Kenneth Barnes currently holds the Chair in Work Place Theology and Business Ethics at Gordon-Conwell Theological Seminary. As might be expected, therefore, Redeeming Capitalism is about the theology and ethics of business. Its basic argument is simple: the capitalist economic system that now exists is not the same as that which has existed in the past and, specifically, is not that endorsed by Adam Smith; it suffers from serious flaws that derive from a “moral vacuum” (page 1), which is itself a product of post-modern thinking; yet no other economic system provides a better workable alternative, the thinking of writers such as Picketty and Poole is hopelessly Utopian (pages 81 and 86, respectively) and the solution does not lie in regulation (page 59); what is needed is, essentially, moral reformation and the replacement of “post-modern capitalism” (Chapter 6) with “virtuous capitalism”, being capitalism based on Aquinas’s cardinal virtues (Chapter 13).
There is little to criticise in this as an overall thesis. However, below this very high level, much of what Barnes says is superficial, questionable or simply wrong. Indeed, it is an example of the kind of thing that, a generation ago, Peter Bauer memorably described as “ecclesiastical economics”.
The book is littered with errors. Some of these are minor (e.g. the statement on page 23 that the lingua franca throughout most of the Roman empire was Greek). However, others are more serious. In particular, Barnes’ attack on the behaviour of investment banks in the run up to the Global Financial Crisis is undermined by mistakes such as his definition of derivatives as instruments predicated on the “anticipated performance, or cashflow” of the underlying assets (page 4, emphasis added) and his assertion that, whilst what people do with their own money is largely their business, the problem is that “investment banks deal with other people’s money, and the morality of gambling in the context, is at best, questionable” (page 7). The definition is only true of some derivatives; the assertion fails to recognise that it was proprietary business (i.e. banks dealing for their own account) that lay at the heart of the Global Financial Crisis, not agency business.
Overall, Barnes’ attack on modern capitalism is long on eye-catching statements and short on justification. His stark statement that “the cause of the Global Financial Crisis and the recession that followed was corporate greed and mismanagement” (page 71) is a case in point, as is his assertion that there is a “consensus that the financial services sector is rigged and that corruption and collusion between banks, central banks, regulators, and politicians is rampant” (page 75).
Furthermore, scattered through the book are remarks about particular issues that fail to engage with the underlying arguments. For example, his statement that “on average, women are paid about 20% less than men across the entire spectrum of the economy” (source unstated) followed by the assertion that “the numbers are simply too extreme not to be attributable, at least in part, to gender discrimination” (page 127) is inadequate. His statement (this time sourced) that “nearly eight per cent (7.8%) of Morgan Stanley’s employees went to Ivy League schools even though they represent less than one half of one per cent. (0.4%) of university students” (page 127) is not in itself problematic. However, he implies that the success of Ivy League students is the result of nepotism and is an “economic injustice” (page 128) but he never presents evidence to support these claims.
Barnes’ comments on the living wage are likewise superficial. He says that “Those who oppose this concept argue that it interferes with the free market and is therefore a fundamentally bad idea” (page 138) and later asserts that “It seems obvious to some … that the only real objection to the establishment of the living wage is the short-term effect it would have on company profits” (page 138). He has clearly not absorbed the writings of those like Thomas Sowell who presents cogent reasons for thinking that the living wage harms those it is supposed to protect.
A substantial part of the book is taken up by what Barnes concedes is “a very concise history” of economics (Chapter 2) and analyses of the views of Adam Smith, Karl Marx, Max Weber and some modern writers (Chapters 3 to 7). These chapters contain interesting material. Barnes highlights some points raised by Adam Smith that many today forget and rightly pinpoints some serious deficiencies in the views of others. However, the result of this is that Barnes doesn’t turn to his proposals until page 91 of his 207 pages. Rather less history would have left room for rather more precision in Barnes’ analysis of the current situation and his proposed remedies.
Unfortunately, the proposed remedies rarely go below a high level of generality and such specificity as he provides is unconvincing. For example, he mentions credit unions and micro finance initiatives but clearly they cannot constitute the solution to the macro problems of the world economic system. More seriously, his suggestion that we need to move from a system based on contract to a system based on covenant is bizarre. He suggests that “covenants are sacred oaths of mutual inter-dependents and fealty between two parties dedicated to a common cause” and that “Unlike contracts, which are based upon suspicion and anticipate violation, covenants are built upon mutual respect and trust and presume co-operation” (pp 164/5). Barnes never explains what he believes should happen in the commercial world in consequence of this but, in any event, what he says is not true. One can define words to mean anything but, in the commercial world, contracts are by no means always based on suspicion and by no means always anticipate violation. Indeed, normally, they simply define with precision the subject matter of the transaction, allocate risk and generally record the mutual understandings of the parties. Disputes are the exception not the rule.
The reader is provided with no ideas as to how in practice “virtuous capitalism” might be brought into being and, having finished the book, is likely to be left wondering whether he has simply been asked to favour moral good against immorality. Indeed, the reader might wonder whether, despite Barnes’ attacks on Utopianism, he has merely had his own dream of Utopia.
Barnes may have anticipated this criticism since, right at the end of the book he asserts that “This book is not the manifesto of a movement, but is the credo of a community that refuses to underestimate the power of God to do the impossible against great odds” and continues “Redeeming capitalism is not a project; it is a mission” (page 206). Giving people the desire to effect change and the hope that it can be achieved is worthwhile yet, after 200 pages, one might have hoped for more than simply “I believe in virtuous capitalism”!
“Redeeming Capitalism” by Kenneth J. Barnes, was published in 2018 by Wm. B. Eerdmans Publishing Co. (ISBN 978-0-8028-7557-0). 207pp.
Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world.
Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.