The Case against Capitalism (and Socialism)

When teaching my tenth-grade world history students about capitalism, socialism, and communism, I start by giving them a ten-question survey of their views. This includes questions like:

  1. Free trade between countries is: a. Good, because it leads to lower prices for consumers, b. Bad, because it leads to lower wages/ less jobs for workers in your country, or c. Bad, because it leads to the exploitation of the working class around the world
  2. To address economic inequality, we should: a. Give everyone the chance to rise into the middle class through education and hard work, b. Tax the rich to fund programs for the poor, or c. Redistribute land and property from the rich to the poor
  3. Which is the greatest danger to the people? a. Government tyranny infringing upon individual liberty, b. Wealthy elites exercising too much power over the government, or c. Systemic exploitation of the working class by the middle class

Almost no one ever chooses all A’s, B’s, or C’s. Even conservative students will occasionally select the socialist answer, and even liberal students will select the capitalist answer at times.

From there, I try to make the strongest case for each system using the words of Adam Smith and Karl Marx. Then, as a class we pick these arguments apart, identifying their strengths and weaknesses.

For example, Smith and other capitalists claim that allowing individuals to pursue their self-interest in a free market most often benefits society as a whole. This argument works in many cases. Smith is correct in his insistence that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” One can imagine a range of economic transactions where individuals freely pursuing their self-interest in a competitive market results in win-win scenarios.

However, there can be numerous “market failures,” cases in which businesses acting out of self-interest can harm society as a whole. The easiest example to illustrate this concept is pollution. A company might save money by dumping waste into a river rather than disposing of it more carefully. This is good for the company in the short-term, as it increases profits, but terrible for society in general and even the company in the long-run.

So what do we do? We make rules. We pass laws demanding that industrial waste be disposed of safely. Even the most libertarian of economists will not deny the need for such regulations. In fact, they are necessary for capitalism to function. Capitalism is not so much the natural state of human affairs, but rather owes its existence to the establishment of certain laws, going all the way back to the eighteenth century. Conservative thinkers often (rightly) decry government intervention in the economy, but capitalism cannot exist without a government capable of establishing and enforcing “the rules.” In order to have a basketball or football game, all participants must know the rules, and neutral referees (the government) must enforce them. The teams and individual players cannot be expected to police themselves.

Okay, so the pollution example is handled easily enough. But are there inherent contradictions built into the capitalist system, as Marx claims? Consider big corporations. Their obligation is to maximize profits for shareholders. They can do this in two main ways: either reducing production costs and/or increasing demand. But both strategies can have negative repercussions for society, even endangering the capitalism system itself. If businesses cut production costs too much (for example: automating production, hiring fewer workers, or shipping jobs overseas) then either unemployment increases or wages decrease. Either way, there is not enough demand left to maintain current production levels.

Businesses must therefore innovate or die. But each innovation creates a new problem, essentially kicking the can down the road. For example, you can pass laws encouraging consumers to take on debt (for example, the mortgage interest deduction). This allows them to consume more goods. But what happens when the credit bubble bursts? Answer: another crisis (2008), another short-term solution (bailouts, stimulus).

Efforts to drive up demand are similarly problematic, especially for companies that sell products detrimental to the public good. Big Pharma, Big Tobacco, and Big Fast Food companies can only increase demand by getting the public to consume more drugs, cigarettes, and burgers. Each of these outcomes is demonstrably harmful to society as a whole and the individuals who find themselves addicted to these “products.”

Now, a capitalist might say that consumers are free to choose broccoli over Big Macs, gym memberships over cigarettes, holistic treatments over opioids. But when we look around, we see that the allure of cheaper, more convenient alternatives is too tempting for most people to resist. Even conscientious moms balk at spending twice the amount on grass-fed beef or organic produce. In the case of cigarettes and opioids, addiction negates any claim of consumer choice.

America’s current opioid epidemic is the most insidious example of capitalism run amok. It started back in 1996, when Purdue Pharma began aggressively marketing a new opioid painkiller, OxyContin. This included a bonus system for pharmaceutical reps to increase sales. According to one article,

These efforts succeeded spectacularly… OxyContin prescriptions for non-cancer-related pain went from about 670,000 in 1997 to about 6.2 million by 2002… A small group of physicians, some receiving funding from drug firms… lobbied to have pain recognized as the ‘fifth vital sign’… In 2001, Purdue spent $200 million marketing Oxycontin… by 2002, sales topped the $1.5 billion mark. Between 1991 and 2013, the number of annual opioid prescriptions in the U.S. increased from 76 million to 207 million, with corresponding increases in the number of cases of addiction, overdose, and death… the Department of Justice took notice, and charged Purdue with misbranding the drug’s abuse potential. In 2007, Purdue pled guilty and paid over $600 million in fines.

