom of the past. Burke and Tocqueville didn’t hesitate to denounce injustice when they saw it, whether British oppression of Indians and the Irish or chattel slavery in America. But their critiques drew on the best traditions of Western civilization. They avoided the “rationalist” illusion that the world could be created anew. In this spirit, Sowell refuses to judge ideas by their supposed good intentions, but rather by their effects on human beings.

Read the entire review here.

In a new column in the Detroit News, Rev. Robert A. Sirico warns of a “cultural shift which would reject Christian revelation’s role in the forming of American and Western civilization.”

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June 29, 2010

Don’t devalue Christian heritage

By Fr. Robert Sirico

A week or so ago I struck up a friendly conversation with a cleaning lady upon entering a hotel.

She right away asked me, “Did you hear the news of the statue of Christ being struck with lightning in Ohio?”

How could I avoid it? For some inexplicable reason the news of this “act of God” had attracted a great deal of attention. Why, I began to wonder, did this relatively marginal story gain so much press attention?

“Do you think it was a sign?” the lady asked.

“A sign of what?” I replied.

I thought of our conversation for the rest of the morning. I am not one given to “signs and wonders” to discern some kind of mystical revelation, though I grant there is plenty of historical precedent for such epiphanies. Yet, I could not get the image out of my mind and the fascination it held for so many.

It does not take the training of a professional sociologist to realize that a major cultural shift regarding faith, morals and the place of Christianity is under way in Western Civilization. And this has nothing, really, to do with some haphazard lightning strike in Ohio.

Consider the following, which is a mere sampling of recent efforts to undermine the place of faith in the public life of Western democracies:

– The European Union’s insistence that neither God nor the Christian Church be mentioned in its Constitution, despite the clear historical role belief in the form and the institution of the latter played in the formation of Europe.

— The litany (if you will excuse the pun) of coarse jokes, cheap shots and outright viciousness directed specifically at the person of Christ or the Christian faith on TV and which are passed over by the same people who would readily file hate crime charges against their promoters if addressed to any other religion.

— The subtle but clear shift in language away from “freedom of religion” to “freedom of worship” on the part of the current administration, retaining only one dimension of religion (worship) while setting the stage to curtail its public witness. It is freedom of religion, not merely worship that has been venerated since the American founding.

This is not mere paranoia. Numerous other examples exist, but these should be sufficient evidence of a trend that is attempting to foster an entire cultural shift which would reject Christian revelation’s role in the forming of American and Western civilization.

For secularists and some non-Christians this might seem a worthy undertaking. After all, they might reason, why do we need a religion to be telling us how to live our lives, much less a religion that makes a claim to truth? And what is truth anyway, they might ask, not even realizing they are echoing Pilate’s own question to Jesus on the eve of his crucifixion?

Yet, aside from the historical amnesia this would represent, there are several significant ramifications which might well ensue were a complete repudiation of Christianity achieved.

The very idea of limited government and hence tolerance (yes, tolerance, which is not to be confused with the relativism offered as a substitute) emerge from the Judeo-Christian view of the sovereignty of God in personal and social life, rather than the sovereignty of political elites.

The very juridical systems we have grown accustomed to — and have been the envy of the world — did not just appear; they unfolded from the logic of the biblical faith. So, too, with the scientific method which followed from the knowledge that, if things are ordered by a divine plan and we are made in the image of God, then the truth of the physical world is knowable to reason.

Christianity has endowed Western Civilization with a priceless heritage. To lose this to a mass amnesia in the culture, would be an inestimable loss to the sense of who we are as a people and to any real hope we might have of building a just and tolerant future.

A delegate at last week’s Uniting General Council of the World Communion of Reformed Churches held at Calvin College urged the newly formed group to consider moving its headquarters out of the Ecumenical Centre in Geneva. Citing the costs associated with travel to and from the Swiss city, as well as those incurred during visits to the headquarters, Rev. Wesley Granberg-Michaelson, general secretary of the Reformed Church in America, asked the WCRC to move its offices to the global south.

This would be a show of solidarity as well as of acknowledgment of the shifting movement of the center of global Christianity to the southern Hemisphere. According to ENI, Granberg-Michaelson “questioned how the Reformed grouping could talk of promoting global justice, when it had its headquarters in a place of ‘significant economic privilege.'”

