God is a Capitalist

by Roger McKinney

  This article demonstrates historically and statistically that conversionary Protestants (CPs) heavily influenced the rise and spread of stable democracy around the world. It argues that CPs were a crucial catalyst initiating the development and spread of religious liberty, mass education, mass printing, newspapers, voluntary organizations, and colonial reforms, thereby creating the conditions that made stable democracy more likely. Statistically, the historic prevalence of Protestant missionaries explains about half the variation in democracy in Africa, Asia, Latin America and Oceania and removes the impact of most variables that dominate current statistical research about democracy. The association between Protestant missions and democracy is consistent in different continents and subsamples, and it is robust to more than 50 controls and to instrumental variable analysis.

  Woodberry proposes a recursive structural model in which missionaries directly encouraged democracy in some cases but worked mostly through economic development, mass education, printing and civil society to create an environment favorable to democracy. Those were the unintended consequences of Protestant missionaries wanting new converts to be able to read the Bible in their own languages as their ancestors in Europe had done for generations. Until the missionaries arrived, only the ruling elites could read, and as happened in Europe before the Reformation, the elites tried to prevent the common people from learning to read out of fear that education would make them unhappy and lead to unrest. The missionaries created alphabets for non-written languages, translated the Bible into hundreds of native languages, printed the Bibles, tracts and textbooks for schools and established schools to teach natives to read as well as train teachers. Their success motivated native elites who did not convert to build competing schools and publishing houses.

  Missionaries fostered the rule of law by defending natives against abuse by colonial rulers and forcing the rulers to treat locals by the same procedures and laws as the rulers enjoyed. They accomplished much of that through the regular newsletters to churches back home who provided their financial support. If a colonial ruler oppressed the people, the missionaries let the folks back home know about it and those folks assaulted parliament, demanding reforms.

  The efforts of the missionaries distributed power from the elites to educated commoners. “This dispersion of power and resources increased G.D.P., expanded the middle class, and forced most ‘Protestant’ colonizers to devolve power to non-Europeans via elections earlier than ‘Catholic’ colonizers had to.” As a result, “Protestant missions are also associated with high newspaper circulation..., more organizational civil society..., greater economic development..., stronger protection of private property, greater rule of law, and lower levels of corruption...”

  Of course, many atheists in the West have embraced free markets and libertarian ideas, but those tend to be economists who came to their philosophy through utilitarianism. They are small in numbers. A democracy needs a majority of voters to share the same confidence in freedom and markets, but few of those have the mental ability to understand the economic questions, let alone the answers. Another large portion simply is not interested in economics, while a third group have been weaned on socialism from grade school where they learned “milk cow” economics (e.g., I have two milk cows and my neighbor has none; in socialism I give one cow to my neighbor.) that poisoned their outlook on capitalism.

  Even ignoring those problems, the universality of envy predisposes most people to adopt some form of socialism. Socialism offers the promise of a nearly perfect society, the elimination of most evil, by evenly distributing wealth and assuaging envy. That is a much more powerful seduction for the average man than utilitarianism or freedom offers. As the socialists in Germany in the nineteenth century revealed, most people would rather everyone be poor and equal than for the average to be wealthy with some inequality. In their minds, freedom matters little if some can use that freedom to amass more material goods than others.

  Economic education will not change peoples’ minds, especially when mainstream economics itself encourages state intervention in the economy because of its fetishes such as equilibrium, perfect competition and market failures. Remember that the classical liberals of Germany in the second half of the nineteenth century thought they could educate enough people in the ways of freedom to bring about a revolution and they failed. Socialism swept the nation like a flash flood on the American plains with little effort.

  Echoing Hayek, Mariano Grondona wrote in Culture Matters, “In the struggle between the short and long term, the former will win unless a value intervenes in the decision making process. This is the function of values: to serve as a bridge between short-term and long-term expectations, decisively reinforcing distant goals in their otherwise hopeless struggle against instant gratification.” Envy powerfully supports the desire for instant gratification.

  But readers might ask, “Isn’t the U.S. a Christian nation?” The answer depends on how one defines Christianity. Of course, we have Eastern Orthodox and Roman Catholic Christianity with Protestantism dominating. All three agreed on the definition of God, the deity of Christ and his resurrection. Then in early 19th century Germany a group of theologians who denied all of those doctrines continued to call themselves Christian. They denied the historical validity of most of the Bible, especially all accounts of miracles. In their search for the “historical” Jesus demythologized, they determined that the stories of the virgin birth, all of Jesus’ miracles, any claims he made to being God and his resurrection were inventions of later Christians, mostly Paul. They offered no evidence or justification for those views; they simply did not like what the Gospels contain and so dismissed most of them as myths. Those “liberal” theologians make up most of mainline Protestantism. They dominate in universities and are socialists.

