The American Way in Economics
OCTOBER 01, 1964 by EDMUND OPITZ
The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education, Book Review Editor of THE FREEMAN, lecturer, and seminar discussion leader.
Economics deals with our daily bread, with the provisioning of our material and creaturely needs, with the way we make our living. But the way a person makes his living is related to the things he is living for; and a nation’s mode of operating in the economic realm cannot be detached from that nation’s understanding of the end and purpose of human life. An economic system, in other words, functions within a framework of ethical and spiritual components. It has a legal framework, also. This means that the discussion of economic concepts cannot proceed very far without invoking spiritual and constitutional concepts.
If we look back over our own history, in its religious, political, and economic sectors, we note that one key word fits each of them. The key word is "Freedom." I am willing to grant that the motives of the Pilgrims and the Puritans were mixed. But ask yourself this question: "If the Separatists had been able to worship God as they pleased, without hindrance or penalty, in England, would they have emigrated to this continent when they did—or at all?" Merely to ask this question is to get the obvious answer; the impelling motive behind the seventeenth century migrations and resettlements was the search for a place where these religious dissenters might be free to worship God as they chose. Writing about the men and women who established Plymouth colony, Alexis de Tocqueville said, "… it was a purely intellectual craving that called them from the comforts of their former homes; and in facing the inevitable sufferings of exile their object was the triumph of an idea."
It was the idea of human freedom under God. Now, candor compels us to admit that the Puritan idea of freedom contained some blind spots. The Dissenters sought freedom on these shores to worship God as they pleased; it was not their aim to establish the general condition of religious liberty where every man might worship after his own fashion. In the political realm they countenanced governmental invasions of personal liberty which we would regard today as intolerable; and in the economic sector their practices could hardly be described as free market. But despite their shortcomings in practice, these people had hold of an idea which had the power to act as a solvent of existing injustices, taboos, and ignorance. This dynamic idea was the principle of liberty. It could hardly have been otherwise, for the Puritans were children of the Reformation, and the spiritual liberty stressed by the Reformers could not help branching out into secular liberties.
A Great Religious Tradition
Let’s listen to the words of Edmund Burke on this point. Burke made a great speech on Conciliation with the American Colonies and warned his hearers that the colonists were made of stern stuff. The way they all share "in their ordinary governments," he writes, "never fails to inspire them with lofty sentiments….
If anything were wanting to this necessary operation of the form of government, religion would have given it a complete effect. Religion, always a principle of energy, in this new people is no way worn out or impaired; and their mode of professing it is also one main cause of this free spirit. The people are Protestants, and of that kind which is the most adverse to all implicit submission of mind and opinion. This is a persuasion not only favorable to liberty, but built upon it…. The dissenting interests have sprung up in direct opposition to all the ordinary powers of the world, and could justify that opposition only on a strong claim to natural liberty. Their very existence depended on the powerful and unremitted assertion of that claim. All Protestantism, even the most cold and passive, is a sort of dissent. But the religion most prevalent in our northern colonies is a refinement on the principle of resistance; it is the dissidence of dissent, and the protestantism of the Protestant religion."
The Founding Fathers, in other words, were the inheritors of a great religious tradition and the American dream of a society of free men was largely a projection of that religion. This is how the original American equation got its built-in religious dimension.
Christian by Absorption
Every society is held together because its members share a common understanding of certain basic principles. There must be a consensus as to the object of ultimate concern—God. There must be some agreement as to the relation between God and man, and as to the nature of man and his proper end. There must be some agreement as to what constitutes justice, honor, and virtue. The source from which a society derives its understanding of these matters is its religion. In this sense, every society is cradled in some religion, Christian or otherwise. The culture of China is unthinkable without Confucianism; Indian society is the expression of Hinduism; and Islam is composed of followers of Mohammed.
