The Failures of Capitalism

Once you get any kind of distance out of the conservative/libertarian enclave, one of the first things you notice about it is the patronizing tone. A good example of this is one of Doug Wilson’s recent posts, on how N. T. Wright answered a question. Wright was saying that the alliance between conservative theology and conservative politics is a unique trait of American Christianity.

Wilson admitted this was the case as an historical fact, but took issue with whether this meant that the American alliance is wrong. Obviously, as a good libertarian, Wilson thinks we ought to pony up to capitalism and embrace the political right. In so doing, he reveals this patronization (not to mention a good deal of arrogance) typical of all libertarians. Here are a few offerings.

“It is good that we are saved by grace, and not by works. If it were by works, our economic incompetence would leave a bunch of us hosed.”

Obviously, these guys are the other guys, those icky leftists.

“When Jesus taught us to feed the poor, instead of turning their place of habitation into a desolation, this necessarily excludes every form of Keynesianism.”

“We might conclude, for example, that Jesus doesn’t care what our economic policies are, so long as we love Him. Or we might decide that those who are conservative in their economics need to quit it, and become progressive, because that’s what Jesus wants. Or we might go the other way, and say that the progressives ought to become conservatives, also in the name of Jesus. The correct answer, boys and girls, is the last one.”

“All such meddling is economic stupidity, and God did not tell His people to fan out over the globe, doing stupid things to people.”

“If the world’s poor could be fed with leftist ignorance of economics, the world would have been satiated generations ago.”

Yes, anyone who is not a libertarian is ignorant of economics. Gosh, those darn leftists sure are stupid. Can’t they crack a book once in a while? Not only is this supremely unhealthy, not only does this merge affirmation of the gospel with the gospel of libertarian economics and conservative politics, but it betrays just the sort of parochial attitude which Wilson suspects his opponents view him as holding. Yes, well spotted. It is parochial to confuse one’s own opinion with an absolute claim on “the way the world works.” When Wilson says “leftists don’t understand economics,” what he really means to say is that “a number of other people don’t agree with the economic model I have chosen to self-identify with.”

It is also remarkable how much at odds such an understanding is with what seems to be what is going on in the world today. (And please notice that I did not say, “Wilson doesn’t understand economics at all.”) But to claim that the real world supports libertarian economics is a highly questionable assertion, one that must remain an assertion because he assumes the correctness of his position and therefore any problems in the world must be created by the other guy. Now, I have no love for Keynsianism personally, but as John Medaille (Toward a Truly Free Market) points out repeatedly, capitalism doesn’t work.

What, precisely, does a capitalist mean when he says that capitalism works? Simply this: that the capitalist system can provide a relatively stable and prosperous economic order without a lot of government interference in the market. That is to say, capitalism is basically self-regulating and needs no outside force, such as government , to balance supply and demand and ensure prosperity.

Yet, this has been repeatedly shown not to be the case.

the plain fact of the matter is that capitalism cannot function without government interference. Capitalism relies on an expanded state to balance aggregate supply and demand. Consider this fact: in the period from 1853 to 1953, the economy was in recession or depression fully 40 percent of the time. Since 1953 the economy has been in recession only 15 percent of the time.

That is to say, when Keynsianism was introduced into the economy in 1953, it was done in order to stabilize the inherently unstable capitalism that preceded it. And at this Keynsianism worked effectively, or at least effectively enough. The implications are numerous, including that so long as we want to have a capitalist system, we must be prepared to accept larger government, and Keynsian economics, which works to stabilize our economy. To put it another way: libertarians claim to want less regulation and unfettered capitalism given free reign, but the reality is that such a move actively destabilizes our market system and causes problems for everyone. To put it yet another way: capitalism itself depends for its existence upon large government, its practices actively grow and expand government, and it causes the problems with which our system is currently plagued. In short, it does the opposite of what its claimants say it will do.

