Reviewing The Cultural Case For Capitalism Part 10 of 12

In this week's episode, Jonathan Witt tries to defend Capitalism and the Free Market from charges stemming from its association with the Housing Bubble and subsequent recession of 2008. In essence, Witt defends Capitalism and the Free Market there by saying that the economic woes of 2008 and the build up to it was due to regulations and government interference rather than having a functioning free market.

Witt makes this claim by by citing a few examples of federal interference:

1. The government gave tax breaks to home owners but not renters.
2. The government backed Fannie Mae and Freddie Mac suggesting that if they go in trouble, the government would bail them out.
3. The government passed regulation that required mortgage companies to provide mortgages to people with bad credit--these were called subprime loans.
4. The government held down interest rates to 'artificially' low levels in order to spark the economy.

Now according to Witt, all of the above created the housing bubble by temporarily increasing the demand and it seemed to work for a while but was doomed to failure. However, we should note that not only did Witt leave out a lot of details about the kinds of loans being granted, he takes for granted how the loans themselves became parts of financial products in a market that either lacked regulations or the enforcement of regulations. Thus when people began to default on loans, not all of their own doing, these financial products failed and since they were created and sold without regulatory oversight, the free market in which these financial products were sold caused a collapse and not just in the American economy, but in the world's economy as well. And what we find out is that most of the leverage problems occurred in this free market. So if we grant Witt his assertion that the market in which loans were made was not free, we still have free market failure. 

In all of this, what we see in Witt is not just a superficial handling of the Housing Bubble led recession of 2008, but an extreme selectivity in citing factors involved with the recession. How is it that Witt forgot to mention that many of the financial institutions that were hit the hardest by the bursting of the Housing Bubble were institutions not touched by the federal regulations requiring that a certain percentage of loans be given to those with questionable credit who were in need of housing? These regulations came from the Community Reinvestment Act of 1977, which was updated in 1992, and were in response to the failure of the Free Market to help certain urban communities.

In addition, doesn't Witt see that when someone who provides mortgages to people can sell those same mortgages to investors, that such mortgage providers, who are also driven by the profit motive, have less incentive to qualify those requesting loans because it would be the investors who would be on the hook for outstanding loans? And why didn't Witt question another financial product called a Credit Default Swap (CDS) that acted as  insurance policy protecting the investors who bought financial products that included the subprime loans? After all, the CDSs allowed many investors to hold an insurance policy for the same mortgage. Some have likened CDSs to many people being able to buy a home insurance policy on your house while you are the only policy owner who has a vested interest in your house's upkeep.

When the house of cards collapsed, past deregulation that erased the barrier between commercial and investment banking and allowed banks to merge so that the failure of some banks and financial institutions would be catastrophic to the economy, the government had to step in and bailout some of them out. That, according to people like Witt, is not the Free Market. But what Witt doesn't either realize or admit to is that the ingredients he associates with the Free Market including the loosening of government regulations, the reliance on competition, and the ethic of maximizing profits, which makes self-interest the only interest, in the end destroy his idyllic notion of a Free Market. The reason for this is simply that one must be concerned with others in order to maintain such an institution. The ingredients he's identified with the Free Market turns one inward and what one can gain for oneself. 

There are other criticism we can place on Witt's defense of Capitalism here. But it is more important for people to read about the Housing Bubble and subsequent recession of 2008. To gain a more balanced and informed view of all of that, one can check this UNC website (click here) or, for a less balanced but still informative source, one can check the movie Inside Job.

What Baseball Teaches Us About The Free Market

I feel like the past few seasons have demanded a name change for my favorite baseball team. Instead of being called the Boston Red Sox, the name should be changed to the Boston Bipolar Sox. After all, the team has been traveling between the cellar and first place since 2012. There seems to be no happy medium, no place for Goldilocks to find something that is "just right." 

Of course, the trials of the Sox are not the issue here, but the plight of its ace pitcher John Lester is. Why? It is because he is due for a new contract and the Sox's last offer was not regarded to be a serious offer. What was he being offered? He was offered $70 million dollars for 4 years. Upon hearing this, I suggested to a friend of mine who works in a major company's IT department to demand that he be either awarded a $70 million dollar, 4 year contract or be traded. My friend didn't consider that to be a serious proposal to make at work.

Why was $70 million considered to be a slacker's offer by my Bipolar Sox? It is because if Lester so chooses, he could get more money elsewhere. Thus, the Free Market has spoken. For the Bipolar Sox to pay Lester $70 million over 4 years is unfair. But we need to think here. If the Free Market has determined that Lester is worth more than $70 for 4 years, can we honestly say that the Free Market is concerned with fairness?