From a purely economic perspective, Purdue did what they were tasked to do: they made profits for their owners and shareholders. It’s hard to imagine any fines outweighing the billions they have made as America’s largest legal drug dealer. Perhaps they told themselves they were doing good – just helping to ease the pain of those who were suffering. Perhaps the enormous sums of money streaming in helped them sleep at night.

In the last sixteen years, overdose deaths from opioids have risen fivefold. From 2000 to 2016, 600,000 Americans died of opioid overdoses. Today, an average of 115 Americans die each day from overdosing on heroin or prescription opioids. At just 5% of the world’s population, we consume 80% of its opioids.

Addressing Big Pharma’s role in the opioid crisis does not require dismantling the entire capitalist system. But we have to be willing to change the rules to avoid undesirable outcomes. Interestingly, The U.S. and New Zealand are the only countries that allow pharmaceutical companies to advertise drug claims directly to consumers. Banning DTC marketing would not be enough to solve the problem, but it would be one step in the right direction.

If you change the rules of the game, you change how the game is played. Think of how much the addition of the 3-point line has changed basketball; outside shooting is now essential to win games. Within a few years, shooters got so good that the line had to be moved back. Think how much differently soccer would be played if there was no off-sides call. What if baseball went to a five-strikes-and-you’re-out rule, or dropped it to two? Either way, players and teams would respond to the new rules to maximize their chances of success.

To recap: every modern economic system, including capitalism, needs a clear set of rules and a government capable of enforcing them. Altering the rules alters how the game is played. When coming up with the rules, we must put the good of human beings first and foremost in our minds, not abstract concepts – whether they come from the left or the right. Increased government regulation is not a magic wand we can wave over any problem to improve it, and neither is deregulation.

G.K. Chesterton describes the confusion over the “capitalist” and “socialist” labels. Though most would consider him a conservative, Chesterton refused to defend capitalism, which he defined as:

That economic condition in which there is a class of capitalists, roughly recognizable and relatively small, in whose possession so much of the capital is concentrated as to necessitate a very large majority of the citizens serving those capitalists for a wage. If capitalism means private property, I am capitalist. If capitalism means capital, everybody is capitalist. But if capitalism means this particular condition of capital, only paid out to the mass in the form of wages, then it does mean something, even if it ought to mean something else.

G.K. Chesterton and Hillaire Belloc proposed a third option, which they called “distributism.” This system, based largely on Catholic social teaching, seeks to distribute property more evenly than “pure” capitalism (which doesn’t really exist), but without relying on government ownership of the means of production; thus, it is not socialism either. Distributism is based on the Catholic concept of subsidiarity – the idea that a community of a higher order should not interfere in the workings of a community of a lower order. The nation should not try to do what the states can do; the states should not try to do what the localities can do; localities should not try to do what families can do.

Simply put, scale matters. Almost everyone prefers the idea of small businesses to big corporations. Why not restructure our laws to favor the former and impede the latter.

Take this famous exchange from the classic film It’s A Wonderful Life:

George Bailey: Now, hold on, Mr. Potter. You’re right when you say my father was no businessman. I know that. Why he ever started this cheap, penny-ante Building and Loan, I’ll never know. But neither you nor anyone else can say anything against his character, because his whole life was… why, in the 25 years since he and his brother, Uncle Billy, started this thing, he never once thought of himself. Isn’t that right, Uncle Billy? He didn’t save enough money to send Harry away to college, let alone me. But he did help a few people get out of your slums, Mr. Potter, and what’s wrong with that? …is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him. But to you, a warped, frustrated old man, they’re cattle. Well in my book, my father died a much richer man than you’ll ever be!

If we are to be “capitalists,” then let us be capitalists like George Bailey and not Mr. Potter.

How do we encourage the George Bailey’s of the world and keep the Mr. Potter’s at bay? Most of us would rather live in Bedford Falls than Pottersville. So why do we give our money to Mr. Potter? It will be hard to change the rules of the game to favor small businesses, as they cannot afford corporate lobbyists. In the meantime, we can consider the social effects of our daily economic decisions, choosing to spend our dollars supporting small businesses whose goals and business practices align with our values, even if it means spending a few extra dollars for daily items.

