God is a Capitalist

by Roger McKinney

  The distinction between legal and illegal immigrants is arbitrary and capricious. If it wanted, Congress could immediately transform all “illegal” immigrants into legal ones overnight. Restricting immigration by labeling some of it illegal violates mankind’s natural right to seek refuge from oppression in a location where families can flourish as God intended. Most of the fear of undocumented immigrants comes from the devastation of the U.S. economy that socialism causes. Get rid of the socialism and undocumented immigrants present no problem.

  Christians should follow sound, Biblical principles even if they appear to work against their short term interests because doing so keeps them from committing errors that no reasonable person could foresee at the time. No opponent of immigration in the 1930’s knew that Hitler would murder six million Jews in the next decade. U.S. citizens opposed immigration at that time for the same reasons they do today, with the addition of anti-Semitism of the past brought on by Progressivism’s eugenics. In spite of the limits, 200,000 Jews managed to escape the Nazis and flea to the safety of the U.S. as reported in “The United States and the Holocaust,” an article in the Holocaust Encyclopedia on the internet, but we should wonder how many more might have been saved had the U.S. not feared immigration so much. After the U.S. cut off Jewish immigration from Germany, a ship loaded with Jewish refugees tried to dock at a Florida port, but were sent back to Germany.

  Immigration opponents might argue that there was no way they could have foreseen Hitler’s genocide, but lack of foresight is the point. We follow Godly principles because we lack perfect foresight and cannot see all of the unintended consequences of our policies. Those principles reduce the occurrences of bad unintended consequences. Hayek reminds us in Fatal Conceit that only socialists demand to know all of the future consequences of policies before they embrace them.

  International trade

  As the Israelis of the Torah period understood, and the theologians of the University of Salamanca rediscovered, property requires freedom, otherwise it is a sham. But free markets do not end at the boundaries of a nation. If a property owner is free to trade with anyone within his national boundaries, why should he be forbidden to trade with people across the border? The right to property is the foundation of the Christian insistence on free international trade.

  We have already seen that Solomon engaged in international trade and encouraged others to invest in it as well. During his reign (c.971-931 BC) Solomon teamed with King Hiram of Tyre to launch expeditions to the east coast of Africa. He built a fleet of cargo ships at Ezion Geber on the Gulf of Aqaba while Hiram provided experienced sailors because the Phoenicians had been exploring and trading with the people of the far western Mediterranean and possibly the British Isles for centuries. Three years later the ships returned with gold, silver, ivory, apes and monkeys (1 Kings 9 and 10). Solomon traded with Hiram for the wood, gold and precious stones used to build the Temple and his larger, more elaborate palace. He also traded with the Queen of Sheba and bought horses from Egypt and Kue (southeast Turkey) for his chariots. Of course, Solomon would have paid for those with exports of Israel’s production, probably wine, grain and some manufactured goods.

  While pagan philosophers often condemned bourgeois commerce, and the church adopted their position, both praised the large merchants who imported goods across long distances because they took things from places where they were abundant to where they were scarce, especially food. Theologians have always understood that God in his providence had blessed the nations of the earth with different forms of wealth so that the nations would have to trade with each other to get what each needed to prosper and thereby increase peace and build international community.

  Opposition to international trade arose after the Dutch Republic came to dominate trade and the kings of surrounding nations saw their gold sailing to the Republic. Kings needed gold to pay their armies to fight their endless, senseless wars and they needed their people to have gold so the king could confiscate it. What became known as mercantilism was the efforts of courtesans to figure out ways to keep gold in country. The ancient idea that one nation cannot grow rich except by impoverishing another motivated them. And they saw international trade as a cold form of war. Therefore, they sought to block imports and subsidize exports.

