Browsing the blog archives for December, 2011.

A Christmas Reality Check


I ran across an interesting blog today by Trevor Brookins on The Socialist’s Journal. Brookins contends that socialism is the natural extension of Christianity and challenges economic conservatives “who call themselves Christian” to point out the flaws in his logic.

Brookins seems like a nice guy and I accept his challenge. His “Jesus in a socialist” claim is not uncommon and can be refuted without too much difficulty. A quick read of Brookins’ short post will provide you with the context of my argument.

Brookins quotes four Biblical passages that emphasize the emptiness of a life preoccupied with the pursuit of wealth. I don’t agree entirely with his interpretations, but his general premise is largely correct. Indeed, the love of money is the root of all forms of evil. Note that the reference to money is more broadly interpreted as material wealth. The accumulation of wealth is never challenged, only the love of it. King Solomon was definitely part of the top 1% in his day, but his wisdom is widely acclaimed today.

As with all such arguments, however, the transition from Biblical warnings about the proper place of wealth to a Marxist economic system is made without any serious critical analysis. As Brookins puts it, “Socialism as an economic philosophy safeguards against people being rewarded for their love of money and thereby disincentives a love of money.” We have now uncovered the major flaw.

Brookins is arguing that socialism actually helps Christians live out the Biblical admonitions about wealth by punishing its accumulation. Put another way, Brookins is arguing that it is morally appropriate for a government to steal from productive individuals for the express purpose of redistributing wealth to those who are less productive. This is theft pure and simple, something devoid of Biblical support.

From the Ten Commandments to the writings of the Apostle Paul, the Bible challenges us to help the less fortunate while also respecting personal property. Christians should do so voluntarily, both as individuals and as voluntary members of churches. Jesus never promoted the confiscation of wealth by a secular government as a means of achieving a more just society.

There are at least two more logical flaws as well. First, Brookins calls for socialism as a means of redistributing the wealth created by capitalism. Had his call been heeded from the founding of our nation, the U.S. would have little to redistribute anyway. Second, Marxism teaches us that those with less have a right to the personal property of others. This view is a disincentive to work and innovation, and has contributed to many of the social ills we experience today.

So how do Christianity and capitalism co-exist? Simply stated, Christianity is the glue that makes capitalism work. The teachings inherent in Christianity (with roots in Judaism) complement capitalism by encouraging believers to meet community needs government is incapable to addressing efficiently and effectively. When government is authorized to carry out this function, it fails miserably.

With this I close with best wishes to everyone for a Merry Christmas and a happy holiday season. And to Trevor, I wish you and your family much prosperity next year. If 2012 brings wealth your way I encourage you to spend it wisely. I won’t be campaigning for the government to pick your pocket.


Moral Hazard and the EU


The Euro is under a lot of pressure these days. The size of government has ballooned in countries like Greece, Italy and Portugal. Ordinarily this type of problem would be confined primarily to the profligate nations, but not when there is a common currency. The problems of several nations affect the entire continent, particularly the 23 that use the Euro. And what affects the Europe affects the entire world.

Investors fear government default in these nations, prompting the rest of Europe and even the United States to negotiate a bailout. The International Monetary Fund (IMF) is a key bailout vehicle, ultimately transferring a large percentage of the European risk to U.S. taxpayers. We have been told that a bailout is in our best interest, lest the crisis in Europe reap havoc on the U.S. economy. This might be true in the short run, but it’s definitely a fallacy over the long term.

The irony of the situation should be enough to raise your eyebrows. While our government must borrow from China to finance our own leviathan, we are being asked to help pay some of Europe’s. The common sense answer to the bailout question is an obvious “no,” but economists and politicians usually opt for expediency instead of rational thinking.

There’s a simple lesson to be learned here. A common currency is a horrible idea because it fosters a predicament economists call “moral hazard,” an arrangement where one party in a contract can benefit at someone else’s expense.  Health insurance is a good example of moral hazard. Individuals with low health insurance copays are more likely to visit the doctor for marginal ailments, thereby shifting some of the unnecessary medical costs to others in the pool. Each individual decries the system but has an incentive to abuse it. A certain amount of moral hazard is unavoidable, but socialism breeds it in massive quantities. Its effects are destructive, as we see in Europe.

When each nation has its own currency, the strength or weakness of the currency will depend on government and economic factors within the nation. Exchange rates can fluctuate and to punish those that are fiscally irresponsible. But when nations share a currency, their politicians have an incentive to game the system to their own advantage. Of course, member nations “agree” to follow certain guidelines designed to eliminate the moral hazard, but these are not airtight, as evidenced by the financial chaos on Europe. When Europe’s central planners originally promoted the Euro, they set the stage for the current crisis. It was only a matter of time.

Unfortunately we are experiencing the same type of problem in the U.S. States that overspend turn to the federal government for help, which directly or indirectly must come from other states that are more fiscally responsible. Liberals are happy to oblige, thereby creating greater dependency on Washington and ensuring more irresponsibility in the future. Of course, the root of this problem can be traced to Washington’s ability to churn out more dollars, but this angle has already been addressed in previous posts.

Whether it’s Italy or California, governments should be held accountable for their actions and must be required to make the tough decisions necessary to balance their own books. Bailouts simply breed more of the very behavior we are trying to eradicate. The antidote for moral hazard is personal responsibility, and it’s high time we got a good dose of it.