Editor’s note: This content was originally published for the Christian Economic Forum’s 2019 Global Event. This content is shared with Denver Institute for Faith & Work with consent from CEF. Richard Lackey was a speaker at "Business for the Common Good" on Friday, Jan. 31, 2020.
At America’s inception God’s handwas evident in many ways. In 1776, less than a year before the signing of theDeclaration of Independence, the Scottish-born Adam Smith published his seminalwork titled An Inquiry into the Natureand Cause of the Wealth of Nations. In this work, he underlined a whollyunique economic system that lies somewhere between the idealized free marketsystem where no government intervention or regulation exists and thehyper-regulated and controlled market systems witnessed in the egalitarianregimes of France and others of the time. This had great influence on leadersof the day. Adam Smith wrote:
Every individual who tries to maximize the value of his own capital and labor necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much is promoting it. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention . . . By pursuing his own interests, he frequently promotes that of the society more effectually than when he really intends to promote it.
Adam SmithAdam Smith hardly expressed a divine orientation to this market model, rather he recognized that self-serving behavior was a dominant human trait that naturally promoted efficient trade, but his commentary came on the heels of enlightenment where God was often pushed into the box of deism. Individualism was championed though reasoning, even as it related to right and wrong, but the foundations of society were still built on long-standing biblical principles.
In a time of emergence from a heavily regulated and ordered society, proposals for empowered people and limited government found fertile ground in young America. The success of the system was quickly realized with thousands soon following to be part of this idealistic new country. Decades later Alexis de Tocqueville would note that America was exceptional in its model of democracy—having a focus on a “practical” seeking of security and wellbeing built upon a foundation of “puritanical” origin. Where the divine nature of God and His teachings were held in high regard, the democracy flourished. This was “Capitalism 1.0.” It would continue to prove itself through an age of industrialization, would be championed in post-war solutions like the Marshall Plan, and it would fuel the birth of democratic governments around the world. Through all of this, new technology drove much of the market transformation. From new farming tools to more efficient machinery for processing food, metals, and fuel, we found we could continually produce more, and this could be done better and faster than before. While it was of no great concern then, two things were happening at the same time: the volume of natural resources drawn upon began to increase exponentially, and the volume of dollars being stored away or being held in the form of capital stock also increased exponentially.
Consequently, the purpose and power of money began to shift. For most of history money has served three primary purposes: (1) A Medium for Exchange, eliminating the need for barter and facilitating free trade, (2) A Unit of Account, promoting a common measure of value, and (3) A Store of Value, giving individuals the ability to hold the money over time.
As more people held these Stores of Value, some modest inflation ensued. This did not seem to be a problem, and was perhaps even a benefit, supporting the collaboration of wealth to create more infrastructure and more systems to build more wealth . . . more efficiently, and all backed by silver and gold.
Understandably, many were outraged when President Nixon took the United States off of the gold standard in 1971 as it not only eliminated the hard asset security of the US dollar, but also opened the door for the government to print money with little incentive or mechanism for containment. Being sufficiently unchecked, the US government has continued to create money with no real asset behind it and it has leveraged those unfunded liabilities to create a larger government to do more of the same. As the United States and other free market economies following in its wake have walked away from the biblical principles of accountability and personal responsibility that are required of true liberty, an otherwise unfettered freedom has been slowly replaced with the doctrines of socialism. In Paul’s second letter to Timothy he noted, “For the time will come when people will not put up with sound doctrine. Instead, to suit their own desires, they will gather around them a great number of teachers to say what their itching ears want to hear. They will turn their ears away from the truth and turn aside to myths” (2 Timothy 4:3-4).
Tamrat Layne, a friend and former prime minister of Ethiopia, shared, “I have lived in communist and socialist societies and seen them fail time and time again, and I can say unequivocally that capitalism is the greatest system on earth, but where God is not honored, even capitalism can become fascism.” While many coming from a faith perspective would concur, many who see the short comings of today’s version of capitalism assume capitalism is bad or broken at a minimum; others even argue it is evil.
