Montreal, March 5, 2006 No 169




Chris Leithner grew up in Canada. He is director of Leithner & Co. Pty. Ltd., a private investment company based in Brisbane, Australia.




by Chris Leithner

          These days, academics and the people they train, particularly in business schools and faculties of economics, strongly influence the way people in the real world think about commerce and finance. Statist thinking that is, the conviction that politicians, suitably advised by academics, know best permeates universities. As a result, neither politicians nor academics trust individuals to be the primary arbiters of their own material destinies. Nor, apparently, can standards of living be allowed to depend upon the ability of businesses to serve consumers.

          Instead, politicians and academics agree that the fortunes of hundreds of millions and even better billions of people are best placed in the hands of a small number of suitably pedigreed people. They also agree that the ideas that inform decision-makers should derive from the best and brightest of prestigious universities. Once upon a time, academics were the properly obscure and safely ignored residents of ivory towers. Alas, today they are much more prominent and powerful. Indeed, in the U.S. on 1 February, one became the high priest of economics and finance (see also Leithner Letter 67 and Letter 71).


          Just as bad as academics, it is sad to say, are theologians, priests, ministers and cadres of religious bureaucracies. When they talk about commerce, economics or finance and these days in Australia, some of them can't hold their tongues they typically embarrass themselves. In this respect they resemble politicians (see also Letter 59): their knowledge, both abstract and applied, is typically deficient and sometimes almost completely non-existent; and their repudiation of St Thomas Aquinas' legacy is so complete, and hence their command of reasoning and evidence is so faulty and their vocabulary so emotive, that it is painful to hear and read their words. There are some honourable exceptions, of course; but as a rule of thumb most clerics in Australia including prominent ones who call themselves "conservatives" support to various degrees the sentiment uttered by the American theologian Paul Tillich. In his view, "any serious Christian must be a socialist."

          It is therefore difficult to find religious writing in Australia that unequivocally celebrates commerce and capitalism. If one seeks insightful and sympathetic treatments of these things, then one must either turn to Australian academics and politicians (of all people!) who take religion seriously(1).

          The lamentable reality is that Australians presently face a relentless barrage of messages secular and spiritual, written and spoken, visual as well as acoustic that commerce and capitalism are bad, and that a life spent in business is at best amoral and possibly criminal. Yes, many school leavers study business "to get a good job" and "to make heaps of money." (Few attend university mostly in order to broaden and deepen their minds. And for good reason: Australian universities long ago abandoned the ability to do so.) But young people often hasten to add that they hope eventually to do something less grubby and more rewarding, and thereby "to make a difference." Australians whose vocation is business thus get little joy from those upon whom they once relied for instruction and inspiration. Equally sadly, they bulk smaller as role models among the youth whom they might once have inspired.

          The truth, of course, is diametrically different. Commerce and capitalism are not inherently bad. Nor are they neither-good-nor-bad-depending-upon-the-context. Quite the contrary: properly conceived and practised, they are inherently and unambiguously good; and they are admirable for reasons that most of today's politicians and academics cannot fathom and most of today's clergy cannot bear to admit. Commerce and capitalism are noble for reasons that, when they stop and think, Christians, Jews and Muslims and, indeed, when modestly restated, coherent agnostics can readily accept. God created us in His own image. He therefore bequeathed to us minds with which to reason and choose. He also gave us the will, if we choose to use it, to honour covenants. He created us so that we would imitate Him; He rejoices when we do so; and He rewards us when we honour our covenants with Him and punishes us when we do not. Commerce and capitalism are thus inherently and unambiguously righteous because, when conducted according to the golden rule, they reflect God's glory.

          I am unable to locate in the Scriptures any admonition to shun material prosperity. Quite clearly and unequivocally, they instruct us to reject the worship of material things. Equally clearly, however, they praise the creation of material wealth. The message, it seems to me, is obvious: we should thank God for commerce, capitalism and the wealth that springs from them; and one way to thank Him is wisely to buy and sell goods and services, prudently to accumulate and generously to divest capital. Make as much as you can, save as much as you can and give as much as you can the sheer excellence of this maxim hardly restricts itself to the followers of John Wesley.

