“Unfettered Free Markets Suck.”
-Adam Smith’s great, great, great, grandson
I have just finished Barry Asmus and Wayne Grudem’s book, “The Poverty of Nations.” In it they argue that prosperity is best arrived at by unfettered free markets, clear titles to property, and the rule of law – all of which make risk taking entrepreneurship possible. I agree with titles and law. I take issue with their first premise: the unfettered free market. I think that defending the unfettered free market is a mistake, especially for Christians. Before I attack it, here are some common arguments for the free market:
1) Free markets allocate resources efficiently. No one person or government can allocate resources the way competition, working freely, can.
2) Free markets take advantage of all of the information in a society, generating stability. No one bureaucracy can adequately plan the way every consumer’s needs can, stimulating through the mechanism of supply and demand, the fulfillment of consumer’s needs.
3) Free markets generate creativity and promote innovation. Steve Jobs says, “I can make a better phone” and we are all better off.
4) Free markets limit the abuse of power by keeping it distributed widely, into the hands of each and every consumer.
These all contain at least an element of truth. And, although I am acquainted with both Barry and Wayne and think highly of them, I would like to push back against the idea of unfettered free markets…[1] Unfettered free markets are simply not, to use a common colloquialism, “all that.”
1) Competition is imperfect. Agents in the UFM (unfettered free market) will naturally conspire to decrease competition – oligarchies anyone?
2) Bidding is also. The UFM assumes that we are all equally free to “bid” for services. Children and future generations, for example, are not. Companies can and do work against their own long-term interest for short-term gain (Chinese air pollution reaching American shores and the Great Pacific Garbage Patch come to mind).
Photo credit: Lea Kelley
3) Cost divergence = markets that aren’t really “free”: The UFM assumes that the nominal cost (what I pull out of my wallet to buy a car) and the real cost (all of the expenses of driving my car: cost to build the roads, lost opportunity cost of land under the freeway, pollution cost of car, cost of administering and policing the roads) are equal. They are not. A government was probably involved in taxing consumers to cover the real cost. Societies’ must provide infrastructures. Do you want that infrastructure planned and inspected by disinterested parties or the company profiting from the bridge you are driving on? Thought so.
4) Socialists are happier. If the UFM was the best economic system then people living in them should be “happiest.” In fact, that is what Dr. Grudem and Mr. Asmus tell us. Unfortunately, the evidence does not bear that out. (http://goo.gl/FZSKVL) Bloomberg reports, The “happiest people,” year after year live in Northern Europe: 1) Denmark, 2) Norway, 3) Switzerland, 4) The Netherlands, 5) Sweden. All are tightly controlled economies. The U.S. ranks 17th.
So color me a believer in some government regulation of economies. Unfettered free market systems regularly create long-term nightmares that people band together and elect governments to solve. Drive up the I-95 toward Philadelphia. It looks like a scene from the movie Soylent Green. Consider also the chemical companies in East St. Louis. Those companies spent 100 years gerrymandered out of the school district of their plant workers so that they didn’t have to pay for schools for their own employees children…even as their toxic sludge oozed up into the basements of those schools. Humans can and should band together to make sure that some decision-making is centralized for the common good – automobile safety regulations, and eliminating lead paint on children’s playground equipment come to mind.) The issue is to figure out which regulations are “doable” (like lead paint) and which are not (a $30/hr. minimum wage) and then give government the teeth for enforcement. A government with no teeth is no government (Insert name of any one of dozens of countries with ineffective/corrupt governments here).
Regulating human selfishness is, by the way, biblical:
1) “The love of money is the root of evil. The UFM assumes that I will love money and my self-interest…not God and neighbor. Do we really want a system that glorifies our sin nature, rather than one which acknowledges but works to moderate it? (1 Timothy 6:10)
2) Scripture assumes that humans, because of sin, are not “free,” but natural oppressors of other humans. (See Amos 2:6-7, 4:1-9). Has an unfettered FM really insured human thriving? Ask the employees of the Triangle Shirtwaist Factory. O wait, we can’t.
3) We are told to “Bear one another’s burdens.” (Gal 6:2) Let’s employ the hermeneutic principle known as “the clear meaning of words: “Bear”: to carry.” “One another’s”: someone else’s. “Burdens”: That which is heavy.
4) Generosity, the “re-allocation of wealth,” was commanded of individuals (Deuteronomy 23:24-25) in early Israel…but the early government was too weak to provide services. To maintain a completely individualized system leaves aid unevenly distributed-a burden upon those in places with more poor. In an era with more social organization we can do better.