In like fashion, our Western culture stems from the Judeo-Christian tradition; we are a branch of Christendom. As one of our editorial writers has said, "The United States is not Christian in any formal sense, its churches are not full on Sundays, and its citizens transgress the precepts freely. But it is Christian in the sense of absorption. The basic teachings of Christianity are in its bloodstream. The central doctrine of its political system—the inviolability of the individual—is the doctrine inherited from1900 years of Christian insistence upon the immortality of the soul. Christian idealism is manifest in the culture and habits of the people…. The American owes all this to the Church. He owes it to the leadership the Church provided in the founding, settlement, and political integration of his incredibly bounteous land." (Fortune, January, 1940)
In short, our institutions and our way of life are intimately related to the basic dogmas of the Christian religion. From this faith we derive our notions of the meaning of life, the moral order, the dignity of persons, and the rights and responsibilities of individuals. Ours is a Christian society, with its counterpart in a secular political state.
And this religious heritage, to put the matter briefly, spells out into personal liberty in the political and social spheres. The God who gave us the freedom to accept or reject Him certainly intends us to be free in our relations with other men. People who believe this will, when they come to draft the fundamental rules for the governing of a society, design a political structure severely limited in scope. They will limit government so as to unshackle the productive and creative energies of men. Government will keep the peace by restraining those who disturb it.
The men who drafted the Constitution did not design a streamlined political structure. James Madison and the others had been once burnt by government, and they were twice shy. They created a political structure in which the national government was to be internally self-governed by three separate but balanced powers, and the several states were to retain their original sovereignty in order to act as a counterpoise to the central authority. This entire political equilibrium revolved around the sovereign individual; the only excuse for government was to secure him in his rights. The Founding Fathers knew that a free government implies an unfree people, so in the interests of personal liberty they pinned down their government to strictly limited, defined, and delegated functions. The words "no" and "not" employed in restraint of governmental power occur 24 times in the first seven articles of the Constitution and 22 more times in the Bill of Rights.
The Realm of Economics
So far, I have had little to say about economics, as such. The omission is deliberate, and the reason is this: An economic system does not have to be constructed; establish the proper spiritual and constitutional framework and an economic order will construct itself. In this respect, an economic order is somewhat analogous to a crystal. Not even the most skilled chemist could build up a crystal by adding molecule to molecule; but almost anyone can set up the conditions under which a crystal would construct itself. Remember how you made rock candy, by preparing a saturated sugar solution, and then into this clear thick liquid a piece of string was dipped on which the sugar crystals formed. Something of this sort happens in human affairs in the realm of economics, but to understand this we’ll have to examine the nature of economic activity and the human purposes this serves.
Economics is the realm of business, industry, and trade. On the surface, economics deals with prices, production, exchange, and the operations of the market place as a reflection of our buying and consuming habits. Fundamentally, however, economics is concerned with the conservation and stewardship of the earth’s scarce goods. At the basic level, there are four such goods. One is human energy. A man can put forth just so much work before exhaustion demands rest and repair for his body, and as a result men devise labor-saving devices. A second scarce good is time—the thing that’s always running out on us. A third is material resources—iron ore, wood pulp, living space, and so on. The fourth is natural energy, such as is found in a waterfall. These goods-in-short-supply are our birthright as creatures of this planet. Use them wisely, as natural piety dictates and common sense confirms—that is, providently and economically—and human wellbeing results.
As a result of economic activity, using and combining these four scarce goods, we get the bewildering variety of goods in today’s markets—houses, automobiles, foodstuffs, entertainment, dental services, round-the-world trips and so on. Relative to the demand for these things, they are scarce—else they wouldn’t be economic goods! Every day we are faced with the necessity of choosing between two or more things we want, knowing that if we buy this we must do without that. We work at some job or other, and are paid for our efforts, which enables us to buy things to satisfy our most urgent wants. The net result of this kind of individual action in society is that scarce goods are allocated efficiently.
Economic activity in a healthy society is in the realm of means, being somewhat analogous to digestion in a healthy individual. A person has aims for his life which far transcend the processes by which his body is maintained; but if these processes begin to falter and work badly, his attention is drawn away from his life’s goal and begins to focus on them instead. He becomes a hypochondriac. Given other circumstances he may become a glutton. In any event, he has idolatrously erected means into ends, to the detriment of both means and ends.
