The Truth about Property Rights

The bestselling (and remarkably, self-taught; he’s a neurosurgeon by profession) investing theorist, William J. Bernstein, recently wrote a book entitled The Birth of Plenty: How the Prosperity of the Modern World was Created.  A common enough theme to write on these days, and at first glance, probably much the same fare as Niall Ferguson’s Civilization: The West and the Rest (which I haven’t read yet) and Rodney Stark’s The Victory of Reason (which I’m sorry to say I have).  And from the book’s description, it would appear to be another paean to the glories of Enlightenment capitalism, arguing that four factors have led to modern prosperity:

  • Property rights, which drive creativity
  • Scientific rationalism, which permits the freedom to innovate without fear of retribution;
  • Capital markets, which provide funding for people to pursue their visions;
  • Transportation/communication, which allows for the effective transfer of ideas and products.

In an intriguing little interview at AdvisorOne, however, Bernstein displays a rare perceptiveness about what these frequently-lauded “property rights” really are, and how they must be maintained:

When people read Birth of Plenty, they assume I’m a libertarian, because of the book’s emphasis on property rights.  But at the end of the day, “property rights” is nothing more and nothing less than the respect that folks with less than you do have for your property, and if there’s too much spread between the rich and poor, that erodes that respect and property rights enforcement costs skyrocket. 

This little statement neatly encapsulates the two points about property rights that I’ve tried to hammer home on this blog before: (1) property rights are rooted in social convention—they exist because society believes they ought to exist, and determines to protect them by custom, and law; (2) property rights exist for the purpose of common welfare, not for their own sake or the sake of individuals only.  Put these two together, and you find that, if property ceases to serve the social good, it ceases to command the respect of society; morality and custom therefore no longer suffice to protect it, since it no longer serves its moral and customary purpose, and the only thing left to protect it is the brute force of legal enforcement.  And it becomes a vicious cycle—as laws and security guards proliferate, people come to think of coercion as the only safeguard of property, so that as long as you can get around the letter of the law, or the enforcement reach of the law, you’re welcome to as much as you can get ahold of.  

Bernstein understands, in other words, what the Torah understood—that redistribution of property is not the abolition of property rights, but the surest means to protect them, and along with them, social welfare and stability generally.  Bernstein goes on, deploring the effects of skyrocketing inequality:

There is no question that economic inequality is killing us; we have the highest rates of obesity, homicide, violent crime, and incarceration in the developed world, things that all covary strongly with inequality.

If there’s one myth that’s more corrosive than any, it’s the notion of “job-killing taxes.”  By that logic, Somalia should be the world’s richest nation, and Sweden and Switzerland the poorest; Massachusetts ought to be our poorest state, and Mississippi the richest.

It’s a brutal fact that in highly productive societies, a lot of income needs to be redistributed. The objective evidence on the subject suggests that marginal tax rates have to be very high — in the range of 70%-80% — before the income effect becomes overwhelmed by the incentive effect; I find it hard to believe that Bill Gates, Larry Page, or Mark Zuckerberg are going to work any less hard if their income tax rate jumps to 45%. 

He also adds some sage words of advice that run very much against the grain of our society’s conventional financial wisdom, and against the self-interest of the investment advising industry.

I’ll forego the 50-cent words and simply say that wealth is not a dollar amount, but rather a ratio measured in years: in other words, how many years’ living expenses you’ve saved.  The person with a million dollars who needs to spend only $50,000 annually is twice as rich as the person who needs $100,000.

If you think that your happiness is tied up in the things you own, then you are both sadly misinformed about human neuropsychology and doomed to be unhappy. Bottom line: keep your expenses down, save like hell, don’t stop until you’re pushing up the daisies, and look for “utility” in the things that really matter: connections with other people, competence in a vocation or avocation, and most importantly, acquiring autonomy over your time and effort, i.e., becoming your own boss.

If you can’t reach those three goals by the time you’re in late middle age, you’re toast.

Needless to say, I’ll certainly be buying the book.


Calvin the Capitalist?

