Source: “Reformed World” (Theological Magazine of the World Alliance of Reformed Churches, 1/2009)

Executive summary

The bible has an understanding of how the economy works which is fuller and more realistic than what is taught in today’s faculties of economics. Above all, it has a clear view of the purpose of the economy, an essential issue which modern economics ignores. Calvin was a particularly perspicacious commentator on what the bible has to say about these issues. He stressed that the question was not so much what to produce, but for whom. This article explains some of the essential gaps in present-day economic analysis before taking the example of world trade in labour and capital to illustrate how these authorities cast light on the problems of today’s globalised economy.

Fornicating with all the kingdoms of the world

1. …the LORD will visit Tyre, and she shall turn to her hire, and shall commit fornication with all the kingdoms of the world upon the face of the earth.
2. And her merchandise and her hire shall be holiness to the LORD: it shall not be treasured nor laid up; for her merchandise shall be for them that dwell before the LORD, to eat sufficiently, and for durable clothing. (Isaiah 23.17-18).

At the time of Isaiah, Tyre was an important centre of international trade. The attitude expressed in verse 17 reflects a view still widespread today among critics of globalisation. But the astonishing verse 18 answers the critics: the trade, even if it is the hire of a harlot, is justified by the purpose it serves, or as Calvin stresses more tellingly, by whom it serves. Calvin devotes a long commentary to verse 18:

The Prophet does not mean that the merchandise of Tyre will be consecrated to God while she continues to commit debauchery, but describes a time subsequent to her change and conversion. At that time she will not lay up riches for herself, will not amass them by illicit means, but will engage her efforts in the service of God, and will use the profits of her trade in relieving the needs of the faithful. In short, he describes the repentance of Tyre, who, having formerly been addicted to avarice, has been converted to Jesus Christ, and will no longer labour to amass riches, but will employ them in kind and generous actions; and this is the true fruit of repentance, as Paul admonishes, that he who stole should steal no more, but, on the contrary, should labour that he might relieve the needy (Ephesians 4:28). The inhabitants of Tyre, who formerly, through insatiable avarice, devoured everyone else’s riches, will henceforth give of their riches to others. It is an evidence of brotherly love when we meet the needs of our neighbours, as it is an evidence of cruelty if we leave them hungry, especially when we ourselves have more than we need.

For Calvin, the word ‘communication’ has particular significance. He insists on the essential role of conversing, exchanging, trading, passing things on to those who need them – all those activities are included in his meaning of that single word -in defining the very humanity of humanity. The passage below casts light on the passage above by focussing on it the perspective of ‘communicating’. Together, the pair of passages determines the manner in which we should assess how far trade is meeting its proper purpose. They set the stage for the arguments which make up the rest of this article.

Let us realize that as God has thus joined us together, that each of us is obliged to his neighbours. If God had wanted to keep each of us apart, well then, we would not have the necessity that compels us to mix with each other. Whatever people may wish, they have to communicate with each other. So this is what we must come back to: we have to know, in fact, that God wanted to make us like members of one body. And just as the eye cannot do without the foot, the hand without the ear and the mouth without the stomach¹, likewise great and small cannot rest content each with their own person but we must be united and have a mutual bond, as it were, of fraternity. When we have that outlook, everyone will then conclude, ‘I see my neighbour needing me and if I were in the same position I would want to be helped, so I must do likewise’. In short, this communication of which St Paul speaks here is the brotherly love that comes from the outlook we have when God has joined us together and linked us as if in one body, wishing that each one of us should busy himself for his neighbours and no-one should be devoted to himself alone but together we should serve everyone.²

Some basic principles of economics

We must surely recognise that the purpose of any economy is that which Calvin described, echoing Isaiah and Paul: it is an evidence of brotherly love when we meet the needs of our neighbours, as it is an evidence of cruelty if we leave them hungry. For once, Calvin is moderate in his expression: the Magnificat is more outspoken:

My soul doth magnify the Lord. He hath shewed strength with his arm; he hath scattered the proud in the imagination of their hearts. He hath put down the mighty from their seats, and exalted them of low degree. He hath filled the hungry with good things; and the rich he hath sent empty away³ .

The neo-liberal model of the economy exists in the imagination of the hearts of the proud, but not in the real world as the following paragraphs will strive to show.

