The Fuzzy Correlation: A Ramble about Capitalism, Socialism and Politics

Here are some thoughts I had the other day about capitalism, socialism and politics.

(And I'm an idiot for even trying to share some of this stuff in the current political climate. Somebody, please, take this keyboard away from me.)

I don't think we can ever escape sin. Consequently, I think every economic system is going to have sinful aspects to it. Capitalism is no exception. But one of the interesting features of capitalism is how it harnesses sin for the greater good. We pursue our self-interest, often in competition with each other, and all boats rise, prosperity fueled by the "rat race" of modern economic life. By saying, effectively, "Good luck, you're on your own" capitalism takes our innate instincts for survival and social comparison (shame and "keeping up with the Jones's") and turns it into gasoline for the engine of productivity. As Adam Smith pointed out, we don't appeal to the benevolence but to the self-interest of the butcher, baker and candlestick-maker. Or, in the words of Gordon Geckko, "Greed is good."

A couple of observations about this. First, it seems here that capitalism gets human nature right. This is one of the reasons capitalism appears to be more successful than communism. Communism seems to miss the mark on human nature. Ironically by being too optimistic and hopeful, even Christian. People don't tend to work hard for the good of others. Saints might do that, but normal people don't. Normal people are lazy and like to free ride on the system. Just ask any Children's minister at church how easy it is to get people to teach Sunday School. Everyone likes to drop their kids off at Sunday School. But fewer actually step up to take a turn teaching. Free riding is human nature.

So capitalism does seem to have the more realistic anthropology. It assumes humans are selfish and self-interested and then puts them in competition. This infuses economic life with an anxiety that is effectively leveraged into work.

While capitalism is premised on human selfishness this focus on individual effort isn't wholly without biblical precedent:

2 Thessalonians 3.10
For even when we were with you, we gave you this rule: “The one who is unwilling to work shall not eat.”

While the "collectivist" visions of community life in Acts 2 and 4 seem utopian (and even communist), we get a sense in 2 Thessalonians 3.10 (and in other places where Paul preaches work) that people were free riding on the system. Thus the rule: If you want to eat, you have to work.

What capitalism does is to take this notion--if you work you can eat--to a unique place, an extreme even. It suggests that, if we assume a level playing field, that any need you are experiencing is the product of your failed work ethic. You are not eating because you are not working. And that's a working assumption among many Americans today, particularly among conservative Christians.

And to some degree, you can't really argue with that assumption. It's empirically true that if you don't work you'll struggle to pay your bills. Which creates another interesting feature of capitalism: it helps assign the blame when it comes to need. Specifically, if you are in need that's your own fault. Society isn't being "unjust." There is no "injustice" here. You're just failing to follow the Apostle Paul's command: Work.

This is why, in America today, we moralize socioeconomic status. Failures of character (e.g., a lack of a work ethic), it is believed, produce need. Strength of character produces success. Thus, God is blessing the wealthy. God helps those who help themselves. A sentiment that many think is in the bible. (It isn't.) This is why we see health and wealth gospels so popular among Christians. Health and wealth gospels resonate with how we think capitalism accurately assigns praise and blame.

Now this blame assignment would work well if, in fact, the playing field was perfectly level. Imagine, say, if we could hit the reset button and let everyone have the exact same family, go to the exact same high school, have the exact same gender, have the exact same skin color, have the exact same physical appearance, have the exact same genetic aptitudes, have the exact same life experience, and so on. Imagine a perfectly randomized clinical trial. In that case, yes, we might be able to identify the virtuous by their subsequent success. But, as we all know, that's not the situation we have. What we have is a system well in motion, one with with a variety of different and unequal starting places. The topography of "fairness" isn't level. It's hilly and uneven. Just how uneven is a matter of debate.

I want to talk some more about that hilly fairness topography, but before I do I'd like to pause and make a few comments about the effects of sin within the the randomized clinical trial described above. Specifically, while communism gets human nature wrong about our work ethic (i.e., we'd rather work for ourselves rather than for others) capitalism gets human nature wrong when it comes to acquisitiveness and fair play. It's true that capitalism creates productivity. But it doesn't reliably reward virtue. In fact, since capitalism mainly rewards success within a competitive environment we'll often find that "good guys finish last." We call this corruption and greed.

