Book Review: Money, Greed, and God

This book belongs in my Pantheon of books that defend capitalism from a moral perspective, along with Wealth and Poverty by George Gilder (and his Soul of Silicon address to the Vatican); Thou Shall Prosper by Rabbi Daniel Lapin; Business as a Calling by Michael Novak; Doing Well and Doing Good by Richard John Nuehaus, among others.This is not your simplistic "greed is good" defense of capitalism. In fact, it sets to accomplish just the opposite: to explain how capitalism channels self-interest to serve others first, before you can achieve your own self-interested objectives.Like so many intellectuals before him (Thomas Sowell comes to mind), Richards started out hating capitalism in the 1980s as a college student. He writes he had a "sophomoric infatuation with Marxism" but then moved on to Democratic Socialism when he learned that Communism led to misery and death. He quotes American novelist John Dos Passos:

Marxism has not only failed to promote human freedom, it has failed to produce food,

And Thomas Sowell:

Socialism in general has a record of failure so blatant that only an intellectual could ignore it or evade it.

Citing the scholarly study of communism—led by French scholar Stephane Courtois in The Black Book of Communism—this ideology was responsible for 85-100 million deaths, leading Richards to propose the following macabre equation:

Extreme moral passion — Reality = Mass Death

Rather than creating a heaven on earth, communists brought up hell instead. Winston Churchill said it well:

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

Richards is obviously someone who has given this topic major thought, holding leadership positions at the Discovery Institute, and the Acton Institute for the Study of Religion and Liberty. He's currently a visiting fellow at the Heritage Foundation (Patri Friedman, David Friedman's son and Milton Friedman's grandson, might say he's overinvested in think tanks).He's also the executive producer of two excellent documentaries, The Call of the Entrepreneur and The Birth of Freedom. I had the pleasure of seeing Richards with George Gilder and Father Robert Sirico at the premiere of the former movie in New York in December 2007.Capitalism is Consistent with ChristianityThe book is also attempting to make the case for capitalism to Christians, who usually cite various Biblical passages to argue against materialist progress, such as:

The love of money is the root of all evil;You cannot serve both God and Mammon; andIt is easier for a camel to pass through the eye of a needle than for a rich man to enter the Kingdom of heaven.

Richards takes these objections seriously, providing intelligent and religiously consistent arguments for the morality of free markets.This line of reasoning may contradict some famous Christian thinkers, though Pope John Paul II's 1991 encyclical, Centesimus Annus, actually made the case for the moral superiority of capitalism, as explained by Michael Novak and Richard John Nuehaus in the books cited in the opening paragraph.Richards quotes Rich Karlgaard, the Christian publisher of Forbes magazine, who says listening to a pastor or priest preach on business "is like hearing a eunuch lecture on sex: He may have studied the topic but really knows little about the mechanics."The Eight Myths of CapitalismThe main thesis of the book, laid out in eight concise chapters, is to refute eight simple myths Christians make with regards to economics. This is especially important since we are defined far more by our beliefs than by our knowledge. The eight myths are:

1. The Nirvana Myth (contrasting capitalism with an unrealizable ideal rather than with its live alternatives).
2. The Piety Myth (focusing on our good intentions rather than on the unintended consequences of our actions).
3. The Zero-Sum Game Myth (believing that trade requires a winner and a loser).
4. The Materialist Myth (believing that wealth isn’t created, it's simply transferred).
5. The Greed Myth (believing that the essence of capitalism is greed).
6. The Usury Myth (believing that working with money is inherently immoral or that charging interest on money is always exploitive).
7. The Artsy Myth (confusing aesthetic judgments with economic arguments).
8. The Freeze-Frame Myth (believing that things always stay the same—for example, assuming that population trends will continue indefinitely, or treating a current "natural resource" as if it will always be needed).

For a capitalist economy to prosper, various moral virtues are a necessity: cooperation, respect for private property and rule of law, stable families, self-sacrifice, delayed gratification, risk taking based on hope, which Richards makes clear are all consistent with the Christian worldview.The essence of capitalism is not greed, self-interest, private property, rule of law or many of the other justifications made for it. For Richards, the moral superiority of capitalism is because it works and allows wealth to be created. Since wealth is the only known antidote to poverty, this is critical in alleviating human misery. Michael Novak, who also began his intellectual life as a leftist, also makes this point in his books.This is precisely why Adam Smith studied the wealth of nations (not individuals), since poverty needs no explanation. Man is born poor; poverty is ubiquitous. What's more, even if we understood the "root causes" of poverty, what would we do with that knowledge? Spread more poverty? The only answer to poverty is wealth creation; unfortunately, capitalism is not ubiquitous.The wealth-creating gift of capitalism—which even Karl Marx acknowledged—is a central theme running throughout the book. For instance, I liked Richards' argument against the minimum wage:

It's a form of price fixing that tries to distribute wealth before it's been created.

