Saturday, November 26, 2005

Celebrate Industry, It Helps the Poor

At high levels of many Christian churches is a real and harsh bias against capitalism, a distrust of free markets and an abhorrence for globalization. Perhaps the bias is meant with good intentions, but it has arisen in part because of a missing conversation partner concerning economies and helping the poor, generally a pro-free market partner. The general assumption seems to be these three principles: history tells us capitalism is dangerous and exploitative, and should be heavily regulated. “Living wages”, an increased minimum wage, redistributed wealth, or other price controls are seen to be the best ways to lift up the poor. And the greatest exploiter of all is the nebulous “globalization”, which apparently has its crosshairs on the world’s most vulnerable. I would like to counter by taking a glance at two oft-criticized capitalists of the early 20th century to explore whether they may have raised the standard of living for all by their industrious production.

It is widely assumed that John D. Rockefeller and Andrew Carnegie were “robber barons” intent on building lives of unnecessary wealth at the expense of the poor. I would argue their efficiency and vision of how industry (what now seems to be the Church’s greatest foe) can act in its own interest actually improved the lives of most Americans, including her poorest consumers. Consider these facts:

1. After Carnegie revolutionized the steel industry, the price of steel rails was about a tenth of the cost in 1898 of what it was in 1875, passing those immense savings on to every railroad user in the nation.
2. Rockefeller reduced the price of kerosene from one dollar a gallon to ten cents a gallon, passing those immense savings on to every kerosene user in the nation.
3. All of the companies Rockefeller acquired were done so voluntarily, mostly by companies who asked to be acquired by Rockefeller.
4. Both producers made unusually efficient use of resources, even waste: Rockefeller produced 300 products from the waste alone. Carnegie made three times more steel with about one fourth the employees as the next biggest steel producer in the world.
5. By the time of their death, Carnegie and Rockefeller gave away over $1 billion dollars to private charities, institutions, libraries and cultural foundations.
6. Carnegie wrote an essay entitled “The Gospel of Wealth,” which encourages the rich to act as trustees of their wealth and use it for the betterment of society.

So the Church sees all of this and still continues in the tradition of hating capitalism. Should they? Was the work of Rockefeller and Carnegie done explicitly in the name of Christ? No, and in no way should it be compared to Christian charity. And this is not to say business is perfect. Of course I do not endorse any company practices its business immorally. But before the Church proposes ideas that only demand business reform, we should consider the net benefits of the market.

Steven Malanga for City Journal, asks whether minimum and living wages have proven beneficial for cities. His answer is a qualified no, mainly because the artificially high wages make many low-skilled workers unemployable. As a result of such price controls, jobs are driven from cities with high minimum wages to cities without them. Nationally, the loss of jobs would be devastating, hitting the poor where it would hurt the most by creating a lack of jobs. He writes, “A recent Congressional Budget Office report, for example, estimates that upping the minimum wage to $6.65 an hour would eradicate between 200,000 and 600,000 jobs.” The same is true of the living wage, which would place an even greater burden on the private sector. “The living wage poses a big threat to their economic health, because the costs and restrictions it imposes on the private sector will destroy jobs—especially low-wage jobs—and send businesses fleeing to other locales.”

Globalization, for example, seems to be an assumed danger to the world, but I would argue it will likely benefit the world in the long run. There will be difficult transitions, just as there was when Rockefeller and Carnegie changed the way the steel and petroleum businesses operated. But these transitions are a necessary stage of growth and improvement.

Rob Sligh, Chairman and CEO of Sligh Furniture Company recently remarked on the net benefits of free trade on the global economy. He wrote, “The pain of economic adjustments aside, candor insists that we acknowledge the benefits of an increasingly free world. For example, world poverty has fallen more in the past 50 years than in the previous 500. In the past 40 years, average income in the world almost doubled. The poorest fifth increased the most, more than double. The richest fifth also increased but at a lesser rate, 75 percent. World hunger is declining. Undernourished people in developing countries declined precipitously from almost 40 percent in 1970 to less than 20 percent today.”

This is good news. (Not the gospel, but good news for sure.) The Church would do well not to ignore this sort of news when considering the full implications of globalization and the free market on the world’s poor.

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