See, what is fair carries with it a moral component. And since when is paying an athletic entertainer $70 million considered to be a moral failure? We should ask this question, especially when the Free Market has spoken to fast food workers, some bank employees, and some adjunct professors, all who are paid poverty wages, is the Free Market fair or is it a place where people negotiate to see what they can get from each other? Too many business owners and employers are looking to pay their employees as little as possible, especially the low skilled employees, while those in certain professions attempt to extort as much money as possible from their employers. With the former, outsourcing work to countries that allow human and trafficking and sweatshop labor conditions along with using illegal immigrant workers allows some business owners and employers to underpay some of their employees so that regardless of working full-time hours, their paychecks keep these employees locked in poverty.  With the latter, some, especially in the entertainment world, can get paid exorbitant amounts of money regardless of how little actual benefit to society their work provides. After all, how much does our society really benefit from when the team I cheer for wins a championship?

See, the Free Market isn't about fairness, it's about what each party can manipulate out of the system for themselves. And thus when Free Market fundamentalists tell us to "shut up and listen" to the market when it comes to the pay of those who have low skill jobs, we need to speak out louder. We need to say to these fundamentalists that one cannot arrive at a morally just paycheck through formulas and negotiations between unequal parties. We need to say as often and as loud as possible that, all too often, the Free Market is not a fair market. And an unfair market is an immoral market. And when we live as if the Free Market is a fair market, we can be assured of one thing, the devaluing of people which takes place in the Free Market is both a moral barometer of the society itself and creates a moral debt that eventually must be paid. And to ignore that debt is the same as committing moral suicide which is all too often followed by physical destruction.

Comments Which Conservatives Block From Their Blogs For March 12, 2014

March 9

To Dr Jay Richards and his video posted by Justin Taylor on the Gospel Coalition's blog



1.   Was the old Soviet Union a socialist state? The assumption is that, starting with Lenin, the Soviet Union was following Marxism and Socialism. 

Before determining whether the Soviet Union was a socialist state, consider what was said in the following two links

    i.    http://www.marxists.org/archive/luxemburg/1918/russian-revolution/ch08.htm
         Reading just the first paragraph would suffice

    ii.   http://www.youtube.com/watch?v=4xpbgfkF9yk
          Here, Noam Chomsky challenges the popular perception that Lenin and the Soviet Union direction that followed was Socialist at all. In addition, he describes why both the Soviet Union and the West called what was practiced in the Soviet Union, Socialism

2.   By establishing the Soviet Union as the opposite of American Capitalism and be stating that the only alternative to the Soviet Union was what was practiced in the Soviet Union, he has established a false dichotomy. There are a number of different anti-capitalist models such as anarchism, socialism, and communism. We'll note that fascism and capitalism  stand in contrast to those models. And each model has various flavors. So fleeing to American Capitalism simply because the Soviet Union model failed is living in a false dichotomy. 

3.   Richards stresses the importance of freedom for vibrant economy. But freedom for whom? If the workers are not in control of production, are they free? If the community doesn't have a say in how businesses that reside in the community, is the community free? And what about protection? Do consumers, workers, and communities lose protection when businesses are given more freedom.

    We have to ask if what Richards is really promoting is privileges, not freedom. That is because freedom for a select few cannot be freedom because it is not for all. Liberty - equality = privilege.

4.   Giving the businesses privileges over the rest of us puts those owning businesses in an at best paternalistic relationship with the rest. The relationship is paternalistic if the privileged side takes care of those who are underprivileged. But the privileged have advantages and call the shots and the underprivileged are to tolerate their inferior status for the  sake of keeping their benefits. Now where is the freedom in that?

5.   Yes, gov'ts break laws. But they don't do so without businesses--remember that Hitler was put in power with the help of leaders of big business. And there are a number of ways those with wealth and the gov't interact. Regardless of these ways, both are competing to win the loyalty of the rest by claiming they best represent the rest of us.

6.   What Richards misrepresented about our founders is that they opted for a strong federal gov't that would protect the minority with wealth from the rest. One can verify this by reading the Constitutional debates. This means that the founders, since they were opting for strong gov't, may not have been committed to limited gov't. BTW, Richards substituted anarchy for anarchism. In anarchism, there is great cooperation and can be a high degree of organization, there is just no centralized authority that has coercive abilities.

7.   BTW, if one wants to examine the reasons why Asian countries have benefitted better from globalization than many Latin American countries is because many Asian countries have well-regulated economies while many Latin American countries have allowed the free-flow of capital. In addition, there are two kinds of private property: personal and capital or business. So we should note that different laws should be set up for each kind of private property. The attempt to overlook this distinction at the end of point #5.

8.   The win-win game Richards talks about does not exist. Every great economic power in today's world has gained economic wealth partially through colonization, theft, and exploitation. Remember that America started with ethnically cleansing the land of its indigenous population and slavery. Then it moved to empire and controlling who was leading certain countries with resources. Other European countries had their own empires too.

9.   His point on the church is not historically supported. Rather, the Church, especially conservative churches, have generally supported those with wealth and power. That is true of America for the past couple centuries and it was true of France. It was also true of pre-revolutionary Russia. And it was true of Germany.