He also provides a dose of reality to the ONE Campaign, which is the call for the USA to spend 1% of the federal budget on foreign aid, with its famous promoters such as rock musicians Bob Geldof and Bono. The former actually said,

Something must be done, even if it doesn't work.

Citing how rich governments have sent $2.3 trillion to poor countries in the past fifty years, Richards delivers the final blow to this feel-good nonsense:

No developing country ever got rich that way.

Facts are stubborn things.In the same chapter, Richards points out that true compassion is a spiritual gift, a free act, and implies that one "suffers alongside." If it's based on the coercion of the state, it's no longer compassion, not to mention it loses its effectiveness in alleviating misery.Chapter three does an excellent job tearing down Karl Marx's labor theory of value, along with why scarcity, in and of itself, does not equate to value.Richards illustrates the "trading game," which I believe is an exercise you could use with adults and they would be amazed at the seven lessons this game illustrates (Richards' example is from the sixth grade).My favorite section of this chapter is "I, iPod" a take off on Leonard E. Read's famous 1958 essay, "I, Pencil," which illustrates how not one person in the world knows how to make a pencil, yet through the coordinated, and free, acts of millions of individuals of different ethnicities, religions, cultures, nations, etc., pencils are in abundance when we walk into Staples—all with no pencil Czar from the Obama administration overseeing everything.How does this happen? The price system, the most counter-intuitive system in the world.Myth #4 is one of the most pernicious of the eight myths, and Richards does an excellent job is dispelling it in chapter four. He cites Bill Gates' address to Harvard's graduating class of 2007 that economic inequality was a moral outrage and that "reducing inequity is the highest human achievement."Richards' retort is spot on: "Nonsense. If that were true, I would be right to seethe in anger because I have less than Bill Gates. That's envy, not justice."He also dispels the confusion that money is equal to wealth, citing economist Hernando de Soto (another economist in my Pantheon, especially his The Mystery of Capital):

Capital is now confused with money, which is only one of the many forms in which it travels. Money facilitates transactions, allowing us to buy and sell things, but it is not itself the progenitor of additional production.

I wish more people understood this, including a lot of professionals and businesspeople. Real economic wealth, as Adam Smith pointed out in 1776, consists of goods and services useful to others. Bill Gates on a deserted island with all his money is not a wealthy man, since he'd have to do everything for himself, which would lead, ultimately, to a nasty, poor, brutal and short existence.Richards further points out that the federal government's budget is much larger than the net worth of the wealthiest Americans, so if we are concerned about concentrated power why on earth would we want more of our wealth to be concentrated in the U.S. government?I also love the conclusion to this chapter:

We rightly see poverty as a problem, just as disease is a problem. But the problem isn't that some people are rich and some are poor, any more than the problem of disease is that some people are healthy. The problem is quite simply that some are poor. If we want to bask in the wasteful heat of self-righteous moral indignation, then by all means, let's keep blathering on about income gaps. But if we really want to help the poor, we need to get our eyes off decoys and focus on the real problem—poverty—and its only known solution: creating wealth.

Greed Works?The next chapter debunks the "greed is good" myth of capitalism, a non-starter for Christians, and others. Who likes greedy people? How does good result from evil, virtues from vices?In Oliver Stone's 1987 movie Wall Street, the Nietzschean anti-hero Gordon Gekko proclaims, "greed, for lack of a better word, is good," as if greed is the pinnacle of virtue for businesspeople. This view is commonly attributed to Adam Smith's famous invisible hand; but like most conventional wisdom, it is more conventional than actual wisdom, since Adam Smith never claimed that greed was good.In fact, the term is properly credited to Bernard Mandeville (1670-1733), a Dutch psychiatrist and pamphleteer. In his work The Fable of the Bees [1714], Mandeville claims that "private vices are public benefits." Adam Smith, in his mostly forgotten book The Theory of Moral Sentiments, disagreed with this, calling it "wholly pernicious" and the thesis "erroneous."Even more absurd are those who claim that Smith's theories are based on impersonal—or psychological—and ethical egoism. Psychological egoism is the idea that everyone is always motivated to act in their own perceived self-interest, while ethical egoism is a normative theory about what people ought to do, and what they ought to do is always act in their self-interest and not concern themselves with the welfare of others.Yet, who subscribes to these views? Taken to the extreme, this view would prevent anyone from starting a family—indeed, it would be a dagger in the heart of family life, marriage, friendship and brotherhood. Helplessness may be the only truly universal human experience, since all of us pass through infancy. The human race would not have survived one generation if every person acted as if he were unconnected to any other person. Most parents would die for their children, and this is not even considered heroic behavior but rather ordinary.Richards also explains why good intentions don't always produce good results, and bad intentions don't always yield bad results, citing the example of Bernie Marcus and Arthur Blank who in 1978 were fired as executives of Handy Dan Home Improvement Centers. To exact revenge, they started Home Depot. A morally bad motive perhaps; but not a bad outcome, creating wealth for millions of consumers.Isn't it better to have a system that channels our more base instincts towards service to others? This is why Adam Smith draws a distinction between self-interest and greed, and so does Richards:

