The Spirit of Democratic Capitalism is a 1982 bookNovak, The Spirit of Democratic Capitalism, 1982, Simon & Schuster, by philosopher Michael Novak, in which Novak aims to understand and analyze the theological assumptions of democratic capitalism, its spirit, its values, and its intentions. Novak defines democratic capitalism as a pluralistic social system that contrasts with the unitary state of the traditional society and the modern socialist state. He analyzes it as a differentiation of society into three distinct yet interdependent power centers: a political sector, an economic sector, and a moral-cultural sector. Democracy needs the market economy and both need a pluralistic liberal culture. Against the continuing growth of democratic capitalism, modern socialism has contracted from a robust utopian program into vague "idealism about equality" and overwrought criticism of capitalism, most notably in the "liberation theology" of Latin America. Novak ends with the "beginnings of a theological perspective on democratic capitalism" illuminated by the journey from Marxism to Christian realism of Reinhold Niebuhr.
Irving Kristol described Novak's book as "unquestionably a major work for our times." The Spanish translation of the book served as inspiration for the Chilean lawyer and politician Jaime Guzmán where he was not satisfied by Hayek's thought.
Introduction
No theologian "has yet assessed the theological significance of democratic capitalism",(p13) the society of "three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is pluralistic and, in the largest sense, liberal."(p14) The link is not an accident. You can only have democracy with a market economy, nourishing and nourished by a pluralistic liberal culture: a threefold system.
Democratic capitalism requires economic growth, the "belief of all individuals that they can better their condition."(p15) Without growth and social mobility democracy devolves into the Hobbesian "war of all against all."
The treatments of democratic capitalism by religious writers, in papal encyclicals and mainline Protestant theology, have not really understood its essence. So democratic capitalism needs a moral theory about itself, to define a "political economy most consonant with Judaic tradition and the Christian gospels".(p20)
Capitalism is neither Heaven nor Hell. "Yet all other known systems of political economy are worse."(p28)
One: The Ideal of Democratic Capitalism
What is Democratic Capitalism?
People hate capitalism; its successes do not impress the "poets and philosophers and priests"(p31) "The more it succeeds, the more it fails."(p32) Intellectuals indict capitalism for all kinds of sins: affluence, moral weakness, and vulgar taste. The intellectuals that do defend capitalism have not made a broad enough case.
"What is the spirit of democratic capitalism?"(p36) Max Weber saw that commerce takes on a new meaning, or spirit in capitalist countries. Capitalism's spirit required free labor, practical intelligence, planned and organized for profit in a continuous enterprise in a stable network of law operating mainly in cities and towns.
But Weber did not see the "necessary connection between economic liberty and political liberty."(p45) It is not just "an economic system dependent upon a moral spirit".(p46) Rather than being an "iron cage" "democratic capitalism is demonstrably open"(p47); it reinvents itself constantly. "The spirit of democratic capitalism is the spirit of development, experiment, adventure. It surrenders present security for future betterment. In differentiating the economic system from the state, it introduced a novel pluralism into the very center of the social system."(p48)
Pluralism
The big idea in democratic capitalism is pluralism. A traditionalist or socialist society "imposes a collective sense of what is good and true... exercised by one set of authorities."(p49) But can society work if no-one is in control? Many people, from Solzhenitsyn to popes, find such a society immoral and chaotic. Social scientists find it sickening, as producing anomie, alienation, etc.
The founders of democratic capitalism "feared absolutism more than they feared pluralism."(p52) In a plural society, people can question things. One can step out from under one's "sacred canopy" and experiences "culture shock." "In a genuinely pluralistic society, there is no one sacred canopy."(p53) Society is renewed by crises of conscience, the "taproot of democratic capitalism."(p55) Pluralism avoids the single "sacred canopy" by design.
The founders deliberately separated economic institutions from the state, and limit the power of clerical and state bureaucrats to meddle in the economy. Political activists compete in the political sector, economic activists in the economic sector and religious and intellectual activists in the moral-cultural sector. By design it is hard for any one person to get power over all three sectors. But the three sectors need each other. Capitalism needs a moral culture to nourish "self-restraint, hard work, discipline and sacrifice"(p57) and a political system committed to limited government, a sound currency, and regulation of competition.
