SOCIALISM and CAPITALISM: so you think you know the difference?

The Old Testament God was a socialist; the New Testament

God is a capitalist, part 01

Posted by: Fr. Ernesto Obregón    in uncategorizedtroosevelt

[This is the start of an interesting series by Fr. Ernesto Obergon  (OrthoCuban). Comments on the first three posts are vigorous.

It gives a different slant on Economics.                     Fr. Orthohippo]

One of the raging debates in American Christianity today has to do with whether President Obama is a socialist. And, much has been written about how God is not against people being rich. Much of the debate over God, riches, and poverty frankly comes from the Old Testament, in which it is pointed out how Abraham was rich and had many servants, as did many of the patriarch and people such as Joseph, second-in-command of Egypt. People are quick to point out how Nicodemus and Joseph of Arimathia were quite rich. And so, it is argued that God is in favor of capitalism. But, the problem is that the argument seems to assume that God is in favor of laissez faire capitalism. What is laissez faire capitalism? It is a theory of capitalism that arose in the late 1600’s. Please note that it was considered to be a theory of economic liberalism because it advocated ceasing any state control on the economy.Laissez-faire activists support little or no state intervention on economic issues, which implies free markets, minimal taxes, minimal regulations, private ownership of property and free circulation  of labor. They support certain kinds of negative liberty as opposed to positive liberties, such as wealth redistribution, given by the state. However, some laissez-faire proponents, like progressive libertarians prefer negative income tax as a replacement to the existing welfare system, arguing that it is simpler and has fewer of the “perverse incentives” of “government handouts”.

Their opposition to wealth distribution is based on the belief that it takes capital from the most productive sectors of the economy and gives it to the less productive sectors, and is enforcing economic egalitarianism, which reduces productivity and the incentive to work. They may further argue that any temporary equality of outcome gained by redistribution would quickly collapse without coercion because people have different levels of motivation and native abilities, and would make different choices based on their differing values. Material inequality, they argue, is a necessary outcome of the freedom to choose one’s own actions without imposing on others.

But, when one looks at the Old Testament, is that really what God supported? Well, there are several laws in the Old Testament that question whether God actually supported that type of capitalism. Please realize that laissez faire capitalism is not the only type of capitalism. In fact, we have not had a full laissez faire capitalistic system in the USA since the late 1800’s. The rise of the robber barons in the USA and the writings of Charles Dickens in England pointed out that an unfettered capitalism often leads to a system of monopolies that oppress the majority of the country in incredible ways. Thus, some of the antitrust laws were passed under President Teddy Roosevelt, a Republican. Basically, since the latter part of the late 19th century and most of the 20th century, we have   retained capitalism, but gone away from the laissez-faire conception.

So, what other types of capitalism exist? Well, one of them is called Ordoliberalism. Let me remind you that, when first developed, laissez faire capitalism was considered to be a liberal economic philosophy. Thus, ordoliberalist capitalism sees itself as a continuation of that liberal policy. (In passing, this should remind you that terms can change their meaning over time. What was considered liberal in earlier centuries is considered conservative today.) But, what is ordoliberalist capitalism?

Ordoliberal theory holds that the state must create a proper legal environment for the economy and maintain a healthy level of competition through measures that adhere to market principles. The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) power will emerge, which will not only subvert the advantages offered by the market economy, but also possibly undermine good government, since strong economic power can be transformed into political power. Quoting Stephen Padgett: “  A central tenet of ordo-liberalism is a clearly defined division of labor in economic management, with specific responsibilities assigned to particular institutions. Monetary policy should be the responsibility of a central bank committed to monetary stability and low inflation, and insulated from political pressure by independent status. Fiscal policy—balancing tax revenue against government   expenditure—is the domain of the government, whilst macro-economic      policy is the preserve of employers and trade unions.” The state should form an economical order instead of directing economical processes. . . Wilhelm Röpke considered Ordoliberalism to be “liberal conservatism,” against capitalism in his work Civitas Humana (A Humane Order of Society, 1944). Alexander Rüstow also has criticized laissez-faire capitalism in his work Das Versagen des Wirtschaftsliberalismus (The Failure of Economic Liberalism, 1950). The Ordoliberals thus separated themselves from classical liberalism.

In other words, an ordoliberal and a laissez faire supporter are both capitalists. Where they differ is in what is the role of the government in regulating the economy and how much concern the government should take for the populace at large, by way of regulations governing employers (for instance, allowing unions, safety regulations, etc.).

It is very important that you grasp that both the laissez faire economist and the ordoliberal economist believe in capitalism. The reason it is important is that if you listen only to the most conservative of Republicans, they will have you convinced that the two alternatives in economic policy are either laissez faire capitalism or socialism. To put it bluntly, that is an outright lie. Many previous Republicans, such as Teddy Roosevelt, were not socialists, but were against laissez faire capitalism. For instance, “After 1906 he [Teddy Roosevelt] attacked big business and suggested the courts were biased against labor unions.” Teddy would have been classified as an ordoliberal capitalist today.

So, the big question is what God might think about economic policy. Well, as I suggested earlier, I think that as we look at the Old Testament, we might get a glimpse as to how God might have set up parts of an economic policy. And, you might be surprised at what you find!


About Fr. Orthohippo

The blog of a retired Anglican priest (MSJ), his musings, journey, humor, wonderment, and comments on today's scene.
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4 Responses to SOCIALISM and CAPITALISM: so you think you know the difference?

  1. Jy says:

    I feel like I’m back in school.

  2. Steve Culbert says:

    Wow! I am sure this is interesting if I could understand what Fr. Ernesto was talking about. He is using words I have never heard of. It is way over my head. Oh well I let the ones with college degrees figure this one out. Maybe a degree in Economics?

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