5) There are numerous injunctions to create government. Scripture repeatedly advises the appointment of “judges” – administrators of law and social organization (2 Sam 7:11, 1 Chronicles 17:10, 1 Chronicles 26:29, 2 Chronicles 19:5.) This starts when Jethro sees a need (Exodus 18:13-27). He then creatively solves the problem by generating a new solution: judges for disputes. Why can we not utilize this same method in economics?
6) Did I mention that Jesus told us to share? More than once, too: (Mark 10:21-22, Luke 6:20-21, Matt 25:34-36, Mark 12:41044, Luke 14:12-14, Luke 16:19-25, Luke 11:39-42, Luke 12:16-21).
The question is how best to administer sharing and some regulation for the common good. In Acts, the church gave that task to deacons. Are church buildings and local deacons the most efficient way to care for the poor? Perhaps in some places. Probably not in all places.
And then, there is still that question as to where the “happiest people” live. Again, the data says that Dr. Grudem is wrong. It is NOT the places with the most open and most unfettered free markets, but specifically those places in which markets have some public controls to protect consumers.
The sad thing for me is the way much of the American church defends partisan policies (no economic limits or regulations…Somalia comes to mind) as if this is the Gospel of Jesus Christ. Do I really need to say that it is not? I recently posted on FB my joy that a friend, a music minister at his church, and brought to the U.S. as a 9 year old, received Deferred Action to be able to work. Christians railed against this…against a Christian music minister being given the freedom to work in the market as the result of his parent’s illegal actions 15 years earlier. It generated 120 comments in 24 hours.
And we wonder that Christians are no longer seen as crusaders for good? O how we have fallen. In the 1840’s 1/3 of active abolitionists were ordained clergy. The church, once seen as a bastion of care for the less fortunate, is now seen as a tool of tax and charity avoidance. God’s people are commanded to care for the widow, orphan, and alien (Jeremiah 22:3, Exodus 12: 49, Mal. 3:5, Ps. 82:3, 68:5, 10:17-18, Ex. 22:22-23) …And yet we argue for a free market for all…unless, of course, you might not be able to produce papers when stopped for Driving While Brown.
Julian the Pagan, in his (362 AD) campaign to revive paganism wrote, “I think that when the poor happened to be neglected and overlooked by our priests, the impious Galileans (Christians) observed this and devoted themselves to benevolence. They support not only their poor, but ours as well, everyone can see that our people lack aid from us.”
Where did this spirit go? Once upon a time we Christians were known for our love and self-sacrifice. We were known as great defenders of the week and great lovers of those in need.
Will the church reclaim a moral high ground? One in which we love our Lord and His least, last, and lost more than we love protecting our markets, our assets, and our borders?
[1] Barry is a great guy and a friend of Young Life. Wayne is also a very nice man, a best selling author, and has a most amazing array of memorized Scripture.
the gospel side 
I am not sure what Adam’s Smiths ggggson is getting at. IF the free market or the unfree market operates devoid of laws or does not enforce them then chaos will rule. Such is the case in the USA today where illegal immigration laws have not been enforced and as a result after amnesty of 1985, 11 to15 million persons entered this country illegally and put a lot of stress on the tax payers, just to cite one problem with some of the arguments he puts forth. We have sown bombs all over the world in the name of freedom. We have helped to create a terrorist monster all in the name of God, duty and free —–. How has that worked out.
Jesus said ” Go into the world and preach the Gospel”, not go and force the world to your way of life.
I will stop here because I know this will stir a lot of Defenders of the Turf.
I really appreciate your comments, Harold.
I think you are right-we have assumed people wanted to be us and then spent billions figuring out which bad guys to arm…or bomb.
The border thing is a thorough mess that will become much, much worse over time. One look at population estimates makes that obvious. The Central American “have nots” are reproducing each generation at 12x the rate of the “haves.” If this and danger and unemployment in Central America continue, they will not stay out. And before long we will not have the ability to keep them out. So we must develop other methods besides tall fences, helicopters and armed ICE officers. The fall of Rome to hungry Eastern European and Asian hordes is analogous. A “strong border” didn’t help them for long.
Thanks for the good lead, Matt. I’ll check out Thistle Farms right away.
I forgot to mention–Wayne Grudem was my former husband’s advisor and Greek teacher at Trinity Ev. Divinity School in Deerfield, in the early 80’s. I agree that Wayne was (and still probably is!) a very nice man. He struck me as a very earnest, Godly man, too. I respectfully disagree with his complementarian view of women (speaking as a current pastor and former chaplain), but I deeply respect the depth of his knowledge of Scripture!
He is still a complementarian…the faculty at Phx Seminary is divided on that point. He is firmly on the conservative side of the divide.
