The Humane Economy of Wilhelm Ropke

To some people, free market economics is the worst social evil of our age that is responsible for every other social evil. What causes Racism? Capitalism. Child abuse? Free market. Objectification of women? The market economy. War? Economic liberty. Poverty? The same. Bad hair days? Definitely capitalism, too. You get the idea.

On the other hand, there are others for whom free market economics are akin to the good news of Jesus Christ. Andrew Carnegie did, after all, write a book called, The Gospel of Wealth, which largely extols the market economy. There are others to this day who see capitalism as not merely permissible by God, but actually required by a correct reading of Scripture.

In reality, liberty, including economic freedom, is a necessary condition for human flourishing, but it isn’t a sufficient condition. The free market economy the cleanest dirty shirt we’ve got. Like any human system, it has sinful people involved, so it is subject to abuse and distortion. Unlike other human economies that have been envisioned, it has the best means to keep people’s natural tendencies toward evil and oppression in check.

One of the most careful proponents of a free market that I’ve read in Wilhelm Röpke. He was a German who emigrated to Turkey in 1933 because of his resistance to the National Socialist regime. Early in his life he was inspired by socialism, later by the Austrian school of economics, and finally landed on a position that encourages a free market with targeted and limited government interventions. Röpke argued for what might be described as a humane capitalism. Röpke was one of the main thinkers that inspired the creation of the West German economic system after World War II, which helped to shape its balance between social welfare and free market, a system that resulted in West Germany rapidly recovering and developing into an economic power, with East Germany lagging behind, mired in socialism.

Röpke’s classic book, A Humane Economy, is an important book for socialists and libertarians to read so they understand both the needs for and perils of a free market.

One of Röpke’s concerns is over “mass society.” It was the enmassment of human activity that Röpke had witnessed in the rise of fascism in Europe before the war. Like other forms of socialism, the National Socialists ceased to recognize people as individuals or small units, and pursued global solutions with a faceless homo economicus as the actor. This faceless stand in for humans sometimes makes a good generalization, but it fails to take into account the goodness of owning a business, of small firms being able to compete in a grand economy, and of individual craftsmanship. At the extremes, unfettered capitalism and socialism lend themselves to aggregating humans into the faceless mass. Röpke was just as opposed to corporate monopolies as he was to state monopolies. Unlike some contemporary neoliberals, Röpke recognized that the power of the state was essential in preventing any sort of monopoly from forming.

What makes Röpke particularly significant is that he honestly represents the damage that redistributive programs like welfare can have as they encourage inflationary economics and can reduce the incentives to engage in meaningful economic activity. At the same time, he demonstrates that well-designed welfare systems can be essential to provide a safety net and can actually prevent the worst cases of abuse by the state and by corporate entities. Röpke is exactly the sort of thinker that will make people on both poles of contemporary social and economic debate uncomfortable, which is one of the best reasons to listen to him.

Another important aspect of Röpke’s perspective is that he emphasizes the necessary balance between collectivism and individualism. Both ideas in the extreme are debilitating to society. Röpke writes, “Man can fulfill his nature only by freely becoming part of a community and having a sense of solidarity with it. Otherwise he leads a miserable existence and he knows it.” A more apt criticism of most forms of socialism and the contemporary economy in the United States could not be written. In socialism, one is forced to assimilate with the mass, to contribute as the authorities deem necessary and to receive in exchange only that which the collective deems warranted. In late post-industrial capitalism, one tends to be isolated from the collective, set to gain what one can earn on her own, and catechized to believe that individual freedom is something of a summum bonum. To some degree, at least, Röpke seems to offer a golden mean.

In A Humane Economy there is resistance both to state totalitarianism and the totalitarian utilitarianism of some economics. But he is unquestionably opposed to the ravages of Communism. Röpke argues:

“Totalitarianism gains ground exactly to the extent that the human victims of this process of [social] disintegration suffer from frustration and non-fulfillment of their life as a whole because they have lost the true, pre-eminently non-material conditions of human happiness.”

He continues,

“What the free world has to set against Communism is not the cult of the standard of living and productivity or some contrary hysteria, ideology, or myth. This would merely be borrowing Communism’s own weapons. What we need is to bethink ourselves quietly and soberly of truth, freedom, justice, human dignity, and respect of human life and the ultimate values. For these we must set our course unerringly; we must cherish and strengthen the spiritual and moral foundations of these values and vital goods and try to create and preserve for mankind such forms of life as are appropriate to human nature and support and protect its conditions.”

