Read part 1 of this series here.
As we observed in Part 1 of this series on economics, biblical ethics places a high value on the principle of stewardship, but stewardship requires a high level of economic liberty for individuals to fulfill their God-given duties of dominion (Gen. 1:28).
As image bearers of God, human beings possess certain rights, and in order to fulfill their duties of stewardship, they must have the right to economic freedom, property ownership, and free exchange. They must the right to produce things, to grow things, to exchange things, to increase their wealth, and to share their resources for the glory of God. Having these rights means that people should be able to own businesses, to engage in commerce, and to deploy capital in ways that create wealth. Hence, rightly ordered societies will have a means by which people can do these things and achieve economic independence for themselves.
In Part 2 of this series, we will consider three reasons why capitalistic systems, rather than socialistic systems, approximate a biblical ethic of economics.
First, let’s cover some definitions.
In common vernacular, socialism has become interchangeable with economic redistribution and/or collectivized ownership of goods and services. Technically, there’s more to socialism than that, but every socialistic system will at least have these two things.
In contrast, capitalist systems entail the private ownership of the means of production and a distribution of resources among members of society through the free market exchange of goods and services. There is no ideal capitalist system in existence today, and although proponents of socialism argue that “true” socialism has never been tried, most economies are either “capitalistic” or “socialistic” to varying degrees.
With this in mind, we will make broad comparisons between socialistic systems and capitalistic systems regarding three moral issues related to a biblical worldview.
First, capitalistic systems preserve the basic human need for economic freedom in a fallen world. Capitalistic systems recognize the right to own property, run a business, and to exchange freely with others. They contain rules or laws that protect individuals from theft, fraud, or coercion. These systems give individuals the freedom to make risks, to reap rewards, and to become entrepreneurs who are (mostly) free from state control.
Sin, though, has created a world where some human beings will oppress, exploit, and dominate the weak and vulnerable in society. Capitalistic systems are better suited to restrain this evil because they tend to disperse power throughout society by decentralizing the means of production and encouraging competition and innovation.
Socialistic systems, in contrast, cannot achieve the same level of freedom and decentralization as the market economy. Instead, they tend to distort the economic game by consolidating power, suppressing human freedom, and violating property rights. Whereas market economies rely on private property, free enterprise, and the rule of law, socialistic regimes rely on state coercion and central planning. Moreover, socialist systems are grounded in a collectivist worldview that denies the possibility of property rights and individual identity outside of the state. In socialistic systems, individuals are mere members of a collective society; they have no identity, no rights, and no economic freedom.
Ironically, socialistic systems offer the promise of security and safety from market forces (as if this were possible). These systems have an undue confidence in the state to eradicate social problems like poverty and economic inequality, so rather than moving society into closer conformity to biblical economic principles, they allow a small, corrupt group of leaders to centralize power over the rest of the people, leading to enormous problems politically and economically. Ultimately, socialistic systems make their people dependent on (and at the mercy of) the state.
Second, socialistic systems are not only immoral, they are also irrational. It is no secret that human beings have great difficulty predicting economic forces and their effects on society. This is a problem for any system, but it is especially problematic for socialistic systems.
Socialistic systems have what is called a “calculation problem” that renders economic planning impossible. The “calculation problem” essentially says the centrally-managed economies have no way of rationally allocating their resources because they have no way of knowing true supply and demand. This problem is not only impossible for socialistic regimes to overcome, but by attempting to do so they produce unforeseen, disastrous consequences for their economies. In order to overcome the calculation problem, socialistic systems require god-like omniscience over virtually every economic activity, which is clearly impossible.
At the core of these systems is an ideological (and ungodly) hubris about rationalistic social engineering. By believing that society can be managed through purely rationalistic methods, socialistic societies ignore the noetic effect of sin on human reason by supposing they can overcome the curse of Genesis 3. Christians should obviously reject this idealistic thinking as incompatible with a biblical worldview.
In contrast, capitalistic systems do not require quasi-omniscience. Instead, they allow markets to determine economic value as true supply and demand comes from price valuations that are unique to each person and can change as needs arise. With the natural flow of supply and demand, the value of goods and services are under constant change. Capitalistic systems work because individuals, unlike central planners, are capable of making rational decisions based on price signals in the market — signals which are constantly changing as scarcity and need fluctuate. Individuals, more than governments, can make informed choices regarding the value of the goods and services they need or want. There is no need for ideological hubris or social engineering.
Finally, socialistic systems are counterproductive for developing human virtues. Under collectivized economic planning it is impossible to create natural incentives of hard work, diligence, prudence, innovation, and efficiency because collectivized systems do not usually reward these virtues. Incentives in socialistic systems are not related to moral virtues at all, but to party loyalty, political prowess, corruption, and bureaucracy. Socialistic systems pervert the moral incentives that align with integrity and biblical stewardship by encouraging individuals to manipulate the political and economic system in their favor.
In contrast, capitalistic systems provide the basis for developing personal and social virtues such as cooperation, frugality, thrift, savings, prudence, and more. Capitalist societies are not the only place where greed is a problem, but a free market environment is the best place to control man’s greed by forcing him to cooperate with others and serve his fellow man. The best competitors in a free market economy know how to cooperate with others through voluntary exchange.
Moreover, those who cultivate the virtues of diligence, prudence, and responsibility tend to be better at accumulating wealth.
It is only when the market system is corrupted by bureaucracy and special interests that these natural virtues are replaced with vices commonly seen in socialistic systems. If these problems are found in a capitalist system, the solution is not to move toward socialism, but to root out corruption.
Much more can be said about these two systems, but it should be clear that capitalistic systems more closely approximate biblical principles of economics. They account for human freedom, knowledge, and virtue better than socialistic systems and are (so far) the best mechanism available for Christians to fulfill their obligations of stewardship.
Sadly, the Western world appears to be moving away from economic freedom and toward central management. Threats to economic freedom are coming in many forms — through socializing of massive sectors of the economy like healthcare, energy, and banking; through regulations and corporate bailouts; through fiat monetary policy and taxation; and through increasing use of Environmental, Social, Governance (ESG) scores and “stakeholder” capitalism.
Western societies are now on a path heading toward economic serfdom to the state, which is a place that no one should want to be, Christians especially. A biblical worldview on economics can lead us down a better path, one that God intended for societies to follow and that Christians should point them to.
Follow Tim on Twitter! @TimYonts
Ready to dive deeper into the intersection of faith and policy? Head over to our Theology of Politics series page where we’ve published several long-form pieces that will help Christians navigate where their faith should direct them on political issues.