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To Reduce Wealth or Poverty?

This essay–originally printed in Swedish in 1994–was prompted by the 1993 pastoral letter, “On the Rich and the Poor,” from the bishops of the Church of Sweden, formerly the established church. The following was written as a letter in reply, not to attack the bishops or the church, but to clarify what has been distorted by some of the bishops’ formulations.

The bishops’ pastoral letter was given considerable attention in Sweden when it was published, as was this reply. It appears here in English for the first time. The first half appeared last issue; the second half appears this issue.

Man was given freedom and ate of the fruit of knowledge. Only one who is free can do right and wrong. This capacity to will is what separates mankind from the animals. Only one who has knowledge has moral responsibility. When men co-operate with each other under equal conditions, it is due to an agreement between them.

The Invisible Hand

When Martin Luther emphasized the freedom of the individual to take a stand on eternal issues, he also legitimized the individual’s right to take a stand on secular issues. Just as people are not supposed to obey religious authorities blindly, they are not supposed to obey secular ones blindly either. Luther’s inquiry into secular and spiritual rule, and whether an evil man can perform good deeds, dates from this time.

This last question, as far as economics is concerned, was later decisively answered by Adam Smith, educated in moral philosophy and, to some degree, in theology. Smith argued that you get your bread not because the baker is altruistic, but because it is in the baker’s own interest to bake. If you find his bread tasty, and if he can charge for it, he will profit from baking bread and you will profit from buying it.

This invisible hand was one of Adam Smith’s great achievements. When supply and demand meet–spontaneous order–the result is far superior than it would have been if people had tried to centrally plan the production of bread. It is therefore no coincidence that Moses did not write “You shall bake your bread so that you may live in the land” on the tablets of stone. The invisible hand ensures that people acting in their self-interest will voluntarily co-operate, without any commandments regarding the details of production. The commandment “Thou shalt not steal” is, however, necessary for the protection of property rights.

Freedom of Contract

Two parties agree to do something together if both believe they will mutually profit by their collaboration. All contracts are therefore voluntary. This does not mean, however, that the result will turn out well for both parties; the collaboration can turn out to have been a misjudgment. Neither the individual nor the collective are omniscient. Thus a contract can turn out to benefit only one party, or even be bad for both.

Furthermore, if a contract is entered into between parties who are so unequal that one of them is in fact forced to participate, there is no freedom of contract. It is the same if an illiterate who is badly informed of a contract’s content signs one. This classic debate about the necessary requirements for a working freedom of contract was mainly conducted towards the end of the nineteenth century. But from this discussion about individual contract rights, the debate came to be conducted in terms of categories and classes. The error here is that while an individual can move from one state of being to another, a whole social class, by definition, cannot. This is why lower classes are always poorer than upper classes, which easily leads to the static analysis of exploitation. It is important to note that the membership of both classes is not always constant.

When a person starts a factory and begins hiring, he may become much wealthier than those he hires. If we want to make it so this person is not to become wealthy in this way, we have two alternatives. Either this person should, from the start, have the same salary as his employees, or this person should not start his business at all.

The former would mean that the employees must also share some of the financial risk, of which they may not be aware. If so, the decision to start up any business, with all its attendant economic risks, would be spread among too many people. An important factor behind the rise of business in the nineteenth century was that with the emergence of corporate law, contract rights were being codified. That is, responsibility for a business was limited to the size of the equity stake. The limited liability company is one of the most important inventions of modern times.

The second possibility–that no one is allowed to start a business, forcing everyone to remain equal–is a principle only consistent with the quiet of a cemetery. It has nothing to do with life.

The Dangers of Idolatry

The bishops write that “all ideologies and social systems that are presented as absolute and hence shapers of the future become idols. This is true when capitalism, so-called scientific socialism, mercantilism, liberalism, nationalism, and other such society-shaping systems are attributed absolute values and the ability to shape the future.” Of course this is true. But is it a coincidence that the pastoral letter does not write about “socialism” but “so-called scientific socialism”? Is it also a coincidence that the pastoral letter does not name the ideology that today dominates Sweden and that is attributed by many absolute values, namely democracy?

