A Theology of Capitalism

The Spirit of Democratic Capitalism.
by Michael Novak.
Simon & Schuster. 443 pp. $17.50.

Intellectuals sometimes take considerable time to catch up with the facts. In 1543 Copernicus published his major work on the heliocentric theory; during the next century this theory received confirmations from Galileo and Newton. Yet throughout most of the 18th century, the Cassini family, directors of the observatory at Paris, remained piously geocentric. It can be said in explanation of the Cassinis’ remarkable slowness to recognize the facts that not only could one write satisfactory almanacs and navigate accurately under the Ptolemaic conception of the universe, but that it was possible under its assumptions to do distinguished work in astronomy, as the Cassinis did and as Tycho Brahe had done before them. So acute a reasoner as Sherlock Holmes found no objection to the Ptolemaic theory, even after Dr. Watson informed him that it had competition. Holmes tartly replied that he could not imagine that the question was of any practical importance. That is, for a great many purposes, including most of those important to society, the Ptolemaic theory worked. It is not surprising that for some people it should have survived its intellectual demolition for a century or more.

It is not so easy to exculpate those who still hold to the superstitions of socialism. Whatever can be said of the status of Marxist theory, the failure—utter, consistent, and continuing—of Marxist practice is apparent to anyone with eyes to see. The most recent example comes from Poland, where four decades after the liberation of the workers from capitalist oppression and the end of their exploitation by the bosses, the workers are worse off than their comrades in even the least developed capitalist states. And yet many intellectuals—one is tempted to say most intellectuals (excluding, of course, those in socialist countries, where probably no one believes in socialism except as a means of maintaining ruling-class privileges)—continue to think socialism a form of economic organization superior to any other. This is a faith in the Tightness of the old order as wrong-headedly pious as that of the Cassinis, but not nearly so harmless.

It has not been clear why socialism should be so esteemed despite its failure and—the inevitable corollary—capitalism so despised despite its success; most observers who have found the situation troubling enough to warrant attention have confined themselves to vague speculations about the contrariness of intellectuals. Now, Michael Novak has made some progress in clearing this matter up for us, but this is only a fringe benefit of his remarkable book. For The Spirit of Democratic Capitalism is perhaps the first serious attempt to construct a theology of capitalism. That this very phrase rings a little strange in the ears even of sympathetic hearers testifies to the compromised reputation of democratic capitalism even among many of its friends.

Yet no one would be surprised to hear of a theology of socialism, for such things are three-a-penny. Systematic attempts to show Communism to be an embodiment of Christianity have stretched out over this century, especially since the rise in Latin America of the “liberation theologians” of the Roman Catholic Church. And even before World War II, the Reverend Dr. Hewlett Johnson, the “Red Dean” of Canterbury, an Anglican cleric whose orthodoxy would probably have allowed him to sign with a clear conscience at least three dozen of the Thirty-Nine Articles, found an ideal Christian for his time in Joseph Stalin.

Novak rehabilitates the moral stature of democratic capitalism by showing how little it resembles the caricatures of it which pass almost everywhere as analytic descriptions. He uses the cooperative institution of the corporation to show that the spirit of democratic capitalism is far from the anarchic individualism that has attracted criticism from several directions, and refutes the common claim that the capitalist states comprise a center that exploits a dependent periphery.

Much of Novak’s evidence for this position is based upon a comparison of North America and Latin America. As he points out, the economic positions of the two hemispheres were roughly similar during their struggles for independence in the last quarter of the 18th century and the first quarter of the 19th. Indeed, the riches of the Southern Hemisphere had originally been regarded as greater. The dream of the easy money available in the Seven Cities of Cibola animated much of the Spanish movement to the New World, but no one went to New England looking for gold. The nearest approach to Eldorado in the north were rich fisheries exploitable only by hard work and at great risk.

The orthodox explanation for the fact that North America is now rich and Latin America poor, enshrined in Marxist and liberal analysis alike, as well as in liberation theology, is that North America waxed fat by exploiting Latin America. Following the work of P.T. Bauer, Novak points out that, considered both as a fraction of U.S. foreign investment and as a fraction of the internal Latin American economies, U.S. investment in Latin America is small. Moreover, U.S. foreign investment itself is a comparatively small part of the U.S. economy. Even if these facts did not obtain, there is a more serious difficulty in that Latin American poverty existed well before there was any U.S. investment in Latin America. The causes of Latin American poverty are in fact much more complex and less satisfying to socialist analysis and Latin American pride.

One of these is narrowly technical: Latin Americans have more children than North Americans, and consequently even equal amounts of economic activity per worker would yield lower rates of income per capita. While Novak is inclined to find the practice of having large families admirable, he insists that the statistical consequences of the practice must not be charged off to Yanqui imperialism. But there are more important reasons for Latin American poverty, and these are embedded in the history of Latin America.