To them that have shall be given…

The neo-liberal model on which rest international trade in general and the World Trade Organisation in particular⁴ assumes that the normal state of an economy is a stable equilibrium. Any disturbance can only be fleeting; everything will quickly and spontaneously settle down again (With an astonishing degree of psychological elasticity those who hold this view of the economy as fundamentally static are nonetheless able to combine it with a vision of it as endlessly growing).

The Bible on the contrary sees the economy in unstable equilibrium. For unto every one that hath shall be given, and he shall have abundance to excess: but from him that hath not shall be taken away even that which he hath⁵. The aphorism sums up in a single phrase the whole dynamic which explains the jubilee, which in turn underlies both Testaments⁶. Anyone who has not been dazzled by academic economics will spot the process of cumulative causation⁷ at work everywhere in the economy, including the international economy. Thus, to give two examples among countless others, the average income in the ten richest countries in 1970 was 23.4 times greater than that of the ten poorest; by 1999 the ratio was 37.5; or the head of the transnational pharmaceutical firm Novartis earned 361 times as much as the least well-paid of the firm’s employees in 2003 and 747 times as much in 2008.⁸

In this dynamic kind of relationship the rich are willy-nilly the cause of the poor: both are inseparable consequences of the single process of cumulative causation. Gregory the Great (c. 540-604) put it simply: “If you have a second pair of shoes and a poor person is barefoot, your responsibility is not to give them to him but to return them to him.” Every economic process must incorporate this requirement if it is to be fair. The jubilee presented in Leviticus 25 emphasises this obligation in melodramatic style but in utter earnestness.⁹

It is not enough to leave the process to private charity, because that leaves the burden on the shoulders of the particularly generous or those who suffer from strong guilt feelings. Neither of those categories is more responsible for the workings of the system than anyone else. Nor is it sufficient to shunt the burden onto marginal processes regarded as charity, as many market ideologues consider social security, not to mention development aid. A disorder which is an essential characteristic of the workings of the economy – of every economy – must be corrected by a mechanism built into the workings of system itself. As William Penn said, “Christians should keep the helm and guide the vessel to its port; not meanly steal out at the stern of the world and leave those that are in it without a pilot…”¹⁰

When I became a man, I put away childish things

The liberal market economy has been described as a gentlemen’s club. Its actors are all assumed to be healthy independent adults in their age of vigour. They have nothing to learn – indeed, according to many purists of market theory, among themselves they enjoy perfect knowledge¹¹, they know everything; maybe therefore they are not merely gentlemen, they are like gods (cf. Gen. 3.5).

Just as the market is perfectly static it is somehow free from the contingencies of human life. It is timeless, even though it mysteriously incorporates a disincarnate form of perpetual adult growth. The playing field (an appropriate place, incidentally, for vigorous young men) is to be level. No-one present on the field is entitled to particular protection. The game is not golf, which is played on undulating ground and in which the players are given a handicap in relation to their skill; it is not even football, where players play in different leagues according to their ability.

Yet, to every thing there is a season (Eccl. 3.1). Children are born and grow up. When I was a child, says Paul, I spake as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things (1 Cor. 13.11). For example, says Calvin in his commentary on this verse, learning is necessary in childhood: it does not go with the virile age¹².

Young economies need to learn the skills they need if they are to become fully qualified players, otherwise they will be constantly defeated or sidelined. In the days of GATT¹³, the infant industry argument was a standard implement in the toolbox of international economic policy. Countries could practice new skills behind protective barriers until they were adept enough to put away childish things and affront the adults. WTO has abolished all that.

There are three parties to almost every transaction

Let us look not only to the private convenience of the person with whom we are dealing, but let us also consider what is expedient for the public. For it is perfectly obvious that the interest the trader pays is a public allowance; thus one must properly determine that the contract is of service to the community rather than harmful¹⁴ .

Calvin is referring here, in an essay on interest payments, to a constant feature of economic transactions which modern economics tend to ignore: they are hardly ever a private affair between a buyer and a seller, they normally affect other people. In more technical terms, economic transactions normally include externalities. These may take the form of either costs or benefits. An external benefit occurs when the transaction generates a pleasant consequence for someone who was not a willing party to it. If someone buys flowers to put on their balcony, that is a transaction between the buyer and the florist, yet all the passers-by in the street will share in the pleasure of their beauty at no cost to themselves. If a smoker buys a packet of cigarettes to smoke in a café, the act damages the health of the other customers: that is an external cost.

