#116 The Resurgence of Socialism

By D. Arnott | March 17, 2022
the christian economist dave arnott

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#116 The Resurgence of Socialism

Whole Foods founder John Mackey calls capitalism “The greatest thing humanity’s ever done.”  Then why do young people favor socialism?  This podcast explains five reasons, based on the work of Niall Ferguson.  

As the Christian Economist, sometimes I get caught between conflicting prescriptions.  Christians, and really, anyone who believes in a Higher Being, are concerned about the means.  We believe that God has prescribed a certain way for us to lead our lives, and our objective is to align with it.  Economists, on the other hand, tend to focus on the outcome of a transaction.  They almost always take the utilitarian view.  

Today’s topic: Socialism, fails on both the Christian worldview and the economic outcome.  As the means, Socialism uses power, of which Christians don’t approve.  And on the ends measure, Socialism has failed everywhere it has been tried. 

Then why do 65% of young Americans favor it?  My information source for this podcast comes from an article titled Capitalism, Socialism, and Nationalism: Lessons from History by Niall Ferguson, at the Hoover Institution at Stanford University.  After establishing Socialism’s awful historical record, he asks the question, “Why, then, has socialism come back into vogue in our time—and in America, of all places?”  He provides four answers, and I will add a fifth if time allows. 

Of course, it depends what is meant by “capitalism.” Which, by the way, Whole Foods founder John Mackey calls “The greatest thing humanity’s ever done.”  That’s not only worth repeating, it deserves an entire podcast, but for now, I will simply repeat: Whole Foods founder John Mackey calls capitalism “The greatest thing humanity’s ever done.”  But perhaps people don’t understand it very well.  According to a Gallup poll, just 56 percent of all Americans have a positive view of capitalism.  However, 92 percent have a positive view of small business,  86 percent have a positive view of “entrepreneurs,” and 79 percent have a positive view of “free enterprise.”  It also depends on what is meant by “socialism.” Asked by Gallup to define socialism, a quarter said it meant equality.  I’ll look into that idea in a few minutes, stay tuned. 

 

Creative Destruction

The first of our five concepts is creative destruction, and yes, free-market capitalism allows for it.  The horse and buggy were creatively destroyed by the automobile.  Typewriters were creatively destroyed by computers.  VHS tapes were creatively destroyed by youtube, the program on which you are watching this video.  Aren’t these creative destructions good?

The guy who invented the phrase “Creative destruction,” Joseph Schumpeter has an opinion on the subject.  in his book Capitalism, Socialism and Democracy from 1942, he predicted that free-market capitalism would fail and socialism would replace it.  Let’s hope he’s wrong. 

In the Christian worldview, creative destruction is part of creation, not the fall.  We believe that humans, made in the image of God use their creative nature to come up with new ways to redeem the earth back to God’s creational intent for it.  A couple of quotes from my little book Economics and the Christian Worldview apply here.  One is: As long as the fallen nature produces unlimited wants, and the creative nature has unlimited creativity, there will be unlimited employment.  Another is: There is a limited amount of land, and God is not making any more.   But He is making creative human beings who discover more efficient ways of using it. 

It’s always seemed strange to me that progressives don’t like creative destruction.  So, if they want to conserve the economic status quo, that makes them conservatives.  We either have a definitional problem, or people who call themselves progressives are against progress.  

Oligopoly

That capitalism tends towards oligopoly is correct, and it is a real danger.  I warn my classes at Dallas Baptist University, “You might want to turn on your recorder because the Christian Economist is about to call for more government control.  If there is ONE role for government in the economy, it is to maintain and sustain competition.  Free market capitalism tends to move toward oligopolies, and that’s not good for an economy.  I unpack the Christian Worldview related to competition in many podcasts:  #56 Thankful for Capitalism, #33 Ending Discrimination, and #7 Competition and the Fallen Nature. 

Yes, totally free-market capitalism, without some control, would likely produce oligopolies, and maybe even monopolies, which favor suppliers and harm demanders.  Matter of fact: Christian economists should NOT favor perfect free-market capitalism, nor perfect socialism for the same reasons: They both produce monopolies. 

 

Freedom

I call myself “The Christian Economist.”  Sometimes there is a disagreement between Christian beliefs and economic outcomes.  But when it comes to freedom, we find that not only is there agreement between religion and economics, there is also agreement politically.  All three of these disciplines agree that freedom is good. 

In Biblical Economic Policy, Sergiy Saydometov and I found ten Biblical Commandments of Economics.  The first is, “People should be free.”  Since writing the book, I have reconsidered whether freedom should be simply one of the ten, or perhaps it should be an over-arching concept, under which the other nine should be placed.  I’m not going to re-write the book in this podcast.  Suffice it to say that freedom is important in Christianity, economics, and politics. 

But here is the irony: Free societies allow dissent.  That dissent allows socialism to have a voice.  But the opposite is also true: Socialist societies use their power to limit dissent.  Thus, the weakness of free-market capitalism is that it allows freedom!  The strength, if you want to see it this way, is that Socialism does not allow dissent, so it can sustain itself.  I hope you’re seeing the absurd level of thinking here: That socialism’s strength is its limitation of freedom. 