Joseph Peace summarizes disributism thus:

In practical terms, the following would all be distributist solutions to current problems: policies that establish a favourable climate for the establishment and subsequent thriving of small businesses; policies that discourage mergers, takeovers and monopolies; policies that allow for the break-up of monopolies or larger companies into smaller businesses; policies that encourage producers’ cooperatives; policies that privatize nationalized industries; policies that bring real political power closer to the family by decentralizing power from central government to local government, from big government to small government. All these are practical examples of applied distributism.

In my son’s 10-year-old boys’ basketball league, the rules are designed to give all players the chance to play and grow. For example, each player must play at least two full periods. If one team is up more than 10 points, they can no longer apply full-court pressure. Now, is this the equivalent of “socialist” basketball? Certainly not. The system still runs on competition. Coaches and players still have the freedom to decide what type of sets to run and shots to take.

It seems like the rules of the game are rigged to disproportionately benefit those who are already wealthy. This is not just a Bernie Sanders talking point. In fact, both Sanders and Trump – the two most popular candidates in the last election cycle – ran against capitalism (recall Trump’s attacks on free trade). The fact that the eight wealthiest people in the world have more money than the bottom half – that’s 3.5 billion men, women, and children – should give us all pause. Most voters – Sanders and Trump supporters alike – want to see the rules changed to create a more fair game. If a rec sports league can do it, why can’t we?

Instead of focusing on labels and ideologies, which often mean different things to different people, we should be focused on real-world solutions that put people – not profits, and not government – back at the center of economic life.

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Is the Climate in Crisis and the Market Immoral? Reaction to Laudato Si’

I consider myself a free market fan, a climate change skeptic, and a Roman Catholic. For weeks now, the secular media has been telling me that I would hate this papal encyclical. Pope Francis was going to stick it to the anti-scientific conservative deniers and side firmly with the more liberal environmentalists. Now that it is out, reaction is even more hysterical. Fortunately for me, I have learned not to listen to the secular media on anything to do with my faith. Most journalists can’t understand that when it comes to the Catholic Church (whose very meaning is “universal”), it is not about Right or Left, conservative or liberal, Republican or Democrat. It’s not about scoring short-term victories for a particular “side.” There are no “sides.” We are one community of believers and one human race; we win and we lose together.

Though I have seen his words taken out of context and twisted on many occasions, Pope Francis has never given me any reason to doubt his deep faith and good intentions. I was inspired by his palpable excitement over the Gospel in Evangelii Gaudium. Far from dreading its release, I was thrilled when a leaked copy of Laudato Si’ was made available. Having since taken the time to read it carefully in its entirety (as I expect many have not), I am now ready to share my thoughts.

Taken as a whole, I found much in the encyclical to appreciate and ponder. Pope Francis’ call to unite in defense of the environment is timely and well-stated. I will however add a few of my own observations to the pope’s analysis of the scientific, economic, and political situation. These three “quibbles” are not so much cases of outright disagreement as they are merely additional perspectives. First, I think Pope Francis overstates the case for anthropogenic climate change, though he is careful to maintain that the Church does not seek to settle scientific debates. Second, while much of Francis’ criticism of global capitalism is warranted, I think he overlooks the potential of the free market to generate solutions to both environmental degradation and poverty. Lastly, while international cooperation is certainly necessary, I view the suggestion of a global governing authority as somewhat naïve and potentially dangerous. However, none of these “quibbles” prevent me from embracing the larger point Pope Francis is making about the moral imperative of caring for the environment and the poor. It is one we would all do well to heed.

Everything is Connected

In addressing concern for our “common home,” Pope Francis is neither overstepping his bounds nor breaking with the rich history and tradition of Catholicism. He makes numerous references to other popes, bishops, and saints who have at various times expressed concern for the environment as a moral imperative. For example, he cites Saint John Paul II’s warning that human beings seem “to see no other meaning in their natural environment than what serves for immediate use and consumption.” He also notes Pope Benedict’s recognition that the environment and society have both been “greatly damaged by our irresponsible behavior,” resulting from “the same evil: the notion that there are no indisputable truths to guide our lives, and hence human freedom is limitless.”

cows and smoke

I agree with Pope Francis that Christianity obliges us to be good stewards of the environment, that appreciation for nature can draw us closer to God, and that respect for God, nature, and human life are intimately intertwined. Everything is connected:

Our relationship with the environment can never be isolated from our relationship with others and with God. Otherwise, it would be nothing more than romantic individualism dressed up in ecological garb..

When the human person is considered as simply one being among others, the product of chance or physical determinism, then “our overall sense of responsibility wanes”.[96] …Human beings cannot be expected to feel responsibility for the world unless, at the same time, their unique capacities of knowledge, will, freedom and responsibility are recognized and valued.

