Morality and Religion in Economics
Herein is the second installment of Bowyer’s thoughts on the “rediscovery of a virtuous monetary system.”
Q: The categorical title of your weekly Forbes.com column is “The Great Relearning” described as “I take my 30 years of reading the great classics of Economics, Literature, History, Political Science, Philosophy and Theology, and apply what I’ve learned to the most demanding problems which leaders face, especially investors and entrepreneurs.” Much of your column is informed by, and addresses, religious leaders. Since capitalism often is portrayed as amoral — “the invisible hand” — this brings an unusual and fresh perspective to the discourse.
What thoughts might you have on the intersection of the gold standard and the moral order?
A. Well first thing is that I need to update my Forbes profile, it’s now more like 33 years, ages 18 to 51. Brian Anderson in his wonderful Economics in the Public Welfare talks about the transition which occurred in the west around WW I. When the Germans described treaties as worthless scraps of paper, Anderson saw that as the beginning of a horrible new era, not just in foreign policy, but in every other area of life. If treaties are just scraps of papers, so are contracts, so are marriage covenants, so are constitutions, so is almost everything which separates civilization from barbarism.
The gold standard never is just abandoned in a vacuum. It’s been abandoned where it already held sway, where it had been the law of the land. The move to paper money has always been a perfidious act, an act of faithlessness to old commitments, a movement of the ancient boundary stones. It was associated with imperial decay in ancient Rome, with decadence and corruption of every sort. I know that sometimes it is abandoned by virtuous statesman for temporary emergencies, e.g. Lincoln and the Greenbacks. But those statesman always emphasize the importance of the standard and the necessity of return. But modern ‘statesman’ simply throw the standard away in blithe ignorance of the patrimony.
Q: What authorities and scholars have been most influential on your thinking about monetary matters?
A: I’ve already mentioned some. I’d have to add my friend Alex Chafuen, who introduced me to the Salamanca school, and Marjorie Grice-Hutchison who taught me more about it.
Q: There seems to be a “wall of separation between theologians and economists,” kind of a “render unto Caesar that which is Caesar’s, render unto God that which is God’s” stance. But Adam Smith’s companion work to Wealth of Nations was titled A Theory of Moral Sentiments. How does one bring moral philosophy and what used to be called “political economics” back together?
A: Smith was clearly a theist if not a Christian, and if one examines his use of the phrase ‘invisible hand’ in ToMS it’s perfectly clear that he uses that phrase to refer to ‘the Deity.’ You can’t start with The Wealth of Nations and expect to understand it completely. I would also point out to you that title, The Wealth of Nations is a quote from the Prophet, Isaiah. I think that Smith has been dreadfully misunderstood in many ways, chiefly in attributing to him a sort of proto-Randian view that he saw selfishness as virtue. He did not. ToMS is centered really around the idea of empathy. Empathy is the basis of the moral and social order. Now The Wealth of Nations showed that the market system works even if empathy is not present but it does not teach that empathy or altruism are wrong or unnecessary to build a society. Mandeville seems to have taught that view and Smith was aware of Mandeville’s work and was no doubt aware that he had not gone as far as Mandeville. I agree with my friend George Gilder that empathy is foundational to enterprise.
Q: The left presents as far more engaged with the moral issues implicit in economics — such as what they call income inequality (which might better be couched as “inequitable prosperity”.) The right seems fixated on the language of efficiency. MBA candidates talk about this as the distinction between “doing the right thing and doing the thing right” but for political and policy purposes “doing the right thing” seems a more compelling argument. There are signs that some thought leaders, such as AEI’s Arthur Brooks, are tackling this disconnect. Should more be done? If so, what?
A: Yes, I like what Arthur Brooks is doing at AEI. I’m glad they brought someone from outside of DC to run it. Even the conservatives there seem to catch our own strain of Potomac fever. I also like the selection because AEI had become a sort of hot-bed for showing contempt for Tea Party types. Brooks is the right guy for the job.
Socialism is evil. It has killed more people than any other set of ideas. It is soaked in blood and torture and repression and terror, and yet its advocates seem to have the rest of us on the defensive all the time. The left lives in a constant state of J’accuse and we play along by offering defenses.
When do we get around to talking about what Rueff taught us, that monetary debasement led to price controls which led to the imposition of a security state in German which leads directly to Nazification? Is there anything more blood soaked than that? Well yes, there is, the rise of the Soviets, another form of socialism even more blood soaked. What so many people miss is that the revolutionary ideologies tend to be brought on by the effects of monetary debasement. Debase the money and you destroy the middle class, which has always been the greatest bulwark against tyranny.
Q: Keynes, in The Economic Consequences of the Peace, wrote that “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” How significant a factor do you consider the fiduciary management of our currency by the Federal Reserve, versus the maintenance of the monetary unit of account through definition of and convertibility to gold, to be in our current social and political disorders?
A. It’s central. We have these waves of boom and bust, what the Austrian economists have described in their theory of the business cycle. What some people, even those who understand this theory, miss is that the boom bust cycle is not the worst thing about debasement. The worst thing is that true economics gets blamed for the evils of false economics, the market system. Even the gold standard gets scapegoated and a wave of even worse debasement and government overreach is initiated. Mark Smith’s book Equity Culture traces this through history.
After a bubble and bust, there is often a wave of anti-capitalism, recession revenge, and the ‘speculator’ class is the virgin which we throw into the volcano to appease whatever primal nature gods we think we have offended. I think that Reinhart and Rogoff are right that after a crisis growth tends to be low, but I don’t think it occurs as a direct result of the crisis, I think it occurs because of the wave of financial prohibitionism which tends to come after the binge and purge.
To read part I of the interview, click here.
Interview originally published on The Gold Standard Now.