Breakpoint with Charles Colson
Special Interests or the Common Good?
The Finance Reform Bill
May 3, 2010
On Friday’s BreakPoint, I said passing a “sensible, effective finance reform bill” is a “moral and economic imperative.” The lack of moral restraints, which has turned financial markets into a kind of casino, has made regulation necessary and politically inevitable. . .
And when the debate is over, I’d like to say we saw Congress embrace reform that reflects the best of our democratic and biblical heritage—creating a financial environment where the poor are not exploited but may “glean” from the fields, as the Scripture says; where merchants use honest scales; and where justice prevails, yes, “rolls down like living waters.”
Christians can be such dunderheads when it comes to things like this. It’s as though we think that, with just the right kind of legislation, all economic problems will be solved.
‘Financial markets’ will always involve more or less risk. Markets are, in part, situations in which people are free to experiment financially. ‘Schemes’ of finance and investment do not have to be dishonest to be risky – sometimes very risky. When someone is attempting to make something new, something he thinks people might find useful or desirable, he typically needs people who will supply money to make it possible to try the idea. Many such ideas fail, some succeed, others succeed wildly. That is part of human freedom and the economically free interaction of human beings we sometimes call ‘the market.’
This can be done in very large ways through large financial institutions. It can be done in very small ways as when a few friends pool their resources and try something new.
When such things fail, no one has necessarily been robbed or cheated. Regulations and laws cannot take the risk out of investment. Such laws and ‘reforms’ can only transfer the risk to others, or prohibit risk-taking. Of such transfers and prohibitions is tyranny made.
Do evil players ever enter the market? Of course – in the same way that evil politicians are often elected to office. Is there a small role for government action in the market? Yes, but it is very limited. Players in the market must be required to live up to their contracts, however they decide to construct those. The injustice of theft or fraud should not go unpunished.
But risky, even unwise, financial schemes do not constitute theft or fraud. And attempts to outlaw stupidity in the marketplace are bound to fail for many reasons. For one thing, there is no legitimate way to distinguish stupidity from risk-taking. More importantly, we are MUCH more likely to get stupidity from Congress than from the marketplace. Also, stupidity in the marketplace is occasional and voluntary. Stupidity from Congress is constant, and imposed on everyone by force.
Christians need to stop being naive about economics. Justice will prevail – to the extent that it can among sinful human beings - only when the marketplace is free.