Economic activity, too, may become an end in itself for a person whose life lacks more worth-While goals, or even for a society when its value system is scrambled. It is up to a society’s religious institutions to keep its value system in repair; and if they fail to respond with new duties to meet new occasions, it is inevitable that the false gods will take over. Then we may have what Albert Jay Nock decried as "economism"—the doctrine that the whole of life consists in the production, exchange, and consumption of things.
Beyond Basic Needs
All creatures take the world pretty much as they find it, except man. Man alone has the gifts which enable him to entertain an idea and then transform his environment in accordance with it. He is equipped with needs which the world as it is cannot satisfy. Thus he is compelled to alter and rearrange the natural order by employing his energy on raw materials so as to put them into consumable form. Before he can do much of anything else, man must manufacture, grow, and transport. His creaturely needs man shares with the animals, but he alone employs economic means—tools and capital—to satisfy them. This is an enormous leap upward, for by relying on the economic means man becomes so efficient at satisfying his bodily hungers that he gains a measure of independence from them. When they are assuaged, he feels the tug of hungers no animal ever feels: for truth, for beauty, for meaning, for God.
It conveys something like a half truth and a whole error to label man a spiritual being. He is, in fact, a spiritual being who eats, feels the cold, and needs shelter. Whatever may be man’s capacities in the upper reaches of his nature—to think, dream, pray, create—it is certain that he will attain to none of these unless he survives. And he cannot survive for long unless he engages in economic activity. At the lowest level economic action achieves merely economic ends: food, clothing, and shelter. But when these matters are efficiently in hand, economic action is a means to all our ends, not only to more refined economic goods but to the highest goods of the mind and spirit. Add flying buttresses and spires to four walls and a roof, and a mere shelter for the body develops into a cathedral to house the spirit of man.
The Human Situation
There are three schools of thought as to man’s economic nature and needs. First there are the economic determinists, who argue as if man were merely a soulless appendage to his material needs. For them, the modes of production at any given time decree the nature of man’s institutions, his philosophies, and even his religions. Economics, under this dispensation, will be a tool of the state. On the opposite side of the fence is a school of thought which appears to regard it as a cosmic calamity that each soul is sullied by connection with a body which must be fed and kept warm. Spiritual purity will not be attained until there is deliverance from this incubus; but until that happy day, let us try to forget that man has creaturely needs which only the products of human labor can satisfy. Nothing in this scheme to dispose men to pay any attention to economics! But there is a third way.
The mainstream of the Judeo-Christian tradition is characterized by a robust earthiness which makes it as alien to the materialism of the first of the above alternatives as to the disembodied spirituality of the second. Soul and body are not at war with each other, but are parts of our total human nature. It is the whole man who needs to be saved, not just the soul. Creaturely needs are, therefore, legitimate; and being legitimate they sanction the economic activities by which alone they can be met.
Such an understanding of the human situation prepares us to accept the idea that economics is a discipline in its own right, governed by its own natural laws. This tradition also makes it plain that economic action is in the realm of means, and thus properly subject to noneconomic criteria. These noneconomic criteria are supplied by our religion, which deals with the meaning and purpose of this earthly life, and the destiny of man beyond it. When men have a lively sense of the spiritual dimension of their lives, they are in a good position to cope with the problems posed by the political and economic sectors; but when there is an erosion of spiritual values, the malaise here will be reflected at the social level.
There Is No Alternative to the Free Market Economy
I have been discussing the significance and some of the earmarks of economic life in a free society—a free society being one which limits its government by a written constitution to certain delegated functions. But are there not, some might ask, alternatives to the free market, private property economy? What about socialism, or the planned society? The answer to these questions is that there are many ways to liquidate an economy, but there is only one way to produce economic goods. There are no genuine alternatives to the free market economy. Every so-called alternative depends upon political redistribution. Political interventions in the economy deprive some people of what they produce for the assumed benefit of other people. This is to commit an injustice, and, of course, it diminishes production.