This sort of attitude is what makes Röpke so helpful. He recognizes the horrors of socialistic economics, but also sees the abyss that is a purely materialistic utilitarian capitalism. Röpke reminds us that at the heart of the economy is the human. We are not graphs and statistics alone. Those things can be helpful, but they are not enough. We need to be more humane by treating people around us like humans. Economics can only function when it is constrained by virtue.

A Humane Economy: The Social Framework of the Free Market

By Röpke, Wilhelm

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Is Socialism Ecologically Friendly?

There is an odd correlation in some of the public square between socialism and the ecological movement. The so called “Green New Deal” is a major example of this, where a proposal has been created to install socialism in the United States for the sake of the environment. This belief in the environmental friendliness of socialism didn’t begin with thoughts of the recent proposals, but the logical connection between the two is dubious, at best.

The first time I came across the argument that socialism was the best solution to the environment was in Naomi Klein’s popular book, This Changes Everything. It was a shoddy book by an activist who writes journalistically, but given the popularity of Klein’s sales and the increasing popularity of the combination of economic control and ecology she proposes, it seems to resonate with a number of people.

Among Klein’s basic proposals is a Universal Basic Income (UBI), which has supporters on both among free market advocates and those who desire more centralized economic control. She claims UBI “makes it possible for workers to say no to dirty energy jobs but also because the very process of arguing for a universal social safety net opens up a space for a full-throated debate about values.” (Klein, 2014: 461) Given that in her recent book, On Fire, Klein offers a definition of “green jobs” that include daycare workers, it isn’t clear exactly what a “dirty energy job” is and why it should be resisted. (Klein, 2019: 268)

But the deeper issue is that there is often no clear connection between socialism and improving the environment, the very grounds on which the so-called Green New Deal is supposed to stand.

As the Washington Post revealed in this profile of Saikat Chakrabarti, who has been one of Rep. Alexandria Ocasio-Cortez’s political handlers, the so-called Green New Deal was originally not about the environment, but about imposing socialism on society:

Chakrabarti had an unexpected disclosure. “The interesting thing about the Green New Deal,” he said, “is it wasn’t originally a climate thing at all.” Ricketts greeted this startling notion with an attentive poker face. “Do you guys think of it as a climate thing?” Chakrabarti continued. “Because we really think of it as a how-do-you-change-the-entire-economy thing.”

This was readily apparent to many who read the summary of the so-called Green New Deal proposal and noted that it took a great deal of time to get to anything that was supposed to benefit the ecosystem.

The conflation of radical redistribution with eco-friendly is not unique to political formulations of ecology, though. In his book, Religion and Ecology: Developing a Planetary Ethic, queer-theorist Whitney Bauman proposes (1) free higher education (and transferring student loan debt to the U.S. government), (2) global, universal health care, and (3) an increase in leisure time as key remedies for environmental ills, the method for which is not clearly defined. (Bauman, 2014:  147–148) The idea is to get people disengaged from economic activity so they take on the attitudes of “polytheistic nomadism” and have space to imagine a world that is truly environmentally friendly.

The message seems to be that by granting economic power to a central elite––an oligarchy that we will democratically choose, of course––people will stop working so hard and have time to consider the lilies.

There is no question that this sounds terrifically appealing on a Friday afternoon after a long week of work. And, of course, there is some helpful truth within the ideas, which allows people to focus on the legitimate good(s) proposed without considering the damage it would take to get there or what it would do to society.

As a Christian and a non-libertarian advocate for a Free Market economic condition, I believe that debt from higher education (and a whole bunch of other consumer sources) is too high, that we need to reevaluate and structurally improve our health care system at many levels, and that the harried pace of modern life are damaging to the human psyche. I am also of the opinion that we need to think carefully about our individual and corporate impact on the environment and continue to make adjustments at all levels.

However, I can’t support proposals like the so-called Green New Deal because of some of the fundamental flaws in the worldview.

Can Socialism Self-Regulate?