The authors of The Federalist Papers wanted to avoid the tyranny of the majority, so they constructed a political "system which would empower many factions and interests."(p58) No single group would be trusted with the common good, but gathered together, the combination of interests should "strike not to far off the mark."(p58) But this practical wisdom has been preempted by the utilitarians, and then accused by idealists of being merely utilitarian "interest-group liberalism." Novak prefers to use his own Thomist tradition, recognizing the "dangers inherent in idealism, the uniqueness of the person, and the special advantages of the practical... order."(p59)
We are born into a social world, into families, and only later become individuals. The system of the founders institutionalizes this in three steps. First it recognizes that all right-thinking people of goodwill do not hold the same moral vision. The second thing is to differentiate "between an individual and a person."(p63) "Personhood entails the right--the vocation--to be different. Third, it calls for a secular or civic faith. Thus the US Constitution: "a practical, rather than creedal, vision of the good society."(p66) It does less than command the socialist virtues; it does more than license mere interest group horse-trading.
"A democratic capitalist society is, in principle, uncommitted to any one vision of a social order."(p67) Therefore, moral-cultural institutions belong to the system, but they must not command the system. Religious bodies have a role. "But it is neither in command nor at the center."(p69)
Emergent Probability
Democratic capitalism has a particular view of history. It is the notion of "emergent probability." It thinks of the world as an emerging system of goods of order as developed by Bernard Lonergan. Adam Smith’s The Wealth of Nations was an attempt to understand how the world might be organized to provide such goods "so as to raise the wealth of all nations."(p77) It proposed organizing the world not from the top down but from the bottom up, "to empower the rationality of every individual."(p79) It is not sufficient, but it is necessary.
Sin
"Political economy must deal with humans as they are",(p82) including evil. Each system identifies the greatest evil. For traditional societies it is disorder, for socialist societies, inequality, for democratic capitalist societies it is tyranny.
In democratic capitalism we turn attention from "the moral intentions of individuals and toward the final social consequences of their actions."(p89) This results in affording high status to commerce and industry. The clergy is fanatic, the military plundering, the nobles proud and belligerent, the state parasitic. But commerce aligns with liberty, requires a "healthy realism" and is insensitive to station and class, and it provides a center of power separate from politics.
Leftists accuse capitalism of institutionalizing selfishness and greed. But "self-interest" is something more. Quoting Milton and Rose Friedman: "Self-interest is not myopic selfishness. It is whatever it is that interests the participants, whatever they value, whatever goals they pursue."(p94) It includes interest in the religious, moral, scientific and just. Democratic capitalism recognizes that sinfulness cannot be eradicated. It tries to make sinful tendencies productive and creative.
Providence and Practical Wisdom
When Thomas Aquinas abandoned God as Nous for Providence he created a problem for politics: "how can political economy be Provident?"(p96) It takes more than theory; it takes practical intelligence and wisdom in as it relates to "time, the market, the so-called invisible hand, profit, and the zero-sum society"(p97).
Under democratic capitalism time takes on a new meaning. People start looking forward to the future instead of back to the past. They break out of eternal cycles and experiment. Time is money, and people are advised not to waste it. Religion becomes activist rather than meditative. When people become concerned about time as an asset, they intelligently organize life into time saving habits. Such practical intelligence increases wealth. "Practical insights are the primary cause of wealth."(p103)
Intuitively, when millions of people enter the marketplace the result must be anarchy. "Traditionalists and socialists... occupy the commanding heights and try to impose order."(p104) In fact, economic activism promotes order; under scarcity people need one another, and must coordinate their activities through the price system. Adam Smith’s metaphor of the "invisible hand" tells us is that the motives of individuals do not determine the social result of their actions. There seems to be an order, a system "beneath the seeming individuality of individual choices."(p114) Rational order may exist without rational commands from on high.
Markets always get a bad press: Mammon, usury, and incompatibility with humane values, and so on. But commercial values furnish "a school of virtue favorable to democratic governance."(p117) It encourages "the cooperative spirit", the "attention to law", self-determination, limited government and encouragement to industry, the discipline of common sense, attention to the small savings and small gains that power economic growth. It breaks the utopian vision that fails to deliver. It is "proportioned to man as he is, not as dreams would have him".(p118) But there are losses, to old communal ties and the heroic spirit. "Commercial virtues are not, then, sufficient to their own defense. [It] needs taming and correction by a moral-cultural system... [and] by the political system and the state."(p121)
The socialist ideal is the quest for "security and equality", the capitalist for "self-improvement and growth".(p123) But risks cannot be avoided in making the world predictable and safe. It creates a zero-sum society foredoomed to failure. Democratic capitalism, committed to growth offers the hope of a larger future to all. It is not utopian, but it offers "a practical wisdom worthy of admiration"(p126), a "plain sort of wisdom suited to this world."(p126)
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