In his Calvin, Geneva, and the Reformation, Ronald Wallace shoots the tired old hypothesis full of holes.  After first surveying Calvin’s teaching on usury, and pointing out just how restrictive his “permission” of it was, he tells us: 

“Though he believed in the necessity of some distinctions remaining, he believed that the appearance of extreme differences in wealth and poverty within a community was inexcusably evil.  His comment on Paul’s ideal that ‘through giving there should be equality’ is illuminating.  ‘Equality’, in Paul’s mind, he thinks means a ‘fair proportioning of our resources that we may, so far as funds allow, help those in difficulties that there may not be some in affluence and others in want’.  The vision given in Christ’s parable of Lazarus in heaven lying at the bosom of Abraham implies that riches do not shut against any man the gate of the Kingdom of Heaven but that it is open alike to all who have either made a sober use of riches, or patiently endured the want of them. 

“Calvin believed that Christ’s command to us to ‘sell your possessions and give alms’ might under certain circumstances demand the giving away of capital as well as current income.  It enjoined that ‘we must not be satisfied with bestowing on the poor what we can easily spare, but that we must not refuse to part with our estates, if their revenue does not supply the wants of the poor.  His meaning is ‘Let your liberality go so far as to lessen your patrimony and dispose of your lands.’ . . . The answer the Lord gives to the greedy who argue too much about their rights to keep their own is, ‘It is indeed thine, but on this condition, that thou share it with the hungry and thirsty, not that thou eat it thyself alone.’ . . . This teaching tends to have more in common with medieval thought than that which lay behind the vigorous growth of Capitalism.”

In short, Calvin appears to have held back to the traditional Christian teaching that private right to property must serve the end of common use, otherwise this “right” degenerated into a wrong against the neighbor, and that the persistence of significant inequality in resources was therefore immoral insofar as it was avoidable.  But it gets even more interesting.  Wallace suggests that Calvin challenged the ethos that is perhaps the chief pillar of capitalism and of modern life, an ethos that few even think to question, so deep is our faith in its benefits—competition:

“It must be noted at this point that Calvin could never have approved of the idea of a competitive society.  Rivalry and struggle of one member with another is impossible within a true Christian body.  No member is living in full health while competing with another.  It is interesting to find how closely on this mater Calvin’s thought comes to that of Kropotkin the anarchist.  In contrast to Hobbes, and to all thinkers who look back to the natural state of man in society as being one of continuous struggle, Kropotkin believed that ‘the law of nature was the law of cooperation, of mutual aid rather than struggle.  Within each species mutual support was the rule. . . .’

“Moreover, Calvin was always warning about the deadly effects of covetousness—an unquenchable and irresistible fire in the soul destructive of all individual and social good.  He called those who extorted cheap labour from the poor, blood-suckers, murderers of a worse type than any street thug.  He was never weary of castigating those who used their financial power to draw money from others to themselves.  He expreses his dismay that when prices were so high wealthy merchants could keep their granaries closed in order to raise the price even higher and thus to cut the throat of poor people’.  Nothing in the commercial world, he believed, could be lawful which was hurtful to other people, and ‘all bargains in which the one party unrighteously strives to make gain by the loss of the other party’ are condemned.  The idea that any form of rivalry in commercial enterprise could help society or tht self-seeking could further the common interest could never have entered his mind.  He believed in restraining rather than in setting free the competitive spirit.  

“The spirit of Calvin has therefore nothing in common with the ‘Spirit of Capitalism’.”

To be sure, so insistently does Wallace press his case here that it seems that he has an anti-capitalist axe of his own to grind.  Nonetheless, most our modern cheery capitalist-cum-Calvinists would do well to consider these points of rivalry between the two creeds.


Leviathan or Puppet?

One of the favorite rhetorical weapons of the Right is to point to the sheer page count of federal legislation, particularly the Federal Tax Code.  They are especially fond of pointing out that the tax code is longer than the Bible, though there seems to be considerable haziness on the precise margin.  This is often presented as damning evidence of the overgrown power of the federal government, a sprawling, all-consuming monster that has its tentacles in everything.  Of course, no one would deny that there is a lot of truth to this picture.

But reading Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens, it occurred to me that another interpretation is possible.  Perhaps the sheer length of US tax regulations is more a sign of impotence than omnipotence.  Think about it.  

