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Christianity

& Capitalism

July 5, 2008
Christianity & Capitalism

A Quick Review

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Christianity & Capitalism
A Model for Examining
Capitalism
• No economic system is prescribed by
the Bible.
• We’re using a multi-disciplinary
examination of capitalism through the
lenses of Scripture, history, and
economics.
• Capitalism as an institution.
• Does capitalism promote Shalom? 3
Christianity & Capitalism

Key Economic Concepts


• Definition of capitalism: an economic
system where 1) people own their
labor; 2) property rights are protected
by rule of law; 3) investments are
determined privately; 4) and the
market sets prices, wages, production,
and distribution.

• Key components of capitalism:


– “The Invisible Hand” 4
Christianity & Capitalism

Free to Choose
• The building block of capitalism =
voluntary transactions by buyers and
sellers
– When two parties voluntarily transact
with each other, both are better off.

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Christianity & Capitalism

The Origins of
Capitalism

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Christianity & Capitalism
Earlier Economic
Systems
• Feudalism (Medieval Europe)
– Self-sufficient manors where serfs (who
were tied to the land) had to pay a
tribute.
– Guilds suppressed skilled craftsmen.
– No incentive to innovate. Limited
marketplace.

• Mercantilism (16th-18th centuries)


– Growth of overseas trade and colonies
as ways of enriching the state.
– Government subsidies, monopolies, and 7
tariffs were common.
Christianity & Capitalism

Industrial Revolution
• Capitalism was gradually
institutionalized in England in the
17th-19th centuries.
– Religious tolerance, large common
market, Parliament’s support (e.g.
patent law, lowered tariffs, 1811
Luddite rebellion)
• Sustained innovation of the Industrial Revolution
was only possible because of the advent of the
capitalist system.
– 14th century China
• Political fragmentation in Europe (weak states)
allowed capitalism to spread there next, and then
exported to rest of the world in 19th-20th
centuries. (Source: Joel Mokyr, The Lever of Riches, pp. 172-208, 239-269.)
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Christianity & Capitalism
Did Christianity Create
Capitalism?
“Western Christianity contained the
seeds of future technological process.” –
economist Joel Mokyr
• Specific examples of Christianity laying the
groundwork for capitalism:
– Centuries-long debate over usury gave insight
into nature of money and helped create
banking.
– “The [Benedictine] monk was the first
intellectual to get dirt under his fingernails.”
– Calvinism encouraged hard work and frugality,
which created a pool of investment capital. 9
Christianity & Capitalism

• Christian beliefs and concepts that


led to the rise of Capitalism:
– Humanity’s role in creation.
– Private property.
– Reason.
– The Reformation.
– “The faith of Abraham”
– Optimism for the future tempered by the
doctrine of original sin.
(Sources: Joel Mokyr, The Lever of Riches, pp. 201-205. Jay Richards, Money, Greed, and God, pp. 145-
151. Walter Russell Mead, God and Gold, pp. 191-247.)
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Christianity & Capitalism

Intellectual Challenges
• Thomas Malthus (Malthusianism) –
“The power of population is
indefinitely greater than the power in
the earth to produce subsistence for
man.” So we’ll all starve to death.
• Karl Marx (communism) –
Communal property &
centralized decision making
will replace private property
& decentralization following
a working class uprising. 11
Christianity & Capitalism

What has Capitalism


Produced?
(i.e. Where’s the Beef?)

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Christianity & Capitalism
The World Economy is No
Longer Stagnant

A.D. 1 A.D. 1000 A.D. 2000

(Source: Angus Maddison, "World Population, GDP and Per Capita GDP, 1-2003 AD," at the
Groningen Growth and Development Centre. http://www.ggdc.net/) 13
Christianity & Capitalism
The U.S. Economy is the
World’s Largest

(Source: J. Bradford DeLong, “Cornucopia: Increasing Wealth in the Twentieth Century,”


Department of Economics, U.C. Berkeley, http://www.j-bradford- 14
delong.net/TCEH/2000/TCEH_2.html)
Christianity & Capitalism
Knowledge has Exploded

(Source: U.S. Patent Office, http://www.uspto.gov/web/offices/ac/ido/oeip/taf/h_counts.htm) 15


Christianity & Capitalism
U.S. Economy Has Created
Millions of Jobs

(Source: Bureau of Labor Statistics, February 6, 2009. Available at http://www.ritholtz.com/blog/2009/03/hh-


est-survey-differences/) 16
Christianity & Capitalism
Poverty and Income
Distribution
• Capitalism has produced an uneven
distribution of wealth between the rich
and poor.

