Ever since Gordon Gekko’s character in the movie Wall Street uttered the phrase, “Greed is good,” there has been a wide-spread and oft-repeated myth that capitalism is based on greed. And, so the argument goes, if capitalism is driven by a sinful desire (greed), then it must be rejected as an immoral system.
Such issues have come up again in recent months as a number of new members of congress (and old members) are pushing the country away from capitalism and towards socialism, mostly on moral grounds. Even some well-meaning evangelicals, who have a genuine care for the poor, find themselves drawn to this new movement and its disdain for capitalism.
In light of this current climate, I appreciate Jay W. Richards’ book, Money, Greed, and God:Why Capitalism is the Solution and Not the Problem (HarperOne, 2009). Richards sets out to dispel many myths about capitalism, and is particularly intent on showing that it is not at all contrary to the teachings of Jesus and Christianity, as so many suppose.
Chapter five is devoted to the myth that capitalism is driven by greed, and Richards makes a number of useful points:
1. The fact that individuals in a capitalistic society happen to be greedy, does not mean capitalism is actually based on greed. Richards is quick to distinguish the greedy intentions of individuals (which, unfortunately, are prevalent), with the capitalistic system itself.
2. There is a difference between selfishness and self-interest. Capitalism is based on people operating out of their own self-interest, says Richards, not operating out of selfishness. Self-interest is not in itself immoral. Indeed, many of our daily actions are based on self-interest, such as brushing our teeth, looking both ways before crossing the street, and eating healthy foods. One might even say, our self-interest is an act of stewardship of the things God has given us.
3. Thus economic exchanges in a capitalistic system are mutually beneficial. Because capitalism is built on self-interest, then it means that people only engage in economic activity when it is mutually beneficial. When Joe buys meat from the butcher he does so out of the belief that the meat is more valuable to him than the money it costs. Thus, he exchanges the money for the meat willingly. He is not forced to beg for the meat, nor is he forced to buy the meat. He buys it because it gives him a benefit.
Likewise, the butcher also sells the meat willingly. He sells the meat because he believes the money is more valuable than the meat he is selling.
Thus, argues Richards, in a capitalistic system both parties benefit.
4. Capitalism does the best job of channeling selfishness for good ends. Although capitalism isn’t based on selfishness, it does do a very good job at channeling it towards a good outcome. Imagine an economic system that required everyone to act selflessly–it would be doomed to fail. Instead, capitalism, argues Richards, accounts for the fact that some (most?) people will act selfishly and guides their actions into a good outcomes. If the butcher is selfish and tries to sell a piece of spoiled meat, he cannot force people to buy it in a free economy. Thus, it is in his best interest to offer meat that the consumer actually wants. Richards comments, “The cruel, greedy butcher…has to look for ways to set up win-win scenarios. Even to satisfy his greed he has to meet your desires” (123).
5. Capitalism actually encourages generosity. Richards points out, contrary to popular opinion, that there is no evidence that America is more greedy just because its capitalistic. In fact, America is the most generous country in the world when it comes to charitable giving–by a landslide. Richards also observes that there is an inverse relationship between taxation and giving. “The more the government confiscates the less people give. Conversely, the freer the economy, the more people give” (124).
In sum, Richards’ book (particularly chapter five) reminds us that capitalism is not opposed to Christian thinking, but actually is consistent with the Christian understanding of human nature. It recognizes the proper role of self-interest. It encourages freedom, not coercion. It recognizes people are fallen and sinful and channels bad behavior towards good ends. And it ends up providing more prosperity out of which people can give generously.
David Spoede says
President (Dr.?) Kruger, you should consider adding a link to this blog to allow sharing, such as on Facebook. There is a Facebook icon on the page, but clicking on it takes one to your Facebook page.
Great review, by the way. That’s why I want to share it!
Bryan Irvin says
An excellent more recent book on this subject is by Kenneth Barnes (professor of marketplace theology at Gordon Conwell) and it’s called Redeeming Capitalism. He’s has an interesting perspective because before he became an academic theologian he worked in international business for over twenty years. I really enjoyed it and found it very insightful. Highly recommended!