  Of course, it did not work. De la Court and Richard Cantillon explained why it did not work, but no one listened until Adam Smith lectured them. The nineteenth century witnessed a return to sanity and an explosion of freer international trade that helped enrich Western Europe and the Anglo nations. But bad economic ideas never die because they are based on ignorance and envy; they merely hibernate for a while. Opposition to trade sprouted again and overtook Germany with the failure of socialism under the regime of Bismarck. Rather than accept failure, socialists blamed foreigners – immigrants and nations exporting to Germany. Germany began to block imports and subsidize exports. Then recession hit the West and protectionism exploded in popularity in the U.S. Hoover signed the Smoot-Hawley tariff bill that put high tariffs on manufactured goods. Trading partners followed the U.S.’s example and international trade shut down, turning what should have been a normal recession into the Great Depression, the worst economic crisis in the history of the West.

  Austrian economists fight with the mainstream on most areas of macroeconomics, but not on the subject of international trade. David Ricardo’s distillation of the concept of comparative advantage in the early nineteenth century is the most confirmed principle in all of economics. In essence it says that every nation should do what they do best and trade with other nations for the things they cannot produce or produce cheaply. It applies to individuals as well as nations. For example, few Americans will go out to their garage and attempt to make a set of tires for their Ford Fusion when the original ones go bald. Instead, they will work at what they do best and buy tires from a company with the expertise to make tires well. Nations should do the same. Centuries of experience have proven Ricardo to be right.

  Critics of trade will point out that the U.S. taxed imports for most of its history and did better economically than it has in the more recent decades when it has embraced freer trade. But that argument is an example of the post hoc fallacy. Yes, the U.S. has always been plagued with mercantilists in high places and until the income tax of Wilson, tariffs were the main source of revenue for a tiny federal government. But readers must ask if the U.S. economy grew because of those tariffs or in spite of them? All historical evidence shows that standards of living grew in spite of tariffs. And tariffs were relatively low until Smoot-Hawley because the federal government was small. So why has freer trade since the Reagan administration not boosted economic growth? The answer is that trade is not magical or all powerful. It is one factor among many others that can overwhelm the benefits of free trade. The U.S. has become increasingly socialist since the election of F.D.R. as president and that massive increase in socialism destroys the good that free trade can accomplish.

  Others criticize the loss of jobs that go with freer trade. And of course when domestic producers encounter competition from abroad with better and cheaper products they tend to fail and their workers lose their jobs. No one can deny that. So why do all good economists continue to support free trade? They do so because they can see the long run. Those job losses are the immediate, short run consequences of freer trade. However, in the long run cheaper and better products free income from consumers and producers to buy other goods that they could not afford before free trade and that creates more jobs than were lost in the short run. Anyway, that is how trade will work in a free market. If we do not see that happening today, and we do not, then we should assume we no longer have a free market, which we do not. We are socialist.

  War

  A common fallacy held by most historians and the public says that World War II rescued the U.S. economy from the great depression. The idea has its roots in Keynesian economics, which was a resurrection of ancient mercantilism. In Keynesian econom
ics, people saving money take it out of circulation and cause recessions. Money must circulate for the economy to keep growing. It is related to the trickledown economics of the Middle Ages in which wealthy people assumed that their spending on conspicuous consumption enriched the lower classes by providing them with income. Wealthy people often thought their vast consumption was necessary for the benefit of others. Readers will find the same concept in economic textbooks described as the circular flow model. It is also integral to the Modern Monetary Theory.

  But Keynes was wrong. Adam Smith had written about savings 150 years before Keynes and anticipated Keynes’ mistake: producers borrow the savings of people and use the money to pay workers and buy materials so savings always circulate in the economy as if the money had been spent on consumption. The only time money goes out of circulation is if the owner puts it under his mattress instead of in the bank.