Why do they keep saying it, then? Because the capitalist ideology depends upon theoretical operations of economic “laws of nature” just the same as laws of gravity or physics or mathematics. Wilson is at odds with his great Austrian instructors when he says that we can just look around and see the glories and effectiveness of capitalism around us. Ludwig von Mises, the founder of modern Austrianism, wrote

The economist does not base his theories upon historical research, but upon theoretical thinking like that of the logician or the mathematician. … he does not learn directly from history.” (von Mises, Ultimate Foundations of Economic Science, p. 73)

So much for falsifiability and concrete historical observation. Such abstractionism is blind to the world, so naturally we have difficulty convincing him that his theories do not work in practical application. The theory seems sound, they say, so the problems must come from interference. It couldn’t possibly be that capitalism is a failure and has to be subsidized by government spending and Keynsianism in order to simply continue functioning. Wilson says he has opposed crony capitalism from the start, which is all well fine and good, but the most pressing question does not seem to be one he has seriously asked himself.

Is it possible that all capitalism is crony capitalism? Is it possible that Medaille is correct when he writes, about the failure of capitalism, “I do not mean that there are certain imperfections in it, or that from time to time it experiences difficulties.” Rather, he means that the problems are systemic to the theory itself.


4 thoughts on “The Failures of Capitalism

  1. “It is parochial to confuse one’s own opinion with an absolute claim on ‘the way the world works.’…”

    What exaactly do you suppose opinions are for, then? Collectibles? Entertainment?

    What would you think of a man who held an opinion that he, himself doesn’t believe to be true?

    “When Wilson says ‘leftists don’t understand economics,’ what he really means to say is that ‘a number of other people don’t agree with the economic model I have chosen to self-identify with.’…”

    Yes, that is what is being said. Do you have a rebuttal? All you have said is, “this is what he said”… Are you going to go on an contribute something? A rebuttal? A refutation? Anything?

    1. Certainly a man believes his opinions to be right. But this shouldn’t be held to with such conviction that it is impossible through careful and thoughtful engagement to alter his mind if he is in the wrong. Wilson is so convinced he is right about libertarianism that he can barely have a reasoned discourse with anyone on the subject. They are naught but envious, ignorant savages, blindly making the world more and more awful. That is the problem.

  2. When Christians say “capitalism” or “libertarianism” we may not agree with everything that goes by those names (how can we?), or with every jot and tittle of some system using those names; we may agree with the drift–government should be a lot smaller–and be willing to qualify details as needed. When Pastor Wilson mentioned N. T. Wright and then slammed Keynes, I suspect Wilson meant that Wright favors liberal (big government) politics, not that Wright agrees with every jot and tittle of Keynesianism; and I suspect Professor Wright may have taken this more personally than it was meant, instead of accepting Wilson’s invitation to reconsider whether God favors big-government-ism or disfavors it.

    Since God is practical–the Word became flesh–God favors what is really logical and what really works; so the [overstated] von Mises logical approach and an empirical approach should, and I think do, tend to confirm the wisdom of the economics that are Biblical; and I am trying, as in my post on Wilson’s blog, to say this nicely for the most part. (There are times to hit hard.)

    Have you considered government’s ability to be the problem? Do you support the Institute for Justice? Many US poor people have cars. Many US cities limit the number of taxis. This makes it hard for poor people to earn money as taxi drivers. It enables taxi owners to oppress the drivers who work for them. It makes it hard to get rides: easy to drive past a black customer and choose a white one. It raises the price of rides.