I now realize that most of my dissatisfaction with the secular environmentalist movement is the result of its devaluing of human life and its misplaced worship of creation in place of the Creator. How can we mourn the extinction of the Rocky Mountain grasshopper when we ignore the millions of human beings suffering from disease, starvation, and war? How can we go to such lengths to protect the nesting grounds of birds and turtles when millions of children are annually slaughtered in the womb? Either life is a gift to be cherished, or it is not. Either there is a power higher and a purpose greater than our individual desires, or there is none. You can’t have it both ways.

Quibble #1: Climate Change

After establishing respect for the environment as a moral and religious issue, Francis goes on to catalogue the damage we have done to our planet over the course of the last two hundred years. This list includes pollution, loss of biodiversity, decline in the quality of human life, societal breakdown, global inequality, and, of course, climate change. Some in the media would have us believe that Francis’ call to dialogue about the climate is in fact the end of the discussion, but consider his words for yourself:

A very solid scientific consensus indicates that we are presently witnessing a disturbing warming of the climatic system. In recent decades this warming has been accompanied by a constant rise in the sea level and, it would appear, by an increase of extreme weather events, even if a scientifically determinable cause cannot be assigned to each particular phenomenon. Humanity is called to recognize the need for changes of lifestyle, production and consumption, in order to combat this warming or at least the human causes which produce or aggravate it. It is true that there are other factors (such as volcanic activity, variations in the earth’s orbit and axis, the solar cycle), yet a number of scientific studies indicate that most global warming in recent decades is due to the great concentration of greenhouse gases (carbon dioxide, methane, nitrogen oxides and others) released mainly as a result of human activity.

In at least six other places that I can count, Pope Francis tempers the case for global warming with the caveat that the Church does not seek to settle matters of scientific debate (paragraphs 14, 15, 16, 19, 61, and 188). It appears that his advisors on this issue included a number of climate activists to the exclusion of at least one climate skeptic, which may explain his “catastrophist” position. I personally don’t find the evidence as persuasive, making this Quibble #1.

First, it is important to note that the earth has experienced times of far greater concentration of carbon in the atmosphere without a corresponding increase in average temperatures. This contradiction led the founder of Greenpeace to come out as a climate change skeptic. The evidence for global warming is often presented as conclusive, but several recent scandals have shown scientists to be manipulating the data to exaggerating warming trends. Some even described the decades-long hiatus as a “disaster,” which explains the ditching of “global warming” for the more neutral “climate change.” But if we are to count rising, falling, and steady temperatures all as evidence of man-made climate change, then the theory is unfalsifiable and thus unscientific.

Dansgaard-Temperature2

It is also worth noting that climate change is largely a prediction about the future. With as much disagreement as exists over the past and present, how much greater is the margin of error over events that have not yet occurred? A number of scientific models have already been discredited, including predictions of another Ice Age and concerns that overpopulation would run the world out of food. Even if the Catholic Church and the scientific community were to reach an agreement on the issue of global warming, this alone would not constitute ironclad proof, as they were united in support for the geocentric theory for nearly fifteen centuries. Pope Francis himself bucks the majority of the world’s scientists when he offers an intelligent design theory of human evolution:

Human beings, even if we postulate a process of evolution, also possess a uniqueness which cannot be fully explained by the evolution of other open systems… Our capacity to reason, to develop arguments, to be inventive, to interpret reality and to create art, along with other not yet discovered capacities, are signs of a uniqueness which transcends the spheres of physics and biology. The sheer novelty involved in the emergence of a personal being within a material universe presupposes a direct action of God…

Much like the idea that human life evolved via a series of random genetic mutations, theories of anthropogenic climate change contain several holes and contradictions. Yet to question either in the scientific community is to risk professional suicide. This is not to assert with 100% certitude that global warming is not occurring. I agree with Bjorn Lomborg that there is likely a small amount of global warming related to human activity that has been greatly exaggerated, but to stop or even slow it would require draconian restrictions on production and consumption that would have devastating effects on human life.

This leads to the question: if one disagrees with the proposition that climate change is an apocalyptic threat, what does this mean for human behavior? Are we to keep wasting, consuming, polluting, and emitting away just because the world won’t end if we do? I think not. You don’t need to believe in global warming to value clean air, pristine oceans, biodiversity, human life, and more prudent development of the earth’s resources. Imagine I told you that smoking cigarettes would cause you to spontaneously combust. This statement would be false, but this is no reason to start smoking two packs a day. I agree with Ross Douthat that the pope’s arguments still resonate even if stagnation is more likely than catastrophe. Perhaps a greater concern is “not a fear that the problems of our age can’t last, but the fear that, actually, they can.”

surfer

Quibble #2: Capitalism

It is true that Pope Francis has some harsh words for global capitalism:

The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy. As long as production is increased, little concern is given to whether it is at the cost of future resources or the health of the environment…

Since the market tends to promote extreme consumerism in an effort to sell its products, people can easily get caught up in a whirlwind of needless buying and spending. Compulsive consumerism is one example of how the techno-economic paradigm affects individuals….This paradigm leads people to believe that they are free as long as they have the supposed freedom to consume.