Every time you take a breath, wash your hands, eat your fiber, take your vitamins, clock in at work, look both ways before crossing the street, crawl into bed, take a shower, pay your bills, go to the doctor, hunt for bargains, read a book, and pray for God's forgiveness, you're pursuing your self-interest. Only foggy moral pretense confuses legitimate self-interest with selfishness.

Richards takes on Ayn Rand, who believed that "capitalism and altruism are incompatible, they are philosophical opposites; they cannot co-exist in the same man or in the same society."Rand celebrates selfishness, repulsing many Christians. Richards posits that capitalists embrace Rand most likely because they have nowhere else to go.I was fortunate enough to find an alternative place to go in 1981 when I read George Gilder's masterpiece, Wealth and Poverty. Gilder argues, like Richards, that capitalism is based on altruism, giving before you receive a return.This is a counterintuitive aspect of capitalism: gift giving precedes voluntary exchange so much discussed by economists. Before you can exchange, you must produce something to exchange, which entails paying employees, suppliers, taking risks, etc. This is why Gilder equates enterprise with altruism (alter in Latin means "other," as in other-directed), and labels profit an index of altruism.It's also why Rand devoted her last speech, at Fordhall Forum in Harvard, to an attack on Gilder's book.Anthropologist Claude Levi-Strauss labeled this the Law of Reciprocity:

The essence of giving is not the absence of expectation of return, but the lack of a predetermined return.

The creative nature of enterprise is also a problem for economists who'd like economics to be a predictive science, like physics. Yet it's hard to place entrepreneurs in a Petri dish to see how they respond. Creativity, which can only flourish and serve others under capitalism, cannot be planned. Black Swans create our future, not planned and predicted rationality.The following chapter discusses the origins of capitalism, including why Max Weber's thesis that capitalism emerged exclusively from Calvinism is incorrect, as well as a fascinating exploration of usury, and the reasons the Bible forbid this practice, while arguing there is nothing wrong with charging interest for credit in the modern economy.Ugly consumerism is discussed next, where Richards points out the importance of production, not demand, to an economy. Supply creates demand, whereas demand really creates nothing. Africa has just as much latent demand as America, what they lack is a supply-side economy with incentives to produce good and services useful to others.The final myth chapter deals with "natural resources" and are we going to run out? But there's no such thing as a natural resource, except for the ingenuity of man. Resources are what we make useful. Prior to the internal combustion engine, oil was nearly worthless.Climate change is also discussed and Richards points out that proponents of this contentious theory have been funded to the tune of $50 billion over the past decade, whereas opponents have received a paltry $19 million. So much for opponents of climate change being bought and paid for by the oil companies.The concluding chapter lays out the ten ways to alleviate poverty—that is, ten ways to create wealth. All very true, yet banal, as none would resonate with revolutionaries or look as cool on a T-shirt as Che Guevara's portrait.Richards also provides data from the World Bank's study, Where is the Wealth of Nations, showing that in the United States 82% of our 2000 per capital wealth resides in intangible capital (16% is produced capital, and only 3% in natural capital). The poorest country, Ethiopia, derives 50% of its wealth from intangible capital, 41% from natural capital, and 9% from produced capital.The Appendix is a fascinating discussion of F.A. Hayek's idea that the free market is an example of order emerging from chaos. Richards disagrees. He believes that the market is an example of order emerging from order. This argument will resonate with a religious—especially an intelligent design—worldview.You'll also learn about the Web site gapminder.org, which is a visually stunning portrayal of income distribution around the world, along with many other interesting graphical statistics.My only complaint about the book is it needs an Index for easier reference.Richards has done the world a great service with this book. If you believe that ignorance in economic matters is our most expensive commodity, this book is the antidote. It deserves your thoughtful attention.