Saturday, October 20, 2007

Muhammad Yunus

Muhammad Yunus wants to change the notion that business exists to maximize profits. He believes that the problem with this theory is that human beings are insulted, used and objectified in the process. "Money-making is a very important part of human beings, but human beings are much bigger than that." His solution? "Social Business"- a praxis of business that is committed to never making capital on the de-humanization of another. Rather than existing to make as much as a business possibly can, businesses can achieve a social good while breaking even or making a modest profit. His work in micro-lending as founder of the Grameen Bank won him the nobel peace prize in 2006. This is the Gospel in a realm of human existence that is otherwise driven by power and greed and easily turns a blind eye to its extensive exploitation of others.



pedro said...

I've been thinking quite a bit in the last few months about things we take for granted that dehumanize others. This is alway at the back of my mind during my studies in public policy, but this last summer I did an internship for a community development nonprofit that's affiliated with our church. My internship consisted of research on poverty and an assessment of strategies that are trying to address poverty in North Minneapolis. I had never truly grasped how much discrimination has continued to socially cripple and isolate poor, urban African Americans. A key conclusion of my findings was that overcoming racialized urban poverty in America requires overcoming a history of discrimination against blacks. This is not a novel insight, but in the past, scholars have often proposed that this should be accomplished through black assimilation into successful white suburbia. Unfortunately, western societies have often tried to force assimilation of indigenous people and minorities into the culture of the majority. This is dehumanization as well, because it implies that the marginalized are somehow less than human until they are "civilized." I proposed that suburbanites (whatever race) should move into the city and engage within poor communities. This would not be gentrification, nor would it be an imposition of suburban culture on poor city dwellers. In stead, the aim would be the formation of a new sociocultural identity which is a synthesis of privilege and poverty. As a matter of fact, Christ advocated this model during his time on earth, and Christians have been implementing it to one extent or another for two millennia. Phnil, I would really like to read some contemporary theological takes empowerment (like liberation theology). I did read a book that was written by Christian Pohl about the history, practice, and theology of Christian hospitality which has informed my thinking in this area.

Nathan Smith said...

wow Pete, that sounds incredible. I'm really glad that I read both Phil's post and your comment. It encourages me to again engage the broken in their context. Awesome. Blessings!

Clay G said...

With regards to the idea that profit-making has a de-humanization effect on others, I'd like to add a couple of opposing ideas to remember when considering this topic.

First off, in most financial transactions in capitalist countries there is a gain on both sides of the deal. The company makes a profit by selling goods or a service, and the consumer benefits by getting that good or service at a price that they are willing to pay. The company will always want to charge more and the consumer will always want to pay less, but it is the force of competition (which is present in healthy capitalist economies) that prevents a company from charging too much. Another important force in capitalism is a concept developed by Adam Smith. He said that individuals pursue their own interests in society, and producers attempt to maximize their profit by providing for these interests, and in effect they are guided by an invisible hand that ensures that the market will settle on an equilibrium that is beneficial to the community as a whole.

While this does not make much sense on the surface from a Christian perspective where we strive to love our neighbor and aid the less fortunate, I am convinced that a healthy capitalist society is the most humanitarian form of economy. It provides the most benefit to the most people, and it raises the standard of living for everyone, even the most poor.

When you consider the technological advancements over the last 150 years that have improved the standard of living across the whole globe, they have come almost totally from profit-making companies in capitalist countries. All of the medications that we use for illness (and that we provide to poverty stricken countries as aid) came from pharmaceutical companies that made profits. The same goes for cars, internet, water filtration technology, air conditioning, etc... The prospect of making money compels innovative and profit-motivated (selfish?) people to create value. Whatever company discovered virtually any anti-hypertensive medication made a killing money-wise, while at the same time saving millions of lives across the globe. Henry Ford also became rich, and improved standards of living internationally forever. Take away that profit potential and you lose the incentive for innovation, unless you believe that people will create value from purely godly and altruistic motives. I think that history proves that this will never happen on a broad scale until we are in Heaven.

I know a lot of people will probably strongly disagree with my comments here. I wanted to mention them, though, because I feel that capitalism is often an easy target yet the benefits it provides to society are overlooked. I'm sure that Muhammad Yunus realizes the ENORMOUS elevation of standard of life capitalism has provided to the billions of poor in his home country. Millions of lives have been saved from the starvation.

Just so you don't get me wrong, I think that micro-lending is a tremendous idea. I believe that it is our command as Christians to shelter the poor and aid the sick. If we don't selflessly do this then we will answer for it before Christ. I just don't think this command can be forced upon a society. I have not done my research on micro-lending, but it is my hunch that much of the funds that are lent come from "selfless profit-makers" in capitalist countries who want to help those less fortunate than they. Indeed, the United States provides more international aid to humanitarian causes by multiples over the next country down on the list. And most of this donated money comes from private giving.

Sorry for the long post, it became a lot lengthier than I had intended.

elnellis said...

hey clay, i can see what you are saying and yet it feels naive, something which i know you are not. i'm not sure what you mean by a "healthy capitalist society." it probably doesn't help that i am a fan of conspiracy theories and movies and stories that expose corporations as soul-eating machines.

believe me, i don't have a problem with people making money or getting rich off of their gifts or ingenuity when there is a buying market for it. what i have a problem with is the notion of profit for profit's sake, that business is only good if the numbers are going up. a prof of mine who has a consulting firm told a story in class where he was doing numbers at the end of a quarter and they were down from the last quarter. he was depressed about it and wondering what he was doing wrong, etc when his wife said, "what are you so down about, our needs are being met, you are doing what you love to do and you are helping people! what more do you want?" and he had to check himself, realizing that we've all bought in to this notion that business exists to maximize profits at all costs. Yunus' concept of "social business" allows you find meaning and satisfaction in your work because you are doing "good work" and making a living at it- not because you are making lots of money by testing pharmaceuticals on entire African villages or offering benefits at full-time but only hiring part-time employees.
that's what makes me sick and that's why i get excited to hear a guy like Yunus. to me it sounds like "Thy Kingdom come" in the realm of money-making.

Clay G. said...

Phil, I agree that there has been evil committed at the hands of profit-seeking corporations. I believe there should, at all times, be a strong and strict rule of law to prevent and punish these types of events. I would argue that the most egregious human rights violations in the last century, though, have been committed in socialist or communist countries who tried to eliminate the potential for profits in their economies, among myriad other terrible things that they did.

Really my only point in posting was to urge you not to throw the baby out with the bath water here. Yes, seeking money can tempt one to sin in order to get more of it. But, as I illustrated earlier, don't forget the multitude of world-changing and poverty-relieving things that were invented and created over the last couple hundred years because the potential of making profits was the driving factor.

pedro said...


