Sunday, October 31, 2010

One Instance Where I think the Religious Left is more Biblical:

No it's not on redistribution. Certainly, charity and voluntarily giving away wealth is a biblical concept. I'm not convinced government redistribution is.

Yes, I understand modern capitalism arose out of "Christendom." (Arguably a lot of a-biblical and anti-biblical things did as well). But there are two things about capitalism that seem in DEEP tension with what the Bible teaches: One it's a system based on materialistic coveting. That violates one of the Ten Commandments. And two it's a system that requires usury in order to work, something the Bible arguably categorically forbids.

One could argue Islam has not advanced economically because they don't permit usury. But one could also argue this is the more authentically biblical Christian position as well.

Indeed Christendom used to outlaw virtually all forms of usury. The Bible, at its most charitable, cautions against usury. At its least charitable the Bible, like the Koran, bans it. The Bible never mentions anything positive about lending money and charging interest on it (correct me if I am wrong).

Aristotle too thought there was something "unnatural" about money making money.

Yet, arguably our modern system of wealth creation wouldn't work without it. Arguably Christianity had to "find" a way to reconcile itself with usury in order to usher in the modern world of material comfort. Arguably whenever Bible believers use their credit card, get paid interest on a cash bond or in a bank, they do a Thomas Jefferson and cut out those verses of the Bible which suggest it's sin. (Or do Bible believers repeatedly confess this as a sin?)

Modern democratic-capitalist systems treat usury similar to earned wages. We let the market determine the numbers, but get to a point where we draw a line with a minimum wage or maximum interest rate cap.

And free market economics teaches, probably correctly, that these interferences have unintended but foreseeable negative consequences. See Todd Zywicki's latest post on proposed state law to cap non-traditional loans at 36%. There probably are bad consequences, which may outweigh the good, that will come from such a law. Lenders simply won't loan folks who they'd like to charge above the cap rates. Many of those borrowers will go to loan sharks instead.

(Likewise with the minimum wage, I wish every McDonald's worker could be paid a "living wage"; but what would actually result is they wouldn't have jobs and more skilled workers would be hired to do the work; I had a student who was a manager at McDs; he didn't know about any of this economic theory; but he testified that one manager could do the work of 3-4 minimum wage McD workers.)

On the other hand, it could be irresponsible folks are already in too much debt and not getting ANY loan is better than getting a high interest loan.

Again, as a free market guy who is not much of a religious believer, I don't want to see stricter usury laws. I see usury (that is, ANY interest) in principle like cocaine. Payday loans are like crack. I think these should be legalized as well; but I don't suggest getting involved with it.

But I'd like to see socially conservative Christians, who think liberty must yield to public issues of morality, make reforming usury laws with much stricter caps something central to their political agenda.

There is nothing wrong with lending money in and of itself. If there were no inflation, then there would be no need for interest. Getting paid interest that equals inflation is, in my view, not usury, but like lending money and getting back what you lent out. But we need additional interest in order to make the system work.

In other words, we need to take a neutral mechanism (lending money) and sprinkle it with a little cocaine (something bad but that should be legal) to make the system work.

That's how I view our modern banking system on which capitalism depends.

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