  Fundamentalist, traditional Christianity gave the world its first taste of freedom and the values to sustain it. It is unlikely that anything as powerful as religion will come along to rescue us. The surest way to a renaissance of liberty in the West is a good old fashioned Christian revival. To employ Hayek again, on that question may rest the survival of our civilization.

  Chapter 8 – Christian Capitalism

  Readers may wonder how to make sense of a term like “Christian capitalism.” How can a field of science be Christian? After all, most would not look for a Christian physics because the principles of physics are the same for Christians as well as non-Christians; those principles do not change because of one’s religion. From another perspective, all modern science is Christian because, as has been discussed, monks and clergy in the middle ages had the idea and got the courage to investigate the natural world because of the Christian doctrine that God is rational and distinct from his creation. Neither God nor spirits animate the natural world directly, but the material world responds to laws that God created. Many scientists may be atheists, but the irony is that they assume a unique Christian cosmology in order to practice their discipline.

  Of course, those who subscribe to the fallacious philosophy of logical positivism do not consider economics to be a science. They have arbitrarily determined that only the material world exists. For the best defense of economics against logical positivism see Mises’ brilliant book The Ultimate Foundation of Economic Science: An Essay on Method.

  Human nature

  Critics of mainstream economics often accuse the discipline of being out of touch with reality and in many cases that criticism is justified. But if we want to have economic theories that accurately depict reality then we must have a correct understanding of human nature and how humans act. Mises and Hayek regularly pointed out the obvious fact that the subjects of economics are vastly different from those of physics because humans reason and learn while electrons do not. Economist John E. Anderson made that point in his article, “Economics and the Evangelical Mind:”

  Since appropriate models and suitable policy can only flow from a correct understanding of human nature, and we are sure that the evan
gelical mind is well grounded in a biblical understanding of that nature, there is reason to hope that evangelical economists can make additional important contributions to the discipline of economics as they apply their minds and hearts to the work to which God has called them.

  That may sound obvious, but it is not obvious to most economists and the failure to understand this has done great damage to the field.

  For most of its short history, economics enjoyed a Biblical view of human nature because the early crypto-economists at the University of Salamanca, Spain, were theologians and economics was a subset of moral philosophy. The great Adam Smith taught moral philosophy, not economics. He had more in common with the scholars of Salamanca than with what became the field of economics. One might see his book, The Wealth of Nations, as an application of the principles developed in his earlier book, The Theory of Moral Sentiments, to the field of economics. Smith followed in the tradition of the scholars of Salamanca who studied markets in order to determine the morality of business practices. The centuries-long quest for a theory of a just price led scholars to break with Aristotle on the idea that a just exchange required items of objective, equal value. The Salamancan scholars determined that any exchange conducted without fraud or coercion was a just exchange, thereby establishing the grounds for free markets.

  The theologians who investigated the morality of markets for centuries operated with a traditional Christian view of human nature known as the doctrine of original sin that was based on the Biblical account of Adam and Eve in the Garden of Eden. God had created moral beings without a tendency toward evil, but when they rebelled against God they changed human nature by giving it an affinity for evil. As a result, mankind has within it the capacity for great good but even greater evil, and a tendency toward the latter. Of the seven deadly sins to which mankind has the strongest attraction, envy is the deadliest, most pervasive and most relevant to economics. As Schoeck wrote in his book Envy: A Theory of Social Behavior, mankind cannot achieve a utopian society because of that inborn tendency toward envy.

  As noted in chapter 7, Adam Smith subscribed to the traditional Christian view of a fallen human nature. He assumed that people are naturally greedy and power hungry. His solution to greed was competitive markets. Society could not trust politicians to restrain greed because businessmen would merely buy the politicians and get laws passed that favored their businesses. But when businessmen had to compete with each other for customers, they would battle to see who satisfied customers the best, and that was all we needed to restrain greed. Smith sought to channel fallen human nature for the improvement of society, not change human nature, which he would have considered impossible except by an act of God. Economics was founded on a Christian understanding of human nature.

  The atheist and deist founders of socialism in the early nineteenth century jettisoned the traditional Christian view of human nature and replaced it with their own fabrication: mankind is born innocent and turns to evil only because of oppression. Socialism can save mankind and create the kingdom of god on earth by having the government end oppression through abolishing private property, redistributing wealth, and increasing market regulation and education. This is one reason a Christian cannot be a socialist; it is inconsistent with Christian doctrine of human nature.

  But it is also the reason socialism has maintained a strong allure for most non-Christians and many Christians. Capitalism offers an improved standard of living and has delivered that by making the people of most nations in the West at least thirty times wealthier than their ancestors three centuries ago, but modern societies are far from perfect. Socialism promises to perfect society through the elimination of evil in mankind. It competes as a counter gospel to the Gospel of the New Testament, except that it promises salvation on earth, now, instead of having to wait for a distant future when Christ returns.

