Conservative Colloquium

An Intellectual Forum for All Things Conservative

Christian Socialism vs. Economic Reality

Posted by Tony Listi on September 29, 2007

Gerard Jackson

Monday 13 November 2006

Christian socialists, like all lefty intellectuals, argue that poverty is a product of an unjust ordering of society. From there it is only a short step to seeking out the culprit and (you’ve guessed it) the guilty party is the ideology of “neo-liberalism”. More than 60 years ago the prescient Schumpeter wrote that “capitalism (the free market) stands its trial before judges who have the sentence of death in their pockets”. (Capitalism, Socialism and Democracy, George Allen and Unwin LTD, 1957). But their case against the market is based on a vicious socialist caricature of the real nature of market economics.

They attack market economists for emphasising the individual. Alas, if only that were true of most of them. In fact, for most economic analysts the individual does not exist as such. Once his preferences are assumed he is expelled to the margin and his preferences simply become part of the given data. In the field of macroeconomics he does not exist at all. Only the Austrian school seems to fully appreciate that to expel the actions of individuals from economic analysis is to drain it of its lifeblood. Therefore these critics are wrong on two points: (a) that most market economists stress the individual and (b) their implication that it is immoral to do so.

These intellectuals accuse market economists of only understanding “freedom as freedom from government”. If this were true of these economists they would all be anarchists. Virtually all market economists recognise the vital role that government plays in society. What they want is freedom from arbitrary government. It is tyrannical government they fear and loath, not government per se. Anyone who does not maintain a healthy scepticism about the problem solving ability of governments — meaning politicians — and ignores their inclination to expand and abuse their power is putting his wealth, liberty and life at risk. Governments consist of men and women who have exactly the same vices and weaknesses as the rest of us.

Having applied the fallacy of conceptual realism to government these lefties then apply it to the economy. (Unfortunately they are not alone in doing this). Despite what they claim, market economists do not see “the free market as the heart of the economy”. What these economists say is that the market process has proved superior to any other in raising the living standards of the masses. They have an abundance of historical evidence to support their claim and sound theoretical reasoning to explain the workings and benefits of the market process.

Furthermore, these economists would treat as absurd any notion that somehow the economy can be separated from society. It follows that to state, as so many leftists do, that market economists view the “economy as something separate from the rest of society” is just plain silly as, for instance, any reading of Adam Smith or the Austrian school would have clearly demonstrated otherwise. We also get the hoary socialist clichés claiming that market economists support the “primacy of capital over labour”, of “competition over collaboration”, of the “supremacy of the profit motive” and “the priority of private property over common ownership”. Let us examine these calumnies.

The charge that market economists favour privileges for capitalists is a vicious slander. Market economists believe in the rule of law. They do not believe that the state should grant privileges to anyone — whether he be a capitalist or a trade unionist. The charge also reveals the usual left-wing ignorance of economics. By capital leftists are referring to the owners of capital. (Capital proper being the material means of production).

Now we do have a can of worms. Every worker who invests in a pension fund is in this sense an owner, or part owner, of capital. Anything that damages the profits of the firms in which his savings are invested will therefore damage his future living standard. Even if the mass of people had made no investments in companies the accusation still would not hold, which brings us to charge that the market is based on conflict at the expense of cooperation.

Leftists refuse to admit that the free market could not exist unless it was based on voluntary cooperation. Unlike socialism the market does not need secret police, goon squads or the threat of a Gulag to maintain its existence. Market cooperation is of the highest order; it is one in which the actions and expectations of millions of people are continuously coordinated without the direction of any agency. People volunteer to work for Holden, BHP, the local supermarket or courier service. No one is coerced or visibly directed to these concerns, even in our severely hampered market place.

True, these concerns compete with one another but their competition is of a peaceful nature and occurs within a legal framework. This is the kind of competition that stimulates progress, brings about superior methods of production and generates material abundance. Every country that substituted the power of the state for the workings of the market has, without exception, impoverished its citizens and robbed them of their liberty. This is another historical fact that these socialist ideologues chose to ignore. (If socialists were consistent — and few are — they would condemn competitive sports out of hand for violating the socialist spirit of cooperation).