While I do agree with you on grounds of historical record and based on theory that capitalism has been the most successful economic system yet devised and that it has incentivized innovations that have saved countless lives, it is still an imperfect human system. On the upside, i read an article last year in a demography class that claimed that 50% of Americans owe their lives to increasing fertility rates and decreasing mortality rates. These come through improved infrastructure, nutrition, and medical technology. I am vividly aware of (and thankful for) this progress since my wife and I are expecting our first child within a month. Although my wife would like to deliver with as few interventions as possible, we have talked about the fact that some of the potential interventions can save both her life and the life of our child.

In economics, income virtually equals consumption. Due to our high GNP, Americans, in particular, consume a disproportionate amount of the worlds resources and contribute to a disproportionate amount of the world's pollution. In the long run, the poor will be most affected. Sure, China is rapidly catching up to us, but it is telling that China's increasing pollution has come with increased industrialization and free-market participation. These problems are all related to what economists call "externalities": non-market effects that are consequences of market actions. Positive externalities exist (as we have already mentioned), but so do a host of negative ones.

I would agree with Phil in that our model of growth without bounds is untenable, even when increasing technology makes some growth possible without increased actual resource use. Unlimited growth seems contradictory within a world of limited resources. I think that part of the idea of economic growth, especially in the age of global warming and mega pollution, should be a growth in quality rather than merely a growth in quantity. Self-interest is not the ultimate problem. Self-interest could include things like maximizing my economic utility by making sure this world is a cleaner place for me and my family to live in. A real problem is that not all costs are factored into economic price. Again, many externalities exist which are a public cost made at the expense of private profit. An extreme example of this is either imperialism upon which a portion of European wealth was built or slavery upon which a portion of American wealth was built (equilibria which did not benefit the entire community). A major deficiency of capitalism is that market transactions do not really take a long-term horizon into consideration. Although firms and markets are analyzed in relationship to the "short-term" and "long-term", economic actors do not really maximize utility in the future. They maximize utility now. I think this is one of the major deficiencies of a very successful economic system and the reason why not all problems can be addressed through market solutions.

Besides, I still can't conceive of Christ as a capitalist :)

pedro said...

Another thought is that although we study markets in "equilibrium", we make many assumptions and generalizations (ceteris paribus and all that) that may not capture the complexity of the market. Markets in perfect equilibrium produce just the right amount, charge just the right price, and consume just the right amount. Outside of economic models, however, the real world does not always behave as if it were in equilibrium. For instance, Wal-Mart (everyone's favorite bad guy) has tried to overcome competition in the market by lowering prices, which they are able to do through cutting cost on inputs (i.e, by strong-arming suppliers and cutting labor costs by paying its workers less - because they can). Enron tried to play the same game by cooking the books. In a way, these actions are strange. Henry Ford had the brilliant idea of paying his workers enough to be able to buy his cars and make himself more money. Consumers have also circumvented the market, notably through illegal peer-to-peer media exchange (music, movies, etc.). Like Phil said, though, profit has become the economic god. I guess the point is that markets in themselves cannot provide welfare for the community. In the absence of a transparent, incorrupt government, markets fail (look at what has happened in Zimbabwe). I would argue that a healthy society (and spirituality) is important as well, hence my point in the first post.

Clay G. said...

Pedro, thanks for the great reply (and I wish you the best on your coming child!). It seems that you have really grasped with this issue.

You pointed out that we live in a world of limited resources. This is true, but can't be confused with the idea that we live in a fixed pie world, and that as China or the US consume a lot of the pie then poor countries go hungry. I think this can be illustrated by the fact that standards of living of the poorest countries over the last few hundred years have been improved even though they have not made nearly as much economic progress as America or the rest of the West has. It could have been argued that the country of India suffered under crushing poverty over the last century because the West was hoarding all of the resources to allow it to grow, yet when India dropped many of its socialist policies and adopted a more free-market friendly economy towards the latter end of the 20th century they quickly became one of the fastest growing economies in the world. They still have billions in poverty, but the rising tide of their economic status is lifting all boats, as they say. Do you think that the country of India's growth is coming at the expense of poorer countries? I would argue that they are creating value and reaping the benefits of it.

You used the examples of WalMart and Henry Ford to illustrate how producers pay their employees less so that they can make more. This seems to be the battle cry for increasing the minimum wage, and I oftentimes find it frustrating that the public debate does not look at all of the cause and effect of this issue. I think that maybe it is partly because many of the effects of WalMart's business model are not immediately intuitive to the general public, and politicians take advantage of the very emotional phrase "let's raise the minimum wage," using WalMart as an example, and harvest plenty of votes. (I think this is partly illustrated by the fact that no one knows of the body of economic research which shows that really the only people who benefit from a minimum wage hike are minimum wage employees who are actually able to keep their jobs (meaning - many min. wage employees lose theirs)). Yes, WalMart squeezes the most they can out of their suppliers, and they pay many, probably most, of their employees low wages. If you were to only take this into account, you wouldn't see the whole benefit received by multitudes of Americans, many of them poor, having the opportunity to buy clothes, food, school supplies, medications, and now health services in low cost clinics, for prices that are well below what their market prices were before WalMart entered the mix. One can point to the lavish riches of WalMart execs as the end-all argument against the greedy free market system, but his opponent in a debate would point out the fact that the overall benefit to society has been largely positive. Much of this benefit has gone to the lower class, who are now a little less poor (they can buy more for their dollar of clothes, food, healthcare, school supplies,etc...), which seems to me to be the end effect that all of us Christians so desire. In this example it was not necessarily an intended consequence. On the matter of the actual employees who earn the poor wages, consider that these are jobs that they wanted. Anyone can see the demand for WalMart jobs if you watch a store before it opens - there are literally lines of people out the door applying for employment at this so-called unhumanitarian company. I would argue that they have a good grasp on what is and what is not good employment for themselves.

I bring up WalMart only because it was mentioned in Pedro's post and I think that the issues surrounding the debate about this company are very apropros on this topic. You also mentioned the short term outlook of free market systems. This may be so. I'm curious about how you see this problem being rectified? Also, I'm curious about what you think would be good changes to see in secular free enterprise governments and economies to make them more palatable to Christian virtues?

Lastly, in regards to Chris not being a capitalist, one thing I know for sure is that He sure was opposed to it in the temple. And how!

pedro said...


Good thoughts. A quick point of clarification on wages - Henry Ford actually paid his workers MORE money than many manufacturers were paying workers. This gave workers more disposable income so they consumed more. Of course, this strategy has come around to kick automakers in the butt. Labor is one of the highest-cost input for any firm. With outrageous pension liabilities, the big American automakers are in hot water.