Buyers and sellers actually share an interest in externalizing costs to the greatest extent possible. Why pay yourself if you can make other people pay instead? Furthermore, whereas economic transactions normally take place between a limited number of identifiable partners, externalities may affect a large number of people more difficult to identify. If those affected are scattered and perhaps unaware of what is happening to them, they are more likely to have to carry the external costs or forgo the external benefits. Externalities often bring into play relationships between the strong and well organized on the one hand and the weak or poorly organized on the other.¹⁵

Collective organization or official intervention is normally required to rectify externalities. Calvin’s dictum applies here: one can recognise a just and well-regulated government in that it will do justice to the afflicted and needy¹⁶ . It is worth recalling verses 3 and 4 of the Psalm on which he is commenting:

Defend the poor and fatherless: do justice to the afflicted and needy. Deliver the poor and needy: rid them out of the hand of the wicked.

The bible, unlike the neo-liberal economists, recognizes that the distress of the afflicted and needy is not a state of nature but a consequence of the actions of people who could have decided otherwise: that is why they are described as wicked.

Production and trade

The bulk of human needs are met through production. To produce anything, a number of factors need to be combined, including different kinds of labour and capital as well as a variety of natural resources like sunlight, water or minerals. Since the factors of production are not evenly distributed over the face of the earth, some of them usually have to be moved to a different place to be combined with the others. Some of them cannot be moved, like particular rhythms of daylight and darkness or seasons, or mineral resources which have not yet been extracted from the earth. Others are clearly mobile, like labour and capital. These therefore feature prominently in international trade. The rest of this article will not explore the countless pathways of trade in consumer goods and services, but concentrate on international trade in labour and capital.

The world is peopled by both rich and poor. Championing the cause of the poor is God’s very function. Thus Calvin paraphrases Psalm 140.12. We have had ample occasion to recall that the bible constantly and in the strongest terms insists on the obligation to give priority to the needs of the poor. The Protestant ethic realised during the industrial revolution that in this regard it was particularly useful to make sure that the poor had work.

Work may meet the needs of the household directly, without passing through the market, and that kind of work, which statisticians and economists all too often ignore, is as dignified, worthy and useful as the other kinds:

Work takes a variety of forms. For whoever helps human society and brings profit to it through their industry, whether in governing their family or administering public or private affairs, or advising or teaching others or by whatever means, cannot be counted among the idle¹⁷ .

None the less, a large part of production is traded for money. One way in which those who have the means can provide work is by buying goods and services produced by others. That does not of course mean that one should buy just anything in order to make work, but that stinginess can be a vice: Those who deprive themselves, and others along with themselves, of the use of a bit of money deserve no praise¹⁸ .

International trade in labour

Humankind was created to employ themselves in doing something and not to be lazy and idle¹⁹, Calvin wrote in his usual hectoring manner. Psalm 128.2 had said the same thing in a cheerier way: For thou shalt eat the labour of thine hands: happy shalt thou be, and it shall be well with thee. The converse is equally true, as Calvin stresses:

For craftsmen and workers, their whole income is in their capacity to earn their living…

As God has placed their life in their own hands, i.e. in the work they do, if one deprives

them of the necessary means it is like cutting their throat²⁰.

Labour is a factor of production like iron or electricity. But it has a further characteristic which is fundamental: labour is people, and people are our neighbour whom we are enjoined to love like ourselves. To treat it only as a means, as a mere input like a lump of iron, is to fail in this essential respect, to be less than human not only to the workers but to ourselves.

To ensure that everyone who needs work has access to it, there are two main possibilities: to move jobs – through delocalisation – to where there are people looking for work, or to move the people looking for work to where there are jobs. There are powerful arguments in favour of the first option. Firstly, people who are rooted in their community, among their friends and relatives, their parents and children, have full scope to contribute to the life of their community in any number of ways as well as by through their employment, for instance by governing their family or participating in the life of their community or advising or teaching others. Delocalisation is normally from a richer to a poorer country. In that respect it is a way of achieving what Catholic social teaching calls the preferential option for the poor.²¹ In so far as delocalisation removes jobs from richer countries, the poorer countries have more means at their disposal, including more capital. By the same token, by employing cheaper labour to do the same job the richer countries have freed resources at home which they can use to provide new jobs to replace the ones which have been moved elsewhere.

