The Death of Political Capitalism

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We also notice based on Weber’s statement that the more religious the people became, the lesser was their inclination to political capitalism and the greater was their tendency to embrace market capitalism. In today’s debate, libertarians commonly understand political capitalism as related to statism in the forms of interventionism or crony-capitalism. So following Weber’s line of thought, we could say that the greater the commitment of the people to faith communities, the less statist they become and the more they are inclined to free market.

Read the article here.

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A Prosperous 2013!?

As 2013 starts, it is common to hear the greeting “Happy and Prosperous New Year!” However, after watching Overdose: The Next Financial Crisis, I am wondering about the suitability of the greeting.

Here in South Korea, 2013 is perceived as another gloomy year. The Korea Herald considered this year economically darker than 2012. Financial Services Commission and the Korea Institute of Finance mentioned about 570, 000 Koreans who were potentially loan defaulters (January 1, 2013). The Editorials today also mentioned about the stormy year that senior college students and urban settlers will face. It was forecasted that “the number of new job openings will decline from 440,000 last year to 320,000 this year.” The new graduates will find it tough to compete to find a job. Home rentals will also rise this year especially in Seoul’s metropolitan area.

With the kind of economic scenario here in South Korea and the one showed in the above video, can we consider it mentally sound to say and expect that a prosperous 2013 is really possible?

Introducing the Idea of the Covenant

I have been reading the answer of the Austrian economists on this subject. I agree with them that economic prosperity is an outcome of following natural economic laws. However, as a theological educator, I do not believe like the deists do that economic laws are self-operating. I still believe that regardless of the chaos we see, the Creator of nature is still here and is never silent. His will remains sovereign even in economic realm.

In the Bible, we read that Moses told Israel that their economic prosperity is closely connected to fidelity in fulfilling the terms of the covenant, the legal expression of God’s will (Deuteronomy 29:9). In the book of 2 Kings, we find that King Josiah started both religious and social reforms by gathering the entire nation to renew their pledge to the Book of the Covenant (23:1-3).

This idea of the covenant is strange for most people today. They reason out that the Bible and the covenant have nothing to do with economic prosperity. But that is not what we find in reading the Bible.

Interestingly, an Old Testament scholar by the name of Meredith G. Kline wrote a groundbreaking study proving the covenant structure of the book of Deuteronomy. Its structure is similar to the structures of the legal treaties in the ancient near east. Ray Sutton and Gary North utilized this discovery in writing their own books.

In simple terms, the structural similarity of Deuteronomy with ancient near east treaties includes the following:  the One who is really in control, authority based on representative government, moral standard, blessing and curse, and continuity.

Both Sutton and North argued that the terms of the covenant are not only limited to Israel. Since the God of the Bible is the Creator of all, no one can escape the terms of the covenant. Each one of us is either a covenant breaker or a covenant keeper. This declaration holds true even for the three most important human institutions: state, church, and family.

The Widespread Violation of the Covenant

There is a saying, “Ignorance of the law excuses no one.” The same truth applies to the demand of God’s covenant. Whether we accept the existence and the terms of God’s covenant, this does not change the truth that we remain accountable to God and His covenant. If we will assess today’s generation, ignorance of God’s covenant is pervasive and so is the violation of its terms.

Take the state for instance. Today, many libertarians and reformed theologians claimed that the government has been heading towards totalitarianism. It is claiming divinity to itself. There is no one higher than the state. And add to it the fact that people today look to the state as their savior.

This dictatorial tendency of the state is evident towards its attitude to private property and personal freedom. And there are indications today that even the Lordship of Christ over the church is now being usurped by the state. It is also noteworthy that Ray Sutton wrote another book, “Who Owns the Family?” identifying the coercive power of the state over the family.

Taking the third component in the covenant, you will see that the standard of morality today is blurred. Absolute ethical standard no longer exists. Polls and majority votes decide morality. Abortion is no longer considered murder. Theft in the form of currency debasement is now termed quantitative easing. Internet pornography is not perceived as adultery. Divorce is now becoming the norm. Same sex marriage is now allowed. LGBT (lesbians, gay, bi-sexual, and transgender) is now increasingly gaining a voice and becoming more influential. We are living in a licentious world. Almost everything is allowed. Each one has his own standard of what is right and wrong.

And since people no longer believe in absolute moral standard, the idea of obedience and disobedience, curses and blessings is unacceptable. People do not believe in divine judgment both in time and eternity. It is primitive and foolish to believe in such things. Global economic crisis and escalating violence around the world are considered natural.