You're right about minimum wage policy - price floors like minimum wage and price ceilings like rent controls are often implemented to raise wages or lower costs respectively. What they often do, however, is create scarcity. Anyway, most minimum wage workers are really suburbanhigh school students. The adults who work at Wal-Mart have no other choice - many unskilled workers are being left behind in our high-tech, high-skill service economy. Even though Wal-Mart gives people jobs, it does not pay them a livable wage. I don't care if you're talking about Arkansas or Southern California, no individual (let alone family!) can live on $5.85 per hour in America. I have struggled to live on $7.50 per hour. Actually, in the last few years, even the middle class has been getting relatively poorer. Data have shown that wage increases are failing to keep up with inflation. All of these wage factors are really important. Although Wal-Mart's minute medical clinics have made some primary medical services cheaper, the fact that the rest of its goods are cheap (I would argue both in cost and quality), most of our consumption does not go to the types of things you buy at Wal-
Mart. Food, Housing (including rent or mortgage, energy costs, taxes, and insurance), and transportation are the biggest regular expenses that a household faces. Medically, preventative care and office visits are a small portion of medical expenditures overall. Take a look at your monthly bank statement and you'll get a sense of what I'm saying. Frankly, I know a poor family here in Minneapolis, and their house is full of cheap shit. Seriously - their house is cluttered with all sorts of talking mechanical santa clauses and troll dolls and video games and stuff like that. It's everywhere. I've seen similar in other poor households. Because they don't have resources to save and accumulate assets and wealth, they amass massive credit card debts and spend whatever disposable income they earn on "treasure" - buy now in case we lose everything tomorrow.

An interesting book to read that puts the hopelessness of poverty into perspective within capitalism The Working Poor by David Shipler. Check it out - it's a good read.

Laissez-faire economics is passe. A completely free market is inefficient because resources will not be allocated evenly. As I alluded to before, government regulation is an indispensable part of a healthy capitalist market. The government's macroeconomic policy has real effects on things like interest rates and employment, and regulations make sure that neither powerful corporations nor rogue consumers abuse the market. That is not to say that all government policies are good (e.g., minimum wage and rent ceilings, where they exist), but this very fact of the necessity of a strong regulatory environment implies that it is entirely appropriate to use non-market interventions to rectify negative market externalities. Regulating pollution is one example. Redistributing wealth to the poor is another.

Now redistribution does not necessarily equal socialism. All taxes in fact, redistribute wealth. Sometimes tax incentives favor the wealthy, and sometimes they support the poor. Regardless, whenever the government collects money, it redistributes its revenue for the good of society.

The concept non-market interventions and redistribution goes back to the original post on microfinance and my original comment on the role of Christians in caring for the poor.

The people of God have always been called upon to care for the alien and strange. In OT times, these were the popple who were not part of the economic, political, and religious structure in Israel; therefore they had no land, no means of production, and no means to sustain themselves. This is why economic redistribution was built into the law of Moses. God's people were to empathize with strangers in their midst because they, too, had been strangers in a strange land.

In early Christian times, the radically egalitarian nature of Christian theology and practice embodied by hospitality was critically countercultural and served to break down class boundaries. This all sounds rather communistic and socialistic, but in my thinking, the most beautiful moments in Christian history have been when strangers have been welcomed and nourished. We all know that Christian history is full of bloody conquest, vice, and corruption. Similarly, I would accept that capitalism has been a relatively efficient means of distributing and adding value to resources, but the best is far from perfect. I have no idea how we address the long-term issue in economics. I think that is one of my enduring goals, though. Let me know if you have any ideas.

pedro said...

An interesting note is that microfinance is viable because it works within capitalism. It provides credit to people who would not have access otherwise (due, again, to inefficiencies and assymmetry in the market) and allows them to start their own business.

pedro said...

Actually, some microfinance strategies are funded by less-than-wealthy cooperatives within the lendee's community. It is the peer pressure to pay back the principle of the loan which contributes to a high repayment rate of these types of strategies. Of course, other strategies are, indeed, fuded by Western organizations.

Swift said...

This is far, far, far from anything I can add to. So I'll just post to say that I've really appreciated what you all have said. I'll chew on it all for a while.

Clay G said...

Pedro, I'm really enjoying our conversation on this topic. Thanks for your input. I've been trying to put my finger on exactly what our differences are here. I think, and correct me if I'm wrong, that you and I agree that a free market economic system is the best yet (and I'm sure you would want me to make sure the word yet was in there). There are no other systems to date in a secularized economy that are able to afford so much to the lower classes. I will look into the book by Shipler. I'm curious what he means by the "hopelessness" of poverty within capitalism. It seems to me that that one of the greatest improvements that the idea of free market enterprise brought to the world was removing the hopelessness of poverty through removing class barriers (though by no means classes) and rewarding innovation and hard work with financial benefit (given that, of course, the specific government of such a country puts in place a rule of law that facilitates this). The concept of the "American Dream," which takes a beating in some circles but which truly exists, was unheard of before the American experiment succeeded. When it comes to the potential of upward mobility for any citizen, I hold that our society, mainly because of capitalism (among others), is peerless.

You said: "A completely free market is inefficient because resources will not be allocated evenly." I don't think that's wholly true, and I believe this is where our disagreements stem from. A free market does not strive to evenly allocate resources, it seeks an efficient allocation of them. Depending on how you look at the issue, this makes all the difference in the world. I believe, as well as many other free market proponents (though not all), that human beings possess equality in the courts of law (and I would add equality under God). We all share the same basic rights. Humans are not, though, equal in condition. Some are smarter, harder-working, stronger, analytical, etc... What capitalism tries to do is to allocate resources to their most efficient uses. Those who have the drive and the human capital are rewarded by striving to capitalize on it. This is why economic growth prospers under this type of system. Socialism, on the other hand, attempts to evenly redistribute resources (I'm not labeling you a socialist here). I can see the emotional argument for socialism. I understand the ideas that started the French, Chinese, and Cuban Revolutions, among others, and I can't say that these radicals were unintelligent. But this idea fails terribly when fully implemented (many European nations seem to do well being partly socialized). You don't need to look too far into those important historical events to see the human misery that they caused. I fully reject the notion that there can be a classless society, or that this is even an ideal that should be sought after here on Earth.