A Biblical Historians perspective:
The reason “unfettered free market capitalism” is frustrating for those who would try to erase the imbalance of power and reward enjoyed by some is the same reason socialism proves to be frustrating. And so does every other form of human government.
You see, the designers of the American system of governing via a Constitutional Republic with a free market understood, and cautioned themselves and their posterity often, that self-government won’t work without self-discipline. The very foundations of our government are built on, and absolutely rely on, the “righteousness” of the governed. As long as the governed are, in at least a general way, righteous, then the laws will be applied righteously. Those same laws protect the rights of the unrighteous in spirit, and when the governed are, at least in a general way, unrighteous, so will their nation be.
The same principle applies to the free market and capitalism. As long as the people participating and profiting, either as businessmen or as consumers, are, at least in a general way, righteous; then the opportunities, profits, charities, products, indeed all of the facets of a healthy marketplace will reflect that righteousness…at least in a general way. When the population loses that righteousness, the marketplace will similarly reflect that lack of righteousness as evidenced in greed, profiteering, collusion, class division and need.
This is also why trying to legislate “righteousness” will never really raise the level of righteousness of the governed.
Biblical? Absolutely! Read no further than the curses and blessings in the Covenant God signed with his people at Sinai. As long as they maintained a high standard of righteousness (and kept God in his rightful place as Sovereign) they would prosper; there would be health and happiness. There would be no want. The other side of the coin…that of the curses…would be their experience if they failed to maintain that high level of righteousness (and keep God in his rightful place). They would experience want, lack of health, lack of world status, slavery, pestilence etc.
The Founders of the American Experiment knew and understood this, and were willing to build a nation on the premise of self-governance (through Constitutional Law) and a free market. They were right. History shows that America, with the freedoms enjoyed by its citizens and the free market have produced far more than any other nation in history when it comes to goods produced, technology invented, personal wealth, charity towards others and the spread of the Gospel. But now, the light and salt effect of the Christians, that has helped to maintain that high level of righteousness in the government and market place is waning…and so the government and market place reflect that trend…as the Founders knew that it would.
The question, then, should not be how to change the system of government; how to legislate morality on the masses regarding opportunity, profit or charity; but should be how to make the light and salt more effective thus reversing the trend of American (global?) society. Or maybe the question should be why have we, the light and salt, abdicated our responsibility to the world so desperately in need of what we have?
Your point is well taken, and embarrassing, in that Christian Businessmen are not easily identified from the crowd. I know, as a businessman myself, I cringe when a customer or associate plays the “ichthus card” since that usually means I am about to get taken for a ride…a terrible indictment on the general standard of personal righteousness of Christians in America today.
Excellent points, Darrell. I especially appreciate what you brought out concerning the Founders of the American Experiment. With the freedoms enjoyed by the people of these United States during the first two hundred years of its existence, the boom in invention, innovation, production and creativity has never been matched. (Yet.)
Isn’t it the painful truth about the “ichthus card?” I’ve found this to be true, as well. Except I never thought of such a pithy expression to describe this phenomenon.
Amen on the question of why we have abrogated out role as salt and light!
One Sunday 20 years ago I was asked to do the “pastoral prayer” on “Repentance Sunday” at a church I was working at. I asked that very same question. I was fired for it.
Sometimes the church doesn’t want to be the church. Just a place of social connectedness where our preexisting values can be affirmed. When someone rocks that boat, people react.
To your point, a realtor I respect told me that he stopped doing business with “Christian” realtors. He said, “It has gotten to the point where when someone tells me about Jesus I start looking for the angle they are about to use to rip someone off in the deal.” The group he still respects: Mennonites.
Superb post, Matt! I wholeheartedly agree with your whole post. While a super-fan of Adam Smith and many of his contemporaries, I have lived life in Chicago/the Chicago area for all of my life. Yes, I have seen political corruption at its worst. Yes, I am jaded and cynical, as far as governmental, local and Federal regulation (and pay-offs) are concerned. However, I fully agree with you that something must be done. NEEDS to be done. Especially for the children, the seniors, those who cannot care for themselves, for the poorest of the poor. That is what we as believers are called to do. We are called to serve.
At least the regulatory agencies here in the US function fairly well. Usually. This is often not the case at all, given the ‘stellar example’ you cited: China. Corruption can be true of countries south of the United States, as well. Grease the political/regulatory wheel enough, and I suspect you and I will sadly acknowledge corruption at the local and regional levels, as well as the corporate level.