In a nation with a strong, respected, generally-accepted authority (perhaps a mere hypothetical), laws ought to be able to be fairly concise.  The law can say “Thou shalt not do X,” (where X is a fairly clear and generally-accepted concept), without too much further elaboration, and can generally accept that people will by and large try not to do X.  But suppose people feel disinclined to obey; they will start saying, “So what counts as X anyway?” Or, “They won’t be able to convict me of X if I just do it this way…”  To cope with this loss of authority, this lack of concern for the spirit of the law, the law will have to become ever more complex and detailed, trying to plug every hole in the dam.  We might suggest the principle, “Where words are many, authority is probably absent.”  Of course, this becomes a vicious cycle, since the increased regulation simply provides further incentive to try to dodge the law and search for loopholes.  

Treasure Islands suggests that this is exactly what has happened with our tax codes.  Eager to avoid taxes, companies and wealthy individuals used accounting tricks and offshore tax havens to get off scot-free, and governments responded with ever more complex tax codes to catch the fleeing money, usually with only very short-term success.  Even worse are those cases where the complexity and absurd length of the regulations is a result of lobbying, so that governments are not merely struggling to maintain control but have capitulated entirely, allowing corporations to all but write the tax codes for them.  

It’s for this reason that, while sympathetic in principle with a dramatically slimmed-down tax code, I have so little patience for the gimmicky proposals that get trotted out every election cycle by the GOP, such as Herman Cain’s absurd “9-9-9” plan.  “We can get the tax code down to just a few pages and still bring in just as much revenue!”  For how long?  A week?  The current code started out at just a few pages too, and you can guarantee that as long as multinational corporations and wealthy individuals remain as powerful, mobile, and creative as they now are, that any tax code that wants any slice of their money will have to grow like kudzu just to keep up.  


Wealth Inequality–A Moral Problem?

One of the more interesting chapters in Jay Richards’s Money, Greed, and God is chapter 4, “If I Become Rich, Won’t Someone Else Become Poor?”  This chapter brings us to the heart of the impasse between left and right, with the one side contending that “the rich are getting richer and the poor are getting poorer” while the other insists that, on the contrary, the rich are getting richer and the poor are getting richer too…just not as fast.  From a certain perspective, both claims are true.  Even the right, in its more honest moments, admits that income inequality is growing.  Which means that, in relative terms, the poor are growing poorer.  But is absolute poverty increasing?  The right denies it but of course, it depends where you are talking about–in sub-Saharan Africa, it is.  On the whole, my limited grasp of the statistics suggests that the right is correct, global absolute poverty is slowly declining.  

Now, from the right’s standpoint, this means we do not have a moral problem–the rich are not getting rich at the poor’s expense. (In fact, from the right’s perspective, this would be true even if absolute poverty were increasing; so confident are they in the wealth-creating power of the market, that they would have to chalk this up exclusively to the failures of the poor or their governments).  Richards thinks that he has demonstrated another example of “zero-sum thinking,” revealing the left’s logical and moral idiocy.  If the poor are getting richer too, then why does it matter how fast the rich get richer?  It’s not a moral issue.  

Here we find a clash of moral intuitions–Richards and his ilk honestly feel that there is no moral problem here, whereas others find a glaring injustice.  The source of it, I suggest, lies in different presuppositions about property.  

 

Before dealing with the presuppositional issue, there is a prior hole in Richards’s argument worth addressing.  First, as I mentioned in my review, just because the global market isn’t necessarily a zero-sum game doesn’t mean it never is.  Sometimes the rich really do get rich by ripping off the poor.  Richards says incredulously, “For decades, Latin American theologian Gustavo Gutierrez has looked around at the poverty in Latin America and concluded that Latin America is poor, in part, because North America is rich: ‘The poor, dominated nations keep falling behind; the gap continues to grow.’  It’s as if the United States sucks the wealth out of Nicaragua, El Salvador, and Peru and leaves Latin Americans without food or houses or land.”  