I think that efficient allocation of resources is the most humane because it rewards those who strive hardest for their own gain, but EVERYONE in the society receives the benefit of their innovation and created value, though to different degrees (again, I think we agree here). The negative externalities do, as you said, mandate government regulation. If this were not the case, at least to some extent, then I do not believe that capitalism could be called humane from a Christian perspective. I said that there is equality under the law, but not of condition. I agree that there should be programs in place to fix negative externalities in education, safety, etc.. (pollution too) so that there is an equality of opportunity. There are always some who will have to be cared for by the government, no matter what. But even resource allocation isn't the answer. At the risk of sounding like a broken record, when you remove the incentive for innovating and creating value (taxing the heck out of those with money and handing it to the poor) then the community will be worse off. Everyone will be worse off, even the poor. Some of the worst recent historical human catastrophes were in systems where an attempt at totally even resource allocation was attempted.

We'll probably just disagree on how much wealth redistribution is necessary or appropriate. I'm OK with having that difference. Its a harder debate.

One last thing, you mention the radically egalitarian nature of Christian theology. In my understanding of the teachings of Scripture I don't really see a call to eliminate class. I only see a command to the individual on how to act within their community. I see a mandate for love, hospitality, goodwill, etc.. I think that there is tremendous opportunity within our current economic system, given all that we have been afforded, to pursue these virtues as Christians.

Clay G said...

Pedro, I'd like to say more on our WalMart wages conversation, but my family duties are calling. Hopefully I'll get time soon.

Phil, if you don't want your blog to be a venue for economic discussions then please feel free to send me a cease and desist.

elnellis said...

i, like swift, am out of my league in this conversation but am also enjoying it from the sidelines. keep at it!

pedro said...


I was incorrect in saying that "A completely free market is inefficient because resources will not be allocated evenly." That statement just doesn't make any sense. Sorry.

I think you may be right about the basis of our disagreement being on how much wealth distribution is appropriate. However, I think that there may either be a crossing of signals or a disagreement about the ability of the market to distribute resources equitably. I say this because I disagree with the fact that incentive and hard work alone are sufficient to reward people with upward economic mobility. Again, The Working Poor (while admittedly an observational rather than an experimental study) attests to the difficulty of the poor to become wealth through hard work. not everyone starts life on a level playing field. Resource distribution is not just about economics – it is also about power. I think that this is valid insight that Marxian economics introduces into economic discourse. Often, wealth may be created at the expense of others. This was my point about the fact that a completely free (i.e., unregulated) market is inefficient and does not distribute resources fairly. American history demonstrates this fact. during the late 18th and early 19th century, some brilliant and economically ruthless self-made tycoons (e.g., Minnesota’s James J. Hill and Andrew Carnegie) amassed considerable wealth at the expense of other individuals and firms. Their ruthlessness is revealed in their tendencies to collude and exclude competition from the market – which counteracts the spirit of capitalism. The backlash against this laissez-faire economics was the rise of the American labor movement and a wealth of anti-trust legislation. Even though these men were often ruthless businessmen, they were often generous in their charity, founding great public works that still benefit Americans today.

I agree wholeheartedly that incentive plays a very important and valuable role in our economy, and as a student and soon-to-be practitioner of public policy, I know that the most effective government interventions are those that use market incentives for firms to change their economic behavior (reduce pollution, for instance). I would disagree with you, though, when you assert that capitalism removed class barriers. I think that it has furthered class mobility, but poor people (especially poor adults) cannot necessarily climb out of poverty by hard work alone. When I assert this, I am saying that the greatest difference between someone who is able to create wealth in America and someone who remains poor may not be innate ability or hard work. It may be race, access to education, or a variety of other structural societal issues. Hearkening to the previous paragraph, I would assert that some of these structural issues have been mechanisms of economic exclusion. An economic system cannot be fully understood apart from its cultural, political, and social context. You argue that the market serves to allocate resources to those who innately more capable to add value to them (“Humans are not, though, equal in condition. Some are smarter, harder-working, stronger, analytical, etc... What capitalism tries to do is to allocate resources to their most efficient uses. Those who have the drive and the human capital are rewarded by striving to capitalize on it.”) Unfortunately, in our society the capable historically (and to a large extent contemporarily) have not included women and racial minorities. I just finished a paper on poverty and economic development in North Minneapolis for the community development nonprofit that is affiliated with my church, and I reviewed some economic and sociological literature on poverty. There is a wealth of empirical evidence on these conclusions. If you’d be interested in reading this report, ask Phil for my email and I’ll get it to you.

I think that this is a difficult conversation in principle because some of the language that we must use within the discourse is difficult to divorce from negative connotations. For instance, redistribution of wealth automatically sounds like it is a socialist concept. However, like I said in a previous post, all taxes are by nature redistributive because they are a mechanism of the government to provide public goods for its people which may not be created by the market or which may not be accessible to all of its citizens through the market (e.g., infrastructure, parks, schools, etc.). We have many taxes in American, so some of our wealth is redistributed. This does not necessarily mean that money is taken from the rich and given to the poor. It is also difficult because economic theory tends by necessity to be generalize and abstract and often cannot consider context.

The major difference between our perspectives may be that you are far more optimistic than I. Where you tend to see the brilliant success of capitalism in raising the standard of living for all people, I tend to see that our society has been built upon conquest (taking land from Native Americans, destroying their culture, and providing them with alcohol, which has led to entire generations of fetal-alcohol affliction), slavery (it is arguable that the “neighborhood effects” that are associated with African American urban poverty are the lingering effects of slavery and Jim Crow) and ongoing inequality. In general, class boundaries tend to propagate over generations. A classless society may not be the answer, but a society in which the poor are included rather than excluded is sure ly something to strive for.

It’s somewhat difficult to discuss a Biblical view of society in contemporary terms because concepts such as capitalism and socialism were in no way part of biblical culture (all 2000 years of it). However, in general, the Bible seems to call for welcoming the poor and strangers into society and into one’s home. It also seems to generally discourage hoarding (but not general accumulation) of wealth and the accumulation of wealth at the expense of others. It values industry and work but it castigates the abuse of religious and economic power. Breaking down class boundaries is not the same as eliminating class. What breaking down class should embody is truly eliminating barriers to class mobility, reversing the social isolation and exclusion of the poor, and not extending entitlement to the affluent due to their economic status.

elnellis said...

ok, so i just typed a very long comment and lost it all because my wifi signal wained. but the heart of what i was trying to say was, yes peter, you put language to what my uneducated gut feels.
the other thing is:
my friend josh is a repeated lender in this organization and loves it. check it out. it gives a relational spin on the otherwise cold hard world of lending, interest, sharks and repossesion.
anyways, thanks for the fun dialog guys.

pedro said...

I HATE when that happens. Phnil, you're not uneducated - you just don't have a background in economics.

