What the Fall Teaches Us About Economics

By L. Alfred James

What the Fall Teaches Us About EconomicsYou might not realize this, but your views on economics are driven by your beliefs about human nature.

If you believe that human beings are naturally good, you will probably be a socialist (though you might not identify yourself as such). This is because socialists believe that the greatest evil in society is for rich people to have a lot more money than poor people. On this view, the disparity between the “classes” of society is truly the source of all evil.

The solution, therefore, is to make sure everyone makes the same amount of money, to evenly distribute all wealth. This is why they earnestly preach that wealthy people should be heavily taxed so their money can be given to those who are in poverty.

This is the central doctrine of socialism.

Socialists even believe that people commit crimes because they are poor and they are oppressed by rich people. Hence, if we will just do away with all differences in income, and make everyone financially equal, then all crime will be prevented.

Shockingly, this is the same doctrine loudly proclaimed by many people in the United States, particularly among those who are younger and those who identify as politically liberal. In all reality, there are very few differences between the goals of communists and those on the left side of the political spectrum in the U.S.

There is only one problem. It doesn’t work. It has never worked. It is a miserable failure. Just look at the history of these economic systems. The only way to keep the system working is to kill people, lots of people, to kill anyone who opposes your system of government. Even though he was an atheist, Robert Sheaffer denounced socialism fiercely. If you just look at history, he said, you can see it is an absolute catastrophe:

While there are more than a few warm-and-fuzzy thinkers for whom this is still true, no intellectually honest person today can deny that the history of socialism is a sorry tale of economic failure and crimes against humanity. This is now recognized even in Moscow and Beijing. . . “Socialism” is simply “envy” writ large, and elevated to a moral ideal. It brands the most productive as criminals, and makes heroes of those who have difficulty achieving anything at all. The full potential of the human race can never be liberated under such a warped ideal. (Robert Scheaffer, Free Inquiry Magazine. Fall 1989, pp. 19-20)

The Bible tells us why socialism is such a failure. Human beings are inherently selfish. If they don’t have to work hard to feed themselves (or their families), then they won’t. If you won’t reward them for their effort, they will put forth as little effort as they have to.

This is why hard work is relatively rare in socialist countries. Hard work is not rewarded, so it does not get repeated—unless you threaten the workers with violence. This is especially the case in communist regimes.

Capitalism is the very opposite. It assumes that evil is rooted in the human heart. It takes advantage of the selfishness of human beings. It motivates people to work hard, to advance in their careers, to come up with brilliant ideas, to conceive of new inventions. All of these things are rewarded.

But you don’t find these things as often in socialist countries. To be sure, you do still find them. But you usually only find them in those pockets where capitalism is being adopted, where people are being rewarded for their efforts and innovations, where concerns for equality are being abandoned.

It is a fact of life: People are motivated to work because they want to improve their lot in life. This is the central doctrine of capitalism. Simplifying slightly, here is why it works:

  • A good man will be motivated to work hard, and to advance in his career, because he wants to honor God and to care for his family. So, on capitalism, he will do good work.
  • A bad man will also be motivated to work; if for no other reason than to make sure he does not get fired, so he can keep a roof over his head. However, because of competition for jobs, his company knows they can fire him and replace him quickly. He is not guaranteed a job. So, on capitalism, he will do good work.

On capitalism, both a good man and a bad man are energized to work. Whether it is virtue or greed that motivates people, they are still motivated. And capitalism actually works when it is tried. It works magnificently well.

The brilliant economist Milton Friedman was once asked by Phil Donahue if he had any doubts about capitalism. Donahue said, “When you see so few haves and so many have-nots, when you see the greed and the concentration of power, did you ever have a moment of doubt about capitalism and whether greed is a good idea to run on?”

Friedman’s answer was profound:

Well, first of all, tell me, is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed?

What is greed? (Of course, none of us are greedy. It’s only the other fellow who’s greedy.) The world runs on individuals pursuing their separate interests.

The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.

Again, Donahue chimed in. “But it seems to reward not virtue as much as ability to manipulate the system.” Friedman’s response is poetic: “And what does reward virtue? . . . I think you’re taking a lot of things for granted. Just tell me where in the world you find these angels who are going to organize society for us?”

Friedman hit the nail on the head. Assuming that people are “angels” is a recipe for economic disaster.

Thus, your belief about human nature is extraordinarily important. If you believe that humanity is fallen, you will find capitalism to be preferable. And history is on your side.

If you believe that humanity is good by nature, you will find socialism to be preferable. However, history is utterly, totally, completely, and thoroughly against you.

We are not angels. Any person or politician who thinks we are is not just theologically misinformed, he or she is historically ignorant.

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