    Keynesianism started in A.D. 1953?? In the US? Eisenhower? Not Hoover/FDR? The A.D. 1853-1953 century had seen the Civil War and two world wars, and the great depression, which may’ve slowed the economy; and libertarians have noted government interventions–in the margin of a liberal book entitled The Robber Barons (by Josephy??) I noted dozens of government interventions that enriched some at the expense of others, or government failures to stop sheer fraud–that messed things up. And Keynesianism worked? Carter’s stagflation? Obama’s stimulus? (Empirically, Bush’s deficits had not prevented the great recession, so Obama should’ve known the porculus wouldn’t work; logically, the porculus money came from taxes, depressing spending at one point in order to stimulate another with no net gain, or from borrowing, so D.C. borrows and Main Street can’t, or printing, reducing the value of dollars–so logically, as well as empirically, it was worthless. Greedily, Solyndra was a half billion dollar photo op, and Solyndra was asked to hold layoffs until after the election; that’s how govt “invests” our money.)

    You take the parable of the talents as describing the judgment the Jews expected, so how come Jesus didn’t set it in that context: “You expect…”? He had compared himself/God to a thief in the night/unjust judge, so your nobleman is within His range. That He said nothing about the generosity of the master or the productive servants does not mean He did not expect, want, or presume any. You gotta earn, or inherit, or receive, what you give away! Business at its best–which it is often not at (Rob’t Graves)–serves in love, enriching both parties. Taking is basic to government; sharing, offering people what they want, is basic to business.

    The Christians selling Jerusalem real estate had been warned by Jesus that in a generation it would be worthless; selling it was a sharp warning to buyers to turn to the Messiah, an enacted parable, in contrast to the opposite action of Jeremiah.. Not quite insider trading, since I’m sure they shared Jesus’s warning. And of course it enabled them to be generous on that occasion. We should all be generous, but perhaps it’s not a coincidence that that particular form of generosity is recorded only on that occasion?

    So shrink the government.
    (Andrew, husband of Wendy–easier than signing out/in).

    1. There are so many myths here, it is hard to know what to address first.

      As Pastor Wilson is fond of saying, “ideas have destinations.” The destination of capitalism and libertarianism, even “Christianly” held, is unitarianism and the inversion of trinitarian life. Economic libertarianism (as well as its half-way house step-brother, neo-conservativism) depends upon philosophical libertarianism, something which Christians ought not to self identify with. John Frame has written extensively against philosophical libertarianism in his No Other God, and in his Theology of Lordship series. Both philosophical and economic libertarianism invert the application of the Trinity to the world, overturning the NT’s message of selfless living and resulting, in the worst cases, in heresy, in the best cases creating substantial tensions within the Christian life that will ultimately force us to choose between God and Mammon.

      A small government is no more or less qualified to govern well as a large one. The assumption that only a small government can govern well is a libertarian assumption, a highly suspect assertion in the real world. The judgment upon Israel in the prophets for refusing to care for the poor and the widow and the oppressed was addressed corporately to Israel’s communal life. Often they were addressed to the leaders of Israel, who failed to care for them in their capacity as rulers. When Daniel denounces Nebuchadnezzar for failure to take care of his poor, he is not denouncing Nebuchadnezzar’s private charity, but his public provision for the helpless and downtrodden through the government of Babylon (Dan. 4:24). There is some evidence in Scripture that a society is responsible corporately for how it treats its helpless and suffering. What we really ought to be fighting about is not big or small government, but effective and justice-oriented government.

      As to Medaille’s claims about the economy, you can look up his source yourself. That chapter of his book, along with the chart demonstrating his claims, is available over at the Distributist Review.

      The lifestyle of those in Jerusalem holding all things in common had nothing to do with the impending destruction of Jerusalem, and everything to do with the Trinitarian life and economic sharing (koinonia) the Church was always supposed to inhabit, which Luke declares is in fulfillment of the Jubilee laws of Israel’s life. It is not “recorded only on that occasion.” Paul makes it a comprehensive principle in 2 Cor. 8, basing it on “fairness” or “equality” for all, and the Greek word koinonia (usually translated “fellowship”) actually carries among its implications the idea of “sharing material and economic possessions.” The Apostles defined the Church as having for one of its chiefest characteristics its fellowship of economic sharing.

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