Not having read the book, I do appreciate the example given, that of the butcher and their customers. It’s a good example of SMB entrepreneurs who make up a large part of the real economy.
But I think this example of mutual benefit is sometimes difficult to expand to the level of large corporates or certain parts of the world of Wall Street. A trader is rewarded for the deal they close; it is of no interest to them whether both parties ‘win’. There’s few incentives to make sure the deal is fair to both parties.
An example I was once told was of a hardware/database selling company that shamelessly sold way too much and too expensive equipment to venture capital funded startups. Their goal was not to provide this startup with the right value for money, but to soak up as many venture dollars as possible. Sure, the customers here thought they were being properly advised by the vendor, but that was not the case at all. The consultant I spoke with ended up parting ways with said vendor because he couldn’t consciously do that anymore.
It’s a bit like physics.. Newtonian physics work well at the day to day level, but fail at the micro and macro level, where we need relativity and quantum mechanics to explain what we see. Capitalism works on most levels, but derails at the macro level, in my humble opinion.
I agree that capitalism is ‘the least worst of all economic systems’, so to speak, but it definitely needs laws and regulations to set boundaries to curb the greed at these extreme ends, and good government oversight as well.
David Spoede says
Good comment, and one with which I completely agree. I’ve often likened economists who believe in the absolute infallibility of a completely free market to high school physics teachers who always begin their lectures on mechanics by prefacing their description of a problem with the words, “assume that there is no friction”. Well, in real life, there is always friction. The same is true of free markets – there is always some sort of friction in the form of intervention by this or that government, or some other flaw that prevents the market from being the pure free market prized by idealists.
Government oversight of capitalist economic activity can be likened to the rule making authority and refereeing of sports. No one would enjoy or participate in a high profile basketball game if there were either no rules or no way to enforce the rules. On the other hand, if there are too many rules, or if the referees take over the game by calling too many fouls, that also destroys the game. The same is true of government oversight and regulation of economic activity – it needs just enough, but not too much.
David S. says
I think what makes capitalism work at the micro level is a combination of govt oversight, a freedom to exercise choice and humanity. Under our form of govt (Federal Presidential Constitutional Republic), capitalism is the answer as it allows the greatest opportunity for charity and generosity which perpetuates our humanity. There will be bad actors under any system. The combination of capitalism and our form of govt allows us to keep bad actors in check. We would loose all of that under socialist models.
In as much as I would like to point the finger at Capitalism in an accusory sense and have done in my ideal moments at times, it does have a lot going for it that I hadn’t considered or been taught.
I would say socialism is more of a theocracy, dictatorship or social experiment than capitalism which is more biblical and democratic giving more power and individual freedom to the common or average person.
Van Rhodes says
Completely agree, professor. However, I urge you to use the term “free enterprise system” instead of capitalism. Capitalism is a derogatory term created by socialists.
I completely disagree with this. Capitalism, in and of itself, IS based on greed and is not THE “Christian” method of economics. However, the reason I am a capitalist is NOT because it is so great, but because every other human-based economic system is even worse due to our inherent total depravity. To paraphrase Churchill: “Capitalism is the worst form economics, except for all others.”
Let’s be careful not to slap a sanctified label on something the Scriptures address minimally at best just to prop up our position!
I wouldnt say sanctified, but pointing out the goodness and freedoms within it rather than falling for the immoral charge (as if socialism is all things nice). Thats what the article is saying to me.
Biblically or Christian(ly) we can trust the providence and wisdom of God in all things despite the layers of corruption within a nation, kingdom or society etc.
I think much depends on what sort of capitalism we are talking about. We have come a long way from a more uninhibited version that dominated the Industrial period and, at the very least, allowed for the exploitation of many. Not only is our present form socialist-influenced, but, as earlier comments have pointed out, we have regulation and oversight that aims at protecting workers, the environment, etc. We have found these things to be a needed counterweight to unrestrained (pure?) capitalism.