The other main possibility is to bring the worker to the job. In this direction too it is not just labour that moves, but people. For them it can be a wrench, as God summed it up when he despatched Abram on his travels: Get thee out of thy country, and from thy kindred, and from thy father’s house (Gen. 12.1). It is also a loss for the society they leave behind, all the more so that it is the more adventurous and daring who tend to depart and those qualities are valuable to the community.

If someone plunders a person’s field or reaps his meadow and seizes everything, everybody will “cry blue murder”²². Yet that is what those who attract migrants are doing: the host society gets its labour cheap in that it does not have to meet the costs of bringing the workers up and educating them; conversely the society which educated them is deprived of the return on its investment.

International trade in capital

Labour can produce nothing on its own. It needs raw materials, tools, equipment and know­how, in a word it needs capital.

One word, but two distinct meanings. On the one hand it covers finance, which is a form of command over goods and services, over whatever can be bought for money. We shall call this ‘finance’. On the other hand it covers tools and machines, know-how and social order, all of them real things indispensable to the productive process. We shall call this ‘capital’.

Finance

Finance is highly mobile. It can move from one end of the earth to another at the click of a button. When it spots an opportunity for profit it can swoop down in an instant. It can fly away just as quickly. Indeed in Latin America it has been nicknamed ‘swallow capital’ (Capital golondrina). The name is picturesque, but perhaps ‘starling capital’ would correspond better: it travels in a flock; it swoops down and gobbles up the local opportunities; 

then it rushes away leaving desolation behind. Depending on its scale, this kind of clustered movement disrupts the local economy both coming and going, as any Icelander will confirm.

We are accustomed to looking first to where we can place money safely. But we should rather have helped the poor towards whom money is in danger, said Calvin²³, but in recent years those disposing of financial capital have not only turned their backs on the poor, but have chosen to place it with the rich where it was even more in danger, thus failing to achieve either of the objectives Calvin mentions.

It is common knowledge that the poor are scrupulous in striving to repay their debts: microfinance institutions achieve repayment rates of 95-98 per cent. It is however excessively costly to discover from London or New York who is the poor peasant woman in a village in Bangladesh who can sensibly be entrusted with a 200 dollar loan. Lending to the poor is essentially a local activity appropriate among neighbours. It is in contradiction with the anonymity of capital on which today’s globalised capitalism rests, but utterly in tune with Christian love for one’s neighbour. The economy of globalised financial speculation and euphoria is now deservedly becoming discredited. Maybe now we can have our cake and eat it: place our money safely for a change, and do that by putting it at the disposal of the poor.

Maintaining the human community, and even maintaining the conditions in which the market can work effectively, requires public services, and these in turn are best paid for by taxation which distributes the burden fairly among the members of the community. One of the motors of international finance is the movement of capital by firms and wealthy individuals to places where it can hide from its obligation to contribute its fair share to the common good, to avoid paying for the services from which the owners of the capital benefit like everyone else. One of the happy consequences of the current financial crisis and the economic recession it has provoked is that people and governments are increasingly unwilling to tolerate that kind of behaviour. Tax havens at least and at last are on the defensive.

Capital

Investment capital may be footloose, but unlike finance it has to settle for a time and fit itself into the workings of its host economy. Capital can be bulky and awkward to move, the more so the more intricately it is plugged into its local setting. Social order, which economists tended to ignore as a form of capital until recently, is particularly difficult to displace because its connections are so multifarious.

Financial capital fornicates with all the kingdoms of the world. All it wants is a passing transaction to satisfy itself. Investment requires a more lasting commitment, even if like many a modern marriage it ends in divorce.

Labour and capital in the wrong places

Surveying the world from the stony heart of the Alps²⁴, we see courageous young people who have left their family and community to seek work, often at the risk of their lives, in order to support those they have left behind. They are struggling to get into the richer countries of the world, however unwelcome they are made to feel there. They are not completely unwelcome however: employers are keen to exploit the migrants’ vulnerability and desperation by offering them work in disgraceful conditions. Meanwhile the financial capital of the rich is 

wheeling about cyberspace looking for golden morsels to gobble up, ignoring the poor who could build a better world if only they could get hold of some of the crumbs which never fall from the table. But Father Abraham said to the rich man, “Son, remember that thou in thy lifetime receivedst thy good things, and likewise Lazarus evil things… And beside all this, between us and you there is a great gulf fixed: so that they which would pass from here to you cannot; neither can they pass to here, that would come from thence… [The rich man’s brothers] have Moses and the prophets; let them hear them… If they hear not Moses and the prophets, neither will they be persuaded, though one rose from the dead” (cf. Luke 16.19-31).

