Transforming Capitalism from Within (Copenhagen, May 2012)

Many Western Christians consider modern capitalism to be the default economic system. And yet, Dr Michael Schluter shows in this video that the Bible suggests a real Copernican revolution of the way we think about our financial systems.

State of Europe Forum 2012 in Copenhagen

Christians should not think that they can tweak capitalism and get something consistent with Christianity. It is a much more root and branch reform that we require. 

The questions are: ‘How do we do that?’, ’What is the teaching of the Bible that points us in that direction?’ and ‘How do we implement it?’

My old professor at Cornell University in the United States, where I did my PhD, said that ‘good policy follows from good analysis’. I therefore decided to focus this short session on what the problem is and point you to where you can read about the policy outcomes that I am proposing, rather than jump straight to the solution. Unless you are convinced that the diagnosis is right, you won’t be very interested in the policy outcomes.

Looking at the world primarily through a relational lens rather than a financial and environmental lens

This is very much in line with the Christian Democratic tradition. Jesus says: “Love God and love your neighbour. On these two commands hang all the law and the prophets” (Matthew 22:37-40). The Law and the prophets include the financial and the environmental, so I think Jesus is saying that the relational has to take priority over both the environmental and the financial. 

We have to think about financial issues in terms of the relational dynamic that they create, rather than vice versa as we do at the moment. The centre of our thought universe if you like, is that money is the centre of the universe, and relationships have to make good as much as they can in order for us to achieve our financial targets. What I am suggesting is a Copernican type of revolution, where we make relationships the centre of our thought universe, and the financial operation has to serve the interest of relational outcomes. That is really turning the thing on its head. 

What advice does the Bible give us as to how we do that? 

Biblical law is the design of a relational God for a relational society

This second fundamental assumption is a very radical one, even to most Evangelical Christians who say they believe the Bible. This is where I depart most fundamentally from personalism and the Christian Democratic tradition. We have hiccups on bits of Biblical law mainly because we haven’t studied them enough.

God, Justice and Society is a book written by Jonathan Burnside, a reader in Biblical law at Bristol university, who used to be at the Jubilee Centre. Burnside will take you through many of the difficult passages in Biblical law and show how fundamentally relational they are and why they are coherent. 

We need to recover the same confidence in our Scriptures as the Muslims have in the Quran. We lack confidence in our own Scriptures and the key point where we lose the argument publicly is on Biblical law. We need to go back to that material. We need to believe that it was inspired by God. We need to study what it says in its cultural context and be ready to answer the arguments. But we believe that the Bible itself in Biblical law provides teaching on how to run an economy. What are the key components?

It is true that there is a problem of taking it from a pre-industrial society into the modern day. Nevertheless, we argue that Biblical law was given for all time by God, not just temporarily. Human beings shall not live by bread alone, but by every word that proceeds from the mouth of God. So why have we cut this part, my brothers and sisters, out of our thinking? Why have we excised the Law from our thinking about politics and economics when it’s all about politics and economics? We need to have the confidence to get back to it.

There are two points to make on the implications of taking Biblical law seriously for the market and the state:

Biblical law endorses markets for goods and services

This may seem a technical point but it is a very vital one. If you say to a Christian: ‘Do we support the market?’ we should say “Yes, if you mean a market for goods and services.” But if you mean a market for capital land and labour, the answer I think must be no. On all of these things – capital, land and labour – Biblical law suggests major interventions into those markets. If you don’t intervene in those markets, you will end up with a great deal of injustice. 

So there is a ban on interest. We must prevent debt. All debt is written off every seventh year. Is this really impossible? Is this really so stupid? The German government is approaching that kind of idea now, but why so late? Also, the problem with giving the state a great big role, as Keynes and others have argued in the past, is that it takes decision-making away from families and communities. If you do that, you take away the foundation on which relationships are built at the family and community level. If families and communities don’t make decisions, governing economic activity and welfare for instance, you make the home a multi-purpose leisure centre. It is reduced to something trivial.

Financial capital is destroying relational capital

Look at pay differentials across Europe. The person on the supermarket desk or in the supermarket taking the payments is getting less than 1% of the salary of the managing director of every major supermarket in Europe, I’d be prepared to bet. In Britain it is something like 1/500 ratio. 

Do we believe all people are created equal? What sign of equality is that? Why are Christians not saying that this ratio is unacceptable? We don’t believe it’s right before God. It is not an expression of loving your neighbour to pay such a huge differential.

Look at the long and unsocial working hours. What is it doing to our families that people are having to work 50-60-70 hours a week? 

Look at debt and at its impact personally. We did a study from our Cambridge research base on this across Britain. We took over a thousand multiple debt cases. The consequences of debt at a household level is child abuse, divorce, wife battering and all kinds of stuff. 