We, as believers in Christ and His way of acting as well as thinking, are called to be examples, too. Examples in the greater, non-believing community. Examples of caring above and beyond, of going the extra mile, of loving enemies, of sacrificing ourselves for others. But do I? Do you? Do any of us? I think of my Feature Friday posts last month in my blog. Ministry to seriously poor people: http://wp.me/p4cOf8-a0
Again, thanks so much for a thoughtful, caring, hard-hitting post.
Love the IncaLink video. Good stuff. Do you know of Thistle Farms in Nashville? It is a line of skin care products started by a ministry to rescue sex workers. It employs 50 former sex workers and made 10 million last year. It is a fantastic example of Christians leveraging the opportunity of the marketplace out of conviction that our faith can help others to faith AND an better life.
Matt, I was so inspired by what you said that I went to the Thistle Farms website. I wrote up a Feature Friday post for my blog! If you have time, check it out. 🙂 http://wp.me/p4cOf8-cI
Nice writeup! And thanks for the props.
The US is not an unfettered free market. Most of your arguments seem to assume that we are or were even a century ago. The argument about Ohio factories and public schools for instance. A large company used the force of government to a) avoid paying taxes for schools (gerrymandering is a political ploy) b) to pollute. These folks had government operatives, they used government to their advantage. On the face of the thing, if government were not involved, and property titles were enforced through a common law court, every citizen in the town would have standing to sue the large company for damages done to their property.
It is also easy to take a snap shot of an event and say, wow look, socialist nations are happiest. Denmark, Norway, etc. Except, I wonder how happy they all were when National Socialist Adolph Hitler (Mein Kompf was a National Socialist tome) threatened their lives and livelihood. Or when Stalin who also pushed redistributive theory was wreaking havoc after WWII staring people to death through bad central planning.
In almost every instance you gave, (oligarchy for instance, where the rich manipulate the levers of government power and regulation to squash competition and impoverish everyone else), the opposite of an unfettered free market is at work. I mean supposing that nations with “governments with no teeth” are unfettered free markets is absurd.
“Do you want that infrastructure planned and inspected by disinterested parties or the company profiting from the bridge you are driving on? Thought so.” I would much rather have the bridge I drive on built by a for profit company rather than a disinterested party. A “for profit company” can be held accountable, sued, driven out of business if a bridge fails. If a government bridge fails because of a “disinterested” worker, there is no accountability. When governments investigate themselves they almost never find fault, government courts rarely decided against themselves, and because everyone is a disinterested party the wrong changes or no changes are generally made.
I would suggest you read something like “Fatal Conceit” or “Road to Serfdom” by F. A. Hayek in macroeconomics, and look to compare apples to apples. Because your comparative material in this article was Apples to Watermelons. I don’t have any problem with government as “the servant of God that carries out wrath on the wrongdoer”. But when government spends more than it has, prints money to cover it’s balances (fleecing the poor btw), manipulates interest rates (rewarding the rich btw), creates victimless crimes by controlling all commerce (Amish selling raw milk for example or local farmers selling produce to their neighbors), creates barriers to energy development like building oil refineries (when combined with money printing this almost destroys the cost of living and forces 2 parents to work out of the home just to make ends meet), refuses to enforce our borders (again affecting wages artificially), and generally doing about all it can do to destroy the economy, it’s a token to the genius of free markets that we even have an economy, much less remain a superpower. I care nothing for being a superpower, but I do believe liberty is best sustained when free people can choose to engage in commerce without government interference. Free Markets are imperfect for sure, but they are head and shoulders superior to government controls which starve the masses on regular occasion. Because disinterested parties are just that, disinterested.
Last, 1 Timothy 6:10 says, “For the love of money is the root of all kinds of evils” not, “The love of money is the root of evil” as you misquoted, I’m sure unintentionally.
Hi Jeremy,
Thank you for weighing in. As usual, your comments are thoughtful and well-articulated.
Typing quickly I did indeed misquote Paul. As I recall, I was using it to defend the idea that greed is not a good motive for Christians and not a good motive to give too much head to in our economic life. So, in that way, although I misquoted, the text still carries that point that those who “love” money will do things they should not. This is true with governments, stockholder groups, and individuals. This is a result of our sin nature.
What I am saying is that a completely “free markets” protects the strong at the expense of the weak. That is not an argument against wealth. It is against allowing those with means to access the advantages of government situation that advantages while keeping those without means locked away from the advantages of government…to use another example, public school funding. We tie school funding to property values, virtually insuring that poor kids will get an inferior education to children of means. Americans with means making sure our children are advantaged in the market. Not exactly a level playing field as assumed by free marketers.