I should check out Kiva's website. A friend of mine in Minneapolis just had a birthday. They told everyone that was invited to the party that in stead of buying gifts, they wanted their guests to contribute to a Kiva project. I think they raised somewhere around $1500 and were able to contribute to the micro lending projects at this url:

When the money is repaied, they'll reinvest. This captures the heart of what I am trying to use economic jargon to communicate.

Clay G said...

Thanks for your reply Pedro. I'm working long hours the next few days but I'd like to respond later this week.

Until then...

Clay G said...


I thought a lot about my comments about the rewards of incentive and hard work and I still stand by them. I think that the introduction of free market enterprise into the world really did create pressure to remove a lot of the class barriers (over a span of time) that were impenetrable before. This is not to discredit the victories of the Civil Rights Movement, which essentially put nails in the coffin of discriminatory practices here in the US. I believe that while these new and important civil rights laws created a disincentive for discrimination, it was actually free enterprise that provided the wings to those disenfranchised poor who wished to climb out of their poverty. This is how we can have people today like Russell Simmons and Stan O'Neal (an African American who just left Merrill Lynch with a $160 million retirement package). While I affirm that incentive and hard work are sufficient today to reward an individual with upward mobility who exhibits these qualities, I agree that there is not a level playing field. You mentioned "race, access to education, or a variety of other structural societal issues" as impediments to advancement - I wholeheartedly agree, yet these are by no means impenetrable (though they used to be). It will always be harder for the poor to increase their wealth than those who have money. This seems to me to be a fact of life. Marx tried to fix it, but I don't think its fixable. It appears to me that the more vigorously Marxian ideals are pursued economically, the more impoverished a nation becomes, but I'm no historian. I will say though that I agree that there does need to be a certain amount of wealth redistribution (of course through taxes) since there will always be some who simply cannot help themselves, and I think it immoral to let them wither away. I just hold that the further a government moves down the spectrum towards "equal resource distribution" the worse off society as a whole becomes, and I present post-Communist revolution Russia, China, and Cuba are perfect examples of this.

You said "What breaking down class should embody is truly eliminating barriers to class mobility, reversing the social isolation and exclusion of the poor, and not extending entitlement to the affluent due to their economic status." While you say that you want to eliminate class barriers and not class, it still seems to me that your solution is to try to equally distribute resources, which is eliminating class barriers through eliminating class. Am I misunderstanding you? I don't really understand what "including the poor" means above guaranteeing them the same rights as all citizens. Also, you mentioned entitlement to the affluent - well, under our tax code today the top 5% of earners pay 50% of all US tax revenues, and the top 20% pay 80% of revenues. In essence, it seems the rich are entitled to pay taxes, since they are really the only ones who do. I'm assuming you would favor increasing their tax burden.

I think you were right to point out the creation of the labor movement. There were some terrible travesties committed by corporations in early 20th century America and the labor movement created a counter to this that even the US Government couldn't rival. There was a lot of good that came out of this, but as you pointed out in a previous post, that power has grown and has had some very negative consequences as a result. Many manufacturing jobs (especially the auto industry) have been lost because American companies simply can't compete in the market when they are paying $30-40 more per hour per worker than some foreign companies. Also, I agree with you that ruthless attempts to "collude and exclude competition from the market" is contrary to a healthy free market economy. This is why laws were put into effect that to heavily regulate this.

"I think that this is a difficult conversation in principle because some of the language that we must use within the discourse is difficult to divorce from negative connotations." I agree. Its funny how the words Marxism and Capitalism raise the ire of those who sit on the opposite ends of the spectrum. I'm glad that we've been able to discuss it in a civil way.

You said "In general, class boundaries tend to propagate over generations. A classless society may not be the answer, but a society in which the poor are included rather than excluded is surely something to strive for." Yes, I believe that the poor should be included by having the same rights as everyone, to a T. It is the government's duty to ensure this at all costs. I also believe that our dismal public school system should be heavily invested in to better equip the poor to succeed. Unfortunately, I think that a lot of the social ills that we see today, especially among minorities, and even more especially among African Americans, are direct results of the breakdown of the family. Efforts were made since the Sixties in the form of the welfare system (under the idea that redistributing money would fix inequality) to help the poor out of their poverty. Its terrible consequence was to introduce not only disincentives to work, but much more devastating, disincentives to marry. So now we have 40 years of continual disintegration of the black family to the point that today I believe 3 out of 4 black kids are born out of wedlock. This does more, I think, to keep individuals in poverty than does any other societal factor, including racism and poor education. This is a difficult problem, because it is not a question of money to fix it. Actually it was poorly directed money that helped caused it. One of the greatest factors to aid success for the poor is faith and family. How do we foster that in an increasingly secularized culture that doesn't value family nor God? I guess I digressed a bit.

P.S. One last thing that I wanted to point out. This is especially in regards to pollution and some other negative externalities that we've discussed. The government can regulate all it wants against business to curb things like pollution and global warming (which I have not been convinced is caused by humans), but the real solutions, I believe, will present themselves when there are profit potentials in finding ways to combat them. Hybrid cars will become readily available not because Al Gore tells everyone to drive them, but because GM or Toyota can make a lot of money selling them (because we will want to buy them). The same applies for solar energy, as well as all other forms of alternative energy use. We want companies to be able to make a killing off of these things, because we will all benefit to a great degree through the creation of real solutions. The economy that best facilitates a free market approach to these problems will solve them first.

Clay G said...

Also, I checked out the Kiva site. I think that this is a great thing that really has potential to produce a lot of good. I'll definitely consider things like this in the future.

pedro said...


Excellent thoughts. Your second-to-last paragraph gets, I think, to the heart of what I have been arguing. Not all, but some, persistent poverty in America is a result of structural issues that began in the past and have been perpetuated into the present. It's interesting that you mention the brokenness of public school system. Many of the worst performing public schools are in poor areas. This reflects both the bankrupt tax base of these areas (at least where I live, property taxes pay for the school system) and lower participation rates of poor parents in their children's education. Funding schools in poor areas would necessarily include what we have been debating all along - redistributing resources toward schools in poor areas.

As far as the decline of the American family, I would say that as much as urban poverty is an African American blight, many African Americans have never had healthy families in America, and it is also arguable that the state of white families have been declining over time, with single-parent households on the rise. The mechanisms may be different on the aggregate (teenage pregnancy vs. divorce), but the psychological impact on children is not much different.

Most African Americans are the descendants of slaves who were bred like cattle. Slaves on plantations were not usually allowed to live as family units, and many slave women bore offspring of their masters. It is inconceivable after 100+ years of such treatment that African Americans would have developed what could be considered healthy marriages and family relationships. My wife will be breastfeeding our child, and we attended a breastfeeding preparation class. Breastfeeding, like marriage, is something that does not work unless it is taught.