Novak points out that Spain held a narrowly mercantilist economic theory contrasting sharply with the untrammelled individualism practiced in the north, where the founding fathers wrote a constitution favoring small merchants and traders precisely because such people were seen to be committed by the nature of their economic activity to the very freedom the constitution was trying to protect. To the south, Latin America did not develop largely because it did not adopt an economic system that allowed development. Moreover, the Catholic Church was originally hostile to capitalism because of conservative objections to liberalism: what the 19th-century Church attacked as “liberalismo” always proves upon analysis to be democratic capitalism. Ironically, the liberation theologians, opposed to the traditional hierarchy in everything else, agree with it in despising capitalism and seeing it as the author of much woe for Latin America.

And so the Church, by opposing capitalism, appears to Novak as a major cause of poverty in Latin America. This is not an isolated instance for Novak: following a seminal study by H.R. Trevor-Roper, he traces the comparative affluence of Catholic and Protestant Europe, nearly always to the embarrassment of the former. Novak’s own Church, then, becomes one of the causes of poverty in large parts of the world. A biblical vade mecum popular during my youth among evangelicals and fundamentalists contained a remark to the effect that Protestantism had made the United States what it is, and Catholicism had made Spain, Italy, and Latin America what they were. The facts, the author concluded, spoke for themselves and spoke loudly. Allowing for his much greater sophistication and lack of animus against Catholicism, Novak seems of similar mind.

In making this argument, he is doing more than refurbishing the work of Max Weber and R.H. Tawney. He holds that both oversimplified matters, and disagrees with both as to the real nature of capitalism. Weber especially he faults for not seeing the inescapable connection between capitalism and freedom. This is, of course, a remarkable argument to be made by a leading Catholic intellectual, particularly one who is not only a theologian but a theologian far from the fashionable fringes of theological innovation—one who, for example, seems wholly comfortable talking about God as if He undoubtedly exists and as if the universe makes the most sense if one assumes that He not only created it but takes a continuing interest in it.



As recently as the Vietnam war, a great many American intellectuals remained attracted to totalitarian socialism; in its backwash, although few of them have been willing to admit it openly, many have begun to realize that the unacceptable face of Communism has survived Stalin, and have begun to demand that socialism be democractic. Novak rejects democratic socialism as firmly as he does the totalitarian variant, even though until comparatively recently he was himself a democratic socialist. His account of his own movement from Christian socialism to democratic capitalism is insightful and astringent. As a budding Catholic intellectual, he tells us, he read heavily in those European writers who saw capitalism as “protestant”: anarchic, individualistic, rejecting of tradition. He once found this position persuasive, but now believes it to have been a misguided nostalgia for village values considered in those days one of the good things about the Middle Ages. He continued to believe in socialism, as do a great many intellectuals, religious or irreligious, because its ostensible ethical system seemed so superior to that of capitalism. It took some time more for him to conclude that “the dream of democratic socialism is inferior to the dream of democratic capitalism, and that the latter’s superiority in actual practice is undeniable.”

This statement might well serve as the epigraph of the book. It is bound to serve as the epigraph for essays or monographs that follow upon this book. Each of the parts of the statement is important: it is not unusual for men to believe that capitalism in practice is superior to socialism in practice, a conclusion which leaves room for the perennial and damaging belief that if only socialism were done right it would bring on the millennium. But Novak maintains—with a richness of analysis that challenges the reviewer—that socialism is also inferior to capitalism in theory.

This is not a view that would have surprised Kant, who provided the definitive refutation of the old saw, “That may be all right in theory, but it won’t work in practice.” Taking Kant’s position, we can see that if capitalism is generally superior to socialism in its practice, that must be because it has a superior theory. Novak’s most important achievement is to spell this superiority out in detail, especially in that ethical area which most intellectuals have long conceded to socialism.

Capitalism succeeds because it is an economic theory designed for sinners, of whom there are many, just as socialism fails because it is a theory designed for saints, of whom there are few. Capitalism converts the private vices of greed and ambition into the public virtue of plenty, an idea adumbrated by Bernard Mandeville well before Adam Smith, but not much heeded since the rise of Marxism. Capitalism demands freedom in order to function, and thus liberates those who live under it; socialism ostensibly supports such liberation but in fact requires sharp restrictions of freedom in order to function at all. Socialism tends to replace the family with a mechanical and insensitive bureaucracy, while capitalism resides in and depends heavily upon the family, a form of social organization that appears, mutatis mutandis, to be the universal preference of mankind.

One need not share Novak’s religious perspective on capitalism to find this book a stunning achievement, but those who have hitherto preferred socialism on religious, or indeed on purely ethical, grounds must now face an argument of immense weight—and one produced by a former fellow believer. If enough of them read it, The Spirit of Democratic Capitalism may prove one of those rare books that actually changes the way things are.

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