I do think you have largely missed what I was trying to say. I am not advocating open borders or communism (with government control of both economic “5 yr plans” and production). I am arguing that when the private company builds the bridge the public holds them accountable with a public inspector…that the “happiest” and “most prosperous” nations are those in which the government helps insure that the blessings of economic prosperity is shared.
You might follow the link to the “happiest countries” story. Or better, Google it. Those stories are being reported in Forbes and Bloomberg-not exactly bastions of liberal bias. They are also reports based on data that has been repeated over multiple years.
My argument is really that there is no such thing as an unfettered free markets. The calls for such are the calls of those who wish to lighten government regulation in order to increase profits. Profit is good. Harming others for profit is not. The real issue is who will governments serve? Themselves? Organized crime? Capital? Labor? If a government serves itself it becomes Hitler’s Germany or Stalin’s Russia. If it serves crime it becomes Mexico and a dozen places in Africa. If it serves labor and makes it unprofitable to do business you have California. If it serves capital you have tax haven countries…where 30% of profits from American multinational corporations money ends up. There is a balancing act called for here. That is what I was trying to say.
I always know when I scratch at something that is itching when I make a “we are at A and should move to B” gets read as “this means a jump to Z!” In fairness I should hurry and write my screed against the Left! I am getting offline emails in which folks are broad jumping over my illustrations (for example the kid who was brought here at nine years old and is leading a dozen people a year to Jesus and gets DACA = throwing open the borders). I really should do the other side post pointing out the Left’s hatred of wealth and false dichotomies (always wanting someone to throw under the bus) so that they can make the same broad jump to straw men. I can just see it now: a suggestion for instance, that not all private ownership of guns is bad to someone on the Left quickly becomes advocating the arming ALL Americans with AK’s jammed in the full auto position.) 🙂
Blessings to you and thank you for the appeal to macro-economics. I really am not advocating state control. Just the state serving all: big and little alike. The world does not work without self-interest. It just needs to be moderated.
What I like about America is the fact that I have a choice. I can decide the kind of health care I wish to receive, how to educate my children (homeschooling is only permissible in America and Canada. Most European countries ban homeschooling as an option), what kind of products I wish to buy, etc.
Along those lines, I believe that the economy is changing because job security is basically nonexistent anymore. The only security I have at my job is what I add to the company. Bean counters and pencil pushers can be easily eliminated in a pinch.
People are deciding what they will and will not buy. And the market is adjusting accordingly. That’s how the system has and will continue to work.
I also believe that it’s not the governments job to take care of the poor and destitute. That’s actually the church’s job. It’s not the government’s job to educate children. It’s the parents’ job. What we need is not to become like other socialist (and that’s what they really are) countries that have turned the reigns over to the government. It’s time to wake up and take responsibility for myself.
My response is not following paragraph by paragraph what you wrote about, but rather it’s where my mind goes whenever I read about different forms of government.
Hi Audragayle,
Thanks for weighing in. I like and love America. I am simply pointing out that others, as a whole, report a greater level of “happiness” than we do. They also have a slightly lower income levels than the five countries listed.
Btw, Your home school data appears to be only partially correct: Sweden and The Netherlands do not generally allow homeschooling…or, if they do, it is highly discouraged. The internet says that homeschooling is legal in Finland, Norway and Denmark and that there are homeschool groups.
Responsibility for ourselves is always the right action. Some, however, have limited ability to assume self-responsibility. For example, I am self-reliant. I learned it from my parents. What about a boy growing up in an inner-city where the only males he knows not in prison are drug dealers? I minister in a neighborhood like this. In this case, churches and public schools provide mentors who do lots of the things a parent would provide and teach that young man the law of choices and consequences and help him make better choices while he is young. Self-reliance assumes a level of parenting that many are not receiving. In this case it takes the entire “village” – the school, the police, the church, the elderly neighbor to step in and provide what the family did not. Self-reliance and responsibility are surely the right outcome. Getting people who start in a hole to that place is the trick. 🙂
Thanks again for commenting, Audragayle!
This was a fantastically thought out and presented post, Matt. The comments are really thought-provoking too. I’ve been part of or witnessed numerous conversations on the topic, but I’ve never seen the Scriptural element brought into it quite as well as you have brought it into focus here. I’m also heartbroken over the “ichthus card” thread in the comments, as, alas, I have also found that to be true.
Anyway, I’ve been traveling almost non-stop for three months and hadn’t been keeping up with the blog during all of that, and am grateful to return to such a thoughtful, engaging, and relevant post.
Hi Eric,
Thanks. I hope all is well with you.
Where did you get to travel for 3 months? Most teachers don’t get to do that.
WTG!