More significantly, I cannot support movement toward socialism on environmental grounds, because centralized control of the economy has not consistently led to a positive outcome for the environment. For the sake of this discussion, I will accept the traditional definition of socialism, which is that the government owns (or substantially controls) the means of production. (There are competing and historically naïve definitions in existence, so such a definition is warranted.)

At a fundamental level, it seems illogical that central planners will self-police environmental issues to the degree that advocates of socialism hope. When the local, state, and federal government are independent entities, they have both standing and incentive to enforce environmental regulations and seek damages from corporate entities that pollute. However, once the various levels of government and production are simply branches of the same massive entity, it is not clear they will have the political will to essentially self-enforce regulations.

Of course, the counter argument is that it isn’t a totalitarian socialism that is being proposed but a “democratic” socialism. However, when a few thousand people are being affected by a chemical spill for the benefit of the rest of the population, it doesn’t take too long to imagine how majoritarian democracy could choose to neglect that tiny minority. It also becomes less and less clear how people will be able to vote in their long-term best interests when their immediate good in regulated by the tiny minority in power, but that is a discussion for another day. It might be more helpful to look at historical examples to see how ecological health has fared under socialist economies.

Historic Impact of Socialism on the Environment

Historically speaking, socialistic systems have not been particularly good for the environment. In his book, The Art of the Impossible, Vaclav Havel describes the environmental blight caused by socialism the former Czechoslovakia. Similarly, historically, the levels of pollution in East Germany were several times that in West Germany during the reign of socialism. Then, you have the ongoing environmental blight and gross pollution present in today’s China, which has made some capitalistic reforms, but is still recovering from their economic communism. During Moa Zedong’s rule, his government created a famine by exterminating sparrows because he thought them to be pests, thus disrupting the ecosystem. The list can go on significantly and include the ongoing environmental meltdown in Venezuela. It is also worth noting that the so-called “good” socialism of the Scandinavian countries is rated near the bottom of the Sustainable Development Index. (For the record, these countries are not socialistic.)

But, some might argue, communism isn’t real socialism and what the so-called Green New Deal is proposing will be environmentally better. First, since the so-called Green New Deal is being compared favorably to FDR’s New Deal of the early 20th century, we can consider the impact that farm subsidies have had on the environment. One of the chief concerns about farming is topsoil depletion, which is significantly accelerated due to monoculture. The rise of agribusiness and the propensity toward monoculture of crops have been enabled and accelerated by FDR’s Agricultural Adjustment Act, which was a precursor to the modern farm bills. The industrialization of farming has only accelerated topsoil depletion. It is unclear that any new proposals from the so-called Green New Deal programs will do much better.

Conclusion

While there is a groundswell movement on the political left to link the concentration of economic power in the Federal government and environmental health, it is unclear that such a movement will have a positive outcome for the environment. In fact, there is good historical evidence that exactly the opposite will occur. We certainly need economic reform, but it might be better to think local, compassionate, and personal instead of looking to socialism.

The Art of the Impossible - Speeches by Vaclav Havel

Looking back, the fall of communism in Central and Eastern Europe came suddenly and, in many cases, was completed with relatively little bloodshed. One example of this is the so-called Velvet Revolution in Czechoslovakia, which led to playwright and dissident, Vaclav Havel, being elected president in a bloodless rebellion.

In a 1997 book, The Art of the Impossible, we are provided the texts—translated into English—of a number of Havel’s speeches from his time as president of Czechoslovakia and, a few years later, the Czech Republic. As historical artifacts, these speeches are somewhat interesting. However, as expressions of a political philosophy, the speeches are engaging and thought provoking.

After decades of resisting Soviet occupation and communist rule, Havel had the responsibility to help his country peacefully transition to a democratic, free-market political economy. The risk of this transition leading to political violence against the former oppressors is always real. Simultaneously, the temptation for the new ruling class to become just like the old ruling class was strong.

The speeches in this volume are arranged chronologically, so they have a variety of topics. There is a clear trajectory in them that shows the ways Havel’s nation was changing and the landscape of Europe was shifting to accept the former Soviet-bloc countries. Each of the chapters, however, seems surprisingly frank and open.