My point in this, as with the argument about poverty in general, is that we need to continue to challenge the conventional wisdom about cause and effect in social issues. Blacks and whites never started on the same footing in America, and the data shows that disparities still exist. Yes there are some wealthy blacks, and there is even a growing black middle class, but there is still a higher concentration of blacks in poverty than whites. We cannot compare the current condition of blacks and whites in America without looking at the important differences historically between these two groups. Considerable selection bias exists in this natural experiment. I may not be completely right in my assumptions, but I continue to argue for them because I think that both of our perspectives (individual responsibility vs. societal responsibility) must be given weight in an understanding of poverty.

Yes, I think that capitalism is the best economic system that we have come up with and when it is properly regulated it has the power to raise the standard of living for everyone. However, I think we need to continue to ask the questions about not just why poverty exists but why poverty continues to plague certain groups of people. Our disagreement may be as much about the amount of discrimination that still exists. Civil rights did not put the nail in the coffin of discrimination. Less of the discrimination that goes on is quite as visible as it was under Jim Crow, but it persists nonetheless. As an example, I cite a study I recently read which concluded that in the two adjacent counties that contain Minneapolis and St. Paul, race was a better predictor of being solicited for a sub-prime mortgage than socioeconomic status.(A more readable summary of that report can be found here) Many more examples abound. The basic facts that blacks have always fared economically worse than whites and that this reality has not dissipated since the Civil Rights movement indicates that structural issues persist which systematically insure the continuation of these trends.

I think that the government has an ongoing role to play in mitigating the disadvantage of minorities in America, but I also believe that these injustices are social at root. When I refer to the privilege of affluence, I am talking about both class and race. The financially affluent are advantaged because their assets allow them to leverage financial capital to further increase their wealth. The financially poor, however, have neither the income nor the assets to get mortgages or other loans to increase their wealth. The result is that the rich get richer while the poor do not. Again it is not impossible for people to climb out of poverty, but it is much more difficult for a poor person to increase their wealth than a rich person. the average person may be better off in a healthy capitalist country, and the middle class may be larger under this system than it has been under any other, but class mobility is still a challenge.

The affluence of race is much less obvious, at least to whites. I should know. I grew up in a lower-middle class family in a comfortable upper-middle class city in Northern Colorado. I am a male. I grew up attending a Christian school where I learned that the history of America is the manifest destiny of people of European descent to possess the land upon which we now live. I have come to learn that my ignorance of the lives of minorities in America had been my bliss. I attended college, and am now in graduate school, and I harbor no illusion that my success so far in my life has been only minimally attributable to hard work. So far in my life, when I have been in tight financial circumstances, my parents and my in-laws have been a safety net. I have never been pulled over by a police officer and treated with suspicion because of my race. I know an articulate African American PhD student and college professor who has - multiple times. It's hard for me to wear someone else's shoes or look at the world through their eyes.

Justice is not about entitlement, it is about truly leveling the playing field. This is not about redistributing resources, it's about granting equal access. I still maintain that this justice is Biblical at heart. To the extent that we will always have the poor with us, how can we strive for the poor to have a high quality of life? It is clear that poor people who live in areas with vacant buildings, crack houses, crime, violence, low educational achievement, etc. do not have the same quality of life as people who live in areas with fewer of these traits. As followers of Christ, disadvantage is something that we should not accept as natural or inevitable. So much of the language of the gospel is the paradoxical language or hope. The weak shall be strong. The poor shall be rich. The wisdom of God is foolishness ot the world. Christ died, and in dying lives.

elnellis said...

have you heard of person-to-person lending? i they had a thing about it on NPR as i was driving this morning.
this is what it is:
this is one of the more popular sites:

ps. you guys are intense and awesome

pedro said...

I haven't, but I'll check it out. I need to find time to start listening to NPR again.

pedro said...

This morning, I was reading a book that I have been working through for a while (Making Room: Recovering Hospitality as a Christian Tradition by Christine Pohl, p. 64-66). The following jumped out of me in light of our conversation:

"What theological understandings help Christians to transcend difference, resist indifference, and welcome inconvenient strangers? John Calvin, writing in the sixteenth century, developed one of the most comprehensive foundations for a generous response to strangers:

'Therefore, whatever man you meet who needs your aid, you have no reason to refuse to help him. Say, 'He is a stranger’; but the Lord has given him a mark that ought to be familiar to you, by virtue of the fact that he forbid you to despise your own flesh (Isa. 58:7, Vg. [Vulgate?]). Say, 'He is contemptible and worthless’; but the Lord shows him to be one to whom he has designed to give the beauty of his image. Say that you owe nothing for any service of his; but God, as it were, has put him in his own place in order that you may recognize toward him the many and great benefits with which God has bound you to himself. Say that he does not deserve even your least effort for his sake; but the image of God, which recommends him to you, is worthy of your giving yourself and all your possessions.'

The author goes on: "More than anything else, the conviction that all human beings were marked with the image of God undergirded Calvin’s response to the stranger. Bearing God’s image establishes for every person a fundamental dignity which cannot be undermined either by wrongdoing or neediness. But, for Calvin, the simple fact of our common humanity also provided a basis for recognition and respect. Humanness itself requires that persons recognize others as like themselves. Each person is made for others and depends on others; therefore, each should sympathize with the sufferings and needs of another:

'We should not regard what a man is and what he deserves: but we should go higher – that it is God who has placed us in the world for such a purpose that we be united and joined together. He has impressed his image in us and has given us a common nature, which should incite us to providing one for the other. The man who wishes to exempt himself for providing for his neighbors should deface himself and declare that he no longer wished to be a man, for as long as we are human creatures, we must contemplate as in a mirror our face in those who poor, despised, exhausted, who groan under their burdens . . .'

For our purposes, she concludes: “Deep sensitivity to the suffering of those in need comes from our ability to put ourselves in their position, and from remembering our own experience of vulnerability and dependence. this sense of shared human experience extends even to those most foreign to us. Calvin wrote that when seeing a poor person, we should think 'now I have been in that condition and certainly wanted to be helped; indeed it seemed to me that people ought to have pitied me in order to help me’:

'But what [is the usual case]? When we are comfortable, it is not a matter of remembering our human poverty, rather we imagine that we are exempt from that and that we are no longer part of the common class. And the reason why we forget, and no longer have any compassion for our neighbors or for all that they endure.'

Clay, I am by no means charging you with a lack of compassion. I think that what Calvin reveals theologically about our relationship to the disadvantaged is apropos to what I have been arguing. His main point is that imageo dei is the basis of our responsibility to the disadvantaged. This is by no means communism nor even paternalism. It is the basis of the golden rule that Christ preached to his followers: “Do unto others as you would have them do unto you.” It is the mark of Christian love. It is never enough to leave the poor to the mercy of the market on the basis of initial condition or innate characteristics.