As to continuity, the basic unit of society is breaking down. Fathers are abandoning their children. Rate of crime is increasing. The recent Connecticut massacre is just one example. It appears that the social fabric around the world is about to collapse. We just wonder what the world would look like 10 to 20 years from now if these trends will continue to escalate.

Renewal of Pledge to the Covenant

Returning to our question, I personally believe that economic prosperity is promised to those who will renew their pledge to the covenant. As of now, I cannot elaborate in this article the distinction between the covenant of works and the covenant of grace. It is sufficient to note that all men are under the covenant of works whether they accept it or not.

As far as King Josiah’s generation was concerned, economic prosperity started in the renewal of pledge to the covenant (2 Kings 23:1-3). Such renewal manifested in religious and social reforms. But it all started with a national gathering. I describe this gathering as a “holy gathering”, a gathering in the presence of the Lord, a gathering centered on the Book of the Covenant.

King Josiah gathered all the elders, priests, prophets, and all the people from the least to the greatest. We need the same kind of gathering today, but ignorance of God’s covenant is the primary obstacle. Even the Church is no longer aware about the existence of such covenant.

In our time, there are so many gatherings of powerful people including politicians, bankers, and economists, and all they can provide is false hope and phony prosperity.

I still believe that education holds the answer to present day economic crisis, but not the type of education that we have right now. The ultimate goal is biblical education. Education in free market ideas and libertarian principles is part of this. I understand this as education in natural revelation. The Bible affirms such type of education. And the best place to start this is among Christian homes. Fathers will play a vital role in this education.

Conclusion:

Moses showed the connection between national greatness and following the terms of the covenant. He declared to his generation: “See, I have taught you decrees and laws as the Lord my God commanded me, so that you may follow them in the land you are entering to take possession of it. Observe them carefully, for this will show your wisdom and understanding to the nations, who will hear about all these decrees and say, ‘Surely this great nation is a wise and understanding people.’ What other nations is so great as to have their gods near them the way the Lord our God is near us whenever we pray to him? And what other nation is so great as to have such righteous decrees and laws as this body of laws I am setting before you today?” (Deuteronomy 4:5-8).

Reference: Sutton, Ray R. 1987. That You May Prosper: Dominion by Covenant. Tyler Texas: Institute for Christian Economics.

Currency Debasement

“Your silver has become dross, your choice wine is diluted with water” (Isaiah 1:22).

The prophet Isaiah brought a concrete economic case against the people of Israel. There are two sides to this case: currency debasement and loss of quality of top national product in the market. There is fraud and deception both in the medium of exchange and the products businessmen sell in the market.

The prophet was not simply dealing here with a “spiritual analogy.” He was clearly talking about currency debasement serving as concrete proof that the people of Israel had already departed from their God. Instead of serving as “salt” and “light” to the world, Israel misrepresented their God by their corrupt economic activity.

God presented his case against His people through His mouthpiece, the prophet Isaiah for the people of Israel to reform their economic practices. Refusing to listen to the warning of the prophet would mean certainty of judgment. It could be in the form of war, plague, and famine. God will not tolerate fraudulent economic practices indefinitely.

Currency Debasement Destroys Empires and Civilizations

Gary North in chapter 3 of his book, Honest Money, clearly indicates that currency debasement is closely associated with the moral corruption of both the political leaders and the public (p. 42). He further identifies that the modern equivalent of currency debasement is now evident through the creation of paper money without a gold reserve. Following this logic, we could say that the creation of paper money is clear evidence that those in power are morally corrupt. People that support this practice are also corrupt. Isaiah’s case against Israel is also a case against modern-day society.

The continuous creation of paper money in our time without reserve would also mean continuity of this “invisible” and “indirect” stealing from public wealth. This would further result into tougher economic life for the majority. Denial of this fact springs from ignorance of monetary history and dismissal of the applicability of God’s economic commands.

Why currency debasement is difficult to stop? Aside from the fact that this is profitable for those in power, most people really do not know the implications of this fraudulent practice. People are not aware that ultimately they lose economically and those who win are those who have immediate access to the newly created paper money and spend it fast into the market. People lose for they get access to the newly created money late when prices of commodities have risen already. People depending on fixed salary are hurt the most.

In the existing monetary system, the minority wins at the expense of the majority. Not everybody will benefit from the present set up of modern economy. No new wealth is created through the creation of paper money.

Those who study the history of money claim that downfall of civilizations and wars are closely connected to the destruction of monetary system. If we will refuse to learn from history and fail to respond accordingly to the present-day monetary crisis, we will just witness in our time a repetition of our past.

Note: This article is a summary and reflection of Chapter 3 in the book, Honest Money. 