For example, the first speech was given on New Year’s Day in 1990, shortly after communism had been overthrown and Havel named president. He notes early in his speech, “Our country is not flourishing.” But this was not simply due to the political turmoil, but a profound misdirection of society, because,

“The enormous creative and spiritual potential of our nations is not being used sensibly. Entire branches of industry are producing goods that are of no interest to anyone, while we are lacking the things we need. A state that calls itself a workers’ state humiliates and exploits its workers. . . . We have contaminated the soil, rivers, and forests bequeathed to us by our ancestors, and today we have the most polluted environment in Europe.”

Havel could say this, of course, because he was looking at the abusive legacy of four decades of communist tyranny. However, the quick pivot toward arguing that he is going to make everything great again doesn’t come. Instead Havel emphasizes the difficulty that lies ahead and how much it was going to take to become a healthy nation.

One of the major themes in this work is responsibility. In contrast to contemporary political discourse in the United States, which typically focuses on rights. On the left, the concern is positive rights: the right to have other people work to provide something for me. On the right, the concern is typically negative rights: the right to own weapons, live faithfully, and keep a larger percentage of wealth. In a state of precarious need, Havel draws people’s attention to their duties to each other and to society in a powerful way.

Among the more interesting speeches is his speech on “The Anatomy of Hate,” given in 1990, only a few months after the fall of communism. As a man who had suffered so greatly in prison, it must have been difficult not to hate his oppressors, but Havel explains the pieces of hate in a way that makes it clear why its pull is so strong and why he resisted it. This chapter alone is worth the price of the book.

Collections of thought like this are helpful for those in generations who have not witnessed the destructive power of communism, because Havel provides examples and testimonies of how oppressive that form of socialism is and, after having experienced the “benefits” of full socialism for decades, how eager the population was to get a market economy. There is a moral difference between socialism and a market economy, and the second is preferred by people who have experienced the first.

At the same time, Havel is clear that freedom cannot exist without responsibility. This responsibility, Havel argues, is rooted in the human understanding of the existence of a transcendent power beyond our immediate understanding. Though Havel explicitly denies being aligned with any particular religion, he recognizes the common recognition within humanity that there is something that made all things, holds all things together, and is moving history toward something. In a manner similar to Solzhenitsyn’s Harvard Commencement Address, Havel calls for respiritualizing politics and daily life; the acknowledgement of something greater helps reduce the absolutizing abuses of ideology.

These speeches are surprisingly fresh and insightful, given some of them are three decades old. The landscape of world politics, particularly politics in Europe, have changed significantly, but many of the challenges Havel recognized are still evident and, indeed, still need to be dealt with.

The Art of the Impossible: Politics as Morality in Practice

By Vaclav Havel

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Socialism Sucks - A Review

I requested a review copy of Socialism Sucks: Two Economists Drink Their Way Through the Unfree World on a whim. The title is provocative and the subtitle sounds intriguing (if not a model of virtue). Given the title, I expected the book to be somewhere beyond polemical into the range of bellicose. Thankfully, the coauthors, Robert Lawson and Benjamin Powell, are not mean drunks.

Lawson is a professor at SMU and, perhaps more significantly, is one of the co-creators of the Economic Freedom of the World index. Powell is executive director of the Free Market Institute and a professor at Texas Tech. There are men who are convinced that a free market it the best economic system. They are libertarians. And, apparently, they enjoy good beer.

The premise of the book, which was proposed via a slightly tipsy text, is that these two economists would travel to various countries impacted by socialism and sample the local beverages while they examine the health of the economy. Their journey takes them from Sweden through China and all the way back to the United States. The chapters are a mix of reporting from ground level and discussion of economic principles. Who would have expected that when going on a pub crawl with these men, readers would learn something about economics?

After an introduction that begins with salty language and breezy prose, the authors go to Sweden. The beer in Sweden is good, though expensive. Of course, Sweden is not a socialist country, so the quality of the beer is not surprising, given Lawson and Powell’s thesis of the deficiencies of socialism. However, the beer is also notably expensive because of the high taxes needed to support Sweden’s bulky welfare system. Sweden is, in fact, able to support their generous welfare system because they have one of the freest economies in the world.