Abraham's Capitalist Children

          Capitalism arose first in one corner of the world, namely the British Isles and parts of Western Europe, that the Christian, Jewish and Muslim faiths have influenced. These religions taught their faithful that the material world is ultimately intelligible. How so? Because all things therein spring from an omniscient Creator who made man His steward. Over the centuries, their adherents learnt that the earth is a realm given to them in trust but not in its final material form. They also learnt that in order to exercise their dominion and receive their inheritance they must, among other things, investigate and establish its properties; and to do so, they must bring to bear their propensity to inquire, choose and create. This belief and these behaviours facilitated the development of an economic system premised upon the notion that wealth springs from the individual's mind, its will and their output.

          Clearly, however, humans are not creators in the same sense that God is. People cannot make something from nothing. If we had not first inherited the world, then we would have naught with which to produce. Given the incomplete and ever-changing world bequeathed to us, and given the abilities endowed in us, we can, if we so choose, devote ourselves to the Creator's service. For Muslims, Jews and Christians, "be it according to His will" is the basis of prayer and work. We open ourselves to Him so that He might act through us. This means, among other things, that we must constantly seek more and better ways to act as stewards. Like that of any steward, our tenure is conditional. Hence the necessity that we strive to do more, do it better and correct our many faults.

          It is important that Christians and Jews recognise the important contribution of the Muslim faith to commerce and capitalism. As Imad Ahmad shows, there is a strong relationship, little appreciated or even known in the West, between Islam and Markets (see also the "Free Markets" link at the Minaret of Freedom Institute). The Koran "is filled with parables using the language of trade. It was merchants, not soldiers, who were mainly responsible for the spread of Islam throughout the world." The rise of Islamic civilisation contributed decisively and, ironically, more in Christendom than in the Muslim world to economic development and economic science. Indeed, "in his history of economics [An Austrian Perspective on the History of Economic Thought], Murray Rothbard noted the more advanced understanding of markets found among the Scholastics and in the 16th century school of Salamanca, compared to that of the ancient Greeks" (see also "Islam and the Medieval Progenitors of Austrian Economics").

          Ahmad also advances a dismaying (for the evil neoconservatives) and exhilarating (for the glorious paleolibertarians) hypothesis: "the rising tide of Islam today is in part a reaction against the Arab socialism that has destroyed the markets of the Muslim world. That the rejection of secularism and of socialism should come hand-in-hand should not be surprising. One cannot be a Muslim and [also be] opposed to freedom of enterprise." Tom Bethell provides corroborating evidence. "Property is [presently] held insecurely all over the Arab world The problem is that there is no security against the depredations of the state Ruthless autocrats, guarded by their own military, have been able to prevail for decades against impoverished masses." The embrace of "Arab Socialism" in the 1950s, aided and abetted by Western governments, entailed widespread expropriation of property and the imposition of centralised state control. Bethell notes "economic decline has been just one consequence" and adds presciently that "this situation is potentially serious for the rest of the world. Young men growing up in large numbers with no material prospects have in the past posed a serious threat to civilisation."

"Capitalism arose first in one corner of the world, namely the British Isles and parts of Western Europe, that the Christian, Jewish and Muslim faiths have influenced. These religions taught their faithful that the material world is ultimately intelligible. How so? Because all things therein spring from an omniscient Creator who made man His steward."

          Ahmed's conclusion is upbeat. "Like their cousins, the Jews, the early Arabs had a strong commitment to trade and bargaining. The rise of Islam did not change, nor did it seek to change, the centrality of trade and commerce to the Arab way of life. On the contrary, the establishment of commercial law, the expansion of property rights for women, the prohibition of fraud, the call for the establishment of clear standards of weights and measures, and the uncompromising defence of property rights (even while calling for a greater responsibility for alleviating the plight of the poor and needy) pushed the Islamic civilisation to the front of the world's economic stage and made the Muslim world the defining force in international trade for over 800 years. The Islamic activists throughout the Muslim world can help to usher in a new Renaissance if they avoid the temptation to yield to political pragmatism and hold fast to the pro-market principles of Islam."