The rich want the fruit of the labour of the poor, but they don’t want to see the poor people themselves within their gates. The alternative is for the rich to send them the capital they need if they are to be productive, but the rich don’t want to do that either. They don’t even want to let the capital in the poor countries remain there to work with the talents and resources of the local community. On the contrary, they entice the people in the poor countries who have accumulated wealth to send it away to the rich countries which fare sumptuously on it or send it on into cyberspace with the rest.

The last word to Calvin

God gives abundantly to his own people the means to aid others, but the wicked are always so ravenous that their want leads them to have recourse to fraud and rapine. Although the ungodly have wealth in plenty, their covetousness is so insatiable that they plunder right and left like pirates, and are never satisfied. Yet God bestows upon his own people not only what is needed to meet their own ordinary needs, but also to enable them to aid others²⁵ .

Bibliography

Biéler, André. (2005). Calvin’s Economic and Social Thought, Geneva, World Alliance of Reformed Churches. Most of the quotations from Calvin have been drawn from this book, but the wording of their translation has been revised. Bonvin, Jean-Michel (1999). Debt and the Jubilee, special issue of Finance & the Common Good. Dommen, Edward. (2003a). “Calvin et le prêt à intérêt”, Finance & the Common Good, no.

16. (2003b). How Just is the Market Economy ?, Geneva, World Council of Churches Publications. Myrdal, Gunnar. (1957). Economic Theory and Under-developed Regions, London, Duckworth. Trocmé, André. (1961). Jésus-Christ et la révolution non violente, Geneva, Labor et Fides.

Prof. Edward Dommen is a specialist in economic ethics. He spent most of his career as an economist with UNCTAD (United Nations Conference on Trade and Development). He has been president of Geneva’s Ecumenical Theology Workshop. He was responsible for the English translation of André Biéler’s Calvin’s Economic and Social Thought (2005) and for the new edition of the original French (2008). He is the author of several books and articles, including How Just is the Market Economy? (World Council of Churches publications).

1 This of course recalls an image which Paul often used: cf. 1 Cor. 12.
2 Calvin, Sermon on 1 Timothy 6, 17-19.
Charge them that are rich in this world, that they be not highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all things to enjoy; that they do good, that they be rich in good works, ready to distribute, willing to communicate. (1 Tim. 6, 17-18).
3 Luke 1, 46.51-53.
4 WTO, succeeded GATT in 1994.
5 Matthew 25.29. This dictum, which was popular at the time, appears several times in the New Testament.
6 Cf. Trocmé 1961.
7 This is the name given to the process by Gunnar Myrdal, who shared the 1974 Nobel Prize in economics for describing it (cf. Myrdal 1957).
8 Tribune de Genève, 25 February 2009, p. 11.
9 Cf. Bonvin 1999.
10 William Penn, No Cross, No Crown, 2d edition 1682, part 1 chap 5 §12.
11 According to efficient-market theory, asset prices accurately reflect all available information: cf. The Economist, 7 March 2009, p. 69
12 I hope readers have noticed how Calvin falls prey to the shortcoming for which Paul is so often reproached, of taking ‘man’ in its gender-specific sense. As it happens, it is singularly appropriate to the neo-liberal vision of the economy described in this section.
13 General Agreement on Tariffs and Trade. It regulated much of world trade from 1947 to 1994.
14 Calvin, Letter to Claude de Sachin (cf. Dommen 2003a).
15 The foregoing passage is based on Dommen 2003b, pp. 11-12 and 42-43.
16 Calvin, Commentary on the Psalms, Ps. 82.3.
17 Calvin, Commentary on 2 Thessalonicians 3.10.
18 Calvin, Commentary on Mark 10.20.
19 Calvin, Commentary on Gen. 1.15.
20 Calvin, Sermon 137 on Deuteronomy 24.1-6.
21 Encyclical Sollicitudo rei socialis §42.
22 Calvin, Sermon 140 on Deut. 24.14-18.
23 Calvin, Letter to Claude de Sachin. Cf. Dommen 2003a.
24 The author lives in Geneva.
25 Calvin, Commentary on the Psalms, Psalm 37.21