There is only one way for mankind to live and improve its economic circumstances, and that is by applying its energies to nature and nature’s products. Goods are produced in this way and in no other. But once produced, the goods of some men may be acquired by other men through political manipulation. Every variety of socialism rests upon this practice. Let government perform this service and the trek to Washington is on. Once on, it will grow in geometric progression as group after group organizes to apply political pressure to get something for nothing; organized labor, the farm bloc, veterans, regional groups, educationists, the aged, and others.
Business and industry, strictly speaking, have to do only with the deploying of economic factors and resources—somebody making something, transporting it, exchanging it. A businessman or industrialist, pursuing his aims as an entrepreneur, seeks to turn a profit. The appearance of a profit indicates that his talents are being employed in a manner approved by a significant number of people. Absence of a profit, on the other hand, ought to be his clue that people are instructing him to go into some other line. So long as a man produces and sells things people want at a price they are willing to pay, he operates according to the rules of economics. The vast majority of our millions of business enterprises are conducted in this fashion. All that is necessary to keep this operation going is for the law to inhibit and penalize cases of theft, fraud, and violence.
Something like this was the dream of classical Liberalism. It was what Adam Smith had in mind when he spoke of "the liberal plan of equality, liberty, and justice."
Classical Liberalism meant freedom: freedom to write and speak, freedom to worship and teach, and, most neglected freedom of all, freedom of economic enterprise, i. e., consumer sovereignty in the market place. A believer in free speech accepts this principle even though he is fully aware that its exercise will result in campaign oratory, socialist tracts, uplift drivel, pornography, public relations prose, modern poetry, and the "literature" of a beat generation. The defender of free speech recognizes these things as corruptions of the divine gift of communication, but they are part of the price he is willing to pay for freedom. Freedom costs, and thus it cannot endure among a people who do not understand this or, if they do, are unwilling to incur these costs.
Acceptance of the principle of economic liberty means that the consumer has a right to demand, and the producer a right to supply, any item which does not injure another—as injury is defined in laws against assault, theft, and fraud. This means that poor taste and doubtful morals will find expression here just as they do in the kindred fields of speech and religion. A rock-and-roll performer will ride around in a pink Cadillac while a symphony orchestra has to beg for funds. A race track will be built where common sense would dictate a playground. People refuse to buy mere transportation; they want a chariot with lots of chrome, tailfins, and three hundred horses under the hood.
Freedom costs, and the costs of freedom in the areas of speech, press, worship, and assemblage are generally acknowledged by a significant number of articulate people. These freedoms are not under assault—not in this country, at any rate. In the case of economic freedom, the situation is different. Few people mistake the abuses of free speech for the principle itself; but the abuses of economic liberty loom so large in the modern eye that it cannot detect the market principle of which they are violations.
And Government Must Be Limited
Freedom, in sound theory, is all of a piece. It hinges on properly limiting government. A society may be called free when its government does not dictate matters of religion and private conscience, does not censor reading material, curb speech, nor bar lawful assemblage. But mere paper guarantees of these important freedoms are worthless if there is governmental control and bureaucratic planning of economic life. The guarantee of religious freedom is worth little if the devotees are denied the economic means to build their temples, print their literature, and pay their spiritual guides. How meaningful is freedom of the press if there are no private means to buy paper and presses? And there is no full right to assemble if buildings, street corners, and vacant lots are government owned. "Whoso controls our subsistence controls us."
If government is properly limited, men are free. In a free society a certain pattern of economic activity will be precipitated. This pattern will change constantly. It will respond as men have less or more political liberty. It will be modified as technology advances, taste is refined, and morals improve. Properly speaking, the economic pattern of a free society is capitalism, or the market economy. Under capitalism the people are economically free, exercising control over their own subsistence, and thus they become self-controlling in other freedoms as well.