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I’m not interesting in commenting on the specifics of either party’s job plan. There are, no doubt, many good ideas that could help the economy and many bad ideas to avoid. I’ll let you decide which are which.

But I thought it might be worthwhile to think about where private sector jobs come from. Most basically, new jobs come from people with money to spend who want to spend their money on more people. This means:

(1) The employer must have money. He may spend his own money. Or he may borrow money from investors or the bank. But somehow he has to have money.

(2)The employer must believe that spending his money on new employees will be good for his business. We may wish that employers hired people just cuz. But that’s not the way the world works. When employers want to be charitable they give to the church or to their alma mater. But with their business they know they need to make money. Consequently, they hire new workers only when they believe that paying more people will eventually be offset by making more money.

(3) The employer must be willing to take a risk. Very few new hires are sure things. Employers don’t know exactly what they are getting with their new employees. More important, they don’t know what will happen with their profits. They follow trends and track receipts and keep money in reserve, but in the end every expansion of business is a risk.

(4) The employer must be somewhat confident in his projection of the future. Yes, risk is inevitable. But shrewd businesses look to minimize risk. They want to know what their taxes will be, whether existing laws will be fairly enforced, what regulations will be like, what’s happening with their competitors, what’s happening with the prices of things they need to buy, what’s happening with markets overseas. There are a thousand things they’d like to know. They can’t know them all. But the more predictable their future looks, the more apt they will be to take risks.

Underneath it All

Of course, none of this matters if the employer is not profitable. Almost no business will expand unless profits are increasing, or it is believed strongly that they will.

So where do profits come from?

People make a profit when they sell goods or services for more than it costs to produce or perform those goods and services. No doubt, many people are greedy and pursue profits at the expense of principle and the good of people. But profits by themselves are not bad. In fact, they tell you that you are delivering a product that people find valuable. Profits help allocate scarce resources toward the goods and services that people want.

When the same goods and services can be delivered more cheaply, profits increase. And with fair competition prices will eventually decrease, which is good for consumers. Productivity is the name of the game. Whenever the same stuff can be produced for less cost, productivity has increased. And when productivity increases, an economy expands. This doesn’t mean everyone will profit equally. One business windfall may spell bad news for some other industry. But over time, with increased productivity, the net effect on the whole economy is positive. And that means more jobs.

Let me illustrate.

Mr. Moo and His Milkmaids

Mr. Moo sells milk. He charges $5 a gallon. Everyone in town wants milk so everyone pays Mr. Moo $5 a gallon. But Mr. Moo wants to make even more money. Maybe he’s greedy. Maybe he wants to give more to his church. Maybe he wants to buy a new car. Maybe he just had a new baby that needs food and clothes. Maybe he wants to bet on horses. No matter the reason, Mr. Moo (like almost everyone) wants to make more money. What should he do?

He could charge more for his milk, but he realizes that at $6 a gallon some of his customers will drive to the next town where milk is only $4.75. So instead he tries to lower his costs. He needs $4 to make a gallon of milk, but he’d like to do better. So next month he replaces his milkmaids with new milking machines. This requires a substantial up front investment, but within a year the milking machines have paid for themselves. Without having to pay milkmaids, his milk only costs $3 to produce. Now he charges $4.25—a savings to his customers and more profit for him.

This simple example shows how productivity fuels profits. Mr. Moo found a way to make the same thing for less money.

But, you ask, how is this good for anyone but Mr. Moo? Well, as the other farmers purchased their milking machines their costs went down too. So they started to lower prices, hoping to attract more customers. Mr. Moo did the same. Even if he is now getting richer, his customers are too. They save 75 cents on every gallon of milk (paying $4.25 when they used to pay $5.00). Now they have the same milk as before but more money. The economy has expanded.

And that’s not all, with more money in his pocket Mr. Moo goes out to eat more, which helps the local burger joint hire one more cook. And all the new machines need servicing, so the local repairmen hires an apprentice. The grocer spends less on milk so he can add another bagger. The doctor, who is saving money on dairy, has more money to spend so he donates to the local art museum which can afford to purchase two new paintings from an aspiring artist. No one knew Mr. Moo’s machines would help so many people and create so many jobs. No one really notices either, but it happens.

But what about the poor milkmaids? True, they are out of work. Their lives, at least in the short run, are worse because of the new innovation. Those dreaded milking machines seemed to have ruined everything. In fact, the mayor almost outlawed them. Others wanted to institute a new milking machine tariff to discourage farmers from buying them and to help save milkmaid jobs. But none of this happened. Instead farmers kept buying milking machines and milkmaids kept losing their jobs. Which was really hard on the milkmaids and their families.

And yet, that’s not the end of the story. Some of the milkmaids went to work for Mr. Pump who manufactures milking machines. His business was booming. He needed more workers to help make more machines. So he hired a few milkmaids. And remember, as the price of milk dropped, so did the price of cheese and pizza and yogurt. Everyone’s grocery bill was less. The whole town had the same stuff but more money. So Mr. Wall and Mr. Mart decided to open a new thrift store. Mrs. Lovejoy, who started watching busy Mr. Wall’s and Mr. Mart’s kids during the day, decided to open a daycare. She hired some former milkmaids to help, as did Mr. Wall and Mr. Mart. A few of the married milkmaids decided they didn’t have to work anymore because groceries were cheaper than they used to be and the family could get by on less. It was hard and humiliating to lose their jobs, but five years later the whole town is better off because Mr. Moo bought his milking machines. There are more jobs. Families are able to purchase more things. And there is more ice cream for everyone.

