We have covered the "capitalism" part, that is, the principle of the means of production being in the hands of individuals instead of government. There is much to add to this since we have seen the downfall of Soviet socialism, but that would take us far afield. We will now turn to the "free-market" part of our discussion. (If you have not read part one, you might want to do so first.)
We should not take it for granted that all forms of capitalism include a free market. To see what I mean by this I will compare them to another form of capitalism, 'crony capitalism'. But, first, I need to explain what a free market is.
A free market is where there are free exchanges. (This is not a tautology, but simply breaking down the free market to its smallest component. The relationship between free exchange and a free market is like the relationship between weather and climate. Weather is not climate, but if you take all the weather over a long period of time, you get climate. Free exchanges, performed at all times and by all people in a society, constitutes a free market.) A free exchange is where two individuals or entities exchange goods and services for money or other goods and services. Nobody is telling one side or the other what they can buy or sell or for how much.
In this kind of exchange, both sides benefit. If someone is selling widgets for $2 each and I want a widget and I am willing to pay that price, then I will buy the widget for $2. I want the widget more than I want the $2 and the seller wants the $2 more than he wants the widget. Who benefits from this exchange? Both sides do. We are both better off having done the exchange. This is the essence of a free market. This kind of exchange happens over and over in a free market to the benefit of all.
The reason that these exchanges keep happening over and over is the profit motive. Some are confused about what profit is. They think it is only something that greedy, rich people have. No. Everyone has a profit motive. That's why we enter into these exchanges - so that we can benefit (profit). Profiting simply means that we benefit from the exchanges we enter into. When we do not benefit and have "buyer's remorse", then we learn not to enter into that kind of exchange again. So the free exchange mechanism is self-correcting. If one side or the other does not perceive that they will benefit from the exchange, they will not enter into it.
There are some underlying assumptions here. First of all, there is an assumption that the seller is being truthful. The seller must be truthful about his product or service or the buyer will be "ripped off". There must be "truth in advertising". Otherwise, a truly free exchange has not taken place. (This certainly accords with "thou shalt not bear false witness", does it not?)
So, both the private property part (thou shalt not steal) and the free exchange part (thou shalt bear false witness) seem to suggest that we are going in the right direction. Another thing it does is dispel the notion that the free market (called the 'unfettered market' by its opponents) is darwinian. Let me explain. A free market is not like the jungle. In the jungle the strongest and swiftest and keenest survive while the others perish. Exchanges as such generally do not occur though some form of symbiosis might. Someone stronger or faster eats you or eats what you want to eat. In a system of free exchange, the rule of law is necessary to keep the strong from oppressing the weak. First is the enforcement of property rights and the second is the truth about the product or service being offered. Being dishonest means that people will not want to deal with you in the future. Dishonesty undermines the free market.
Another thing that is antithetical to free markets are monopolies. When one person or elite, colluding group has complete control of part of the market, it results in higher prices, scarcity and lower quality. (I will not go into how this works as it would take some space to explain. So, I am just stating it. Please understand that what I am saying is not disputed by any economist no matter how liberal or conservative.) This means that to buy certain goods and services one must deal with only one entity. Nobody competes with them so they can charge more and will have no incentive to improve that good or service. This will cause lower productivity and therefore more poverty. (Increases in income in a society can only come by increases in productivity.)
One of the worst forms of monopolistic capitalism (and perhaps the only form) is "Crony Capitalism". This is where the government, often run by a dictator but not necessarily so, gives monopoly powers to certain individuals and companies. The monopolist supports the dictator, making him rich, and the dictator gives a monopoly to his friend, making him rich. This is a form of capitalism because individuals own the means of production, but it is not free-market because the two true beneficiaries are not the ones making the exchange, but the ones who made any other exchanges impossible. A free market requires competition. Competition requires a free market.
I could go on and on about countries like Argentina and the Philippines who were economically ruined by crony capitalism, but we must get back to our original question: Is free-market capitalism biblical? I think that we have shown that capitalism is biblical and that its opposite, socialism, is not. I am not sure that the Bible can truly be said to mandate a particular kind of capitalism, though we seem to find nothing but free exchange in the Bible.
But I am not ready to give up on it yet. The Bible does not just teach what is right and wrong, but also what is wise and what is foolish. We can study books like Proverbs and learn a lot about how we can live good and productive lives including our economic lives. So I think it is not a stretch to say that free-market capitalism is best in the sense that it is the wisest, in general, of all the alternatives. It is a little hard, in this little blog space, to fully explore why free market capitalism is the wisest choice, but I will toss out an idea.
Why not look at what is happening in the world where different systems compete with each other. In Europe, they have less of a free market than in the US and in Hong Kong they have more of a free market. What is the practical result? Hong Kong, both before and after China regained control of it, has maintained the freest market in the world. It has the most growth of any developed nation with the greatest freedom. Europe, which has many restrictions on the market, has a much slower growth rate than either Hong Kong or the US. The US is in the middle, both in freedom and in growth.The European Union has grown an average of 1% in GDP and has added only four million jobs over the past 35 years. The US has grown an average of 3% of GDP and has added, despite its current employment difficulties, 40 million jobs over the past 35 years. Hong Kong has grown an average of 10% per year though being small it could not produce millions of jobs. (I have had some discussions along this line that resulting in my opponents questioning whether or not growth is a good thing. I just shake my head at things like that. An economy will naturally grow if for no other reason than babies keep being born and these babies grow up and want jobs and spend money. Shrinking economies are called depression economies. They hurt the poor the very most while making all but a very few worse off.)
So which way should we go? Should we be more like Europe as some suggest? Some think our society would be more just if we were like them. They have more mandated time off and benefits and the government pays for most health care. (They do not have better or more accessible health care, by the way.) But do we want our growth to just about grind to a halt? (It seems to have done that with what has happened recently but it is not a permanent condition.) It seems to me that the wiser, and more just thing, would be to go toward more freedom.
The book of Proverbs itself is about making choices. We can make wise choices and we can make foolish ones. What I think is really unbiblical is to take choices (free markets) away. We know that the biggest choices that we make are not economic or financial. The biggest choice we make is whether or not we accept Jesus as Lord and Savior. It determines our eternal destiny. Sadly, many will make the foolish choice.
God took quite a risk in creating us with free wills. We live in a risky world. God could have made the world safe by not giving us any choices. But He wanted us to make choices. He wanted us to freely choose or reject Him. It seems to me that if He gave us that kind of choice that He would want us to have free markets. No, it's not as important, but it is better than the "nanny state" that takes care of us and tells us what we can or cannot do. I do not think that God approves of that.