Where most people will find agreement is that it is our job to work hard, to love one another, to care for the poor, the sick, and the vulnerable, and to find delight in our generosity. It may be that we recognize these things need to be done and so we have in part institutionalized them in government agencies and entitlements, making it seem easier on us all the while eliminating the personal call of our Father to be active each day in our service to others and in our practice of generosity.
It is not that capitalism per se is broken, but more likely that it needs a revision, a version 2.0 if you will. In an age where money still acts a “medium of exchange” and a “unit of account” its position as a “store of value” has been eroded, giving what may be a false sense of security to people and countries where there is no hard asset behind the currency. For those who live in the world’s most impoverished countries, they are cognizant of assets backed only by the “full faith and credit” of their sovereign parent and are hesitant to store any local currency as it normally devalues steadily over time. More than 70% of the world’s impoverished depend on agriculture and don’t trust the stability of their country’s unsecured currency. Their definition of wealth is based on the real assets that they produce on their farm, where more land and more production equal more wealth.
Perhaps it is time for a currency backed by a globally understood and appreciated asset to enter the scene in order to pull these untoward money printing sovereigns back to earth. Simply by combining some of the latest technologies we might lift more than a billion people from poverty to middle income. Consider this: with new technologies, individuals earning a dollar a day in Africa can open a bank account using their mobile phone. New storage technology allows commodities like maize, soy, wheat, rice, and much more to be stored in very large air tight bags for up to 20 years without degradation. This means those commodities can now be treated much like a traditional asset class. Small hold farmers who normally sell at harvest along with everyone else are paid low prices for their production because there is an excess supply at harvest. Four months later the maize that sold at $220 a ton is often trading at $360 per ton. These small farmers suffer from the missed opportunity since they cannot afford storage or the time to wait before they are paid, and the processors suffer when the supply of quality inputs dries up only a few months after harvest. These situations could change quickly when these technologies are paired with a new Asset Backed Index Linked (ABIL) currency that has been built on blockchain technology.
Farmers, incentivized to grow more and better, can be paid market price in the form of a digital token backed by stored commodity assets and can elect to convert their electronic token (currency) from ABIL to their local currency when they need local currency or when the price is high enough that they would like to take their profit.
Banks that hold ABIL on their balance sheets and provide currency conversion on behalf of clients would have the ability to push a portion of their volume over and above a committed minimum back to the issuer. This would in turn trigger the sale of the underlying commodities in the market to create cash for the converting party. By empowering farmers everywhere to sell as markets rise, there would likely be fewer price spikes in the markets that often devastate processors and manufacturers. In the interim, volumes of these extended shelf life commodities can be stored throughout each region, thus creating food security, providing confidence in the supply chain for feed manufacturers and food processors, and generally reducing price volatility.
Studies done in several sub-Saharan countries have shown that a guaranteed market is sufficient enough incentive for small farmers to take the risk on spending more money on better inputs. For example, the vast majority of them will reap the benefits of 50% to 100% increases in the production of soya and 250% to 300% increases in the production of maize. In addition to increased production, small hold farmers who have guaranteed markets are typically more willing to adopt good agricultural practices that improve soil health, reduce water waste, and enhance quality. Together these changes lead to long term sustainability and exponential increases in income.
Agriculture is a complex system, but it not a complicated system. Combining technologies like those above may help bring people and practices together for a truly integrated agricultural value chain that drives change, opens markets, and improves livelihoods. There is little evidence to counter the influence of the “invisible hand,” but as followers of Jesus we are called to do more than follow human instinct. We are asked to pick up our cross daily and to follow Him in humility, to serve others as He served them, and to extend grace and generosity with the knowledge that it flows from a never-ending source of love. In this new day, we should consider taking advantage of all of the tools we have at our disposal to create a revised version of capitalism. This version would not be dependent on the passive nature of man, but on the active calling of Christ to think beyond the way things are done in order to build something new, perchance to extend a “benevolent hand.”