Next stop on the journey is Venezuela. The authors actually spend more time in Colombia along the Venezuelan border, because it isn’t safe to enter Venezuela. But what they see is tragic. The once-prosperous nation of Venezuela has residents streaming across the border to Colombia on a regular basis to get goods (like diapers and sugar) that are simply unavailable in their home country. Inflation is so bad that the authors exchanged a US $20 for a foot-high stack of large denomination Venezuelan currency (and they likely got the short end of the stick). The collapse of the economy in Venezuela is, as Powell and Lawson explain, largely due to attempts at price control, seizure of private property by the government, and strict controls on imports and exports. Oh, and beer is generally unavailable in Venezuela because the government won’t allow them to import hops.

After that dreary visit, they go to Cuba. It is, according to some, a paradise of free medical care. What tourists find when they venture off the beaten path is a dreary socialism that is barely making ends meet. There are some restaurants, but their menus are nearly identical and bland. The hotels run by the government are mediocre at best. The beer is bland and low quality. Cars are exorbitantly expensive, even for moderately functional units.

The third stop on the journey is North Korea. This time the authors do not actually go into the country because they have a friend who spent over a year in a labor camp for his visit. What they see from a neighboring Chinese city is a radical difference between the extreme poverty of North Korea’s socialist economy and the pseudo-capitalism of China. These libertarian professors even choose to forgo a strip club with North Korean girls, not because of any sexual virtue, but because they realize that many of the staff at the club are trafficking victims who were merely looking for a way out of North Korea. The misery of North Korea is even more striking when the prosperity in South Korea is considered in comparison. In this chapter, Powell and Lawson drink Swedish beer again, because there is no North Korean beer. In China, however, the beer is cheaper than in Sweden because the taxes are lower.

Although China is governed by the Communist party, there have been significant market reforms in the past few decades. Thus, the authors call it “fake socialism.” There are, to be sure, still significant aspects of the Chinese economy that are not free. What China has is crony capitalism, which is an advance on socialism, but still effective in keeping many Chinese people from prospering.

In Chapter Five, Lawson and Powell’s excellent adventure takes them to Russia and Ukraine, which are hungover from the socialism of the Soviet empire. Their visit to the epicenter of communism serves as a reminder of the millions of people enslaved and slaughtered to make socialism work. One of the most striking vignettes in this chapter is the prevalence of abortion, particularly when the Soviets were in power. It was not something that was particularly good for women, contrary to recent attempts to whitewash abortion and the Soviet regime. According to an estimate by Soviet gynecologist Archil Khomassuridze, “women in the Soviet Union had between five and eight abortions for each birth.” (pg 97) It was done in an assembly line manner, as this quote from a feminist magazine outlines:

“You go into a hall splattered with blood where to doctors are aborting seven or eight women at the same time; they’re usually very rough and rude, shouting at you about keeping your legs wide open et cetera….if you’re lucky they give you a little sedative, mostly Valium. Then it’s your turn to stagger out to the resting room, where you’re not allowed to spend more than two hours because the production line, you see, is always very busy.”

The libertarian authors are not opposed to abortion, but they still find this outcome of socialism horrid. The prevalence of abortion was largely driven by the unavailability of birth control and resistance to large families due to economic difficulties. The medical conditions were representative of the socialist approach.

On a more positive note, the next destination is the Balkan nation of Georgia. Since they have become free from Soviet rule, markets have begun to flourish thanks to the work of several of their leaders and laws intentionally written to encourage development. The result is an economy that is beginning to grow and recovery from the misery of socialism. It takes times to recover and the ugly Soviet-era buildings remind visitors of the joylessness of socialism. Since the fall of the Soviets the local wine industry has flourished. It was an age-old craft that the Soviets sought to eliminate, but local grapes fermented by local methods have made Georgia a stop for wine tasters in Europe as the country opens up to free markets.

In Chapter Seven the authors return to the United States to visit a conference of American socialists in Chicago. They attended multiple sessions to hear about socialism from those who are advocating for it. Then, they proceeded to the privately owned bar down from the convention to casually interview conference attendees over glasses of beers with socialist brands. What Lawson and Powell discover is that there was almost no discussion of actual socialism at the convention and, when asked, conference goers thought that socialism was about support for abortion, queer ideologies, and freeing the oppressed, immigrant rights, and Black Lives Matter. The two economists were politely confused by the failure of the supposed socialists to understand the ideology they were advocating for. Their theory is that, like many cults, the real economic socialists are allowing the conversation to stay on the popular topics instead of revealing the black center of the ideology.