Debt has hugely negative relationship consequences. If we believe relationships are important as Christians, surely we believe that relationships is how God will evaluate our lives. The concept of God as trinity is relational; the incarnation is relational, for God is with us; the cross is relational, as it is about reconciliation; heaven is going to be about the Church as a relational community taken into eternity. Everywhere you look in Christianity it is about relationships. 

We are being asked to make relationships the centre of our thinking. Why don’t we worry about debt at a personal and family as well as a national level? What about intergenerational debt? Someone has coined the term fiscal child abuse, as what is going on in Western countries at the moment, because we are abusing and exploiting our children in the way that we are organising the tax system to benefit us at the expense of our children. It is a huge Ponzi scheme in effect.

Look at mobility. Mobility of capital leads to mobility of labour. Mobility of labour breaks up extended families so they can’t care for each other. It breaks up communities and breaks up relationships that should be mutually supportive. 

Anyone who has pensions with private pension agencies is part of the problem

This is because we are taking our savings and we are putting them into the market. And we don’t know where the money goes. It goes to a pension fund, a trust. From there it goes to a fund manager. From there it may go into a bond or into an equity. We know not. We care not where. 

We, as Christians, are responsible for our savings, and we have no idea where the savings have gone. You might say: “When I meet the Lord I’ll tell him that I got 6% rate of return on my savings. But my neighbour only got 5% on his. So I had a better stewardship of my money than he did.” But my brother, God will say to us: “I am not interested in whether it was 6 or 5%, I want to know where the money went.” “Well I put it into Standard Life,” you might answer, but actually it happened that Standard Life was supporting pornographic websites.

Great, so my savings contributed to pornographic websites or gambling websites. Is that really what God wants us to do with our savings? Don’t we have the responsibility to know where our savings go and how they are used? Christians have got to start by saying “What capital have I got?”, “How is it being used?” and “How do I take responsibility for it?”

Jesus makes this point, I think, in the parable of the talents. What Jesus puts in the mouth of the master when talking to the man who buried his talent in the ground is this: “So you knew, did you, that I was a hard man – hard means unrelational, uncaring – who reaps where he doesn’t sow. Well if that’s the kind of man I am, you should have put my money in the bank and I would have got it back with interest.” 

What banks do is put a Chinese wall between the lender and the borrower. Once you put your money in the bank, you have no idea from there where the money goes, and I am saying that’s wrong!As Christians we need to know where it goes and how it is used. We end up like absentee landlords. We want to take the profits with no engagement and no involvement.

Risk does not by itself justify rewards

Many Christians say: “I put my money on the stock exchange, I took a risk, so I am entitled to a reward.” And I am saying: “The person betting on horses on the racecourse is making exactly the same argument.” What is the difference between betting on the stock exchange and betting on horses? From the lender’s point of view, it is the same proposition: I track the company or I track the horse, I decide which one is best, I put the money on and I take the profit. But there is no responsibility, there is no involvement and there is no participation. 

Need for new institutions

I am making the same diagnosis as Karl Marx and John Maynard Keynes. However, the Christian solution is different from Marx’s – we are not seeking a violent revolution – and from Keynes’, because we don’t believe that we should be asking the governments to repair the relational damage. The conclusions that we have been reaching on the kind of way that you create a relational economy might be summarized in just three terms. We need

·    new institutions: e.g. family associations making extended families into viable economic units for insurance, savings, purchases and so on, regional investment trusts, regional stock exchanges etc.

·    a new growth strategy: We have built our ideas around Michael Porter’s relational concept of centres of excellence;

·    a new approach to welfare: somehow we’ve got to get the central governments out of the middle of welfare provision. It was a huge mistake to get into it in the first place. It won’t be easy. It will take a period of time but we believe there are ways to move towards it.

There is no short term quick-fix solution to Europe’s problems. There is, instead, a long-term strategy, which will mean that we are not just fixing the short-term problems. Actually, what we are doing is building a new set of foundations on which the European economy can be built and be competitive in the long-term against Asia and the other parts of the world. The sooner we start, the sooner we will get our lives back in order. 

But at the moment we are doing exactly what we told the Asians not to do. We told them in 1999-2002: “Fix the debt quickly, negotiate, get yourselves out of this debt by any means you can, but fix it quickly so you can get on to a growth path again.” What we are doing is exactly the opposite. We are struggling and struggling to stop any crisis coming. We are accumulating the debt more and more and the consequence is going to be that when the crash comes, as it has to do, because it’s unsustainable, then the building up process will take longer.

Michael Schluter

Dr Michael Schluter holds a PhD in agricultural economics from Cornell University (USA). He is the founder of the Jubilee Centre and the Relationship Foundation. He also worked as an applied economist for the World Bank.

Recommended reading

Transforming Capitalism from within – Jonathan Rushworth and Michael Schluter

The Relational Manager – Michael Schluter and David John Lee

After Capitalism: Rethinking Economic Relationships – Paul Mills and Michael Schluter

God, Justice and Society – Jonathan Burnside