  War in the Bible is almost always a judgment of God, except for the early days of Israel when Joshua conquered the land. After that, God used war as punishment for Israel’s rebellion. Throughout history, empires used war to steal the wealth of conquered nations but it was a zero sum game; the conquered nation lost as much as the winner gained. That was one of the cases in which the old idea was true that one nation cannot grow except at the expense of another. Mercantilists like Keynes turned war into a source of prosperity. After all, the state at war takes the savings of the people and makes it circulate in spending on ships, tanks and aircraft. But does such spending enrich people as Keynesians claim?

  Killing people does not make people wealthier, except in the sense that there are fewer mouths to feed. Some historians argue that the Black Death raised wages in the middle ages because there were fewer people to hire for work. However, after such massive death, as much as a third of Europe, demand had fallen proportionally. The intersection of the supply and demand curves has merely shifted to the left because G.D.P. has fallen.

  Nevertheless, we can accomplish the same thing as war without the death. All we have to do is produce Jeeps, tanks, ships and aircraft as if we were at war, then shoot down the planes ourselves, blow up the Jeeps and tanks and sink the ships in the depths of the Pacific and Atlantic oceans. What would we have accomplished? Well the workers would have more cash to spend, but since production of food, clothing, consumer goods and housing will have declined while the country labored to make weapons, they will be in short supply. As a result, prices of all of those goods will soar to match the new amount of spending. In real terms, that is, discounting price increases, people will be able to buy no more after the fake war than before.

  Little will have changed. Wages will be higher, but so will prices. And workers will be worse off because now they face higher taxes to pay off the debt the state accumulated to build weapons. Even without the killing, war impoverishes the winners. That is what really happened in WWII, but most people could not see it because rationing kept prices from increasing. So instead of price inflation making people poorer, rationing made them poorer.

  Another way to look at war is through the tradeoff between investment and consumption. The two comprise the whole economy; all spending is either investment or consumption and investment comes from savings. In the short run, the economy can increase investment only by reducing consumption, which is another way of describing savings, and providing funds for investment. Greater investment adds jobs and cuts the costs of consumer goods, such as cars, so that consumers in the long run can consume more. Into which category does war fall? Tanks, ships and airplanes do not produce other goods, so they fall into the category of greater consumption. Defense is always consumption. But in order to consume more we have to invest less. Fewer savings means less investment because of war and that means fewer jobs and higher prices for consumer goods.

  What about a war for oil, as many socialists claimed was the motive for the second war against Iraq under President George W. Bush? Socialists insisted that we fought the war in order to take Iraq’s oil. There are at least two problems with that scenario, which demonstrate the severe lack of reasoning skills among socialists. 1) The U.S. has never received a barrel of free oil from Iraq. U.S. oil companies refused to enter the market for oil exploration in Iraq after the war because of the danger from terrorism. Any oil we got we paid market prices for it. 2) Even if Iraq agreed to give us oil without a charge, or we simply stole it, we would have to figure the cost of the war as the price of the oil. It still would not be free and the price per barrel would have been much higher than the market price.

  But we had to prevent Saddam Hussein, the former president of Iraq, from taking over the oil of Saudi Arabia and other Gulf states in the first Gulf war, did we not? There might have been other reasons for defending the Gulf states, but economics and oil were not among them because if Hussein had conquered the entire Saudi peninsula and controlled their oil, he would still have to sell it to someone or it would be no good to him. No one can eat oil and it has no uses until it is refined. If the Iraqis refined the oil they would still have to sell the products because their country had too small a population to use it all. The only thing that would have changed would be that we bought oil from the dictator Hussein instead of the dictators of Saudi Arabia and the Gulf states. Americans are too eager to go to war. Economically, even the victors are losers. And because of its humanitarian ideals the U.S. loses more since it insists on paying to rebuild whatever nation it has conquered.

  Another reason Christians should be especially cautious is that war always has unforeseen, unintended and undesirable consequences. WWI defeated Germany, Italy, the Austro-Hungarian Empire and Turkey, and broke up the Austro Hungarian Empire into many tiny nations based on ethnicity. But it also helped the Bolsheviks install communism in Russia. Reparations impoverished Germany and helped Hitler launch World War II. And the tiny nations that had once made up the Austro-Hungarian Empire were too small to defend themselves against Germany when in the late 1930’s Hitler began to pick them off one at a time.