There’s a lot going on in this call, and more than I can comment on here. But I will say that I think this is a move that ought to be considered, but not primarily for the reasons Granberg-Michaelson raises (although there are some valid concerns there as well).

In my recent book, Ecumenical Babel: Confusing Economic Ideology and the Church’s Social Witness, I argue that one of the distinctive features of the ecumenical movement over the last two decades or so is what I call the ecumenical-industrial complex, “in which the ecumenical movement is promoted, through the media and political engagement, as an end in itself rather than as a church in service to others.”

Anything that can serve to mitigate some of the group think that goes on in the Ecumenical Centre in Geneva is something to be applauded, I think.

Blog author: jballor
Monday, June 28, 2010
By

Gizmodo has an intriguing post about attempts to regulate and even criminalize photography. As Wendy McIlroy reports, “In at least three states, it is now illegal to record any on-duty police officer.” She goes on to detail some of the exceptions and caveats, noting,

The legal justification for arresting the “shooter” rests on existing wiretapping or eavesdropping laws, with statutes against obstructing law enforcement sometimes cited. Illinois, Massachusetts, and Maryland are among the 12 states in which all parties must consent for a recording to be legal unless, as with TV news crews, it is obvious to all that recording is underway. Since the police do not consent, the camera-wielder can be arrested. Most all-party-consent states also include an exception for recording in public places where “no expectation of privacy exists” (Illinois does not) but in practice this exception is not being recognized.

It is simply amazing the level of accountability and transparency that can now be achieved because of technological advancement. Certainly the Founders didn’t imagine that video recordings would ever exist, much less become important sources of evidence in legal cases.

Are there any compelling reasons that the burden of proof should be on the photographer rather than the law enforcement officer in these kinds of situations? McIlroy continues, observing “recordings that are flattering to the police – an officer kissing a baby or rescuing a dog – will almost certainly not result in prosecution even if they are done without all-party consent. The only people who seem prone to prosecution are those who embarrass or confront the police, or who somehow challenge the law. If true, then the prosecutions are a form of social control to discourage criticism of the police or simple dissent.”

Merely using a camera certainly doesn’t entitle you to do anything you want and expect protection under the First Amendment. But in clearly non-aggressive instances, where police are acting in public and there is the clear potential for recorded data to be used as exculpatory or convicting evidence, the public’s right to accountability and transparency should be respected. Again, writes McIlroy, “Cameras have become the most effective weapon that ordinary people have to protect against and to expose police abuse. And the police want it to stop.”

It’s of course understandable why officers wouldn’t like being recorded, any more than the average person would like to be recorded when doing their jobs. But the job of a law enforcement official isn’t the same as that of an accountant, an editor, or a janitor. It’s a public service position, and one that acts officially and with government sanction in public.

Maybe in our technological age law enforcement officials should increasingly expect to be recorded. Or at least always act as if what they are doing is subject to public scrutiny.

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.

Christianity Today looks at the way the State Department has recently begun using the phrase “freedom of worship” instead of “freedom of religion.” The Obama Administration sees these phrases as more or less equivalent.

Secretary of State Hillary Clinton echoed the shift in language. In a December speech at Georgetown University, she used “freedom of worship” three times but “freedom of religion” not at all. While addressing senators in January, she referred to “freedom of worship” four times and “freedom of religion” once when quoting an earlier Obama speech.

[...]

The State Department does acknowledge that worship is just one component of religion, said spokesperson Andy Laine. “However, the terms ‘freedom of religion’ and ‘freedom of worship’ have often been used interchangeably through U.S. history, and policymakers in this administration will sometimes do likewise.”

But “the softened message” is probably meant for the Muslim world, according to Carl Esbeck, professor of law at the University of Missouri. He told CT that Obama, “seeking to repair relations fractured by 9/11, is telling Islamic countries that America is not interfering with their internal matters.”

Reporter Sarah Eekhoff Zylstra also interviewed Nina Shea, director of the Center for Religious Freedom and a member of the U.S. Commission on International Religious Freedom. She sees something much more troubling about the “freedom of worship” language. (Read an interview with Shea in the current issue of Religion & Liberty).

