Peter J Hill PhD, Professor of Economic Emeritus, Wheaton College
Modern capitalism is a significant part of the everyday experience of many Christians. Therefore it is important for believers to appropriately evaluate this particular social structure. In this essay I argue that the use of markets as a system of social coordination can be a morally appropriate activity from the perspective of Christian ethics. Genesis 1:28 and 2:15 provide a mandate for this human activity in transforming the earth, and market activity is an important part of that form of stewardship.
In making such a judgment it is helpful to understand the different contexts of human interaction. Nobel economist F. A Hayek argued that:
Part of our present difficulty is that we must constantly adjust our lives, our thoughts, and our emotions, in order to live simultaneously with different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e. of the small band or troop, of, say our families) to the macro-cosmos (our wider civilization) as our instincts and sentimental yearnings often make us wish to do we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of a world as once (The Fatal Conceit, 1988, 18; emphasis in original).
Much of the criticism of markets confuses the two orders. In the intimate setting of the “micro-cosmos,” like a family, a moral understanding of our obligations to one another requires a personal response to the needs of others. In contrast, in the extended order respect for the rights of others is the primary component of moral behavior. Treating the two orders as identical has caused considerable confusion as to the appropriate Christian teaching to apply to various situations.
It is also important to note that starting around 1775 modern capitalism began in the Netherlands and England, spread to North America, and now dominates major portions of the world. Thus it became important for Christians to develop a robust moral theology of impersonal exchange.
The moral content of market exchanges is heavily dependent on the rights structure that governs those trades. Sometimes exchanges involve short term transfers of rights, those we call rental agreements. Transfers can also be permanent, involving a change in the ownership of an asset. It is the rights structure that is crucial in determining the morality of those exchanges. Therefore the question is not whether markets are at work or not, but whether the transfer of property rights is based on a moral set of human rights. For instance, a vibrant market in slaves existed through most of human history. But this market was not moral because the rights structure was immoral.
On the other hand, if both norms and the coercive power of the state enforce universal human dignity, recognizing the fact that all humans are image bearers of God, there is a basis for moral exchanges. If the rights that individuals hold are morally appropriate then market transactions are part of the range of moral voluntary actions. We respect people as our moral equals by protecting economic liberty.
An important feature of market trades is their positive sum nature. Both parties voluntarily enter into the exchange hoping to be made better off and, if the process is open and free, mutual gain is the case. Therefore the freedom to act in the economic sphere has two major components. It involves people, as individuals of moral worth, having the freedom to engage in activities that they regard as to their advantage. But it also helps other people achieve their goals.
The general positive sum nature of market transactions doesn’t mean that every trade benefits both parties. It is possible for one party to enter into a transaction hoping to better their position but, after the trade, to find himself or herself worse off. Trustworthy information is important. That means the state has another important role beyond the enforcement of individual rights, the prevention of fraud.
Ease of entry into all forms of production is also important since such entry improves the quality of information to those involved in the transaction. It is often government rules that limit entry into certain forms of endeavor and it is those rules which limit the opportunities for positive sum interactions.
In a very real sense a moral market is a regulated market, with the coercive power of the state focused on the enforcement of fundamental human rights. Of course this is not the only appropriate use of coercive power, but is an essential function of that power if markets are to be moral.
Another appropriate ethical concern of Christians is the impact of social structures on “the least of these.” For most of history there have been transitory alterations in poverty, but there were no long run changes. For the first time, starting around 1800, parts of the world have experienced a dramatic reduction in both the absolute number of people living in poverty and in the percentage of the population in such a position.
In 1820 approximately 76% of the world population lived in what the World Bank calls “absolute poverty,” less than $1.90 a day. By 2022 that had fallen to 9%. The driving force of this dramatic change in poverty was the expansion of markets under the rule of law.
It is also important to remember that the general proposition that Christian ethics provide moral sanction to capitalism doesn’t preclude the use of coercion to provide for the poor. A system of governance that recognizes the need for government activity to care for the impoverished can fit with a commitment to the morality of markets.
One of the common criticisms of the market economy is its emphasis on competition. In order to succeed in the world of markets one must be able to out perform other market players. This criticism ignores, however, the fact that market participants are actually competing to see who is the best at cooperating. One does well in a market setting by doing a superior job of meeting the needs of others, by finding ways to enhance overall human cooperation. Thus market competition is channeled into caring for the needs of others. A successful entrepreneur must offer a package of wage and non-wage benefits to workers that is superior to that of other producers and must also find ways of meeting the needs of customers in a better way than other providers.
The fact that markets offer the opportunity to involve oneself in moral activity doesn’t mean that markets are morally neutral with respect to their impact of participants. In contrast to much of history, occupational choice is substantial. By diligent labor in settings that suit them, market participants can develop prudence, diligence, and attention to the needs of others. However, the material wealth that markets create can lead to a particular vice, hedonism. That wealth can also lead to unbiblical personal autonomy, declaring oneself free from moral constraints and the need to pay attention to the needs of others.
Attention to Christian virtues is important in all settings, and market participants need to be aware of the positive and negative effects of being a part of producing, buying, and selling in the capitalist system. There is a substantial difference, however, between the use of coercion to enforce basic rights and its use to regulate particular moral outcomes that may result from the use of markets. There are reasonably clear, bright lines in the use of coercion to prevent rights violations. Using the power of the state, however, to force the correct character formation is difficult, and the expansion of coercive power to accomplish poorly defined objectives often leads to capture of the state by special interests.
Another concern is the inequality in incomes and wealth that can occur in market settings. The positive sum nature of market transactions doesn’t mean that the participants gain equally. Unequal gain exists in many human interactions and, unless injustice is involved, such inequality is not immoral. In fact, concerns about inequality can be morally problematic if they involve envy, the resentfulness of the wellbeing of others. It is important to note that inequality is not the same as poverty, something Christians should care about. And, as noted above, it is appropriate to use the state to provide assistance for the very poor.
The most fundamental result of market economies is the general improvement of the well being of the participants, although the gains may be spread unevenly. Empirical work on economic growth has shown that the long run impact of the move to market economies has improved the income positions of the bottom part of the income distribution at about the same rate as that of other parts of the distribution.
Much of the resentment of the unequal gains under capitalism is directed at entrepreneurs, some who become very wealthy. William Nordhaus, a Yale economist and the recipient of the Nobel prize in economics, found that in the U. S. economy from 1948 to 2001 successful entrepreneurs only captured 2.2% of the gains they generate. In those cases resentment towards the wealthy ignores the fact that, in the process of getting wealthy, these individuals produced substantial gains for others.
It is also important to remember that most efforts to deal with equity issues involve expansion of the power of the state. That usually means unequal changes in political power, and inequity in the political system can be more dangerous than inequity in the economic system.
Of course participating in markets does not mean that all one’s moral obligations have been fulfilled. Christian ethics provide guidance on both the personal and impersonal fronts. But those important ethical principles do not detract from the basic moral content of the modern market economy.
Peter J. Hill is Professor of Economics Emeritus, Wheaton College, Wheaton, Illinois and Senior Fellow, Property and Environment research Center, Bozeman, Montana.