What a bizarre notion!  It’s as if he thinks that American corporations swept into Central America in the middle of the last century, made deals with local barons to monopolise as many of the resources as possible, worked with corrupt government officials to maintain the status quo, and then, when popular movements started to call for a more equitable economic and political order, they went to the US government and asked that the “communists” be brutally suppressed.  Then, it’s as if the US government went in with guns and money and troops and specially-trained torturers and death squads and helped thugs within Central America wage war against their own people for a couple decades, reducing the people to misery, while American corporations continued to profit.  Can you imagine such a cock-and-bull story?  Preposterous!  And yet, of course, thoroughly documented fact.  

So Richards should be more cautious about cavalierly dismissing the idea that there might be a direct causal connection between enormous First World wealth and appalling Third World poverty.  So eager is Richards to deny that poverty is often the result of exploitation that when it’s undeniable, he denies it in the main text and then admits it sheepishly in an endnote.  After insisting for nearly two pages that we should have no problems with the massive wealth of the world’s three richest people–Bill Gates, Warren Buffett, and Carlos Slim Helu–because they’ve “created” wealth, rather than taken it, he tacks on a little endnote saying that actually, Slim Helu might be something of a crook, but his point still stands. 

 

But on to the main issue.  Let’s assume that the rich are not taking money away from the poor.  Let’s assume that they really are creating wealth by upright means, and it is slowly, haltingly, trickling down to the poor.  Is there still a problem with this picture?  Could we still say that the wealth of the rich comes at the expense of the poor?  Well, yes, duh.  Richards is untroubled by the fact that Slim, Buffett, and Gates together have as much wealth as the world’s 600 million poorest people–unless they stole it from the poorest, then everything’s fine with this picture.  But St. Basil would beg to differ:

“Are you not greedy?  Are you not acting like robbers?  Are you not usurping that which you have received merely in trust?  He who steals some one else’s garment is called a thief.  But he who fails to clothe the naked even if he were able to do so, does he not by chance deserve to be called by a different name?  The bread which you hold back actually belongs to the hungry; the garment which you lock in your chest belongs to the naked; the shoes which rot in your store house belong to the bare-footed; and the money which you are hiding…belongs to the needy.  Thus you do a great injustice to all those whom you could succor…. ‘Whom do I injure’, says the greedy, ‘if I merely keep what is mine?’  But then, tell me, what is really thine?  Wherefrom did you take it?  And how did it get into thy life?  Is the greedy person not like the man who, after having taken his seat in the theater, restrains all latecomers from attending the show, thus acting like one who considers his own that which actually is meant for the common use of all?  Are not the rich of this type?  For after having taken care of themselves by crude usurpation, they declare that everything they have gained by this usurpation is theirs forever.  But if any man would claim only what he really requires in order to satisfy his true needs, and would leave to the needy what exceeds his own immediate needs, then no one would be rich, and no one poor.” 

Richards, Schneider, and Co. will tell us that Basil is a slave to zero-sum thinking.  He thinks that the rich can only be rich by directly ripping off the poor, and they will tell us that they may have been true in Basil’s day, but not in ours.  But listen to Basil.  This is only one small part of his concern.  His main point is that, however you got the wealth, however justly it may seem to be yours, you are stealing by failing to give it when you are able.  From Basil’s standpoint, Buffett, Gates, and Slim’s billions actually belong to the 600 million hungry poor.  We might argue about exactly what this should mean in practice–clearly, you can’t just transfer a couple hundred billion all at once to slum-dwellers in Mumbai, and ideally, we should find ways of sustainably creating wealth for them; and we could argue about whether this “theft” ought to be dealt with legally.  But that’s not where the disagreement lies right now.  Richards sees no relevant moral duty here, no sense in which the superfluity of the rich, not shared with the desperately poor to the fullest extent possible, represents an injustice, represents withholding something that belongs to another.  I dare say he would be flummoxed at the very idea. 

