A Note on Capitalism and Laissez-Faire

At The Center for Gospel and Culture at Boyce College (h/t Aquila Report for the post), David Kotter questions whether the Bible endorses “American Capitalism” or “Communist Central Planning.”  He begins as follows:

The Bible does not endorse American-style Capitalism, nor did the early church practice Communist central planning in the early chapters of Acts.

I suppose this can be agreeable, although Kotter does not define “American-style Capitalism” or explain how the American economic system, which is more fascistic than communistic, can possibly be dubbed “capitalism.”  It can be agreeable if by this phrase he is referring to Fascism, which is the proper name for an economic system in which private corporations operate under partnership with the State.  But if that was his meaning, we might urge him to use a different phrase as the use of “capitalism” is quite misleading.  Sometimes, fascism is described as “crony capitalism” or “corporatism.”  I am not fond of the former phrase.  At any rate, “American-style capitalism” should be opposed because its not capitalism.

He also writes, “Republican Party economics is not a required part of Christianity.”  This is certainly true, since the GOP is largely socialistic, or at least “interventionist,” which is the predecessor of socialism.  Of course, it is also true in the sense that one’s commitment to free markets does not weigh into whether or not he is saved.

Now, not to mislead those who haven’t read the article, there is no doubt that Kotter is a proponent of the market system.  He spends the majority of his time largely expressing his agreement with a variety of components of the capitalist system.  He spends paragraphs 2-4 listing examples of private property, subjective value, the division of labor, entrepreneurship, and other such economic topics.

And then in the next paragraph, he writes:

On the other hand, the Bible does not endorse a completely laissez-faire perspective. Commerce was to be conducted with just weights and measures (Leviticus 19:35-36).

The problem with this, and the need for the present blogpost, is that he is apparently using laissez-faire in a way that is unfair to its use historically.  Thus, if any reader who is unaware of these topics accepts Kotter’s whole post, they will subsequently see laissez-faire through the wrong lens and may in the future consider a proponent of laissez-faire as holding to views which he actually does not.

It might be falsely assumed from the quoted paragraph that a laissez-faire proponent opposes just weights and measures.  Which more generally might give way to the false assumption that a laissez-faire proponent opposes a system of justice and enforcement of fraud and contract.  But laissez-faire has never meant “lack of rules.”  Ludwig von Mises, who is perhaps the greatest economist in the 20th century, was the chief laissez-faire thinker in his generation; he even went so far as to call Milton Friedman a socialist!  And yet, he was also the most vocal opponent of fiat money and government-granted authority to devalue currencies, which is what “just weights and measures” is intended to prevent, among other things.

Laissez-faire, in its historical use, was the theme of the French Physiocrats (see page 367 of this book), who were the most important opposition economists to the mercantilist doctrine of State control over imports and exports.  Whereas the mercantilists sought protective tariffs and government subsidies to help domestic businesses, the physiocrats declared that only free-trade, not managed trade, could lead a country to a prosperous future. It was Adam Smith that later carried forth these arguments and smashed the Mercantilists of his day with his book “The Wealth of Nations.”  Laissez-faire simply means “let it be” and should be interpreted as related to economic theory as “let the trade take place.”  The government should not intervene with two willing parties who are making a transaction. It does not mean: “lawlessness.”

If there is proof of fraud of any sort, then the criminal will be prosecuted.  All of this is entirely consistent with laissez-faire. For the point of laissez-faire is not to express desire for a system without laws, but rather to express desire for a system in which two consenting parties can engage in a voluntary trade without the government preventing it.  Laissez-faire has a historical context (otherwise, why keep the French phrase?). It is best that we keep it in mind.

After this paragraph, Kotter ends on an agreeable note, pointing out that an objection to capitalism on the basis of its inherent greed is nonsensical. For how does any other system remove the greedy mentality from the human being? For more on greed and capitalism, please see my article here.

Three cheers for laissez-faire capitalism.

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