Explore: The Moral Foundations of the Free Market - Dr. Brian Baugus
Myths and Realities
Many people throughout history have asserted that the free market or capitalism as it is often known, is immoral, that it leads to and is driven by greed and that the only way someone gets ahead in such a system is by exploiting workers and customers. It is often claimed that rich get richer only by making poor people poorer. The assumption and assertion is that wealth is transferred to the already powerful by stealing and abusing the poor. If this were the case, free market capitalism would be the worse system on the planet. Logic, history and common sense show that this cannot be the case.
Free market capitalist nations are wealthy, even those that are poor within those countries are wealthy by global standards. But they were not always wealthy. Three hundred years ago the United States of America was a very poor place and just about everyone living there was poor. But now, even the people who get government money because they are considered poor have televisions, cell phones, cars, washing machines, a place to live and much more. In many ways, they live better than kings and queens from a few hundred years ago.
People do not just get rich by stealing from the poor, after all the poor do not have any money, how could so many people get rich stealing from and exploiting poor people? They can’t.
People get wealthy by serving others, by creating wealth for many and getting to keep some of it.
Markets Are a Way to Serve
Some people think capitalism is incompatible with their religion or faith. However, God created man for many reasons, but one is so that we can be a community and live in community with each other and Him. He also wants us to take dominion of creation. He created the world for us but it was not finished, man was to tend the garden and take care of things. That job is still ours to do. Fortunately, He gave us a way to do this: His way, it is a market system.
How do we know God prefers markets? Well, we will look at the rules He gave us, but first we need to look at the two economic systems that prevail in the world today and really throughout history: the Command System and the Market System.
The Command System
The first is generally called the command system. It goes by many names; socialism, communism, fascism, dictatorship, some kinds of theocracies and monarchies, and more. It can even be some kinds of democracies. Despite what it is called and how it looks, if most of the economic decisions are made by the government; it is a command system. Some command systems are okay; most families are command system where parents make most of the decisions for the family. Children are not prepared to take on such responsibilities. The family is a God ordained way to raise and train children but that is not a model for an entire economy. In order to make good economic decisions the decision maker has to have information. In families, parents have information, what is needed, how much there is to spend, what the plans are for the future and so on. This allows the parents to make good decisions but even so they still make mistakes.
The key is making sure that the knowledge needed to make good decisions and the decision maker are close. Think about it this way; you want lunch. You know you are hungry, you know how much you have to spend and you know what you want. You have the knowledge and you should make the decision. But how well would it go if you had to get permission and instructions from some government agency. They do not know what you want, they do not know who you are and by the time they decided you would be very hungry or worse.
The Market System
In the market system those with the knowledge and those making the decision are very close and usually the same person. In a pure market system, prices are set by sellers and buyers working it out, not by some government agency. Workers take the best job available and not the one decided by the ministry in the capital.
But, the market system needs more than local knowledge and local decision-making. This is where God’s rules come in. You need private property which is protected by God’s commands and prohibition on theft. The market system is based on honesty and truthful dealings, something God requires of all of us.
All of this is a way God designed for us to meet our needs and serve each other and take care of each other and His creation. Aid and charity is not the way we serve each other. Maybe in emergencies it is good, but it is not a way of life. Business is the way of life and business survives and thrives in a market economy, which forces businesses to find the best way to serve customers because businesses have to compete and attract customers. Government doesn’t compete, they use force, you either deal with the government or you don’t get what you want.
The Market System Promotes Good Behavior
The miracle of the market system is that it can take very bad people, people who are selfish and greedy and self centered and make them think of and serve others. The only way a greedy person gets rich in a market system is finding a way to serve others well and then convincing people to do business with him. IN this effort he must find out what other people need and meet that need and then he must find people to come to his store and then be nice enough and friendly enough to convince people to do business with him. If his prices are too high or he is mean and nasty, customers will go elsewhere. He does not a government agency to set his price people will respond and bargain and he will adjust.
This is the opposite of the government process, which uses force to get you to do things and buy things so there is no attempt to persuade a customer or convince a customer and therefore no real attempt to please the customer. Government does not really think of how to please the market. It does think of how to please its particular supporters and that often can come at the expense of others, whereas, entrepreneurs seek to please customers but at no expense to anyone else. If Person A gets something from government, it is because government took it from another person first or restricted another person. If I benefit from a price control the someone else is losing, probably a firm that could and would be in business if there were not price controls but can’t be because there are price controls. But if Person A buys something from a firm that does not harm anyone else, other customers are free to shop elsewhere and other firms are free to compete for Person A’s business.
Summary
Markets can be characterized as a suitor, a romantic pursuer. The firm/producer is trying to persuade the consumer to do business with him and is offering all sorts of reasons you should; low prices, better quality, better service, friendlier people and so on. Anything that will convince you to come to his shop and do business with him. Markets are voluntary, peaceful and all parties win, the customer gets something he wants and values more than he spent and the seller gets money which he values more than the item he sold.
Government is about force, not service. It is needed to accomplish certain things but needs to know its role and stick to it. It causes all sorts of harm when it tries to do more than it really is able. It lacks knowledge of what people need and want because that is always changing and it lacks incentives to do things right, it does not face losses when it makes bad decisions and it does not profit from good decisions. Its customers, the voters, can not go to another provider very easily. Yes people can and do move to new countries, but that is hard and expensive. Governments like to say that they prevent monopolies but in reality government is the biggest and most abusive monopoly.
The way to prosperity is God’s way: a reasonable government with a market system based on private property, local knowledge, respect for all people as God’s creations, trust, and active entrepreneurship.