Why are professors liberal?  It’s a direct indication of their economic self-interest.  Let’s start with me.  I am in my 29th year on the faculty at Dallas Baptist University.  I want our baseball and basketball teams to do better.  I want our university to become bigger and more influential.

My colleagues at state-supported institutions have the same interest.  Their want more support from the state, so they want a larger government.  This is pretty simple self-interested economic behavior.

What’s not so simple is that people don’t understand this self-interest.  Here’s another example.  Al Gore is a lifetime liberal, Democrat who has pushed for the bigger government his entire political career.  But then, when he starts supporting climate change policies that call for bigger government, consumers don’t turn on their bias filter.  Without bias filters, we could not survive.  If a salesman at a Nissan dealership tells you that the Nissan Rogue is the best car for you, wouldn’t you run that information through your bias filter?   When a mother tells the soccer coach that her son should be playing instead of his teammate, should the coach run that comment through a bias filter?  Then why do people fail to see the self-interest in state-supported University professors wanting a larger state government?

In the article I’m quoting today Capitalism, Socialism, and Nationalism: Lessons from History, Nial Ferguson goes on to state that “Capitalism “creates, educates and subsidizes a vested interest in social unrest.”  If I believed the problem with the world was the social structures, I would spend a few class sessions instructing my students in social dissent.  Then, we would spend the rest of the semester, out in the streets, protesting.  But I don’t believe that’s the problem with the world.  I agree with James Davison Hunter, who in his book To Change the World,” states that the problem with the world is me.  You see, the Christian Worldview says the problem with the world is the fallen nature of humans.  And it does no good to change the structure of world, if it’s still going to be populated by fallen humans.  

That’s the fallacy of Marxist doctrine which motivates the Black Lives Matter movement.  Their assumption is that there is something wrong with the system, so they must overthrow it.  But, it still won’t be perfect, so they will have to overthrow it again.  And guess what the third step is?  Another overthrow.  I hope you’re getting the point: These economic and political ideas grow out of our worldview.   

 

Political Power

I will quote Ferguson again, “Socialism is politically attractive to bureaucrats and politicians.”  Well, yes, power IS attractive, not only to politicians, but to every fallen human!  I guess the most surprising part of this is that people are not able to see socialism as the exercise of power over others.  Acts 2 is often called upon as supporting Socialism, but there in no power in verses 44 nor 45, which read, “All the believers were together and had everything in common. They sold property and possessions to give to anyone who had need.”  Give.  Not take.  There are many Biblical commands to give.  There is no command to take.  Socialism is about power.  As people in Venezuela have found: You can vote your way in, but you’ll have to shoot your way out. 

Socialism vests power in the state bureaucracy, so our understanding of what we call the fallen nature in theology, or self-interest in economics predicts this kind of behavior.

I’ve dipped my toe in the hot water of climate change in podcasts #92 and #93 titled Public Ownership and Scarcity, parts! and II.  I have mostly stayed out of that discussion because I don’t know much about it.  But I DO know this: Politicians’ response to climate change is an exercise of power.  If you were concerned about the recent haphazard and hypocritical exercise of masking power during the covid crises, get ready for even more in the upcoming climate change rulings.  Political responses to climate change coincide with government control.  Referring back to those bias filters that I mentioned earlier.  We should have the same defense mechanism for socialist-leaning politicians who propose draconian economic restrictions in the name of climate change.  They have even been called “Watermelons: Green on the outside and red on the inside.”  Red, like the Communist red flag.  

Even the spending multiplier that we hear about in economics.  We must ask, “What would be the multiplier of these dollars in the private sector?”  Because they were extracted from profit-making sectors of the economy before they produced the spending multiplier.  

 

Inequality

I will add this one, although the Stanford authors left it out.  

One of my early podcasts was on this subject.  It was #6 titled Jesus Distributed the Gospel Unequally.  Young Americans don’t like the inequality produced by free-market capitalism.  They DO like that grades are distributed unequally, but that’s a hypocrisy that I don’t have the time to explain today.  I think one of the most humorous detractors to inequality is the Pope.  The most powerful person in religious life decries inequality.  Think about it.  You’re also welcome to question political leaders who decry inequality, which they practice as they tell you they’re against it.  

Thomas Sowell has this to say about inequality in his book Wealth, Poverty and Politics, “It is by no means obvious why we should prefer trying to equalize incomes instead of putting our efforts into increasing output. People in general, and the poor in particular, seem to “vote with their feet” by moving to where there is greater prosperity, rather than where there is greater economic equality. Rising standards of living, especially for those at the bottom economically, have resulted not so much from changing the relative sizes of different slices of the economic pie as from increasing the size of the pie itself.”

Mr. Sowell just quoted one of the more simple and direct ideas in economics: You can either grow the pie or divide the pie.  Why young Americans want to divide, rather than grow the pie, is kind of a long-standing question.  I think it’s because they believe they can do both.  But you can’t.  Every policy suggestion does one or the other.  You can’t do both. 

In closing, I will refer to the title of podcast #97 Feeling vs Thinking.  The summary is: Socialism feels good.  Free market capitalism thinks good.  As Sundance said to Butch in the movie, Butch Cassidy and the Sundance Kid, “Keep thinking Butch.  That’s what you’re good at.”  Let’s hope young Americans get better at thinking.  

 

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