Takagi on Latter-day Saints and Capitalism

 

The most recent issue of the Mormon Studies Review (vol. 10) contains a couple of articles on Mormons and capitalism, and I’d like to draw attention to one in particular. Shinji Takagi, a professor emeritus of economics at Osaka University, wrote an article that we published last year in BYU Studies Quarterly. It was a fascinating look at the Nephite monetary system. His MSR article is titled “Capitalism and Distributive Justice: Musings of a Mormon Economist,” and it is one of the most brilliant articles I’ve read in a long time. Since access to MSR is restricted to subscribers or people like me who work for an organization that has privileges, I’m going to describe his argument in some detail here, hoping that this will encourage some of you to access his article.

Takagi explains that capitalism can take a variety of forms, but the variety that has dominated the United States in recent decades is “neoliberal capitalism, which calls for wholesale deregulation and privatization to minimize the government’s role.” The problem with neoliberal capitalism is that has caused income inequality to rise significantly, and it also “has exhibited a proclivity for economic crises and, given its focus on competitive individualism, an increasing incidence of mental health disorders.”

Takagi then contrasts this system with the egalitarian principles taught by Joseph Smith, which he quotes from the Doctrine and Covenants. “Despite scriptural pronouncements and a rich heritage of economic cooperation,” Takagi points out, “there is little trace of egalitarian philosophy in the practice of contemporary Mormonism.” The other article in MSR I referred to traces the history of how LDS thought on capitalism changed over time. Allison M. Kelley, in “Free Agency, Hard Work, and the Justification of Economic Inequality in the Church of Jesus Christ of Latter-day Saints,” also explains how Mormons justify their devotion to free-market capitalism. But back to Takagi. He argues that “capitalism’s indoctrination campaign has been so successful that many (including myself) find it difficult to liberate themselves from its spell, accepting as truth many unproven propositions, including the proposition that it is the only system capable of generating material progress.” He then tackles two primary types of capitalist arguments—philosophy (noneconomic) and efficiency (economic)—and shows that they cannot withstand scrutiny.

On the philosophical underpinnings of neoliberal capitalism, he raises four concerns. First, too many capitalists accept “the polarity of capitalism and socialism.” I’ve discussed in previous posts there are many types of capitalism, and there are also many manifestations of socialism, especially if you recognize that communism and socialism are not, in practice, the same system. Takagi’s second concern is that “many often confuse capitalism with a market economy.” He points out that markets have existed for millennia, but capitalism is a much more recent development, so we ought not equate these two ideas. His third concern is that “many conflate capitalism with modernity and progress.” This happens because early “capitalism in England proved more successful in producing material gains, which forced other countries to adopt capitalistic systems in order to compete.” But this doesn’t mean other systems couldn’t produce even better results. His fourth concern is that “economic liberalism . . . has gained a large following since the early nineteenth century.” Libertarian thinking has been very influential, but it has distinct downsides. Takagi says he has heard Latter-day Saints claim that capitalism is “the only economic system compatible with the divine plan. Individual liberty is important, but why would agency necessarily deny a role for the government?” It can be argued, based on the experience of more socialist countries (such as western Europe and Scandinavia), that freedom is enhanced by such things as “universal education, access to health care, and social protection.”

Takagi next examines the economic arguments for neoliberal capitalism. “A problem arises,” he says, “when one fails to understand that economics is an abstraction of reality.” Economic propositions are derived from assumptions, but these assumptions, such as perfect information and no transaction costs, “almost certainly do not hold in the real world.” Takagi argues that while economics assumes that humans will always act rationally, in reality people do not. For instance, many of us are prone to being altruistic. He also argues against the possibility of perfect information, which market functioning depends on. He uses the examples of health care and finance to demonstrate the need for government regulation of markets. The problem with libertarianism, as I’ve read elsewhere, is that it has never worked in real-world situations. As Takagi explains, “no market for health care would function without a credible mechanism for ensuring a minimum standard of qualification. Likewise, the capital market (where securities are traded) would remain underdeveloped without a credible mechanism to ascertain the creditworthiness of borrowers.”

So, the economic arguments for neoliberal capitalism also fail because the whole system is based on assumptions, theories, that do not hold in practice. “Concepts in economics are often metaphors and should not be taken literally, especially for public policy purposes.” Economics is useful to describe how people often behave, but “it is not meant to prescribe how people should behave.”

The upshot of Takagi’s critique is that Latter-day Saints need to reconsider their devotion to capitalism, something that early Church leaders (and scripture) specifically condemned. This is especially true for supporters of neoliberal capitalism (primarily Republicans), who are supporting a form of capitalism that not only attempts to exclude government oversight of capitalist markets but also directly contradicts numerous passages in the Doctrine and Covenants by spreading the awful social disease of wealth inequality. As Takagi concludes, “Free-market capitalism with private charity does not do the job. Collective action is required to create a more just society in which there is no poverty and everyone thus has freedom and an opportunity to pursue happiness.”