Basil’s rhetoric certainly is revolutionary rhetoric, but the basic notion underlying it is quite simple, and was shared by his successors in the Christian ethical tradition for more than a millennium; the same intuition, I expect, underlies the sense of injustice that many today instinctively feel about global inequality, an intuition that Richards simply cannot relate to.  It is the sense that the world is “meant for the common use of all.”  Private property may be well and good, argued Aquinas, but it must serve the end of common use.  Each person’s right to the use of their own possessions was logically, temporally, and morally secondary to the right of all men to a sufficient share of the earth’s goods.  Again, what this meant in practice had to be worked out carefully–Aquinas did not want an anarchistic free-for-all, in which everyone grabbed for his share.  But he wanted to establish this principle of justice as a starting-point.  And if you accept that, from the standpoint of justice, God created the world for the benefit of all, then there is a problem if the wealth of the world doubles, and 90% of that increase goes to 1000 people, and only 1% to 1,000,000,000 people.  Ideally, you should have a system in which wealth is not created so unequally, but of course such a perfect system is impossible to come by.  If the initial distribution comes out radically skewed, then justice requires redistribution, Aquinas would say.  

If you do not accept the priority of common use, and thus of distributive justice, then it might be a matter for concern and compassion if hundreds of millions die in poverty, but the wealth of the wealthiest is simply irrelevant to this issue.  Questions of justice are irrelevant to this issue.  Charity may be encouraged, but even that shouldn’t be emphasised too heavily; the best thing we can do, Richards and Schneider suspect, is working harder to make the global economy grow and create more wealth, which will hopefully eventually find its way into the hands of the poorest.  

 

Now, perhaps you cannot accept the priority of common use; perhaps you really can’t get your head around distributive justice.  Fair enough.  Even with a number of radical influences, it took me a while.  But it’s important for conservatives to recognise that there is such a principle, widely held to, and in fact historically speaking, the norm among Christian ethicists.  The concern of so many over global inequality, over the fact that “The three richest people in the world control more wealth than all 600 million people living in the world’s poorest countries,” is not just sentimentalising rhetoric and fuzzy thinking, or a juvenile inability to understand that “wealth is created”–rather, it is a morally coherent and cogent posture that needs to be debated at the level of moral theology, not name-calling and statistics-flinging.  



Depart in Peace, Be Warmed and Filled (Good of Affluence #9)

So we have seen that Schneider explains Amos’s attacks upon the unjust rich as first of all an attack on those who have direct responsibility for the poor and for unjust policies that are harming them, not as an attack on third parties who just happen to be rich.  His second line of argument is that what Amos is attacking is not the enjoyment of wealth per se, but a bad attitude toward wealth.  This is a very common sort of claim among divine right capitalists like Schneider–wealth isn’t evil; it’s a bad attitude toward wealth that is evil.  The implication is that their opponents disagree; they think that wealth itself is evil.  Generally, however, that’s not the case; their opponents rather insist that attitudes issue in actions, and so a good attitude toward wealth requires certain concrete just and charitable uses of that wealth, whereas a bad attitude toward wealth can be identified through certain greedy or unjust uses of that wealth.  So I can agree with Schneider’s general statement; however, I will then ask him to flesh out what this bad attitude looks like for us today, and what a corresponding good attitude would entail.  Unfortunately, he gives us little to go on–here, and in the rest of the book.

 So let’s dig in to this section a bit and see what he does have to say. 

He begins by reminding us that the ancient Hebrews had a very high view of creation, the goodness of the material world, and the godliness of rejoicing in it.  Therefore (quoting Gerhard von Rad), “it can only have been extreme indulgence which necessitated the raising of such complaints about the enjoyment of material things.”  “Extreme indulgence,” Schneider goes on, “is a very different spiritual and moral behaviour than merely having and enjoying prosperity in the extreme.  I propose that the important contrast is not between extreme wealth and some properly moderate level of enjoyment, but is between extreme indulgence on the one hand and true delight on the other.  But the question arises: when is the enjoyment of material affluence indulgence, and when is it delight?”

In other words, the problem is not quantitative, it’s qualitative.  Any amount of wealth, however exorbitant, can be delighted in in a godly manner, while even a very small amount can be indulged in an ungodly manner.  There is something to this, of course.  A godly posture towards wealth is not in unerring direct proportion to the amount one possesses.  One can clearly be a miserly pauper.  But I do think it is ethically risky to disclaim any quantitative judgments.  Attitudes exhibit themselves in actions, and I think it would be safe to say that a godly attitude toward wealth must entail some kind of quantitative moderation–even just for the sake of one’s own character, and even more so in the fact of indigence that one is in a position to help.  But let’s hear more about what Schneider thinks the qualitative difference is.