I don’t disagree with either of these points. The free market is not infallible, and it can encourage an unhealthy obsession with “stuff.” However, we should realize that all economic systems have their drawbacks and none can alleviate the very human vices of greed and short-sightedness. The rules of the game may change; our fallen human nature does not.

When Adam Smith first laid out a rationale for capitalism, he argued that individuals freely pursuing their own self-interest would add up to the collective benefit of society. However, there isn’t a capitalist alive today who doesn’t acknowledge the existence of “market failures,” or times when individual self-interest redounds to society’s overall detriment. Pollution is a prime example of a market failure. Thus, we need reasonable regulations on development and prohibitions on certain activities like the dumping of toxic waste into rivers. We need to set just limits on what individuals can do to alter the landscape, even if it is on private property. A great example of this is the disgusting practice of mountain-top removal that has scarred the face of my own home in Appalachia. The answer is not to replace capitalism, but rather to ensure that it is properly regulated. Much of the apparent failures of capitalism are really the result of the immoral collusion of Big Business and Big Government to stifle true competition and “rig the game” for the well-connected.

mountaintop

Pope Francis occasionally sounds as though the market were an obstacle to the poor, when it has in fact enabled billions to escape poverty by rising into the middle class. Industrialization has been proven to dramatically increase standards of living, and capitalism is the only system that has consistently allowed for upward mobility. However, just as the system creates winners, it also leaves losers. We cannot turn our backs on those who have lost out in the free market, whether as a result of low skills, lack of initiative, or just plain bad luck. Thus, in addition to sensible regulation, we also need policies to help meet the needs of the poor that recognize the inherent dignity of work. Pope Francis is correct in calling for us all to examine our own patterns of consumption and disposal, to resist the spiritual emptiness of consumerism, and to embrace the old wisdom that “less is more.” (Although his criticism of air conditioning may have set me back a few years in my attempts to convert my husband.)

Quibble #3: Global Government

My biggest point of disagreement with Laudato Si’ comes in paragraph 175:

(I)t is essential to devise stronger and more efficiently organized international institutions, with functionaries who are appointed fairly by agreement among national governments, and empowered to impose sanctions. As Benedict XVI has affirmed in continuity with the social teaching of the Church: “To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority, as my predecessor Blessed John XXIII indicated some years ago”.[129]

Yes, global challenges require international cooperation. But unless one country’s actions gravely endanger another’s, national sovereignty should be respected. If we can’t trust CEOs and corporate boards to put the common good above their own, how can we put this expectation on elected officials and international agencies? Just as the preservation of individual freedom yields greater results on the micro level, so too is national sovereignty preferable to global governance at the macro level. Man’s fallen nature requires government to be limited and power decentralized so as to prevent tyranny.

Conclusion

Conservatives who feel awkward about disagreeing with the pope on climate change should pause and consider whether they have something to learn from his position on the environment. Liberals who feel triumphant about the pope’s stance on climate change should consider whether they have something to learn from his position on abortion:

Since everything is interrelated, concern for the protection of nature is also incompatible with the justification of abortion. How can we genuinely teach the importance of concern for other vulnerable beings, however troublesome or inconvenient they may be, if we fail to protect a human embryo, even when its presence is uncomfortable and creates difficulties?

When we fail to acknowledge as part of reality the worth of a poor person, a human embryo, a person with disabilities – to offer just a few examples – it becomes difficult to hear the cry of nature itself; everything is connected.

Maybe we all need to be reminded that whatever our particular –ism might be (capitalism, communism, socialism, liberalism, conservatism), it can never hope to contain the whole truth. Our -ism’s don’t have all the answers; they offer but pieces of the greater puzzle. There is always the danger of isolating one piece of the truth and blowing it out of proportion. This is why I prefer to identify as Catholic instead of Republican, conservative, or libertarian. We should be willing to work together with all people of good will, even if we disagree over the best methods to achieve our common goals. Despite having my own opinions, I am deeply grateful for the opportunity to benefit from Francis’ faith and wisdom, and ready to seriously reflect on how I can heed his call to care for the environment and the poor.