10.  BTW, we should note that comparative advantage address is not good for every kind of product. During the last 15 to 20 years, Hairian farmers were forced to compete with American Agribusiness and were forced out of business. This left Haiti without the ability to provide its own food and this results in Haiti having food shortages when the price of either foreign food itself or transporting imported food rises. But this also puts many Haitians out of work. The same is true for other countries that have succumbed to comparative advantage or the specialization of labor by country.

11.  Finally, and this is a Reformed theology criticism, Richards needs to better distinguish God's creativity from human creativity. It isn't that God didn't keep all of the creativity and left some for us as Richards said. Rather, God is the source of all creativity while our creativity is derived from him. This is part of the creator-creature distinction.

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March 10

To Derek Richmawy's blogpost on ideological moralism. This was posted on the Gospel Coalition's blog


There are two sides to this. There is certainly the temptation for all, Christian or not, who are involved with moral causes to become like the pharisee in Jesus' parable of the two men praying. The pharisee spent his time blowing his own horn while externalizing evil. The other side is that we Christians relegate to mere ideological moralism those nonChristians who, as mentioned in Romans 2:14-15, don't have God or His Word but from their conscience do what is right, though neither perfectly nor all of the time. And we minimize what they say and do for the same reasons the previously mentioned pharisee did.

It seems to me that if we really believe that we are sinners and are saved by grace and are not caught up in the externalization of evil trap, we would feel convicted when we see nonChristians love our neighbor more than we do. And there are plenty of times that happens especially when we confuse the  parts of our culture which we enjoy with Christianity.

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To Joseph Pearce's blogpost on giving atheism credit for the guillotine and the gas chamber. This post appeared in the Imaginative Conservative blog.


Certainly atheism is not innocent, but if we look at all of history, we find that perhaps we should use the kind of scoring they use in the NHL. That is because not only does the goal scorer get credit, so does the person(s) who passes the puck. The latter get an assist.
The guillotine just didn't result from spontaneous generation. Rather, it was used as a humanitarian alternative to previous methods of execution used when the clergy played a prominent role (the 1st estate) in French society. Before the revolution, methods by which people were executed included burning at the stake (also see Calvin's Geneva), hanging, being pulled apart by 4 horses, and being beheaded by a sword or axe. The guillotine was seen as humanitarian because of its efficiency and quickness. And the desire for a more humanitarian way of performing executions came from the enlightenment.

But if we want to look at the ant-Christian reaction by those in the revolution, we must first see the role that the Church played in subjecting much of the 3rd estate to poverty. So we have consider how much of the French Revolution's rejection of the Church was due to a rejection of theism and how much was due to a rejection of how the 1st estate controlled society. Sometimes, context is important.

Likewise in Germany, we could say that the Church earned another assist in the development and use of the gas chambers mostly on Jews but also on others. Remember that for centuries, Germany held a Church inspired "eliminationist" anti-Semitic attitude. This was significantly inspired by Martin Luther's pamphlet called, "The Jews And Their Lies" (in particular see the end of page 39-47 of http://www.resist.com/Instauration/OtherPubs-20120723/TheJewsAndTheirLies-Luther.pdf). While Luther called for the elimination of the Jews in Germany, Hitler added the means and drew inspiration from Hitler. And even without Hitler, for centuries the Church practiced a harsh anti-Semitism such that by the 1800s, Jews started to organize the current Modern Zionist enterprise.

And don't forget that the Church gave us the inquisition, the burning of witches and heretics at the stake (Geneva), and even the persecution of fellow believers (see the Puritans' persecution, including the killing, of Quakers). Then we have the Church's support for the ethnic cleansing of America's indigenous people from America and a partial support for slavery. We can count that if we don't wish to include European wars over religion or claiming that the Christian God was on the side of their country (see WWI).

One more point, if socialism is defined by proletariat rule, then the totalitarian rule of both Nazi Germany and the Soviet Union are disqualified from being called socialist. The kind of state that Marxists envisioned as being in control was partially democratic. It was democratic in the way the representatives were selected. But it was not a fully democracy because only the workers and soldiers were qualified to be representatives. But to the opportunistically simple-minded, state control equals socialism even when the state that is  in control is not socialist. 

What this blogpost serves as an example of by its externalization of evil and whitewashing of faults is that of a cult. According to this post, only those outside the movement can be evil and have faults. Those true conservatives who are believers could never abuse others or push for war.

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March 11


To Joe Carter's blogpost featuring Milton Friedman's comments on how business can be the enemy of free markets. This appeared on the Acton blog.


The good thing about what was said is that a Free Market economist stated a role for government. That government needs to keep others from having excessive power. That requires gov't to have an adequate size to do so. Those who worry about the size of gov't, if they are consistent, will worry about the size of all other entities including those in business.

The bad thing is the assumption that the free market is always good. It seems that the free market is like the Pope; it speaks infallibly. Unfortunately, comparative advantage and free markets can rob people of being self-suffienct--Haiti is an example here in terms of food. For doesn't history teach us that one way a country can build its productive resources is through protection?