Honest Economy

Do not use dishonest standards when measuring length, weight or quantity. Use honest scales and honest weights, an honest ephah (dry measure), and an honest hin (liquid measure). I am the Lord your God, who brought you out of Egypt (Leviticus 19:35-36).

God gave this command for Israel to govern her economic activity with honesty. God expects Israel to obey this command. God states the reason in giving this command – He is the one who liberated them from slavery in Egypt. By stating this reason, in a way, God is telling His people that if they fail to follow His command, He is also able to send them back to slavery.

Through this command, God demonstrates that He and His word are sovereign in man’s economic activity. Israel is to be the “salt” and “light” of the world through their economic activity as a nation. If honesty rules supreme in their economic activity, God is properly represented by His people before the world.

Exercising honesty in economic activity entails a standard. This standard must be fixed. Without this standard, it is impossible to maintain order and harmony in economic activity. This standard is evident in the market through the use of physical measurements.

This measurement can assume diverse forms – scales, weights, and balances. To tamper with this standard of measurement is a clear violation of God’s command.

People who are prone to violate this command are those who have access or control over such physical standard of measurement. In the market, it is the sellers. People trust the sellers. Without trust, economic activity is difficult to maintain. But when sellers abuse people’s trust and cheat them by tampering weights, they are actually robbing the people.

Honest Money

Tampering physical measurements has both immediate and ultimate consequences. When sellers get away with their unjust economic practices, corrupt people win and honest people lose. It further reduces the efficiency of the market for buyers will be more cautious in the next economic transaction screening fraudulent economic practices. God does not tolerate such men indefinitely. Ultimately, he will bring wicked men and their evil economic practices into judgment.

In our time, tampering physical measurements is done in various ways. One common example is by “injecting water” into fowl’s meat. In this case, it is not the weight that is tampered, but the goods. But the offense remains the same. There is deceit and honesty no longer governs man’s economic activity.

When it comes to monetary transaction, fraud and deceit are more difficult to uncover. Unlike in the old days when people used gold and silver as medium of exchange, it was easy to identify whether the fineness of gold or silver coins was tampered. But in a world of paper money, fraud is hiding behind human laws and that is why people cannot see it.

The idea of paper money originally came into existence to represent gold money in bank reserve. Each paper money represents a corresponding gold coin in reserve. This is just and honest. To issue therefore a paper money to the public without the reserve is fraudulent. It is theft. It is a kind of tampering with weights and physical measurement.

The big problem now in the existing monetary system is the creation of paper money without even a reserve. Austrian economists call it “counterfeiting.” It is a form of theft. It is a clear violation of God’s economic command.

Note: The original idea in this article is taken from Chapter 3 of Gary North’s book, Honest Money.

Disappointed and…Encouraged

After writing “Savior of Capitalism and Champion of Free Market,” I happened to join a LinkedIn group, Ludwig von Mises. Since I am new to this “Austrian School,” my intention in joining is just to have a feel of the current developments in Austrian ideas. One thread caught my attention. It is about Milton Friedman.

To my surprise, members of the group are praising Friedman as a libertarian. I could not understand for it is contrary to what I have been reading so far. So I raised a question and quoted Murray Rothbard about the need to precisely identify the economic position of Milton Friedman. I received an immediate reply implying that Rothbard’s position is invalid in “real world economics,” and Rothbard himself an “escapist” into economic fantasy land. The responder further asserts that to ignore the contribution of Milton Friedman going to the “right direction” is foolish. Murray Rothbard is foolish in the eyes of this group member.

Being a new member, I just voiced out my disappointment by stating what I thought to be in his mind. My greater disappointment is caused by the silence of other members that to me, it only means that the position of the group on Milton Friedman is the dominant one.

Resulting from that experience, I made a tentative conclusion that for Austrian ideas to spread, the economic position of the followers of Friedman must be exposed. They claim to be proud members of the “libertarian” camp. To me, they are nothing but confused followers of the statist version of “libertarianism” and “free market” ideas.

After a day, as my custom, I visited LewRockwell.com to see new articles written by Gary North. I am happy to read The Future of Austrian School. It is a confirmation of my early conviction. I am glad to receive such confirmation from an Austrian economist himself about the future of Austrian School. In that article, North reports about a seminar at Mises Institute attended by more than 150 students from 20 different countries. As a result of such experience, he foresees a promising future for the spread of Austrian ideas. He recalls that from a humble beginning in the 1950s, the Austrian mindset is now an international movement that is rapidly growing.

North cites how the web serves as a powerful tool to educate the people. The present economic crisis is waking up increasing number of people to the significance of Austrian thoughts. Ron Paul is the common starting point for most people. His consistent message serves as an eye-opener to many.