Defining Capitalism

In the first essay in Counting the Cost, Michael Novak updates a few of his thoughts from The Spirit of Democratic Capitalism and provides a fertile place to begin when thinking about Christianity theology and capitalism. The free market is much maligned these days. Is there anything to say about it that accords with sound Christian theology?


Novak begins at the right place: a good definition of capitalism. He defines it as:


The invention-based economic system made possible by laws protecting intellectual property, plus personal habits of economic initiative, enterprise, and practical wisdom, and in which the main cause of wealth is fresh ideas, ventures, and exercised know-how.


This nuanced definition will come as a surprise to those who define capitalism as, “greed.” The first time I was confronted with that shorter, much less nuanced, definition was in a Statistics and Economics class in college. It surprised me to hear the professor (who really was a very thoughtful man) throw that out there as if that was all there was to it.


That can’t be all there is to it. In fact, it is an error in definition – a confusion of categories. Greed is a moral vice. Capitalism is a system of production, innovation, and exchange. A closer look at actual greed and the human condition reveals that it is no respecter of economic system or position. Plenty of Communists are greedy. Plenty of both the rich and poor are rife with greed. An entrepreneur can build a business to accumulate as much money at the expense of others as they can, or they can work to feed their family and serve their neighbor.


In contrast to that simple, but popular, understanding of capitalism, Novak helps us see a far broader horizon. It is one, in fact, that does honor to the human person as created in the image of God. His definition includes unique human traits such as innovation, enterprise, invention, practical wisdom, and fresh-ideas. These are qualities that belong exclusively to humans, and they are qualities that are encouraged and rewarded in a free market. The more tightly controlled a system of production and exchange is (the closer to socialism a market goes), the more an individual’s gifts, resources and abilities are muted. Instead of relying on the innovation and practical wisdom of an individual who sees a need in a local community, socialism relies on legalized mandates from disconnected bureaucrats. A free market system allows innovation to rise from the ground up, while an economic system of control mandates activity or restricts of activity from the top down.


If initiative and practical wisdom are gifts God gives humans, a system of legally protected exchange that incentivizes them is good for the human condition as God created it. The free market does not, by itself, protect us from abuses of that form of exchange and employment, but that is why it is necessary for the Christian to combine the free market with a virtuous community (founded, I believe, on the strength of the local church and family).


Novak recognizes that the free market is a necessary condition for human thriving, but not sufficient. We need a society structured to encourage creativity and virtue, not one that tries to level the proverbial playing field and achieve a nebulous “equality”. A public pandering to some sense of coerced and managed equality only breeds envy and makes nobody genuinely equal. He says, “The banner of equality cannot inspire people to work, save, and leverage self-denial in the present in order to gain their own better condition in the future. Rather, it incites the many against the so-called one-percenters. A very high social price will one day be paid for group envy.”


The long-term benefit of carefully identifying what capitalism is and is not, is that we are able to find the right roles for individuals, governments, local businesses, institutions and the church. Contrary to a socialism that enlarges the state at the expense of local institutions and the individual, capitalism diffuses economic activity and allows room for robust churches to inculcate individuals and businesses with virtue.

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