Leges Sine Moribus Vanae

          Our Creator has endowed us with the capacity to distinguish right from wrong. He has also bequeathed to us the responsibility to choose among competing alternatives. Each individual must therefore decide whether he will be led towards virtue or succumb to vice. To be truly free is constantly to strive towards and, more often than not, choose virtue. As Lord Acton put it (Selected Writings of Lord Acton: Essays in Religion, Politics and Morality, Liberty Fund, 1988), "liberty is not the power of doing what we like, but the right of being able to do what we ought Liberty is the prevention of control by others. This requires self-control and, therefore, religious and spiritual influences [In Western countries] liberty has not subsisted outside of Christianity."

          Like people in all other walks of life, therefore, investors and businesspeople can, as they deploy the material resources at their disposal, choose to act rightly. Seen in this light, the gift of commerce and capitalism is that it encourages people to choose upright behaviour. Buying and selling in the market and accumulating and divesting capital facilitate various virtues. The first and foremost is honesty; and others include independence, diligence, intelligence, prudence, trust and co-operation. But the choice is ours: whilst commerce and capitalism encourage virtue, they hardly guarantee it. Indeed, action in the market offers many vices and temptations to sin. Yet given man's ability to reason and exercise judgement, it ultimately allows him, if only he will choose this path, to practice virtue, shun wrongdoing and therefore glorify God.

> Private Property

          The private ownership of labour, land and capital is fundamentally good because it provides many opportunities to glorify God. The Bible's prohibition of theft would make no sense if God did not intend that we exercise dominion over ourselves, the earth and the fruits of mixing our labour with land. The individual's ownership and maintenance of property is his way of exercising stewardship over a tiny portion of the universe. Clearly, individuals own nothing in any absolute sense; instead, as stewards, their task is to preserve and fructify what ultimately belongs to God. What does stewardship entail? One aspect is the husbandry of resources, i.e., the provision for one's children and grandchildren. To husband resources is to deploy them as efficiently and effectively as possible. Good stewards act prudently because they always bear the future in mind. Implicit in good stewardship, then, is the preservation and growth of resources that have been entrusted to you.

          Another aspect of stewardship is the devout enjoyment of God's bounty, that is, the use of property as thanksgiving. Good stewardship thus balances consumption today and consumption tomorrow; equally clearly, God rewards those with low time preferences. Finally, good stewardship is charitable. Stewards willingly and gladly give some of what they own (which is not the same as shareholders' funds!) to the poor and unfortunate. Because God provides and preserves, and is merciful and compassionate, He rejoices when we imitate these virtues.

          To own property and act as a responsible steward of it imitates God's sovereignty over the universe. Faithful imitation of God, in turn, glorifies God. Accordingly, to restrict and deny the opportunity and responsibility of ownership, as politicians, academics and clergy of all stripes unthinkingly do these days, is to deny individuals the opportunity to exercise stewardship and thus to imitate and honour God's sovereignty. Seen in this light, critics and opponents of private property mock God.

> Buying and Selling in the Market

          Buying and selling in the market are fundamentally good because they too provide the opportunity to glorify God. Buying and selling that is, undertaking exchange beyond barter are necessary conditions of anything beyond subsistence. If autarky reigned that is, an individual or family could buy and sell nothing, and had to subsist exclusively from the food, shelter and clothing it produced then material standards of living would be woefully and needlessly low. Conversely, becoming a specialised producer of a particular good or service, trading one's output in exchange for money and then exchanging that money for the output of other specialised producers in short, introducing and following to its logical conclusion the principle of the division of labour will over time raise material standards of living. To live a materially richer life, in turn, fulfils God's purpose that we enjoy with thanksgiving the resources we have inherited.

          Commercial transactions, then, are not a necessary evil. Nor are they morally neutral. Quite the contrary, they are inherently good because they are means towards an unequivocally good end the benefit of other people. Through our innate capacity to reason, God has given us a mechanism, the market, whereby we can advantage one another. Buying and selling thus provide a concrete means to love one's neighbour whom one might never have met because he resides on the other side of the world as one loves oneself.