  WWII saved China from Imperial Japan, but opened the door for Mao and communism to take over. Communism was far deadlier and more brutal than even the worst of the Japanese atrocities, including the “rape” of Nanking. More than 30 million people starved to death, some reduced to cannibalism during Mao’s Cultural Revolution. Germany lost the war in Europe only to be replaced by the communist U.S.S.R., which took half of Germany and all of Eastern Europe. But Lenin and Stalin had murdered more than three times as many people as Hitler. The U.S. paid to rebuild Western Europe and the Cold War further impoverished the victors.

  During the Cold War, many French people said that if the U.S.S.R. conquered them as Germany had, please do not rescue them. That irritates Americans who think the French should be grateful for defeating the Nazis. The French have a point. By surrendering to Hitler they lost their sovereignty but kept the Germans from destroying their country. The U.S. and U.K. destroyed nearly every town between the coast and Germany on their long march to liberate German occupied Europe.

  A lot of fiction has been written about what might have happened had Germany won WWII and the plots make compelling motion pictures. But Germany was never in a position to conquer the U.S. It could not have held Western Europe for much longer. The fallacy that it could lies in the belief that National Socialism was a viable system. It was not. Ludwig von Mises explained why in his 1922 book Socialism. For an economy to grow and enrich its people, it needs accurate prices so that producers know what to produce, how much and when. Waste increases without accurate prices and people grow poorer. Germany was as socialist as the U.S.S.R. and its economy would have collapsed even without war within a short time. Besides, Germany was spending over half its G.D.P. on war while the people tried to fend off starvation. The collapse of the Soviet Union proved Mises right.

  Republicans in the U.S. credit President Ronald Reagan for having brought down the great Red Bear. The rationale goes something like this: Reagan increased U.S. military spendin
g and forced the Soviet Union to keep up, spending over half of G.D.P. on the military in its last decade. Growing hunger and impoverishment caused the Communist Party to lose support and the whole thing just fell apart. The truth as reported by Yegor Gaidar, the lead economist under Boris Yeltsin after the fall of the U.S.S.R., in his book Collapse of an Empire: Lessons for Modern Russia tells a much more realistic story.

  The Soviet people were far from starving in the late 1980’s because the U.S. had guaranteed loans to the Soviets to buy food from the West. Then the Poles began to rebel against their Soviet masters. When the Hungarians did that in 1956 and the Czechs in 1968, the Soviets had crushed the rebellions with tanks. This time was different. The Soviets asked the U.S. what it would do if Soviet tanks rolled into Poland to put down the current rebellion. The U.S. said that the American people would no longer allow Washington to guarantee loans to the U.S.S.R. to buy food. Without loans the Soviets could not feed its people. So the leadership decided to try other means to quash the revolt and those failed. When the many tiny nations of Eastern Europe saw that the Soviets could not use tanks against them, more of them rebelled. The break up in Eastern Europe caused panic in the Soviet Union and a group of communists tried to pull off a coup. They failed and Yelstin took over Russia while the other states of the U.S.S.R. also went their own ways.

  The Soviet Union lasted much longer than it should have. U.S. military and humanitarian aid kept it alive during the war. Afterward, the Soviets stole most of the factories that Eastern Europe had built and that boosted Soviet wealth for a while. High oil prices after 1973 enabled the communists to export oil in exchange for food until the collapse in prices in 1986. Then U.S. loan guarantees kept the empire on life support. The serene death of the empire of the Soviet Union would have happened much earlier without repeated help from the U.S. The same thing would have happened to Hitler’s Germany had the U.S. stayed out of the war. And something similar might have happened to Japan had the U.S. not provoked it into attacking Pearl Harbor.