Each of the chapters is a mix of stories about their travels, with a heavy emphasis on the quality of the booze, the food, and the hotels, and economic principles written at an accessible level. Though its title is splashy and some of the language salty, this is an ingenious way to get some people to understand why socialism really isn’t a good thing for anyone except those at the center of power. This is an example of winsomely explaining a topic so that an unusual audience might listen. This might be the only way to get some college sophomores to actually move beyond the memes into some meaningful economic theory.

Socialism Sucks: Two Economists Drink Their Way Through the Unfree World

By Robert Lawson, Benjamin Powell

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NOTE: I received a gratis copy of this volume from the publisher with no expectation of a positive review.

Empirical Foundations of the Common Good - A Review

Empirical Foundations of the Common Good is the sort of project that offers hope for interdisciplinary dialogue. The premise of the book is to provide a response to the basic question how social sciences can inform theology. For the most part, the essays are helpful in this regard, especially for those who rely on traditional Catholic Social Teachings as a foundation for their theology.

With a few exceptions, the non-theologians’ explanations of their contribution to theology are helpful. The majority of the authors avoided the assumption that theology should conform to the findings of their discipline; instead they argued that their disciplines could inform the application of theology.

For example, Christian theology makes the moral claim that Christians should be engaged in seeking the welfare of the poor. Economics provides evidence for how best that should take place. Or, to state it differently, theology provides the telos for the method of economics. When political science, public policy, sociology, and economics claim to provide both the definition of the common good and the method for attaining to the common good, they transgress into the area of applied theology, or ethics. When discipline failure like that happen, the result is the current elevation of politics, economics, and sexuality to the status of summum bonum for society. That, as we see around us, is a guarantee of the pursuit of anything but a true common good.

After Daniel Finn’s editorial introduction, the volume contains eight essays by experts in a variety of disciplines, all making arguments about how their particular discipline contributes to theological arguments about the common good. Chapter One is political scientist, Matthew Carnes, showing how his discipline contributes to a cross-disciplinary discussion through four emphases within Political Science. In the second chapter, Andrew Yuengert asserts that economics can help theologians understand the role of individual choice in seeking the common good. Mary Jo Bane, a public policy specialist, argues in Chapter Three for the contribution of her discipline in helping theologians understand trade-offs implicit in pursuing the common good. In the fourth chapter, Douglas Porpora argues that sociologists have little to say about the constitution of the common good, but have a great deal of expertise in showing how to measure and evaluate the pursuit of those theologically identified ends.

Charles Wilber, an economist, echoes Porpora in his essay in Chapter Five. He argues that economics can help measure progress toward human flourishing, while acknowledging the failure of most economists to separate economic metrics from a holistic understanding of the common good. The sixth chapter puts bureaucracy in perspective, as Gerardo Sanchis Muños dissects the failure of public service to serve the common good. Theologian David Cloutier critiques contemporary iterations of Catholic social teaching, pointing to less individualistic emphases in earlier stages of the tradition in Chapter Seven. The eighth and final chapter, theologian-economist Mary Hirschfeld reasserts the importance of theology for the social sciences, so that a proper understanding of the common good may develop.

The clear message of this volume is that theology needs social sciences to understand how to accomplish its moral ends, while the social sciences need theology to inform them of the nature of the common good. In the present fragmented state of academia, there is too much isolation in separate ivory towers. That is unhealthy for students and tragic for the development of robust worldviews that have a defined end and cogent methodology.

Somewhat surprisingly, this volume is favorable toward markets, though critical of market economics untethered to a moral foundation. However, the various authors regularly affirm the improved possibilities for flourishing that come from enabling market economics. Given the use of Catholic Social Teaching by some to argue for forms of economic socialism, this is volume that deserves careful attention. It may be that proponents of various forms of socialism are, in fact, conflating a pursuit of the common good with discredited means to achieve it.

Like other volumes that Finn has edited, this collection of essays reflects careful conversation. The essays refer to one another and show signs of having been shaped by the arguments in various chapters. This makes the volume easier to read and more helpful for classroom instruction or dialog than many edited volumes that appear to be a random collection of voices shouting in the wilderness.