  Divergent views on human nature distinguish Christians and socialists, but they also direct Christians in navigating the many schools of macroeconomics. Under the umbrella of mainstream economists I lump together what are called the neoclassical, New Keynesian, paleo-Keynesian, real business cycle, and monetarist schools. The neoclassical school has dominated mainstream for the past thirty years, but the others still have influence. For example, the Nobel Prize-winning economist and columnist for the New York Times, Paul Krugman, is a paleo-Keynesian who advocates greater government spending in order to rescue the economy from recessions. Recently, the neoclassical, real business cycle and New Keynesian schools have found common ground in what they call the New Neoclassical Synthesis, but the foundational assumptions remain the same.

  The core of mainstream economics is the assumption that the economy operates in equilibrium most of the time and spins out of control only due to random shocks. Applied to business cycles, I like to call it the “crap happens” school. But the assumption of equilibrium requires presuppositions about human nature that most mainstream economists never think about: it assumes omniscience on the part of the humans involved in the market.

  Hayek criticized the assumption of equilibrium as early as 1936 in his presidential address delivered to the London Economic Club and later published as “Economics and Kowledge.” He reminded members that the equilibrium is possible only when the plans of producers who rely on each other mesh and all of their plans match those of consumers. Such coordination requires relevant knowledge of the expectations of suppliers and customers. However, to achieve equilibrium as defined in economics, that knowledge must be perfect. “Correct foresight is then not, as it has sometimes been understood, a precondition which must exist in order that equilibrium may be arrived at. It is rather the defining characteristic of a state of equilibrium.”

  Hayek illustrated his point with the analogy of building a house. Brick makers, plumbers and others might produce the materials necessary for constructing a certain number of houses. At the same time, prospective buyers will accumulate the savings necessary to buy the houses. If the number of houses for which people saved corresponds to the number of houses the construction industry intends to build, then we have equilibrium in that industry because both builders and buyers will be able to carry out their plans as they intended. However, natural disasters or accidents may destroy some of the building materials or weather may make construction impossible. Then equilibrium is not possible. But there is no reason to assume that the plans would have matched in the beginning, either. So for equilibrium to exist,

  the whole economic system must be assumed to be one perfect market in which everybody knows everything. The assumption of a perfect market, then, means nothing less than that all the members of the community even if they are not supposed to be strictly omniscient, are at least supposed to know automatically all that is relevant for their decisions. It seems that that skeleton in our cupboard, the ‘economic man,’ whom we have exorcised with prayer and fasting, has returned through the back door in the form of a quasi-omniscient individual.

  Mainstream economics adopted the assumption of equilibrium after World War II because it makes it easier for economists to create mathematical models of the economy. But the goal of describing economies with math models began in the nineteenth century as the definition of science began to change. It is hard to imagine today, but theology was considered the “queen” of sciences in the middle of the nineteenth century because science was defined loosely as rational, systemic thought about a subject. Again, the influence of socialists can be seen. In the last chapter, we saw that Saint-Simon considered mathematics to be the most advanced and important science. His Supreme Council of Newton would dictate a new structure for society and in it the top mathematician would head a committee of the best representatives of the natural sciences. It would not include theologians, historians or philosophers.

  As socialists gained greater influence, science became defined as the natural sciences only and those were deemed more or less scientific to the degree they could use math to describe phenomena in their fields. Phys
ics became the “hard” science because of its extensive use of math and biology a “soft” science for its lack of math models. Socialists could then dismiss the social sciences, especially economics, as metaphysics and not have to deal with the onslaught of opposition from economists.

  Naturally, economists wanted to be included in the club of science and so began to search for ways to imitate physics by mathematizing economics. Leon Walras showed that, with the assumption of equilibrium based on nineteenth century mechanics, the dream became reality. That is why the great economist Axel Leijonhufvud could quip in his humorous essay “Life among the Econ” that,

  The Math-Econ [tribe] make exquisite models finely carved from bones of Walras. Specimens made by their best masters are judged unequalled in both workmanship and raw material by a unanimous Econographic opinion. If some of these are “useful” – and even Econ testimony is divided on this point – it is clear that this is purely coincidental in the motivation for their manufacture.

  And Mises wrote in Human Action, “The mathematical economist, blinded by the prepossession that economics must be constructed according to the pattern of Newtonian mechanics and is open to treatment by mathematical methods, misconstrues entirely the subject matter of his investigations.”

  But the assumption of equilibrium causes even more damage. It eliminates time; prices respond instantly to changes in plans and data, and people can accurately predict all relevant future events. It compresses all of the different types of capital, from trucks to trampolines into one homogenous, self-perpetuating blob and eliminates the need for coordination among producers who depend upon supplies of crucial equipment or materials. Finally, and possibly the worst, it euthanizes the entrepreneur. Market participants, consumers and producers, become mere automatons mechanically responding to price signals without thinking. With such a large number of unrealistic assumptions underpinning mainstream economics, it is no wonder they could not see the devastating recession of 2008 coming.