It is hard to discuss economics today, both inside and
outside the church. You wouldn’t know that from the frequency with which it is
debated, because by this measure it seems to be an almost constant topic for
discussion. The difficulty becomes clear, though, if you actually pause to
listen carefully to what is being said. There seems to me to be three barriers standing
in our way.
First, not surprisingly, is the lack of civility. Start
talking about economic policy or theory and depending on what we say, there is
a chance we’ll be tagged by some label: “socialist” and “uncompassionate” are
two favorites. If we face a lack of civility outside the church, well, we
should try our best to learn to communicate as clearly and winsomely as
possible, but we really shouldn’t whine about it. Facing incivility within the
Christian community, on the other hand, is reason for concern. I could list
lots of biblical texts dealing with economic issues that will take a lot of
hard work to interpret correctly. The biblical texts that describe how we
should treat one another—for example 1 Corinthians 13—are unambiguous and clear
enough for a child to understand.
The second barrier to a thoughtful discussion of economics,
both within and without the church, is that the topic has been politicized. By
that I mean that almost as soon as the topic is mentioned, partisan positions,
parties, policies or personalities are invoked. This should not be. For one
thing, economics and politics are not coterminous. For another, as Christians
faithfulness requires we figure out how to think about economics from a
biblical perspective and only after that will we be able to figure out what
that means in the political sphere of life.
The third barrier is that very few of us have seriously
tackled the topic of economics from a biblical perspective. We have some texts
we use to justify some of our beliefs on the topic, but truth be told we’ve
picked those up somewhat after the fact, and they are pretty selective. If you
are feeling guilty about this, that is not my intention. (Feeling guilty about
incivility and politicization is a different story—for those repentance is in
order.) We live busy lives and economics is a huge topic, richly nuanced and like
all of life, constantly in flux. For topics like this, we can be thankful for
thoughtful Christian thinkers who do the hard lifting for us. Which brings me
to an article I am eager to recommend.
The article is free, online (www.cardus.ca) and is a
wonderful introduction to thinking Christianly about economics. Even if you
don’t discuss the topic much, you’ll have a better foundation for understanding
the topic by reading this piece. “Capitalism, Religion, and the Economics of
the Biblical Jubilee” is by Paul Williams, the Executive Director of the
Marketplace Institute, and Academic Dean, at Regent College, Vancouver.
Capitalism
as Ideology
Much of mainstream economics
presents capitalism as a morally neutral economic system. It does so with two
arguments.
The first focuses on the individual
consumer (or firm or worker). Capitalism is morally neutral, it is argued,
because it is designed to enable individuals to make their own choices based on
whatever values they happen to have.
The second focuses on overall
systemic outcomes: capitalism generates the largest possible economic pie and
we can then choose what to do with the proceeds.
But are these arguments compatible?
Capitalism is not, in fact, morally
neutral. The apparent neutrality of individual choice masks the underlying
moral assumption that the individual is the final measure of good, and should
always trump community choice, and that present choices should always trump
those of our forebears. It also fails to account for the unequal nature of many
actual transactions, so that frequently the choice of some undermines the
freedom of others. My choice to shop seven days a week (or the choice of a
superstore to open seven days a week) removes, or at least reduces, the freedom
of the families of shop-workers to spend one day a week together, since the
chances of both working parents getting the same day off recede and the
influence of shop-workers on such economic outcomes is relatively small. The
“good” of a family day of rest each week cannot be expressed in a system that
only recognizes autonomous individualism….
Read the entire piece here.
In a globalized, pluralistic world there is no doubt that product labels can be important. We should know where things were made, what ingredients are in products we will consume, and to what specifications the gadget conforms. Research reveals, however, that there is a hidden trap.
Do you know what a megapixel is, or what horsepower measures? Consumers are irresistibly drawn to product specification—from the “distortion rate” of a stereo to the calories in a snack—even when the numbers mean nothing to them. In fact, given a chance to directly experience competing products, buyers are still more likely to jus pick the item with the impressive-sounding features on the package, even if it is more expensive.
Source: “Specification Seeking: How Product Specifications Influence Consumer Preference” in the Journal of Consumer Research noted in The Atlantic (March 2009) p. 17 which you read here.
The Atlantic Monthly publishes a column, “Quick Study,” that briefly summarizes the findings of selected research articles. A recent entry caught my attention because it suggests a direct link between the collapse of the financial system and the massive bonuses given to bankers and executives on Wall Street. More important, the finding suggests that the financial crisis is not a problem that can be solved by merely tinkering with the technical aspects of the financial system. The human element—including issues of character, virtue, human nature, and definitions of meaning, vocation, the common good, and success—is as significant as programs and initiatives generated by the Treasury, the Federal Reserve, Congress or the White House. Human creativity, it seems, is hurt when demands for efficiency and productivity diminish our willingness to embrace our natural limits as finite creatures.