As for the so-called “supremacy of the profit motive”, the first thing to make clear is the nature of profits. Economic profits (as opposed to accounting profits) are maladjustments between supply and demand. When profits emerge, factors of production are paid less than the value of their marginal product which means that supply is lagging behind demand. This situation is remedied by competing firms and their cooperating factors of production. These actions increase output and lower prices while simultaneously raising the prices of the factors of production. One needs little imagination to see what happens when profits are suppressed. It should also be obvious that economic profits are not a residual or a product of exploitation. It is no wonder the fact that production is guided as much by losses as profits completely eludes socialists.

Every market economist would readily confess to the sin (or is it economic crime?) of favouring “private ownership over common ownership”. Yet traditional Catholic teaching supports and defends the institution of private property. The late Scholastics stated that private property derived from natural and eternal law, using scriptural arguments and an analysis of human behaviour to justify their position. Henrique Villalobos , for instance, quoted Proverbs 10:22: “The blessings of Yahweh is what brings riches, to this hand toil has nothing to add”. They also noted that the division of goods was not mandated by natural law and that the commandment “though shall not steal” had to be based on the assumption that private property was natural and acceptable.

The Scholastics were as scathing in their criticism of common ownership as they were determined in their defence of private property. Domingo de Soto attacked the idea of common ownership from a Thomist angle, pointing out that order and the peaceful division of labour are impossible under conditions of common ownership. Thomas de Mercado, another Scholastic, used the existence of self-interest to support the institution of private property. Saint Thomas (he was not a late Scholastic) was a strong critic of common ownership and stated that private property was necessary for human life. He even went as far as to claim that it was heresy to assert that owning property is sinful. The reader should also note that the Council of Constance (1414-1418) censored John Hus for opposing even the right of the clergy to own property.

So-called Catholic socialist also condemn market economists for believing in the “priority of private property over common ownership”. But this view actually violates Catholic tradition — but not, of course, Marxist thinking. Moreover, socialist views also contradict Pope John Paul II who observed in Centesimus Annus (1991) that “the free market is the most efficient instrument for utilising resources and for meeting a number of human needs though not all”. Two things should be noted: (a) every free-market economist would agree with every word of this statement, (b) the statement implicitly recognises the institution of private property.

Rich countries have been accused of “over-consumption” (whatever that is) and of using 70 per cent of the world’s resources. The US is even charged with consuming 25 per cent of the world’s resource. One does not have to be a mathematician to reckon that if is this charge were true the Earth’s resources would have been used up a long time ago.

What these people cannot seem to grasp is that from a human perspective natural resources are literally infinite and “resource depletion” is just a nasty fiction. In 1970s the Commodities Research Unit in London estimated that the quantity of key metals in the top mile of the earth’s crust were about a million times greater then known reserves. It has also been estimated that there is “100 million years supply of sulfur, borax and potassium chloride; more than one million years’ supply of molybdenum, uranium, tin, cobalt…” (Professor Wilfred Beckerman Two Cheers for the Affluent Society: A Spirited Defense of Economic Growth, Saint Martin’s Press New York, 1975).

Leftist views on the so-called Third World are no better. They frequently write of its poverty and misery while blaming Western colonialism for its fate. Not once do they mention the remarkable economic achievements of Japan, Taiwan, Singapore, Hong Kong and South Korea. (If you want to experience socialism in the raw go and live in North Korea or Cuba). Not once do leftists give the slightest recognition to the role that socialist thought played in causing so much misery and death in the Third World. Not once do they compare the economic success of Japan or Taiwan or Hong Kong with Ethiopia or Cuba. After all, honest comparisons might spoil their socialist ideology.

Quoting a Protestant theologian, and a somewhat dated one at that, might seem inappropriate but some words penned by a Church of Scotland thinker, John Oman, early in the last century are worth pondering:

There is no greater moral peril than the attempt to manipulate the truth, and the peril is in no way lessened because the task is piously performed.

Quotes, unless otherwise indicated, are from Eradicating Poverty in our World, a Pastoral Statement from the Australian Catholic Bishops’ Conference 1998

Gerard Jackson is Brookes’ economics editor

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