I’m sure this question is answered in the book (I should probably just read it) but I think it’s worth asking here. When it is stated that capitalism is the “solution and not the problem,” what version is being defended?
Caleb Roberts says
Defending capitalism from a Christian perspective requires a much more profound reckoning with the actual history of capitalism than what’s going on here, which is mostly just defending capitalism with the claims that capitalism makes about itself.
Read Karl Polanyi’s The Great Transformation, Michael Perelman’s The Invention of Capitalism, R.H. Tawney’s The Acquisitive Society, to name just a few off the top of my head, and you’ll find that this account is severely lacking.
Van Rhodes says
Thanks! Of the three you mentioned, which do you recommend the most?
Caleb Roberts says
Polanyi’s The Great Transformation would be my first recommendation. It’s easy to find, and manages to pack some thorough historical analysis in a relatively readable train of thought. Tawney’s The Acquisitive Society is shorter, but as it was written in the early 20th century, can sound somewhat antiquated in places. Still, it’s an accessible study of the implicit anthropology of capitalism.
David Spoede says
Caleb, would you summarize those books for us, please, or at least state how the points made in those books that impact the discussion on this thread? I’m not sure that I’m quite ready to read 3 books in order to get your point, but I am curious about your reasoning, which sounds like it may be somewhat negative toward capitalism.
Caleb Roberts says
Of course. Regarding greed and capitalism, Tawney’s book helpfully reframes the issue in terms of acquisitiveness, which may or may not be accompanied by greed, arguing that capitalism depends upon a certain acquisitive disposition among its subjects. This disposition represented a fundamental reconfiguration of how rights and obligations were imagined in modern western society. Relatedly, what the common claim that capitalism channels selfishness for good ends misses is that the “selfishness” in question is itself a construct of capitalist society: capitalism entails a certain conception of self-interest that it then imagines to be inherent to humans by nature. This conception may or may not be true, but the point is that capitalist ideology takes it for granted without justifying it. (C.B. MacPherson’s classic The Political Theory of Possessive Individualism is also helpful here).
Finally, regarding the claim that capitalism is non-coercive, this is where Polanyi and Perelman’s books come into play, as they document with painstaking detail the historical origins of capitalism, which was nothing if not coercive and exploitative. In short, capitalism didn’t just spontaneously spring up from the ground; it had to be planned and imposed, which meant that the traditional forms of labor and communal life which were already in place had to be systematically destroyed and cleared away so as to make room for the capitalist system.
Is it a better system than many others? Sure, and there is something like freedom within capitalist relations (albeit a purely negative conception of freedom, very different from the classical Christian understanding of freedom), but it’s important not to imbibe too deeply of the story that capitalism tells about itself. And to recognize the original violence inherent to its founding.
David Spoede says
From reading the reviews of Polanyi’s and Perelman’s books, they seem to be held in light regard by both historians and economists. In other words, they seem to be preferred more by social “scientists” of a certain socio-economic bent. They do not appear to be accurate or complete in their description of the rise of capitalism. They also seem to view the serfs and peasants of pre-capitalistic Europe in a golden haze that would not be recognizable to any historian of that period. From what I have read, the life of the typical serf in pre-capitalistic Europe was horrid. But, I could easily be wrong since I have not read either book and am relying upon reviews I found online.
Capitalism involves people, and people do horrible things, so one can find many horrible things within capitalism. But no one can honestly or accurately deny that the life of the average person in any society that turns to capitalism has improved dramatically. Family incomes, average lifespans, and any other measure of well being improves dramatically when a society becomes capitalistic.
That may be true because capitalism does not presuppose the innate goodness of people. Rather, whether one calls it greed, or acquisitiveness, or self-interest, a capitalistic system assumes the inherent selfishness and self-centeredness of people. But capitalism is also based on the belief that the best check on that greed is other people’s self-interest. Any attempt by society at large, including by the state, to force people to act without self-interest will inevitably end up in tyranny, great evil, and will fail.
What we have now in the West, including the U.S., is not capitalism at all. It is a grossly corrupted form of capitalism. But it would be not only a horrible mistake, but also a great tragedy that would result in unimaginable horror, if we were to discard capitalism.