And there's another flaw in the system, of a generational nature. To see this imagine us starting our clinical trial experiment at Time 1, kicking off the self-interested competition of capitalism to get all those worker bees off and running (or buzzing). The Time 1 round plays out and prizes (think: promotions) are awarded. Trouble is, there are only so many promotions and wins to go around. There is a bottleneck at the top. Which, in one sense, kind of works. With few prizes to go around the competition and innovation really ramps up. And that flurry of activity is generally good. But as Time 1, 2, 3, 4, and 5 tick by something starts to happen. Due to the bottlenecking we start to have growing inequities as time passes. The Have's start having more haves. And the Have-Not's start having more nots.

This is the second flaw in capitalism. Over time, due to bottlenecking, capitalism leads to greater economic disparity. Despite an initial level playing field of, say, 100 employees, there is only one manager position. Someone gets that job and the increased pay that goes along with it. And this pay allows the kids in that family to go to a better high school and college, improving their human capital. That human capital and the old boys network (Dad is, after all, in management and not working on the factory floor) increases the probability of these kids ending up in management and not on the shop floor. This is no guarantee of course. But the odds of reaching the American Dream have ticked up a bit in your favor. And, over time, those odds accumulate.

This isn't to say capitalism is bad. It's just glitchy. Capitalism can't produce utopia. Every system is going to have its problems. And to say that capitalism is better than, say, communism isn't a claim that capitalism is flawless. It's isn't. It has two basic design flaws: It rewards corruption and it creates income inequities. In short, despite capitalism's promise of accurately assigning praise and blame (work = eating) it often fails to deliver.

Like I said, every economic system is contaminated by sin.

And this is hardly a controversial conclusion. Even Republicans feel a bit squeamish about defending CEOs. The only business owners it is safe to praise whole-heartedly are the small business owners. But CEOs and big corporations? There's something a bit shady, a bit too greedy about them. To be sure, Republicans are sympathetic to big business. But watch the rhetoric of the Republicans running for this year's nomination. They'll not sing the praises of CEOs and big business, though they will defend them from time to time, albeit obliquely. No, what they'll do ninety-nine times out of a hundred is sing the praises of small businesses. And why is that? Because we're aware that the system has a glitch. For not very virtuous reasons, big things tend to get too big in capitalism. Perhaps too big to fail. Or monopolies that stifle competition. Or increasing income inequity.

Now let me get back to the issue of how we assign praise and blame in capitalism and moralize socioeconomic status.

Recall, blame can be easily assigned if we all start off with a level playing field. But the playing field, as we've noted above, isn't level. So, given this unevenness, success is only going to be, at best, a rough approximation of virtue. Yes, it will have some approximation. Again, those who are responsible and work hard will, on average, rise to the top. Those who squander their opportunities or don't work will drift toward the bottom. Still, this correlation isn't perfect. Some people get head starts. Some people get lucky. And some people succeed because of vice rather than virtue (think of that Machiavellian co-worker who stabs you in the back to get the promotion or get you fired). And so on. In short, there are many virtuous and hardworking people who, in America today, aren't living the American Dream. And why does this happen in capitalism? Simple. The system isn't perfect.

And this puts us in a bit of a pickle. Given that the correlation between success and virtue is only approximate there is some ambiguity in how we should approach the issues of fairness and wealth redistribution. This in addition to the the generational flaw inherent in capitalism which produces, over time, greater economic disparity.

For example, if the correlation between success and virtue were exact then we really would struggle with the idea of wealth redistribution. We'd be taking something from someone who "earned" it and giving it to someone who is a bum. That doesn't seem right. We should reward virtue. (Again, we are imagining here that the correlation is exact. That those who aren't eating aren't working.)

But what if the correlation is less than exact? Let's say it's actually quite weak. That where I end up in life is more a matter of fortune and systemic corruption than my own virtue. More, that the lucky and/or corrupt "winners" get to pass their "winnings" on to their children, that the playing field isn't reset after each generation. (Call this the "trust fund baby problem" or the "old boys network problem".) Well, in that situation it seems that we'd try, as Americans have generation after generation, to remediate the situation via our social contract. Why? Because good, hardworking people are economically struggling. And lucky or less than virtuous people are living large. That doesn't seem right or fair. The system is no longer rewarding the virtuous.

Call this the theodicy of politics.