If there are two things clearly explained in this volume it is (1) that we need more interdisciplinary dialogue, else theology and social sciences tend toward tyranny, and (2) we need not abandon the methodology of market economics for central planning to better approximate the common good.

Empirical Foundations of the Common Good: What Theology Can Learn from Social Science

$85.17

Oxford University Press

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Note: I received a gratis copy of this volume from the publisher with no expectation of a positive review.

Is Governance Apart from Government Possible?

How much government is sufficient? What sort of governance is appropriate?

Contrary to popular belief, the common view even among free market advocates is that some government is good. Most people argue government is necessary to enforce contracts, ensure market participants act in good faith, maintain law and order in the street, etc.

Edward Stringham’s recent book, Private Governance: Creating Order in Economic and Social Life, seeks to upend that common view. What he ends with is a thesis that points toward valuing and celebrating private governance, which is an idea vastly different that anarchy.

Summary

The book is divided into three uneven parts. Part One consists of three chapters that explain what private governance is and why it is often preferable to government. Part Two contains eight chapters in which Stringham walks through historical and modern examples of private governance in action. Part Three has three chapters attempting to summarize the lessons learned about private governance from the previous eleven chapters.

As Stringham outlines in his introduction, “Private Governance describes some of the major mechanisms that private parties use to produce social order and highlights how modern markets would not be possible without them.” Basically, he is describing the reality that the government cannot effectively regulate the market, no matter how hard it tries. That, however, is something entirely different than saying the market is unregulated.

The “legal centralist” view, as Stringham calls it posits the law as a sort of Deus ex machina that can step in to settle disputes, enforce contracts, and make everything go just right. Even among free market advocates, there is still a strong acceptance of legal centralism.

Instead, Stringam argues, club rules are both more effective, more fair, and more likely to result in mutually acceptable outcomes. Voluntary associations, which are a bedrock of a free society, are typically more effective in governing because they tend to be interested in overall success, not merely seeking self-justification or simply unconcerned for the outcome as much of the government can be.

This is a bold thesis, so Stringham provides a number of case studies to illustrate when private governance worked well in the absence of legal support. The most startling example is of the world’s first stock market, which was founded in the early 17th century in Amsterdam. The early market had a wide range of securities with contracts that the government expressly refused to enforce. And yet stock in the East India Company and other ventures were traded successfully between willing market participants. New derivative forms of stock were invented and futures contracts arranged, all without legal enforcement.

Similarly, the London Stock Exchange arose as a club designed to self-regulate to ensure fair play among its members. Because access to the market was not guaranteed, it encouraged right dealing. So, Stringham is showing, it isn’t that there was no governance, it is that the governance came from non-legal, club-style regulations.

Self-governance led to the creation of mandatory reporting requirements and audit requirements in some stock exchanges. However, those who were willing to accept more risk could form different privately regulated exchanges that managed risks less rigorously.

Stringham provides several other very interesting examples where, undeniably, private governance worked more effectively that legal structures could have. He recounts how PayPal uses private governance to ensure good faith on the vast majority of transactions; transactions that are too small to make legal recourse worthwhile. He recounts the successful use of private police forces in San Francisco when the government was unable or unwilling to deal with threats. He also spends a chapter talking about self-governance, which can be more successful than we allow often simply because of common grace. Stringham spends a chapter outlining the role and benefits of arbitration. He also helps to explain how private governance actually helped mitigate the 2008 financial crisis and how government action significantly contributed to the problems.

Whether you accept his final thesis or not, the examples he provides all illustrate the possibility of significant, complex forms of private governance that help markets and the people who engage in them flourish.

In the last few chapters, Stringham seeks to show how government strips away agency from the customer by intruding in the relationship between the customer and the company. He argues that more often than most acknowledge, governments cross over the threshold from helping to hurting those in the market. Surprisingly, he applies his thesis to the economic philosophy of Hayek and argues that Hayek was too strongly reliant upon government to regulate the market. Stringham concludes the book with an appeal to continue to value private governance, to argue for it, and to seek to reduce imperial entanglements in the market as much as possible.

Analysis and Conclusion

Stringham’s thesis is thought provoking. He argues it well and provides a number of case studies that illustrate clearly how private governance succeeded when most people would expect it to fail. While he didn’t pull me all the way into his camp in eschewing reliance on government enforcement, he does provide a great deal to reflect upon.