Freedom of worship means the right to pray within the confines of a place of worship or to privately believe, said Nina Shea, director of the Center for Religious Freedom and member of the commission. “It excludes the right to raise your children in your faith; the right to have religious literature; the right to meet with co-religionists; the right to raise funds; the right to appoint or elect your religious leaders, and to carry out charitable activities, to evangelize, [and] to have religious education or seminary training.”

Read “Freedom of Worship’ Worries” on the Web site of Christianity Today.

This week’s Acton Commentary. Benjamin B. Phillips is Assistant Professor of Systematic Theology at Southwestern Baptist Theological Seminary, Houston Campus. This commentary was based on an article in the Journal of Markets & Morality (Vol. 12, No. 2).

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Evangelicals and Global Warming

By Benjamin Phillips

Since 2005, evangelicals have divided into two roughly opposing camps over the question of anthropogenic global warming. Official statements of the Southern Baptist Convention through its resolution process, its Ethics and Religious Liberty Commission, and the Cornwall Alliance have typically rejected the theory of anthropogenic global warming and catastrophic climate change predictions. They assert that it is more likely that global warming will be moderate and have moderate or even helpful effects on the environment over all. They also argue that the reduction of carbon dioxide emissions is unlikely to have significant impact on global warming. These groups have focused primarily on the impact of climate-change policy on developing economies and the poor. On the other side, the Evangelical Environmental Network, through its Evangelical Climate Initiative and (as it seems) the SBECI have affirmed the existence and danger of anthropogenic global warming and have called for action to prevent it.

Despite conflict among evangelicals over the existence of anthropogenic global warming, there has been a great deal of consensus on the theological basis for addressing environmental degradation. Most evangelical statements appeal to the fact that God is the creator of the world as a basis for understanding the value of nonhuman creation, and many note that God is its owner. Virtually every evangelical statement on the environment and climate change acknowledges that God has commissioned humanity with the responsibility of stewardship/dominion over the earth and that the execution of this responsibility has been perverted by sin, with negative impact on the environment. Evangelicals have also, almost without exception, affirmed the responsibility of Christians to care for the poor as an important factor in considering environmental policy.

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In preparing for an Acton University lecture last week on Christianity and Government (you can listen to it here)

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I was reflecting on some of the core differences between a Christian vision of government in comparison to modern, secular visions.

While there is no single Christian vision of government and good Christians can disagree on a host of topics, one of the things that sets apart the Christian vision is a robust vision of the good life and integrated human flourishing directed toward certain ends that are fitting to man as a rational and free creature with an everlasting destiny.

The Christian idea of the good life is one of the reasons why for Christians, politics and the state, while necessary and ordained by God, are just not that important in the way they are to many ancients and modern visions.

Many critics say this is because the Church is focused on otherworldly matters. But this is insufficient. While it is true that the main concern of Christianity is eternal salvation, the Church is very concerned with living in this world—but its vision of the good life is found first in relationship with God, and then in the Church, families, and other associations in the place or places in which a person finds himself. This contrasts with certain ancient visions, or those influenced by the thought of Rousseau, which tend to see a plurality of associations as a dividing force and see man becoming integrated in and through the larger “community” of the state, thus making the state and politics central to life.

For Christians the purpose of politics is to create peace and order under which men can live out their freedoms, their responsibilities, and pursue an integrated vision of the good life. Politics is necessary and important, but by no means sufficient, primary, or the end of life–even life here on earth.

This is the vision of medieval thinkers like Thomas Aquinas and the Reformed theologian, Johannes Althusius, who wrote that “politics is the art of associating men for the purpose of establishing, cultivating, and conserving social life among them.” He called this “symbiotics” and said that “the end of the political symbiotic man is holy, just, comfortable, and happy symbiosis…”

This is why Christians today need to be concerned with the revival of community, private charity, mutual aid societies, strong families, and vibrant churches. But it is also why we must beware of finding community in the state, but I’ll leave that for another post.

For those interested you can find Althusius’ Politica at Liberty Fund, and Acton colleague, Jordan Ballor discusses Althusius’ contribution in his new book Ecumenical Babel just out from Christians Library Press and available at the Acton Book Shop.