          This point is fundamental. Precisely because they are so often impersonal, and precisely because buyers and sellers are usually honest, business activity among consenting adults exerts a significant civilising influence upon buyers and sellers. People who might not normally trust one another (because they live on different continents, speak different languages, practice different faiths, etc., and therefore might never come into direct contact with one another) learn, from their repeated and usually satisfactory experiences in the market, that it makes sense because it is usually beneficial to trust others. "Commerce," Montesquieu famously said, "is a cure for the most destructive prejudices; for it is almost a general rule, that wherever we find agreeable manners, there commerce flourishes; and that wherever there is commerce, there we meet with agreeable manners." Hence the insight of Britain's foremost pamphleteer of free trade, Richard Cobden: "I see in the [principle of voluntary exchange] that which shall act on the moral world as the principle of gravitation in the universe, drawing men together, thrusting aside this antagonism of race, creed, and language, and uniting us in the bonds of eternal peace."

> Profit

          Stripped of many and varied complications, if I sell a good for more than I expend in order to produce it, then I earn a profit. If I am a baker, bake a dozen loaves at a cost of $12 and sell them for $18, then I have earned $6 of profit. If people are prepared to pay for my bread, then they tell me, in effect, that the fruits of my mind and labour are valuable. In that sense, these activities benefit me. But there is much more: if people are prepared to pay $1.50 for a loaf that costs me $1 to produce, they demonstrate that the loaf is more valuable to them than it is to me. My labour has thus added value to the materials I have expended to produce the bread. Profit is thus not just a tangible indication that I have made something that other people value: it is also evidence and that I have benefited them.

          Clearly, the lower my costs then, other things equal, the greater my profit. Thus profit can indicate that I have used resources relatively efficiently and effectively that is to say, that I have acted as a good steward of these resources. If I use fewer resources to produce a given amount of output, then more remain for use today or tomorrow, either by others or me. Far from being a necessary evil, profits are a tangible sign of service and stewardship.

          In the parable of the minas (Luke 19:12-26), Jesus recounts that a nobleman summoned ten of his servants and gave one mina (a sum roughly equivalent to three month's wages) to each. The nobleman then said "engage in business until I come." The servant who greatly fructified the resources entrusted to his care, who turned one mina into ten, was rewarded greatly. Rejoiced the nobleman: "well done, good servant; because you were faithful in a very little, [you shall] have authority over ten cities." Another servant, who generated five minas from one, also found favour. He received authority over five cities. But the servant who generated no profit, who placed the mina entrusted to him in a handkerchief and then returned it to his master, was severely rebuked. "Why then did you not put my money in the bank, that at my coming I might have collected it with interest?" Added the nobleman: "take the mina from him, and give it to him who has ten minas For I say to you, that everyone who has will be given; and from him who does not have, even what he does have will be taken away from him."

          The nobleman, of course, is a proxy for Jesus, who travelled to a distant country to receive a kingdom and then returned to reward his servants. The parable applies most fundamentally to the spiritual gifts that Jesus bequeaths to us. Tellingly, however, it is presented in explicitly commercial terms; and in order to make sense it must also apply to material and financial resources. They are part of what God has entrusted to us; profits, in turn, help us to gauge the results of our commercial and capitalistic services to others; as such, they can and should be used to glorify God. Hence the vital point: commerce, capitalism and stewardship have many rewards, material and spiritual, but they also entail great responsibilities. "And that servant, which knew his lord's will, and prepared not himself, neither did according to his will, shall be beaten with many stripes For unto whomsoever much is given, of him shall be much required: and to whom men have committed much, of him they will ask the more" (Luke 12:47-48).

Some Lessons Spiritual and Secular

          For both spiritual and secular people, commerce is inherently good because it encourages us, as individuals acting in the market, to practice virtue. And capitalism, which builds upon the foundations laid by commerce, is inherently good because it enables us, as groups of co-operating individuals such as businesses, to accumulate capital and thereby help others to help themselves. In Australia and around the world, business is the best hope for the poor. As Friedrich Hayek put it, "capitalism created the proletariat, but not by making anyone any the worse off; rather, by enabling many to survive who would not otherwise have done so."

