Self-Interest and Sacrifice

Self-Interest and Sacrifice

by Jeff Treder


Three Economic Systems

Ever since modern economic structures were developed in the period around 1500-1800, three economic systems, each supported by theory, have evolved and vied for dominance: mercantilism, capitalism, and socialism. Since all three are ways of conceptualizing and organizing the same fundamentals—the economic life of human beings in society—they have many things in common, such as production, trade, and monetary systems.  But they are distinct, and in many ways mutually opposed, in their emphases.

Mercantilism stresses economic competition among nations and holds that a nation’s wealth is measured by the amount of bullion (especially gold and silver) owned or controlled by the state.  Colonization is a valid source of wealth, and the nation’s agriculture and industry should be maximized so that its exports can be maximized and imports minimized.  Individuals and organizations may own wealth, but the state controls the economic life of the nation and therefore may intervene, through taxation, tariffs, or other economic actions, in ways that favor some people more than others.  Mercantilism is often regarded as simply the early, unrefined stage of capitalism, but it has enough distinctive features for a category of its own.

Capitalism arose during the eighteenth century largely as a critique of and reaction against the perceived limitations of mercantilism.  Capitalism emphasizes private or corporate (as opposed to state) ownership of businesses, industries, agriculture, and trade and distribution systems; banks also should be independent of state control, and in general, state regulation of the nation’s economic life should be kept to a minimum.  In contrast to mercantilism, capitalism sees global wealth not as a fixed sum—and hence competition among nations for that wealth as a zero-sum game—but as an aggregate of resources capable of indefinite growth through economic, technical, and financial improvements.  Free trade among nations, as opposed to protectionism, is seen as the best way to maximize global economic wealth

Socialism, in turn, arose during the nineteenth century explicitly as a critique of and reaction against the perceived injustices of capitalism.  Whereas mercantilism called for state ownership of bullion and control of the nation’s economic life, and capitalism sought to free the nation’s economic life from state control, socialism mandates state control and ownership of the national economy.  In theory, the socialist state can range from democratic to totalitarian.  Particularly in its Marxist form, one of socialism’s main goals is the eventual unification of the whole global economy under the control of a single state government.  Thus where mercantilism stresses economic competition among nations, and capitalism sees free economic competition among individuals, corporations, and nations as the best way to maximize wealth, socialism seeks to replace economic competition with firmly controlled cooperation among all economic players.


A Growing Quandary

In recent times, especially since the collapse of the Soviet Union, the interplay among these three isms has been highly interesting.  During the 1990’s, mercantilism seemed to be obsolete and socialism eclipsed, probably for the long term, because capitalism had proven itself to be in fact what it claimed to be in theory, the best way to maximize global economic wealth.  To be sure, the rich got much richer, but the rising tide seemed to be raising smaller boats (if not yet all boats) from South Korea to Chile to—above all—China.  Capitalism still had its problems—the savings and loan crisis (1988-91), the Asian financial crisis (1997-98), and the dot-com bubble (1999-2001) among others—but it weathered these storms and appeared to have developed, if indeed it does not possess inherently, self-correcting mechanisms (or, alternatively, our economic masterminds had learned all they needed to learn from the Great Depression).  All during this time, though, the financial sector of our economy was growing a gigantic, unregulated (even unmonitored—what they call “opaque”), and ingeniously fraudulent “shadow banking” system.  This system, made up of investment banks, hedge funds and high-rolling billionaires, operates like a casino on a gargantuan scale. In this casino, traders electronically gamble untold trillions of dollars—mostly other people’s dollars, such as pension funds invested by managers who got duped by a crapshoot marketed as a triple-A security (credit rating agencies are in on the con).  In return for this service, the croupiers (bankers) skim off multi-million-dollar fees.  The global financial crisis of 2007-08, which ushered in the “Great Recession” of 2008-?, has renewed serious questions about whether capitalism is intrinsically unstable and whether, as capitalist economies grow, they are inevitably prone to ever greater scams, bubbles and crashes.

Meanwhile, just when the bumpy ascent of capitalism—promoted, led and dominated by the United States—got most of the attention, a sort of neo-mercantilism (often called state capitalism) was making a comeback.  The world’s economic life has changed greatly since England, France and the Netherlands were duking it out in the seventeenth century, but the neo-mercantilists seem to believe that it’s still basically the same competition among nations.  The ferocity of the competition may be masked by all the guises of diplomacy, but essentially, in their view, it is still and always will be ferocious.  And the zero-sum calculus of mercantilism is becoming more plausible as vital commodities, especially oil, start becoming more scarce.