Significantly, it isn’t clear that Stringham adequately considers that lack of parity between customers and many corporations. For example, mandatory arbitration clauses are now included in many contracts as a standard feature. So, for example, customers defrauded by Wells Fargo’s malicious creation of accounts on their behalf were prohibited from legal action because of an arbitration clause. When there are no other legitimate options (most banks use some form of this clause), it creates a situation where the customer gets a far worse deal by some accounts. There is more to deal with on this topic, so I hope to conversation continues in the future.

Private Governance: Creating Order in Economic and Social Life

$34.48

By Edward Peter Stringham, Edward P. Stringham, Edward Stringham

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Note: I was given a gratis copy of this volume with no expectation of a positive review.

A Few Things Happened at Acton University

Last week I spent four days in Grand Rapids, Michigan at Acton University. If you look for Acton University on the map you won’t find it because it is a conference, not a formal institution of higher education. However, the content is so broad and educational the creators began to call it a university.

 Acton Institute is a think tank and non-profit organization that exists “to promote a free and virtuous society characterized by individual liberty and sustained by religious principles.” They are known as free market advocates, but there is a lot more to it than that.

 The ethos is profoundly Christian, but also wholesomely ecumenical. By that I mean that the experience is ecumenical in that we were talking about our differences and enriching our common faith without negating the real, and sometimes deep, differences in our understandings of the Eucharist, role of clergy, and polity. These differences remain, but an authentic dialog between Catholics, Eastern Orthodox, and various stripes of Protestants (including a significant Baptist contingent) was made possible due to a commitment not to be contentious about the faith and a common interest in the topic at hand.

 The conference is interdenominational, intergenerational, intercultural, and interdisciplinary.

 One example of this was the informative discussion I had with an Orthodox priest about Alexander Solzhenitsyn. There were many points of difference, but I came away with a deepened perspective on the Russian Orthodox author. Of course, there were points where there was a lack of understanding as one Roman Catholic presenter noted that Catholics have the Nicene Creed while the Presbyterians have the Westminster Confession. The fundamental error in his statement went unnoticed by many, but I saw a number of folks shift uneasily as they decided to let it pass. The intent was good, so the conversation continued.

 One night I sat at supper with the president of a private, classical school in Chicago. We had a great discussion on transitioning into classical education from conventional schooling. We also talked about environmental ethics, alternative energy, and the quality of the food. He is a retired journalist, so he shared some of his reporting experience, which spanned several decades. Another night I had a long conversation with a retired efficiency expert who had consulted with companies throughout the world. He was Dutch, but had recently become an American citizen.

 Another night, I shared a table with some Nigerian pastors. They were amazed that we Americans could eat meat every night and cheesecake, too. Then, the bespectacled pastor asked me how he could get a pair of rimless glasses like mine, so we explored the wonders of online optical stores on a smartphone. His phone was nicer than mine. This was an international experience.

 Then there were philosophers, historians, lawyers, engineers, housewives, pastors, firemen, soldiers, butchers, bakers, and candlestick makers. Actually, I didn’t see any of the last three, but they may have been there. It was a profoundly interdisciplinary event.

 The highlights of the meeting was getting to meet Michael Novak, a well-known economist. Actually, I think the high point was when he asked me to get him some potato chips from the lunch line, but I’ll let you judge for yourself.

 The best lecture I went to was by Peter Kreeft. The formerly Evangelical, now Catholic philosopher from Boston College. He is an expert on Aquinas and the Inklings. His talk on Truth, Beauty and Goodness in C.S. Lewis was true, beautiful and good on its own. It was a pleasure to hear him masterfully unfold his topic and answer questions with such depth, breadth, and clarity.

 There were amazing conversations wherever you turned. People were talking about poverty alleviation efforts in their local cities, starting businesses, and funding charities. There was a fermenting energy bursting from every corner. It really is a wonderful thing.

 Everywhere capitalists, yet everywhere there was concern for human dignity and the rule of law. There is an energy in the movement. A synergistic momentum that propels attendees out of the meeting looking for a hill to take and a person to help.

 If you have a chance, you should go. It's an exciting place to meet people and consider future possibilities, and you never know where the road might take you.