“The root of their [those who Amos condemns] evil is exposed by the second allusion in the last words: ‘but are not grieved over the ruin of Joseph.’…Their whole spirituality expresses a lack of proper, sacred grief for the suffering around and about them….They identify themselves with the majestic power and glory of King David.  But they know nothing of the passion and sacred grief for the nation and its poor, to which his songs and music attest.  They have lost touch with brokenness and so they have lost their own souls.  Their celebrations have become frivolous, disgusting, and pathetic displays of self-indulgence.”

What is the solution to this hard-hearted self-indulgence?

“Amos wisely does not fall into the trap of legalism, seeking to pinpoint some politically correct substance to use for bed making, or perhaps whether, in this world of need, beds might not be necessary at all.  For the prophet, it is a matter of finding one’s true humanity.  It is a matter of becoming a mature person with a vision from the Lord and a heart for people, especially the poor and powerless.  The rich must be liberated not from riches but from the selfish mind and heart of the serpent….As Jesus knew, there must always be a certain sacred grief in the joy of God’s people: ‘Blessed are those who mourn.’  This, I think, is the starting point for affluent people in modern societies today: we cannot be righteous unless we have a proper sense of grief.  What exactly this entails is a matter we shall pursue in due course.”

Now, all of this might be pointing in a good direction.  Perhaps what Schneider is saying here is not unlike what I said in my previous post on him, where I called for mercy and generosity to be pursued not in a spirit of legalism, but in the freedom of the justification by faith, and by seeking to grow into a virtuous mind and heart that would guide us into the right uses of our wealth, instead of trying to lay down a priori rules for what we should do with it.  Of course, there I was assuming that this heart of compassion would entail some quantitative limits to our enjoyment of affluence, whereas Schneider does not seem to think so.  It might appear then that Schneider is actually saying that the difference between indulgence and delight is only internal.  The ungodly man thinks only of himself while eating his caviar, while godly man grieves in his heart for the poor while he eats it, but they both eat it just the same.  It would not be hard to give a cynical reading of Schneider’s “sacred grief” which sings hymns of compassion for the poor in church, prays for them, and “has a heart for them,” but never actually does anything for them, lest such sacrifice impede its delight in the affluence God has given.  We can easily imagine this affluent man characterised by “sacred grief” saying to a beggar on his doorstep, “Depart in peace, be warmed and filled.”  

Perhaps this would be overly cynical.  No doubt, Schneider would protest that this is not what he means.  Of course this compassion must issue in actions, he would say, only these should not be actions of asceticism or legalism.  Very well–then what should they be?  This, he tells us, “is a matter we shall pursue in due course.”  If he did pursue it in due course, I wouldn’t be writing this post.  It’s fully legitimate for him to give the negative side of the argument (“not legalism”) at one point in the book, and the positive side (“true compassion”) later on.  However, on my reading of the book, he never actually does so.  He gestures vaguely at considerations of “moral proximity” and “vocation” and then ends the book without providing any real moral guidance.  This is perhaps inevitable in a book that is protesting what he sees as unhealthy and intrusive burdening of consciences by Christian leaders; he instinctively shies away from offering any real moral direction on the proper use of wealth, lest he should burden consciences.  The problem is that Scripture does not shy away from this.  The Bible clearly thinks that wealth, for all its goodness, is terribly dangerous, and we have to be warned against it over and over.  It is morally irresponsible to address a society that is more confronted with the idol of Mammon than any other in history and to persuade it not to take these warnings too seriously, but to just enjoy every bit of affluence with a dash of “sacred grief.”  

 

Schneider will have much more to say, much of it helpful, much of it unhelpful, in his chapters on the New Testament, and I will try to cover these as time allows over the coming weeks–but the gist is much the same.  We are told over and over that the problem is an ungodly attitude toward wealth, and the solution is a godly attitude, but then we are given precious little indication of what form this godly attitude should take.