I don’t believe that capitalism is perfect or will lead to any kind of utopia. (In fact, any advocates of a utopian system are worrisome because they inevitably turn to tyranny to impose their utopian vision.) But, with apologies to Churchill, capitalism seems to be the worst economic system, except for all of the others.
Prof. Kruger’s review comments of the book seems quite the “standard” way Christians defend free markets. However, I believe we need to look at this a bit more dispassionately and through God’s eyes as Christians. I want to bring a couple of points to attention and some lessons for us.
As a system, the free markets are inherently unstable. The “greedy” tag results from the system dynamics, not just some individuals who are “greedy”. Let’s see why.
The good things of free markets are all tied up to key assumptions such as large numbers of buyers and sellers in the market, perfect information, perfect competition, and so on. As some people have already commented, this is most emphatically far from reality. They distort and destabilize the process and set it off on a divergent spiral.
So, for example, in the butcher case, one butcher might have better information with a competitive advantage. He works on it in self interest, and makes more profits. He uses that to further bolster his competitive position. He might even use the money, in self interest, to influence government policy. Other butchers feel the heat, and some leave the market. The distortion grows because there’s less competition. The cycles continue.
This is what happens all the time, with technology exacerbating this dynamic over the last couple of decades. Finally it ends in some kind of oligopoly. The people look on business as greedy.
God’s provision for the nation state of Israel shows how He deals with this problem. It is not a perfect solution, but a mitigation of the worst effects of fallen mankind till His kingdom is established in fullness in the New Creation.
He starts off as a free marketer but institutes the laws of jubilee, which is a decidedly socialist intervention, to limit the distortion that can take place. Debts are forgiven. Slaves are set free. Land, the main asset class of that time, returns back to the original family to whom God allotted it. The cycle start again with a more equal distribution of wealth.
As Christians we must learn from this that God neither favors free economy nor socialism. He takes the right solution components from both these philosophies and institutes them as a whole for Israel. We would be wise to do likewise (I don’t mean exactly the same, but the principle of it).
The prophetic books in the Bible are full of warnings on this count. We should note that the ultimate punishment for Israel, the exile, came about because of their idolatry, but the length of their exile was determined by the number of jubilees they missed – one year for every one. Economic offense is right up there with idolatry in God’s watch-list.
“He might even use the money, in self interest, to influence government policy.” – you see, the problem with capitalism isn’t capitalism, it’s that if it’s not guarded and preserved, the corrupt will turn it into socialism (aka. “influence government policy”). It needs guarding, but that doesn’t make it a flawed system per se.
The laws of jubilee are very much not socialism – the government doesn’t control anything there, it’s returned entirely to individuals. If anything, they’re libertarian, and I think every good capitalistic society could use a good dose of libertarianism.
Influencing government policy is not necessarily socialism. On the other hand it is sound free market strategy to reduce competition, win big, and crush everyone else. The problem is the sinful human self-interest in everything, not any “ism”. We need to make sure that we as Christians are not defined by any of the “isms”.
Guarding is required. And unfortunately most people are looking at outdated physical guarding (aka guns) while in today’s world the real theft is taking place under their noses in the marketplace through continuous focused pressure / corporate groups in government policy to the determent of the common man who only has a broad say once every few years at elections.
John S says
I think it’s important to define ‘greedy’. Greedy for what? If one is after more money so that they may advance the kingdom of Christ – spread the gospel, help the poor, minister to those in prison, make disciples, etc. (things that cost money) – i’d call that good desire or good ‘greed’. Spending on one’s own pleasures being the flip side.
“You desire and do not have, so you murder. You covet and cannot obtain, so you fight and quarrel. You do not have, because you do not ask. 3You ask and do not receive, because you ask wrongly, to spend it on your passions.”
It’s seems getting more is not the issue, rather the persons desires and affections. Perhaps a discussion of national greed vs. personal greed would be helpful also. the systems under which a person lives in do not constrain the heart.