The Spirit of Democratic Capitalism is a 1982 book[1] 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 realism of Reinhold Niebuhr.
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.
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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)
"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)
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.
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.
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)
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 meaning of community in traditional society is clear. "Yet pluralistic societies develop their own powerful forms of community... of free persons in voluntary association."(p129) This community is "accessible to all human beings without exception" in the world. Democratic capitalism has developed "a novel social instrument: the voluntary association committed to business enterprise, the corporation."(p130) I.e., the flagship institution of capitalism is social, corporate. Commercial civilization is interdependent. The community depends on an ethos of cooperation. "Cultures in which individuals are not taught how to cooperate, compromise, and discipline themselves to practical communal tasks can make neither democratic politics nor market economies work."(p134)
Although democratic capitalism is "designed to function with minimal dependence upon virtuous motives... [it] cannot function at all without certain moral strengths, rooted in institutions like the family."(p156) Yet many critics are hostile to what they call the "nostalgic family." They attack on three axes: economic, political, and moral-cultural.
The pluralism of democratic capitalism affects everything, and not least the rivalries between the three systems: political, economic, and moral-cultural. Each has its ethos and creates problems for the other two. This is by design, for the energy of conflict powers progress and correction. "It is a system intended to constitute a continuous revolution."(p172)
Leaders of both the political and moral-cultural system combine in harsh criticism of the economic system. Their exaggerations omit what the economic system has done for democracy and for providing the wealth to found schools, churches, foundations, and freedom for artists and preachers. Many critics fault capitalism for lack of democracy, as if it is appropriate for "every inquiry and action."(p175) But well-managed corporations all use the principle of subsidiarity, pushing decisions down the hierarchy. The economic system creates problems for government because it is designed to. "The virtues it requires, and the virtues it nourishes, are indispensable to a self-governing polity and to a sound morality."(p181)
Even though "[M]ost democratic socialists recognize that strict equality of incomes is unworkable and also unjust",(p211) extreme disparities seem to be "immoral." Small entrepreneurs are OK but corporate salaries are "obscene." There is a need for "moral restraint". Still, the extravagance of the rich is the difference between socialist drabness and urban brightness and gaiety. The rich pay for foundations that employ scholars, museums, galleries, universities, new business and technology investments. In democratic capitalism you can change your life with skill and luck; in socialism the "only path upward is political favor."
Suppose we accept the idea of democratic socialists that highly skilled workers only earn eight times the wage of the lowest paid, as in Cuba? Actually in the United States in 1979 the top five percent earned a little less than seven times the average income of the lowest 20 percent. But 0.5 percent earn more than 10 times the poorest. Democratic socialists call this a scandal; democratic capitalists do not, because these higher incomes don't hurt the lower paid and a society with unlimited incomes is "more dynamic, freer, more generous, more colorful"(217) than one without. And, of course, the rich pay a lot more in taxes.
A special problem for the United States is the relative poverty of blacks relative to whites. Leftist Democrats insist on government programs rather than "personal initiative." Actually, according to Thomas Sowell, most blacks are "disciplined, ambitious, hardworking, and conscientious in seizing opportunity.(p219) In the long view, blacks have done well. In 1900 blacks lived under segregation in the poorest part of the country. Today, "Black households with two parents under age thirty-five, living in the North, do better than equivalent white households."(p221) Still, blacks demonstrate more social pathology than whites. A catalyst is necessary. "The spirit of democratic socialism... seems designed to prevent such a catalyst from ever emerging."(p224)
A huge task awaits theologians in thinking theologically about economic reality at three levels. They must understand economic reality (scarcity, work, money, capital accumulation, etc.) in every economic system in every age. They must understand the specific systems on offer, from feudalism to mercantilism to capitalism and socialism. Then they must understand the details, the moral and ethical dilemmas that "occur within particular systems."(p240) Novak's book is intended to fill the vacuum in understanding democratic capitalism, for he thinks that "the actual practice of democratic capitalism is more consistent with the high aims of Judaism and Christianity than the practice of any other system."(p242) 2ff7e9595c
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