[The quotations from Calvin come from various of his writings]

sean said...

It is hard for me to jump in and post a comment after I have just been brought into this conversation after several days of discussion have been taking place. If I could, I would place this on the side as it is not meant to be a continuation, necessarily, but a mere interjection of my thoughts on
the preceding.

These topics come at an interesting point of my life - a single, native Coloradan who is living in Virginia having studied Finance while working at a private college. The relevance? As follows:

I grew up in the same family as Pedro and never knew what discrimination really meant other than the definition of the word. We were always taught not to be racist or look at people of difference in a negative manner. I heard that, but I didn't really know what that meant until I moved to the South.

Discrimination is still alive here, whether people admit to it or not. Peers will make discriminatory remarks towards race or social class and not even realize what they're saying - which shows how prevalent it really is. I have never been used to the mentality of thinking lesser of, or looking down on people of difference than ourselves. It's not that those in poverty or minorities don't try or settle for being in the situation that they are in - we as a society don't give them a chance to succeed. By that I mean this: ceteris paribus (since we are talking economics) two people side by side, same idea - invention or theory - one a minority and the other a white male, the white male will be believed in whereas the minority won't. maybe that's an observation being here, but those circumstances have been implied to me and I was astonished.

Being single, I'm not the most comfortable financially, nor am I close to being in poverty. I do have a shelter in my parents if I was ever in a bind, and my expenses are for myself which gives me relative flexibility. I have more flexibility to work towards wealth without having the externalities that most people have.

Here's the real crunch that I am in. I formally studied Finance (with a lot of economics classes) in school, but I my life is torn in half. While I am far from being a highly intellectual or knowledgeable economist, I have the following battle: I've been taught that the bottom line is all that matters. Whatever (albeit "ethical" and legal) means to the end is irrelevant as long as we get to that goal. Cut costs. Increase prices. Find that maximizing profit that makes your shareholders happy and you have done your job well.

On the other hand, in my personal life I don't support Wal-mart (that giant which cuts costs and is extremely profitable) or big box stores as much as possible. I go to the higher-priced locals that are trying to make it to the end of the day. I place a higher emphasis on "social profit" than economic profit. That Christian adage that I was taught "love your neighbor as yourself" is in the forefront of my mind every day and probably my biggest personal convictions.

Two of the most intriguing concepts come into play in the original article: money and humans. Human lives are the most amazing, precious, valuable, interesting, and respectable ideas in my mind. As Pedro's wife is going to have a baby soon, it reminds me how delicate those lives are. Our lives are transient, yet we don't hold to the esteem other's lives as we should. We selfishly place more value on profit (which by definition is selfishly profiting ourselves) rather than others.

Is Adam Smith's "invisible hand" theory really as heroic as it sounds? I just read an article last night on Mukesh Ambani who is the 2nd richest man in India. He is currently building the world's most expensive house - over $1 billion. When asked if he ever felt bad spending so much money in a country that is extremely poor as a whole he said no, because his company is allowing more people to get cell phones and other goods at a lower price. With that said, I think Adam Smith's theory is only half-ideal. I think we should work to maximize economic profit while maximizing social profit, but instead of using that economic profit to benefit ourselves (as we think should be the reward for our actions) use those resources to benefit society. Why do we think we will be content when we have money?

One of the most respectable people I have studied is Warren Buffett. Among his simply brilliant ideas and frugality, Buffett donated 90% of his wealth to the "Bill and Melinda Gates Foundation" - one that sets to reduce poverty and increase education. He knows he doesn't need the money. He has lived in the same house for 56 years, he drives a Lincoln, and he hesitantly bought one jet.

I think Adam Smith was right, for 50% of the equation. I think Warren Buffett was right for 100% of the equation. Benefiting society goes far beyond creating goods to sell to them; it includes giving back what we truly don't need.

I have really enjoyed reading the thread of comments thus far. Again, I hope to not disturb the flow of this chain as my comments are merely my own interjection. I will look forward to reading more fascinating comments to come.

Clay said...

Pedro, first off, I should rephrase a comment that I made in my post. I did not mean to imply that discrimination was over through the actions of the Civil Rights Movement, but that severe penalties were introduced and began to be enforced which made what was once an impenetrable barrier a penetrable one. I'm not so naive as to believe that there is no longer racism today. It is present in more subtle forms, though much of its power has been emasculated as is evidenced by the infiltration of minorities into universities, corporations, and lofty government positions. I acknowledge that racism is still a factor that drags on many minorities. In the second to last paragraph of my last post I was trying to bring up a topic that seems to me to be very politically incorrect - that is the enormous power that broken families play in propagating (maybe even causing) poverty. You rightly acknowledged its effects in your post, Pedro. The consequences of single parent upbringings are beginning to show in white families as well, as you also pointed out. There are politicians today who have a lot of power riding on the idea that 1)the Sexual Revolution was a virtuous cause and the breakdown of the family today is not as bad as the "Puritans" would have us believe, and 2) that black poverty is propogated, not by the majority of black children being raised only by their mothers with no male authority, but by racist whites in an oppressive culture who intentionally hold them down. Laying claim to both of those statements reaps a full harvest of votes, but I don't think that they are necessarily true. Research in the social sciences has shown that being raised in an intact family is the best indicator of current and future welfare of children, above race or education. It seems obvious to me why certain political parties simply cannot and will not accept this as a reality, given its ramifications.

The sad thing is that the welfare system exacerbated this disintegration to no end - single black mothers from the Sixties on were now given huge incentives to not marry or work. The question is, how can we affect change in poor urban communities. I want it just as bad as you. I agree that there needs to be a certain amount of wealth redistribution (properly directed, mind you). You and I agree that we have a horrible education system. I'd love to see the State relinquish a lot of its control over education by enacting novel ideas such as school vouchers, something which I'm sure you know, Pedro, finds a lot of support in the Black community. But what there really needs to be is a change in culture. The virtues of faith in God (already present to some extenta) and strength of family need to be underscored in these communities in a major way, and this is something that we know the US Government cannot do efficiently, though the Church can. The roots of these problems run deep, as you have said, through our history as a country and culture.

In regards to your quotes from Pohl and Calvin, what I read I agreed with wholeheartedly. They are good thoughts to remember for Christians and the church. Yet, I don't necessarily find them out of line with my beliefs on free market economies. If I did then I wouldn't be here.

Sean, first, do I understand correctly that you are Pedro's brother? ...OK, a couple of things. Yes, I believe that discrimination is still alive and well. Forgive me if I sounded otherwise. I do think though that we are on a downward slope in regards to its magnitude.