Coming to a Point

The point of this little parable is to highlight the power of productivity. Obviously, my story is hugely simplified. This one example doesn’t take into account that some technologies are morally suspect and some people use them immorally. Virtue is necessary for any flourishing economy. Economists call it social capital. It’s the fancy phrase for trust, honesty, and the rule of law. Economies drag when corruption soars. Every economy needs rules that are justly enforced by impartial rule keepers. All of this is assumed in the story of our capitalist friend Mr. Moo.

I don’t believe the Bible mandates a specific economic system. Capitalism is not required by Christianity. But Christian principles do undergird capitalism. And the biggest of these is capital itself. When we hear “capital” we think of money. But that’s not the only, or the most important, kind of capital. Remember, capital comes from the Latin word for “head.” The most important element in capitalism is the human brain. The engine of capitalism is the God-given drive, ability, and responsibility to create, to innovate, to conquer and subdue. When humans make something out of nothing, or when we make the same something more efficiently, we show forth the image of God in us. We turn a black gooey mess into gasoline and sand into silicon chips. That’s the result of human ingenuity, which results in increased productivity. And it just so happens, that increased productivity leads to profit, and profits are ultimately where jobs come from.

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58 thoughts on “Is Capitalism UnChristian?”

  1. Cody says:

    I appreciate you’re response. It’s a lot more humble than I would expect from….every other sentence of yours that I’ve read. Thank you.

  2. Ben M says:

    Thanks for your comment PJ. This has been an excellent discussion. I’ve been thinking as I write my comments that some people might be misunderstanding what I mean by “Capitalism,” and I want to clarify. I believe in free enterprise and limited government. I consider myself to be conservative to the core. My issue is more with the excesses of a consumerist culture and economies of scale. Also, I feel that the emphasis by many American evangelical Christians on protecting liberties of all sorts (except for the ones that really matter) is hindering the gospel. Many on the left view the term “Capitalism” very negatively and I feel that in order to reach out to such people we need to avoid causing them to stumble because of terminology that isn’t used in the Bible.

  3. David Axberg says:

    Cows are a great investment. I bought 2 five years ago and now have 17. I have sold some to pay for their upkeep (food, Hay). God’s economy is multiplication (be fruitful and multiply) he also honors hard work. His economies are based on families and churches. If these two areas are working as they should then the global economies will be positively effected. God Bless Now!

  4. Craig says:

    Good article. Some people believe that these “milking machines” are putting people out of work therefore it must be bad for the economy. That is absolutely wrong!!!!! Imagine a world without any machines and all work was done by physical labor. Where would we be today? If we lived in a world like that we wouldn’t have cars, computers, tractors, electricity, hospitals, etc. You get the point. A machine is nothing more than a tool. Tools allow us to work more efficiently. Working more efficiently allows for more time to spend on producing more things and better things. A machine may displace a worker but ultimately it makes an economy grow for everyone by creating an excess worker which can now be employed in some other type of work. Look at how the world was before we had the industrial revolution. Would you really want to live in a world without machines?

  5. Allen Knight says:

    A well written, thought provoking post. As an instructor in higher education, I will plan to use your thoughts as an example of critical thinking with a dose of Austrian economics and Christian virtue ethics, which by the way finds its roots in our Greco/Roman Western culture. Since, I have not read your posts before now, I will ask if you are aware of the “Poverty Cure” series from the Acton Institute?

  6. After reading De Youngs thoughts on capitalism I must agree with Neville’s response and others who separate our systems from Gods. God is more concerned about us and what we believe and do in this life, ie following Christ and doing good. I read one author who said the root of all evil was the lack of money. From a secular point of view this may hold some weight. However, in relation to capitalism it relies on a small number of principles. ie Wealth and resources must be with out end and the market sets what you get paid. In Australia the High Court ruled very early last century a worker was entitled to a fair days pay which allowed him/her to be housed and care for their basic needs. This ruling established awards and conditions which forces employers to pay a livable salary with decent working conditions. Capitalism had nothing to do with it. Other countries decided to allow the employer to pay based on their profit or market forces. Mind you this award based system is now under attack from employers and government. Its only people power that keeps it in place. Unfortunately capitalism with out regulation creates greed especially in banks which we all saw the result in the economic crash of last decade and we are all still paying for it. De Youngs blog from what I can see misses an important issue ie human greed and the desire to exploit systems and people. Look around you how many working poor do you see. They have a job but they live hand to mouth every week. That is the result of a system that pays based on market fluxuations and share price-dividends. All systems have faults and these faults are human created.

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Kevin DeYoung

Kevin DeYoung is the senior pastor at Christ Covenant Church in Matthews, North Carolina. He is chairman of the board of The Gospel Coalition, assistant professor of systematic theology at Reformed Theological Seminary (Charlotte), and a PhD candidate at the University of Leicester. Kevin and his wife, Trisha, have seven children. You can follow him on Twitter.

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