If by democracy we mean absolute majority rule, then it is clear that a society can have too much democracy and move towards despotism. It would, of course, be equally devastating to bargain for everything, instead of voting. It should not be possible to vote for or to buy everything. The issue is how to realize a multifaceted society. A society must not only contain politics and economics, but also family, science, arts, and religion.

The pastoral letter also refers to the notion of “the responsibility of trusteeship.” This is based upon something not mentioned, but lately formulated, namely the notion that we do not own the Earth, but have been given it to pass on to our children. But these environmental concerns give no answer to the question: Should property be owned communistically, or by individuals and their voluntary organizations, such as limited liability companies and joint partnerships? We know one thing from modern history: What no one owns is badly kept, and what everyone owns ends up to be no one’s responsibility. The environmental damage in the socialist economies, scientific or not, is well documented. Market economies at least have the advantage that whatever is believed to be bad will gradually diminish. Dictatorships fall slower while they collect evils.

Taxation and Debt

It would not inspire confidence if one were to pronounce on Christianity, quote the ten commandments, and forget half of them. Likewise, it is equally serious when the Synod pronounces on economics and forgets fifty percent. One example is when the pastoral letter writes the following: “The warning-flag that the Church has carried with it from its very first days is raised anew against today’s monetary and financial systems. It is the interest rate, and with it the currency fluctuations that threatens the indebted countries.” Really? Look, for example, at Sweden. We do indeed have problems with the interest rate and the currency fluctuations. We have fallen deep into debt and have lost much of our wealth. But just like other poor countries, the basic problem is our inferior capacity to produce and to create.

Is it not right that most of the payment for a service should go to the one who provides the service? That most of the payment for work goes to the one who performs the work? That most of the payment for a product goes to the one who produces the good? Likewise, is it not therefore right that most of the return on capital goes to the one who provides the capital? It has not always been that way in Sweden, and in other countries as well. For example, it is no coincidence that Tanzania (more than fifty percent of Tanzania’s foreign trade consisted of Swedish aid) had one of Africa’s highest marginal tax rates on income for a long time. Tanzania was not threatened by interest rates or currency fluctuations. It was threatened by high taxes and a regulated economy. This leads to corruption and to despair.

In the tradition of the Church there is an insight, a common theme, that wealth is something very good, but also very perilous. The bishops write: “Creation itself offers an abundance of life and means of subsistence, but everything can be abused and mankind lose the blessings.” What has happened in Sweden and in the global economy during the postwar period is that the world’s wealth has been put primarily in the hands of the state. Taxes have increased and public sectors expanded. How should the Church view the concentration of ownership in public hands? The states have become richer than ever, but this pastoral letter does not devote one line to this situation. Another who did reflect on this problem said that we should “Render therefore unto Caesar the things which are Caesar’s.” Our question today is: What things are Caesar’s?

For many years it has been sung on First of May that “the Internationale brings happiness to all.” Is this not blasphemy, or at least idolatry? To think that any political idea can guarantee happiness is political messianism. The money changers in today’s Temple are mainly selling political ideas, not currencies.

Economics and Morality

The bishops also write that “the gifts of life, which exist in abundance, must be shared generously and in solidarity in order to become a blessing.” If the “gifts of life” means something other than money, for instance personal talents or attributes, they certainly do exist in abundance, but they cannot be shared. These are personal possessions. An attribute that is at one time valuable can in another context be worthless. The problem is not only how we should receive and distribute the gifts of life, but how we make use of them.

Distributing the gifts of life is not a problem; what is fair can always be discussed. But it is always possible to share, be it fairly or unfairly? How shall we use the gifts of life fairly? Matthew 25:29 says “Everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him.” The moral duty to use one’s talents and not slacken is important for this very important reason; of this there is nothing in the pastoral letter. Should not the individual demand much of himself?

Neither money nor politics guarantee happiness, though they are important for peoples’ living conditions. I agree with the bishops when they write that economic growth is only one dimension of the good life.

The bishops are concerned that we all strive for higher morals in the field of economic responsibility and for respect for good basic principles. It is for this very reason that it is important we discuss these issues forthrightly. The bishops write “The common weal must take precedence over private profit.” Here it is hinted that private profit, the driving force of the market economy, will not lead to the general improvement of society. If someone had said that the common weal must be given precedence over the profits of the Church, would not the bishops have felt themselves under attack? In the same manner, statements of this kind must be seen as attacks on every merchant, businessman, and entrepreneur.