This neo-mercantilism has emerged in various forms and with varying intensity in different nations.  In post-war Japan, the state has always been hand-in-glove with major industries, protecting and promoting the most successful companies (or making them successful through crony-based favoritism) in order to build a huge export-driven economy.  In Russia during the Putin era, an authoritarian, ultra-nationalistic state power controls the nation’s economic and political life.  Although Russian industry is decrepit and globally noncompetitive, the nation is rich in natural resources, particularly oil and natural gas, and the Putin government seeks to use these resource exports agressively (including the threat of withholding them) both to increase state wealth and, as far as possible, to bend foreign powers to its will.

The big dog among neo-mercantilists, though, is China.  China has more than four times as many people as the United States, sixteen times more than Germany, a fact that is hard to really grasp but which underlies all of China’s strengths and weaknesses. An authoritarian, superficially “Communist” government oversees a dynamic, labor-intensive, export-driven industrial capitalism.  The Chinese economy can continue to grow, and the government remain securely in place, only as long as they can keep finding markets for their growing output of exports. But the shaky, shadowy condition of the global financial system, together with the onset of commodity depletion, puts that prospect in doubt.  The dubious symbiotic relationship between China and the United States, with the U.S. massively buying inexpensive Chinese exports and China massively buying U.S. debt, has run its course.  The binge is over, or at least is winding down, leaving both of the world’s two largest economies with a headache.

A disillusioned realization appears to be unfolding that each of these three economic systems has fundamental, vitiating flaws, and there is no alternative system waiting in the wings.  Mercantilism envisions a world of endemic zero-sum competition among nations for resources and markets, an environment virtually certain to result in warfare.  Capitalism has multiple flaws.  It promotes a devil-take-the-hindmost ethic producing billionaire plutocrats, a struggling middle class, and lots of losers.  It is a system based on trust, but its captains past and present have proven themselves egregiously untrustworthy. It accommodates systemic fraud and fosters a delusional, manic-depressive mentality among investors and financiers, resulting in an apparently inevitable cycle of booms and busts. And its need for continuous economic expansion has helped to produce a world with too many people, diminishing natural resources, and environmental pollution and destruction.  More economic growth can only worsen these troubles.

The main problem with socialism is that it concentrates power at the governmental top, so that the well-being of the many depends on the wisdom and beneficence of the few—a loser’s gamble.  A further problem is that this governmental power is administered through huge bureaucracies, which are inveterately and notoriously inefficient.  Indeed, socialism is inherently inefficient because people are primarily motivated by self-interest, and calling on them to subordinate self-interest to the interest of the collective, or trying to force them to do so, is swimming against the current. But this takes the discussion to another level, to a consideration of human character.

One of the basic tenets of capitalist theory is that people are primarily motivated by “enlightened self-interest,” and when individuals and corporations are free to act according to that self-interest, the market works to “grow the whole pie”; there will be ups and downs, but the historical trend is upward.  Although the current economic crisis has highlighted capitalism’s problems, it hasn’t really cast any doubt on the idea that self-interest is a primary human motivation and the primary economic motivation. The “enlightened” part is a feature of eighteenth century “Enlightenment” optimism and may be discounted, but a thoughtful consideration of human history, especially economic history, supports the conclusion that human beings generally act according to their short-term self-interest as they perceive it.

Short-term is the predominant time frame. Certainly some people follow long-term plans some of the time, but few 30-year-olds are seriously preparing for their retirement.  And we can only act in our self-interest as we perceive it; we have no other vantage point. As for self-interest itself, the historically unparalleled success of capitalism in producing economic growth is sufficient proof of its motivational power. But if capitalism is flawed in ways too fundamental for us to fix, and if neo-mercantilism reminds us too much of old-fashioned imperialism, and if socialism produces manacled stagnation, what can we do?  So far, the solution preferred by Western Europe, Canada, and (to a lesser extent) the United States, is to water down capitalism with a certain amount of socialism, in hopes that we can reap the benefits of both.  Of course we also reap the detriments of both, and, more pointedly, the solution doesn’t get to the root of the problem. The problem is human motivation, or, in more long-established terms, human character, human nature.
 