This political theodicy problem is, incidentally, what drives populist unrest. The ideal capitalist polarity of Rich = Good and Poor = Bad gets reversed and we start to see the sentiment emerge that Rich = Bad and Good = Poor (this sentiment is usually labeled "class warfare"). This reversal is what see in the lament psalms, hence my label of theodicy. (Incidentally, the polarity in Scripture where Good = Poor and Bad = Rich is called by theologians God's "preferential option for the poor" and it sits in tension with the capitalist polarity of Rich = Good.) When we see the populist polarity emerge we're going to see more voices crying out to rectify the situation. Attempts to move the wealth back to the virtuous poor and to correct the systemic inequities that created the uneven playing field. As I said, it seems that America has had to do from time to time.

One of the things I'm trying to say about all this is that, given the fuzzy correlation between virtue and success, we are looking out on something akin to Rorschach blot. There are examples and counterexamples aplenty that can help illustrate the strength or the weakness of the correlation between success and virtue. During this election year we'll see conservatives emphasize narratives that demonstrate a stronger correlation (think ACORN stories on Fox where Poor = Bad/Lazy) and liberals emphasizing narratives that demonstrate a weaker correlation (think fat cat Wall Street/CEO stories on MSNBC where Rich = Bad/Greedy).

The truth, obviously, is somewhere in the middle. How strong is the correlation between virtue and success in America today? It's hard to say. It's a debatable point. But one thing is clear, your views on the correlation affect how you see the world and how you think our social contract should be arranged.

And in light of that, I'd like to make a few concluding observations.

First, no one really knows what the actual correlation is. And because of that I think everyone needs to be a whole lot more humble about what is going on in America today. More, in light of this uncertainty we should pause to consider the counterexamples to all our examples. We need to get clear about just how unclear the situation is.

In this sense there is something healthy, if infuriating, in listening to the competing examples on, say, Fox and MSNBC. Each is providing the examples and counterexamples that demonstrate the fuzzy correlation. And this is why we get in trouble if we exclusively listen to only one set of examples. We can fool ourselves into thinking that the correlation is stronger or weaker than it actually is.

This is why, I think, political debate is often so unproductive. Rather than paying attention to the fuzzy correlation conservatives and liberals simply exchange examples and counterexamples thinking that they are "refuting" each other when, in fact, they are just talking about opposites ends of a shared and underlying reality. And it's hard to solve problems when you are only paying attention to 50% of the available information.

(As a case study, examine at the narratives that are dominant about what happened during the 2007 financial crisis. On the Right the examples are about individual irresponsibility, low income people buying more house than they could afford (Poor = Bad: poor being being greedy or dumb). On the Left, by contrast, the story is about a greedy Wall Street, their reckless leveraging and how the credit agencies hid the risk under AAA ratings (Rich = Bad: greedy bankers and Wall Street sharks). Which narrative is right? Well, both are right. And that's the point. Tell the whole story. Don't just lock in on 50% of the story and think you're telling the truth. You can't tune into only half the information and think you are describing reality.)

All this is why, I think, America has created a capitalism/socialism hybrid. We have the sense that the association between success and virtue is only approximate. We know there are glitches in the system. So we try, in each generation, to position our social contract somewhere in the "middle" and adjust it back and forth if we think it's drifting too far in one direction. Generally, these adjustments are small.

The point being, Obama isn't all that different from George W. Bush who wasn't all that different from Clinton who wasn't all that different from George Bush who wasn't all that different from Reagan. And so on. These guys really aren't all that different. At least when I look at them. Sure, they adjusted things one way or the other per their party. But voters voted in each case for that particular adjustment. Which is sort of the point of a democracy. But the larger social contract today, looked at from a big picture perspective, isn't radically different from when, say, Nixon was in office. Yes, adjustments have been made. And there will be more adjustments to come. Back and forth, back and forth, looking for the sweet spot of the fuzzy correlation.

Which is really just to say, in my long and tedious manner, that I don't know what the fuss is all about. I really do believe that if things get out of hand in one direction we'll have a new New Deal. And if things get out of hand the other way we'll have a reduction of government. Again, it's back and forth, back and forth.

We are pretty evenly divided in America. And that's what we'd expect if we were finding the middle of the correlation, the sweet spot. And yes, this makes us polarized. Red state. Blue state. Each sitting to one side of the sweet spot. But this also means everyone's doing their job. Bringing into the conversation (and voting booth) examples and information--whether that be about free riders on welfare or CEOs with Golden Parachutes--that we need to make good decisions.

Does that mean the wisdom of the crowd will lead to the best outcome? Not necessarily. But I'd rather trust all of us than only half of us.

To conclude, take all this for what it's worth. Which might not be much. Just some thoughts that were going through my head on my bike ride to work.