Capitalism

Capitalism is often called the "free-enterprise system" because individuals are free to invest their capital (money or property) however they choose. The "law of supply and demand", described by Adam Smith in the Wealth of Nations, is based on the principle that when supply exceeds demand, prices fall, and when demand for a product exceeds its supply, prices rise. An excess of demand over time causes inflation of prices. Individuals may pool their capital together and invest in a "joint-stock company" whose profit motive is to increase the capital of its investors.

Capitalism is also referred to as the "market economy" because buyers and sellers are free to exchange goods and services in a flexible market barter that is influenced by supply and demand. Markets of this type are ancient. In Genesis, Jacob bought Esau's inheritance birthright (Supply = one of a kind) for a bowl of soup (Demand = avoid starvation, Gen.25:32)

The accumulation and conservation of capital for investment in public works and welfare began through taxation of subjects of a King. The Babylonians built a protective 14 mile long wall to protect their city. Joseph collected grain for seven years to survive the predicted seven years of Egyptian famine. The pride of a kingdom was the size of its army and luxury of its royal court.

From the decentralized manorial system of the feudalistic early Middle Ages, grew nations and a theory known as Mercantilism. The Age of Exploration brought wealth to European countries. This wealth was increased through a favorable "balance of trade", i.e., exports exceeded imports. With this increase of silver and gold bullion, a nation could hire soldiers to defend and expand its colonial territories. Colonial powers imported inexpensive raw materials and exported expensive manufactured goods back to their colonies. Spain kept a monopoly in the Americas from 1492 until 1588 (Spain's Golden Century from Columbus until her "Invincible Armada" was defeated by the British). Spanish wealth attracted pirate attacks which slowed Spanish accumulation of bullion and merchant privateers smuggled goods against Spanish law. Excess wealth led to inflation in Europe as wealthy merchants increased prices at a faster rate than wages increased. Almost as rapidly as bullion entered Spain, it left through imports of luxuries from the East. Private joint-stock companies like the British or Dutch East India Company grew very wealthy and powerful. (The British company held power in India until the 1858 Sepoy Rebellion.) Spanish decline also resulted from the expulsion of Jews and Islamic Moors who had been a large part of the prosperous middle class businesses. Also, the brutal Catholic Inquisition killed new ideas and dampened progress.

The Industrial Revolution, which started in England, made the most of capital investments through the mass production of textiles. Agricultural production increased but displaced farm workers with machinery. Poverty in the countryside lead to rapid urbanization and accompanying problems of sanitation and housing. Christians answered this need with Sunday schools and the "Ragged Schools Union" which fed and educated over 300,000 destitute children. George Muller's orphanages, William Booth's Salvation Army, Florence Nightingale's hospitals and Lord Ashley's Young Men's Christian Associations, help relieve the suffering of thousands.

The newly independent states of Latin America in the early 1800s sought a model of development and, with the rare socialist exception, overwhelmingly adopted capitalism. This same process happened with the de-colonization in Africa and Asia in the early 1900s. Many of the new nation-states selected Capitalism as their development model. The rise of capitalism was further strengthened by Imperialism. Imperialism provided an economic education in western work ethics that was latter adopted by new leaders.

Modernization occurred rapidly after World War II which had defined the United States as a superpower. As such, the US attempted to contain the growth communist movements (from the Soviet Union, People's Republic of China, Vietnam and Cuba). The US gave vast amounts of capital and technology for the reconstruction of Japan and Western Europe (Marshall plan). US ideologies were established as they financed the industrialization of South Korea and Taiwan. Capitalism and Christianity came hand in hand to these traditional strongholds of economic isolationism and religious idolatry. (South Korea, for example, now has the largest evangelical church in the world and sends out more Christian missionaries per capita than any other nation.) In addition to winning hearts and minds through Christian charity, the US built a strong military presence to curtail communism. Thus, capitalism and democracy were promoted for political stability.

Solomon tells us in Ecclesiastes 5:10-20 that wealth hoarded harms the owner. It is better to "cast your bread upon the waters and in many days it will return to you" (Ec. 11:1). In other words, invest and give generously (Prov. 11:24-26). The praised women of Proverbs 31 made and sold garments and used the profits to buy a field. Biblical, free-market capitalism, works when buyers adhere to Wisdom personified in Proverbs 8:11, "Choose my instruction instead of silver, knowledge rather than choice gold, for wisdom is more precious than rubies, and nothing you desire can compare with her." When Christians seek the kingdom of God first, then sufficient capital will be the unattended result (Mat. 6:33). For "a good man leaves an inheritance.." (Prov. 13:22)

Will capitalism last? More certain than the inevitable fall of Communism. Jesus predicts people will continue "...buying and selling..." (Luke 17:28) until His followers are taken to Heaven. Those left behind will face the tribulation "so that no one could buy or sell" without the mark of the beast (Rev. 13:17). Until then, 1 Corinthians 6:20 and 7:23 reminds Christians that each was bought with a price, that is, the crucifixion of Christ. We are not our own, therefore "store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also" (Mat. 6:20-21).

Additional resources:
Modernization Theory

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