          Hence the first lesson is to students, undergraduate and postgraduate, who are presently suffering through the dreary irrelevancies and laughable absurdities of business school and mainstream economics: there is something that your instructors have probably not told you (likely because it has never occurred to them). This something may be more important than anything else in your life except your marriage and your children. It is that business is a calling, and people are called to it because commerce and capitalism, properly conceived and practised, are inherently good. Do you want to make a difference? One way is to do business honestly and profitably.

          The second lesson is to entrepreneurs, company directors and funds managers. Forget the platitudes, irrelevancies and inanities of most "mission statements," codes of conduct and the like. Remember above all one thing that, like the Ten Commandments, is very simple to understand but very difficult to practice: you are stewards. Great rewards, spiritual and material, await faithful ones; and great punishments (also spiritual and material) will condemn disloyal ones.

          The third lesson is for Pharaoh and his priests. Let us acknowledge that these days in Australia, significant parts of organised and bureaucratised religion have succumbed to statism and thereby repudiated Scripture (see Leithner Letter 59). But by embracing the very Scripture that many churches have abandoned, individuals can liberate themselves. Yes, tyrants secular and religious misuse and corrupt it in order to oppress some people. But let not these abuses obscure the truth that the Gospel of Jesus Christ is an individual-level, voluntary and thus extraordinarily powerful regulator of human behaviour. Subservience to God (if you are devout) and service to others (whether you are devout, agnostic or atheistic) and above all the triumph over the welfare-warfare state, whose agents dare to regard themselves as God these things presuppose mastery of oneself.

          Scripture promotes self-mastery. It reveals the foibles of human nature and the possibility of redemption; it inspires the defeat of misfortune; and it cultivates a disciplined way of life that inculcates peace of mind. Let us therefore rejoice that we, together with Jews and Muslims, are the children of Abraham; that there is one God who made all things; that God ought to be worshipped; that He helps those who serve others; and that the soul who embraces Christ is saved for eternity. And let us never forget the message that the Ten Commandments send to politicians, academics and anybody else who believes, for whatever reason, that property should be confiscated, markets suppressed and profits redistributed. That message is resoundingly loud and unmistakably clear: go to Hell!

          The final lesson is for humanity. Ian Harper recounts it admirably in "Christian Morality and Market Capitalism: Friends or Foes?" The writer of the Book of Ecclesiastes, identified only as Qoheleth, seeks to discover the meaning of life. He pursues worldly pleasures and material riches but is ultimately disappointed (Eccl. 2: 10-11):

I denied myself nothing my eyes desired;
I refused my heart no pleasure.
My heart took delight in all my work,
and this was the reward for all my labour.
Yet when I surveyed all that my hands had done
and what I had toiled to achieve,
everything was meaningless,
a chasing after the wind;
nothing was gained under the sun.

          Qoheleth was not an anti-materialist. "I know that there is nothing better for men than to be happy and do good while they live. That everyone may eat and drink, and find satisfaction in all his toil this is the gift of God" (Eccl. 3: 12-13). Yet he also knew something that eludes most of us: namely that wealth (and, by implication, commerce and capitalism) is not an end: it is one of several means towards an end. "Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income" (Eccl. 5: 10). So what is that end? How to close the circle of our felicities? How, in short, to live one's life? Qoheleth concludes: "fear God and keep His commandments, for this is the whole duty of man" (Eccl. 12: 13).


1. See in particular "Christian Morality and Market Capitalism: Friends or Foes?" by Ian Harper and "Christianity and Free Enterprise" by Robert Clark), or consult the work of theologians and religious scholars in other countries (see John Paul II's 1991 encyclical Centesimus Annus; Wayne Gudrem's Business for the Glory of God: The Bible's Teaching on the Moral Goodness of Business, Crossway Books, 2003; The Catholic Ethic and the Spirit of Capitalism, The Free Press 1993, and Toward a Theology of the Corporation, AEI, 1981, both by Michael Novak; and The Church and the Market: A Catholic Defence of the Free Economy, Lexington Books, 2005, by Thomas E. Woods, Jr.