Can Free Markets Survive In a Secularized World?

By Steven Malanga

The 18th Century English cleric and theologian John Wesley was troubled by a paradox that emerged as his teaching spread. He, like other Protestant thinkers stretching back to Calvin, taught that one could honor God through hard work and thrift. The subsequent burst of industry and frugality generated by Wesley’s message improved the lot of many of his working-class followers and helped advance capitalism in England. But, “wherever riches have increased, the essence of religion has decreased in the same proportion,” Wesley observed, and subsequently pride and greed are growing more common, he complained.

The emergence of what Max Weber described as the Protestant ethic represented an important point in the evolution of capitalism because it combined a reverence for hard work with an emphasis on thrift and forthrightness in one’s dealings with others. Where those virtues were most ardently practiced markets advanced and societies prospered. And, as Wesley foresaw, what slowly followed was a rise in materialism and a reverence of wealth for its own sake.

Today, we seem to be living out Wesley’s most feared version of the pursuit of affluence unencumbered by virtue. Scam artists perpetrate giant Ponzi schemes against their friends and associates. Executives arrange compensation packages that pay themselves handily for failure. Ordinary people by the hundreds of thousands seek a shortcut to riches by lying on mortgage applications. Heartless phony bailout schemes take the last dollar of people already in distress.

To survive all of this it seems capitalism needs a new dose of restraint. But absent a vast religious revival in the West, which seems unlikely, where will a renewal of the virtues of the work ethic come from? That question becomes ever more difficult to consider because as religious practice fades and our institutions reject traditional values, so too does the memory of the role that these elements played in the rise of capitalism.

In the Church of the Middle Ages, work was something the faithful performed to survive, not something that had a value of its own. The most important occupations were not determined by the market but by church leaders: the monastic life first, followed by farming and then crafts. Although the Church saved what was left of Europe’s culture and economy after the fall of Rome, the continent’s standard of living barely changed for 1,000 years under a worldview that was suspicious of all but commerce on the smallest scale.

Calvin undermined that view by placing work in a new religious context. Work was something that God willed us to do—even the rich. The worldly success that one achieved through hard work was a sign that one was perhaps a member of the elect. But the fruits of hard labor weren’t meant to be spent lavishly on oneself. The Protestant reformers preached that the faithful should reinvest the profits of hard work in new ventures rather than squander them because it seemed unlikely that people who were profligate were saved.

Over time this view of work became so widespread that many of the West’s institutions accepted it, especially in America, a land settled by dissident religious sects that embraced the Protestant ethic. By the middle of the 18th Century Ben Franklin could publish a bestseller with the title “The Way to Wealth,” a secularized guide to work values filled with observations like “A penny saved is a penny earned,” and "Early to bed, and early to rise, makes a man healthy, wealthy and wise.” By the early 19th century de Tocqueville could marvel that America’s preachers seemed as interested in promoting prosperity in this world through industriousness as “eternal felicity” in the next. Our public schools reinforced this message, not because it was religious but because it became the American way.

It was also here in America that the Catholic Church, initially suspicious of capitalism because it was thriving in Protestant countries, embraced the work ethic. As vast waves of poor immigrants from Catholic countries, most especially Ireland, streamed into America in the 19th century, church leaders, worried about a backlash, set up schools that taught the children of these foreigners the same virtues of hard work, thrift and the pursuit of advancement that Wesley had transmitted to the English working class. Within a generation, the Irish of America were thriving the way their countryman across the Atlantic wouldn’t prosper for nearly another 100 years.

But Wesley’s paradox has been a part of this landscape of work and prosperity, too. Secularism rose in the U.S. in the late 19th century and peaked in the Roaring Twenties, another age of materialism. Then the Great Depression and the Second World War brought a revival of religious observance, which continued during the boom years of the 1950s, before another decline began in the 1960s and continues through today.

Perhaps most pointedly, the values of the Protestant ethic also began to disappear from our larger society, especially from our schools, whose principals and instructors, largely schooled in American university education departments that have abandoned the idea that there is a common set of American cultural values, found such Franklinesque admonitions as "There are no gains without pains" too old-fashioned (although one can occasionally find a football coach or phys ed. teacher who echoes this wisdom).

The gradual disappearance of the Protestant ethic has shifted the emphasis in our economy from work and production to work and consumption—but most of all to consumption. A culture of thrift has become a culture of debt, and in the process many people have blurred the line between the legitimate competitive activity that is so essential to capitalism and criminality. When Franklin wrote that the bailiff does not visit the working man’s house because “industry pays debts,” he probably wasn’t thinking of the no-doc, no down-payment, interest-only adjustable rate mortgage with a balloon payment given to someone who conspired with his mortgage broker to obtain a loan for which he isn’t qualified.

The meltdown of the financial markets in the last few months has left us grappling with how we can keep markets free and principled at the same time. The only debate so far is between those who want more government regulation—who want to impose from the outside via the regulator’s eye the restraint that our institutions once tried to instill in us--and those who think that more government will only undermine our prosperity. Neither side seems to be winning the public debate because most Americans are probably equally as appalled by the shortcomings of the markets as they are by the prospect of more government control of them.

People instinctively know something is missing, just not what. A religious revival in America seems unlikely. Is it equally as unlikely that our institutions, most especially our schools, would once again promote the virtues that made capitalism thrive and Western societies prosper--not just hard work, but thrift and integrity, or what we once called the Protestant ethic?