Why I Am a Free-Market Capitalist

Even before I was a Christian, I recognized that free-market capitalism was the most effective way to prosper an economy. To begin with, all empirical evidence suggests that nations fare the best, economically speaking, when they have capitalist markets (see the United States of America and western Europe). Nations that have socialist governments that purport to own all properties, goods, and services have not done well (see the USSR and the People’s Republic of China). In fact, evidence clearly shows that socialist nations notice an uptick in their economy only when they abandon their socialist economic strategies in favor of freer markets (again, see the USSR and its satellite nations, such as Poland, as well as the People’s Republic of China, India, etc.)

It made intuitive sense to me, as well. People simply wouldn’t work as hard without the incentive of being able to keep the fruits of their labor to themselves. Who would work as hard as one could if one had to give up all the earnings to the government for redistribution? It might very well be that one would receive less from the government than what was contributed. If I were in this situation, I certainly would have less incentive to work hard. Adam Smith, in The Wealth of Nations, sheds light on the issue with this well-known quote:

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Now, while I recognize that Smith was referring to the selection of domestic versus foreign markets when he wrote this quote concerning the “invisible hand,” I see little issue with using inductive reasoning to make a generalization. I argue that the final line of the paragraph, that “[b]y pursuing his own interest he frequently promotes that of the society more effectually,” is applicable to all individuals, not simply investors faced with the choice to invest abroad or domestically. Thus, I argue, a free-market capitalist economy which harnesses the selfishness of individuals is the one most likely to produce wealth for the participants (though not without some caveats and restrictions). And here I must turn to my Christian worldview for the foundation of this argument.

19 Now the works of the flesh are evident: sexual immorality, impurity, sensuality, 20 idolatry, sorcery, enmity, strife, jealousy, fits of anger, rivalries, dissensions, divisions, 21 envy, drunkenness, orgies, and things like these. (Galatians 5:19-21a)

Man is naturally these things. They are referred to the as opposite of the “fruit of the Spirit” (v.22), and Christ points out that bad fruit is grown from bad trees–they have no ability but to bear bad fruit (Matthew 7:17-18). So if every man from birth is naturally inclined to these things, we can conclude, well within reason, that man is also prideful and selfish. In fact, Paul says similar when he tells the Philippians about false teachers that “their god is their belly” (Philippians 3:19). These statements apply to all who walk “as enemies of the cross of Christ” (v.18).

To me, then, the economic system that makes the most sense is the one that takes into account the works of the flesh and the belly-focused, self-seeking nature of the unsaved person. Even better, the most functional economic system will be the one that harnesses these truths and sets them to work for the good of everybody else. Thus I conclude that the best economic system, the one that will work the best for the good of the most, is one that utilizes the intrinsic selfishness of individuals as revealed through the truth of Scripture; that is, free-market capitalism.

Socialism doesn’t work because it does not appeal to the selfishness of workers; it gives them weak incentives, too weak to encourage productivity and growth. It also tempts and corrupts those at the very top, who, like the leaders of North Korea, will skim and steal vast amounts of goods collected by the state from the people, leaving their people destitute and starving. By their very nature the leaders of socialist states will be unable to execute the grand vision they have for their nation, because their of their selfishness and rivalry and envy and tendency toward drunkenness and orgy.

Though these things are better harnessed by the capitalist system–and of course, I am not advocating building businesses based on drunkenness and orgy; do not condone these practices nor, by making them available, further condemn those who chose to engage in them–I also recognize that they will still present problems. Managements of companies like Enron will continue to commit fraud, the Bernie Madoffs of the world will continue to defraud. Corporations will do their best to minimize the cost of labor, because that is what they have been designed to do. They will not consider negative externalities–costs incurred by a party neither the seller or the buyer, such as in the case of pollution: other people who don’t use or pave the road may still have to pay, in some way, for the noise pollution produced by jackhammers early in the morning. (Not the best example, but I hope you get my point.) I am still working out my beliefs for these cases, but I should also state that I am not a libertarian: when things are wrong or harmful, the government ought to do its job and stop the negative actions. God gives us governments for a reason (Romans 13:1). Hopefully, by common grace, the government will do its job through the enactment of good laws.

In some cases, scriptural revelation helps shape the worldview that we bring to the public, political sphere. I think this is one of them. The truths that Scripture states lead me to believe that a free-market, capitalist economy is the one that will benefit nations the most. That is why I am a free-market capitalist.

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