It is not because business morals are high, and justice unproblematic –such is clearly not the case–that I have wanted to present some complementary and partly critical views of the Church of Sweden’s bishops’ 1993 pastoral letter on justice and morality in the global economy. It is rather the opposite. It is important that the experience and competence that the bishops possess is put to better use, including matters other than purely clerical. This is not because Church matters have become less important, but because we live in an age when religious secularization has been replaced by political secularization.

The Swedish people were de-Christianized fairly early, but not without religion. Politics as the giver of all good gifts–the new manna from heaven–was a necessary condition for the emergence of the welfare state. Many still believe that it is the welfare state that lifted Sweden from poverty. The truth is that with annual economic growth of three-and-a-half percent, standards of living will double every twenty years. No redistributive policy in the world can improve standards of living for everyone. But fewer people now have faith in politics. In fact, more people tend to doubt everything. For this reason, too, it is important to formulate the problems correctly.

The Decisive Question

This is the decisive question regarding poverty and wealth: Which is more important to reduce, poverty or wealth? If it is more important to reduce wealth, the solution is very simple. The state can by one single decision confiscate all the private wealth in the land. But if the important issue is not to reduce wealth but to reduce poverty, then the problem is vastly greater. It is then impossible to solve the question with a single decision. Instead, poverty must be fought continuously.

Ernst Wigforss wrote in a Social Democratic motion to the Swedish Parliament in the 1920s that poverty is borne with equanimity if it is shared by everyone. Non-socialist politicians also tend with some hesitation to agree with him. But as Wigforss’ distant relative, Harald Wigforss–for many years editor of Handelstidningen in Gothenburg–has pointed out, this view is a half truth, because that was not the way Sweden grew rich. The truth is instead that poverty is borne with equanimity if everyone is united in combating it.

The Swedes of the late nineteenth century did not aim at distributing poverty evenly, but combating it. One-fourth of the population emigrated to the United States of America. There they found both new means of livelihood and a greater measure of religious freedom.

In Sweden we now have almost four hundred thousand openly unemployed, two hundred thousand in relief work and forty thousand in premature retirement. These are to be supported by four million employed, who must also pay for child care and old age pensions. In addition, we have a large public debt which rises by one thousand crowns per worker and week.

If it is the case that the perspective of the poor gives the best insight into poverty, we Swedes will quickly become more insightful. That view is not reasonably one that the bishops support, even if it is the logical consequence of the letter formulated by Bishop Biörn Fjärstedt. What we need instead in Sweden is to see a sufficiently large number of young Swedish men and women who dare to start up new businesses. Some of these from the start will want to help those who are worse off if they themselves are doing well, but many of them will be thinking about themselves. It is only when wealth has been created, however, that people begin to think about how to use it.

It is, of course, not good if a business is doing badly. But many think that it is also not good if it is doing well. These people prefer that companies do only moderately well. But life is not moderate, except on average. Some people will make much more money than others. It is therefore important to stress that there are different kinds of human values.

The first is each individual’s unique value as a human being. This is what is meant by “respect for life.” The two other human values are of a different kind.

One is their commercial value, that is, the market value of a person’s work. This varies with demand. The other is their political value, the influence one person can have in politics. These two latter human values can change, but the first is fixed. Man differs from the animals. He has free will and can choose between right and wrong. Just as no one should become boastful because of success in business or in politics, no one should feel envy towards the business or political success of others. Every individual has a unique value as a human being.

Towards the Future

Sweden has for quite a long time lived in a idyll where it was assumed that everyone wishes to do good. But no more. During the last few years we have seen evil worshipped in black masses. Communism has fallen in Eastern Europe, but in its place we have raw nationalism; look at the long-running civil war raging in the former Yugoslavia.

Many are today talking about the importance of the institutions for the development of economic and political systems. The Church is such an institution. But attitudes, which work together with institutions, are equally important. It comes down to disposition. This word has almost disappeared from use–just like personal responsibility. But in the long run it is not possible to maintain human value without maintaining the idea of personal responsibility.