Why, after all, doesn’t socialism work as advertised?  On paper, democratic socialism is more admirable than any kind of capitalism; considering the needs of others before your own is a high ethical principle in most religious and ethical systems.  Capitalism produces wealth because people are self-interested, but it is based on rivalry and therefore it inexorably foments social injustice and disharmony.  Socialism, on the other hand, is a sort of ideal system which would work well, which would come naturally, as it were, if people were more ideal than they are, more unselfish and generous.  We laud the wisdom of America’s founding fathers in diffusing and balancing governmental power, but those safeguards were wise and necessary precisely because people are self-interested and corruptible, and many of us are power hungry: capitalist robber barons or socialist commissars at heart.


Fundamental Choices

What would it take, then, for people to become less self-centered?  Basically, it would require some measure of self-sacrifice—that is, each individual willingly giving up some of their own wealth (money, time, energy, pleasure, power) when their conscience tells them doing so will benefit the people around them or those they are in touch with.  This insight, though, has been with us for a very long time, since it is nothing other than the Biblical concept of love. “Love your neighbor as yourself.” (Matt.22:39) “Be devoted to one another in brotherly love. Honor one another above yourselves.” (Rom.12:10)  “If you have any encouragement from being united with Christ, if any comfort from his love, if any fellowship with the Spirit, if any tenderness and compassion, then make my joy complete by being like-minded, having the same love, being one in spirit and purpose.   Do nothing out of selfish ambition or vain conceit, but in humility consider others better than yourselves.” (Php.2:1-3)  Selfishness, self-interest, and self-centeredness are contemporary terms for spiritual pride (“selfish ambition or vain conceit”).  Love is the antithesis of spiritual pride, and true love is inherently and essentially self-giving, self-sacrificial.  This is why the concept of sacrifice is so deeply ingrained in the Bible’s message from Genesis to Revelation.  This emphasis on sacrifice is often misunderstood and denigrated, but without such sacrifice, we have no antidote to injustice and its resultant hatreds.

Supreme love involves supreme self-sacrifice, actualized once for all by Jesus Christ.  “This is how we know what love is:  Jesus Christ laid down his life for us. And we ought to lay down our lives for our brothers.” (1John 3:16)  Apart from that love, we are left with our self-centered world where capitalism produces rivalry, injustice, and cancerous growth, and where socialism doesn’t work. There is enough residual incorruptness in human nature that in practice we see capitalism ameliorated by social welfare programs and socialism muddling through.  The source of that amelioration, however, is still love and nothing else.  Sift through all of human history and you will find no other source of love—credible, proven, actual—comparable to Jesus Christ.  He not only tells us to love one another and models that love perfectly, but through his resurrection from the dead and his outpouring of the Holy Spirit, he gives us the power to follow him. He transforms our motives, first through crisis at our conversion (the conversion of Paul in Acts 9 is typical, if unusually dramatic) and then through process as we “work out our salvation” (see Php.2:12-13) during the rest of our life.

It may seem that we have jumped categories here, from economic history to religion and spirituality.  The categories are just an analytical convenience, however.  Everything connects.  Human experience is ultimately one thing, and it is bigger than economics.  Seeing human experience as nothing more than economics and politics is exactly what has led to the current impasse.

We can’t educate ourselves out of the impasse.  “Educate” comes from Latin roots meaning “to lead out.”  The concept is originally a moral one, meaning that the wise lead the ignorant out of their moral ignorance.  But who are the wise?  Not the savants of our economic systems—the evidence is complete.  We are in the old bootstrap dilemma.  As usual, Jesus said it best: “If a blind man leads a blind man, both will fall into a pit.” (Matt.15:14)

Our choices in this matter are fundamental and few, just as they have always been.  Self-interest or sacrifice.  Pride and greed over against love and generosity.  Like oil and water, they don’t mix.  There is no happy medium between them.  In the long term, because of who God is and how he works out his purpose in our lives, personal sacrifice is in our own best interest as well as in the interest of those we benefit.  But in the short term, where we live our lives day by day, it is still sacrifice and contrary to our natural “selfish” view of our best interest.  These antithetical ways of acting are, more essentially, antithetical ways of being. The choices are made by people, by individuals, moment by moment, and over time they add up.  We become the sum of our choices.  This truth is more than three thousand years old and always relevant:  “I have set before you life and death, blessings and curses.  Now choose life, so that you and your children may live and that you may love the Lord your God, listen to his voice, and hold fast to him.  For the Lord is your life, and he will give you many years in the land ....” (Deut. 30:19-20)