You mentioned WalMart, which is something that I touched on with Pedro earlier. You said that you do not shop there on moral grounds because of their business practices, and that you would rather purchase goods at "higher-priced locals." Well, you and I may have the luxury to do that, but a family living at or near the poverty line is most likely thankful that they can buy clothes, food, health care, and other goods at cheap prices. In fact, the collective poor may rather you shop at WalMart so that there's more growth, meaning more stores, meaning more goods available for their dollar. This is the other side of the argument which never gets raised.

In regards to Adam Smith's "invisible hand," from what I understand it wasn't so much of a theory or model that he developed as it was a law (of sorts) that he described, kind of like the laws of thermodynamics. I have studied it and find it to be true, or at least supported through the history of free market economies, which have flourished like no other economic system throughout history. I think that it is the disadvantaged poor who are present in capitalist (as well as all other) societies that you are averse to (correct me if I'm wrong). Adam Smith never argued that they would not be present.

I agree with your comments about Buffet and Gates. I admire them for their charitable giving. That is the spirit that we should see from all Christians who have the luxury of living in a wealthy society like ours. We will all be held accountable before Christ according to what we have been given.

I wanted to end my post with a couple of questions. It seems like everyone here acknowledges capitalism as the best system yet, or at least you've said as much Pedro. So logic would lead me to believe that you think its OK to earn a profit, even though the consumer is paying more for goods than the producer paid for them. I'm wondering how you draw the line between right and wrong? WalMart, for instance, is looked upon as an evil, greedy corporation by many. Their profit margins are less than 4% of their revenues. The local grocer may get a better return than that. So at what point are people "being taken advantage of?" And my follow up to that is, do you agree that as we take away profit potentials from individuals as well as corporations there will be less incentive to create value in our society (Geez, can I get any more Ayn Rand-sounding than that)?

P.S. Pedro, I urge you to get out all of your blogging energy now before the arrival of your baby. Time becomes a much sparser commodity afterwards. I'm getting the evil eye now as I write this from the wife.

Clay said...

P.P.S. I think that a lot of my comments are made at the risk of sounding callous. Actually, I am very involved in this issue both emotionally and spiritually. I just happen to believe that the best solutions will not come from bureaucracies, but from the innovation and wealth created in a free market, and most importantly, through the grace of Christ and the work of His followers here on earth.

pedro said...


I think that we have come to a point of agreement (at least I'm willing to concede we have so I can take your admonishment about blogging to heart). The free market does have potential to raise the standard of living for people. I acknowledge this and foresee that my career in public policy will involve leveraging the strengths of the market for the benefit of all people.

As I mentioned in an earlier response, I think that the market itself is amoral (neither moral nor immoral), but as I have argued, externalities abound. Firms rarely take full economic costs into account when making profit-maximizing decisions. Although regulations are stricter now than in the past, examples abound, for instance, of improper disposal of industrial waste leading to a polluted environment and illnesses among residents near the pollution sites. In Colorado, where Sean and I grew up, many of the seemingly pristine mountain rivers have extremely high levels of mercury that leached into the water as miners extracted gold from ores. Recently in eatern suburbs of St. Paul, 3M has been immersed in ongoing controversy over health concerns arising from production of chemicals related to scotch guard. In the past, it was seen as less costly (and thus more profitable) to dump chemicals in water supplies.

Thankfully, the regulatory environment has changed. I think that because many companies (at least the ones who can still be held liable) are being made to pay for cleaning up their messes, American companies are increasingly factoring this type of pollution into their manufacturing costs. What I look forward to is the day that firms also begin to factor social costs into their economic costs. Wal-mart is obviously very controversial for the reasons we have been debating, so I'll refer back to the original example of micro=lending or person-to-person lending as a counterfactual.

I think that one of the greatest benefits of healthy capitalist societies is the proliferation of civil society, especially NGO's. NGO's have the benefit of using market mechanisms to work toward societal betterment without regard for profit for its own sake. You're right, Clay, profit is the engine of capitalism. Adding value to resources is what makes this system work. Although consumers may pay the lowest price in a perfect market, I think it's interesting that the times are revealing that consumers also maximize utility by contributing to social good. The fact that movements like fair trade initiatives like RED have been viable thus far (in spite of goods that are often slightly more expensive in comparison) is telling in this regard. So are the examples of Warren Buffet and Bill and Melinda Gates that my brother brought up. What you argue for as a solution to urban poverty - a change of culture - I argue for as a means to a better society in general. It is my hope that more firms will recognize the economic profit that can be realized through
social responsibility.

In like kind, I will end my post with a question as well. When can, we draw the line between moral and immoral behavior in an amoral human system such as the free market? For instance, why do we consider unethical behavior like accounting fraud to be more immoral, when we may regard sending manufacturing overseas to countries with unsavory working conditions or human rights records as a legitimate profit-maximizing move? Where is the line drawn?

pedro said...

P.S. I think that our point of agreement is that social change will not come from government intervention. Neither of us has been advocating such. I'm pretty sure that our main contention is still a matter of viewpoint - my pessimism about the market and your optimism. It seems like I favor using the market from without to effect change, and you favor using the market from within.

Clay G said...

Pedro, several things. With regards to globalization of jobs, that is another large debate that I'm leary of getting into. To be honest, I have no problem with the outsourcing of jobs - it lowers costs here and provides jobs in employment-hungry countries. I agree with you that these foreign working situations should be humane, but I wouldn't necessarily hold them to all of our American standards of ethics in the workplace. But yes, humane.

I agree that our market system is amoral. Both good and bad come from it. We do need a strong regulatory environment to cope with negative externalities. I think our efforts in creating such a system in the past century are partly responsible for our high standard of living.

I think that you're right about my optimism. I believe that the free market optimists of the past were well-founded in their optimism. Yes, bad things have occurred, but on the whole, the poor live much better lives today by leaps and bounds than they have ever done. This was accomplished because the wealth created by free capitalist societies lifted all boats. This is something to be greatly thankful for. I'm optimistic that the standard of living for the poor will continue to increase. I'm also thankful that there are many more corporations who, as you say, are beginning to consider social costs of their actions, and for the fact that the pressures to do so generally come from society and not government interventions.

It is indeed a cultural change that we need. I think wealth redistribution helps to a certain extent, but it can have negative effects if misdirected, such as my points about the welfare system. My argument has been from the beginning that we will see much more innovative ideas to solve the problems of poverty, pollution, education, etc.. come from the private sector than from the public sector. That's why I am such a strong proponent of capitalism, because it attaches large incentives to these solutions.