Christianity & Capitalism, Part 2: "the Origins And Results Of Capitalism"
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Christianity & Capitalism
July 5, 2008
Christianity & Capitalism
A Quick Review
2
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.
5
Christianity & Capitalism
The Origins of Capitalism
6
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 tariffs were common.
7
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. 8 (Source: Joel Mokyr, The Lever of Riches, pp. 172-208, 239-269.)
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. 145151. Walter Russell Mead, God and Gold, pp. 191-247.)
10
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?)
12
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-bradforddelong.net/TCEH/2000/TCEH_2.html)
14
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/hhest-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)
17
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 http://www.census.gov/hhes/www/income/histinc/f01ar.html)
18
Christianity & Capitalism
(Source: U.S. Depts. of Commerce, HUD, and Energy. Data available at http://www.heritage.org/Research/Welfare/bg2064.cfm)
19
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)
20
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.)
22
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 data, U.S. Dept. of Agriculture, http://www.ers.usda.gov/briefing/cpifoodandexpenditures/data/2004table97.htm.)
23
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
24
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
25
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
26
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
27
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
28
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,” http://article.nationalreview.com/?q=MmJiZDEyYzkxYWE0OWYxMWY4Y2ZjYzI2YmNmOGExMDE=.)
29
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
30
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. 31
July 5, 2008
Christianity & Capitalism
A Quick Review
2
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.
5
Christianity & Capitalism
The Origins of Capitalism
6
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 tariffs were common.
7
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. 8 (Source: Joel Mokyr, The Lever of Riches, pp. 172-208, 239-269.)
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. 145151. Walter Russell Mead, God and Gold, pp. 191-247.)
10
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?)
12
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-bradforddelong.net/TCEH/2000/TCEH_2.html)
14
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/hhest-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)
17
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 http://www.census.gov/hhes/www/income/histinc/f01ar.html)
18
Christianity & Capitalism
(Source: U.S. Depts. of Commerce, HUD, and Energy. Data available at http://www.heritage.org/Research/Welfare/bg2064.cfm)
19
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)
20
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.)
22
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 data, U.S. Dept. of Agriculture, http://www.ers.usda.gov/briefing/cpifoodandexpenditures/data/2004table97.htm.)
23
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
24
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
25
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
26
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
27
Christianity & Capitalism Economic Growth = Longer Lifespans
(Source: www.gapminder.org.)
28
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,” http://article.nationalreview.com/?q=MmJiZDEyYzkxYWE0OWYxMWY4Y2ZjYzI2YmNmOGExMDE=.)
29
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
30
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. 31
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