(Source: U.S. Census


Bureau, available at
http://www.census.g
ov/hhes/www/incom
e/histinc/f01ar.html)

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Christianity & Capitalism

• But income levels for the lowest quintile


(which is not a static group of people)
have risen over time.

(Source: U.S. Census Bureau, available at 18


http://www.census.gov/hhes/www/income/histinc/f01ar.html)
Christianity & Capitalism

(Source: U.S. Depts. of Commerce, HUD, and Energy. Data available at 19


http://www.heritage.org/Research/Welfare/bg2064.cfm)
Christianity & Capitalism
• Hunger hasn’t been eliminated, but 92.5% of
poor U.S. households (and 98% of all
households) reported they had "enough food
to eat" during the past four months.

(Source:http://www.heritage.org/Resea
rch/Welfare/bg2064.cfm)

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Christianity & Capitalism

The Third World

• “Zero Sum Game” – Is the Developed


World’s wealth the cause of the Third
World’s poverty? 21
Christianity & Capitalism

• Peruvian economist Hernando de Soto


says lack of formal property rights
impedes capitalism, robs Third World
citizens of $9.3 trillion of wealth.
• In spite of this,
Third World
poverty has
fallen in recent
decades as
world GDP and
trade have
risen.
(Source: Jay Richards, Money, Greed, and God, p. 92.)
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Christianity & Capitalism
Free Economies = Meeting
Basic Needs

Repressed Mostly Unfree Moderately/Mostly Free Free

(Sources: Economic freedom scores, The Heritage Foundation, http://www.heritage.org/Index/Ranking.aspx. Food expenditure 23
data, U.S. Dept. of Agriculture, http://www.ers.usda.gov/briefing/cpifoodandexpenditures/data/2004table97.htm.)
Christianity & Capitalism
Economic Growth = Longer
Lifespans

(Source:
www.gapminder.org.)

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Christianity & Capitalism
Economic Growth = Longer
Lifespans

(Source:
www.gapminder.org.)

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Christianity & Capitalism
Economic Growth = Longer
Lifespans

(Source:
www.gapminder.org.)

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Christianity & Capitalism
Economic Growth = Longer
Lifespans

(Source:
www.gapminder.org.)

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Christianity & Capitalism
Economic Growth = Longer
Lifespans

(Source:
www.gapminder.org.)

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Christianity & Capitalism

The Environment
• No economic system is pollution-free.
• “Natural resources” change over time.
• Some analyses suggest global
environmental conditions are improving
—e.g. Index of Leading Environmental
Indicators.
• Bottom Line: What is the cost-benefit?
“Earth got about 0.7 degrees Celsius warmer in the 20th century while it increased its GDP by 1,800%…let’s
stipulate that all of the warming was the result of our prosperity and that this warming is in fact indisputably bad
(which is hardly obvious). That’s still an amazing bargain. Life expectancies in the United States increased from
about 47 years to about 77 years. Literacy, medicine, leisure and even, in many respects, the environment have
improved mightily over the course of the 20th century…” – columnist Jonah Goldberg

(Sources: Index of Leading Environmental Indicators, Pacific Research Institute,


http://special.pacificresearch.org/pub/sab/enviro/2008/study.html. Jonah Goldberg, “Global Cooling Costs Too Much,” 29
http://article.nationalreview.com/?q=MmJiZDEyYzkxYWE0OWYxMWY4Y2ZjYzI2YmNmOGExMDE=.)
Christianity & Capitalism

Key Takeaways
• Capitalism isn’t a perfect institution, but
it has a formidable track record across
the centuries:
– Economic growth
– Explosion of knowledge
– Income inequality but rising living
standards for the poor
– Greater availability of food
– Longer life spans
– Potential for the third world
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Christianity & Capitalism

Our Next Meeting (July 12)


• Faith in the marketplace
• The church in the world
• Prophets, Priests, and Kings

Visit the Gathering’s group page on Facebook for


related articles, copies of this presentation, and a
recommended reading list.
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