The bonuses bankers have handed themselves in recent years aren’t just excessive—they may have hastened Wall Street’s collapse. Although cash incentives tend to make people work harder, expending too much effort can actually hinder tasks that requires creativity, problem solving, and concentration. Anticipating large bonuses can lead to excessive self-consciousness and a focus so narrow that it warps perspective by blocking important outside information—like, say, common sense.
Source: “Large Stakes and Big Mistakes” in the Review of Economic Studies noted in The Atlantic (May 2009) p. 15 which you read here.
The Root of the Problem
September 26, 2008
Hank Paulson, secretary of the Treasury, argued last weekend that the new bailout plan he was proposing would finally go to the root of the problem. That problem, he said, is the “illiquid mortgage assets that have lost value as the housing correction has proceeded.” He wants Congress to approve a $700 billion package that would give him, on behalf of the federal government, almost unlimited authority to buy up the bad (“toxic”) assets so banks can feel confident to lend again.
But why have so many mortgage assets lost their value and become illiquid? The primary reason is that banks and investment companies irresponsibly encouraged people to take out mortgages not adequately backed by the value of the homes they were buying. Perhaps, then, that is the deeper root of the problem.
Well, not quite. Why were these sub-prime mortgages offered and accepted so irresponsibly? Because both the financial institutions and the homebuyers were betting--gambling--that home values would continue to rise and thus “produce” in the future the asset security that did not exist at the time of purchase. That, in turn, would give the financiers more time to try to make more money by means of more leveraging of more money.
Martin Wolf explains that the “aggregate stock of US debt rose from a mere 163 per cent of gross domestic product in 1980 to 346 per cent in 2007. Just two sectors of the economy were responsible for this massive rise in leverage: households, whose indebtedness jumped from 50 per cent of GDP in 1980 to 71 per cent in 2007; and the financial sector, whose indebtedness jumped from just 21 per cent of GDP in 1980 to 83 per cent in 2000 and 116 per cent in 2007” (Financial Times, 8/24/08).
Yet, why were so many families and financial institutions taking on and trying to leverage so much debt? What was the root of that dangerous gamble? In part, government itself was encouraging individuals and companies to buy (or borrow) now and pay later. Government-sponsored mortgage companies Fannie Mae and Freddie Mac led the way or backed up those who were leading the way in this direction. Homebuyers trusted the banks. The banks trusted Fannie and Freddie as well as the investment companies that leveraged the mortgages. Investors trusted the market and those who rated the investments. And this circle of trust depended finally on trust in the government, whose laws and policies backed up or overlooked all this debt-mounting leveraging.
Now, however, the circle of trust has been broken--all around. As a consequence, Paulson’s narrow focus on the “liquidity problem” doesn’t begin to go to the root of the problem. Over the past few months, and particularly the last two weeks, Paulson and Federal Reserve Chairman Ben Bernanke have tried one expensive fix after another that has failed to overcome the liquidity crisis. And they, along with President Bush, now want us (and investors, and Congress) to put our trust in their last-minute bailout plan that requires additional massive public indebtedness? Why should any of us now assume that this program will work?
Clearly, the root of the problem is a lack of trust, including lack of trust in government. For after all, Congress as well as the executive branch has been complicit in the entire system that is now collapsing around us. It is a little late, then, for them to cry “emergency,” abrogate the so-called principles of free-market capitalism that the president says he still believes in, and ask the country to trust them now. This is simply the next--and an even bigger--gamble, made in the hope that prosperity can somehow be recovered without requiring any fundamental change in our habits, desires, and mind-set.
But it won’t work. Trust will not be restored until real responsibility and genuine accountability are reestablished at every point around the circle.
-- James W. Skillen, President
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Copyright Center for Public Justice 2008.
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James Skillen is a keen observer of the political sphere of life, committed to seeing it through the clarifying lens of the gospel. This brief essay arrived via email as part of The Center for Public Justice’s thoughtful Capital Commentary series. I recommend the work of the Center to you, and would encourage you to sign up to receive the Capital Commentary emails.
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If you are like me, what is happening in the financial markets is difficult to comprehend. So, when thoughtful scholars who have expertise in such matters write about it in a way that sheds some light, I am grateful.
Like this post, "Distinctions of This Financial Crisis," (September 21, 2008) by Robert Bruner (Dean, Darden School of Business at the University of Virginia) on his blog, which you can read here.