CHRISTIAN ECONOMIC ETHICS
By Lawrence A. Kratz¹

Christian living is the application of Christian ethics to every department of life-political, economic, social, cultural, and so forth, The purpose of this article is briefly to examine certain problems which arise when an effort is made to apply Christian ethics to economic life.

In formulating a Christian economic ethical outlook, the New Testament is a starting point. It contains several helpful—though fragmentary—concepts pertaining to industrial relations. Labor should carry out reasonable orders related to its work, and should refrain from defrauding Capital (Colossians 3:22; Ephesians 6:5-7; 1 Peter 2:28; Titus 2:9-10). Before a Christian breaks off relations with another Christian against whom he has a grievance, a Christian should submit in good faith to the processes of bilateral conference, meditation, and arbitration (Matthew 18:15-7). Wages ought to be “equal” and “just” (Colossians 4.1). let us reflect upon the practical implications of these rudimentary ideas.

First, let us direct our attention to the New Testament admonition that labor should carry out reasonable orders relative to its work, and should refrain from defrauding Capital. Certainly labor should carry out orders vital to the orderly, efficient, and reliable production of wealth for society. But which work orders are reasonable, and which are unreasonable? The immense practical import of this question is highlighted by the recent national strike in the American steel industry. The principal issue was the insistence of the employers upon new work orders superseding long-standing work rules. The purpose of the new work orders was to facilitate the introduction of labor-saving devices and methods, together with lower production costs for the industry, lower prices for consumers, and technological unemployment for labor. In many cases, labor technologically dis-employed by one industry is never re-employed by another industry, on account of inflexibilities in the attitudes and practices of both business firms and industrial workers. Hence, the alternatives confronting the Steel Industry were: technological progress plus technological unemployment; or technological stagnation plus job security. Which would have been better: rapid progress or stable employment? This is purely and simply a matter to be decided by personal opinion or value judgment. Mine is that technological progress ought sometimes to be slowed-down to prevent all the costs of mechanical innovation falling with concentrated force upon particular segments of the working class. The security of a minority (e.g. steelworkers) ought not be ruthlessly sacrificed for the convenience of a majority (e.g. steel consumers).

How does the worker defraud the employer, or refrain from doing so? Obviously, the worker can defraud the employer by simple theft or embezzlement, or he can refrain from doing so. But the matter is more complicated than that. The worker can also defraud the employer by loafing on the job, by featherbedding, by demanding pay for useless activity, and so forth. Some work rules prescribed by union contracts fall in this category—but not all such work rules. In some cases, union work rules are designed to prevent Speed-Ups injurious to the mental or physical health of the labor force. A legitimate difference of opinion may sometimes exist as to whether a union is featherbedding, or simply resisting an unhealthful Speed-Up.

Next, let us reflect upon the proper industrial application of the New Testament recommendations concerning bilateral conferences, mediation, and arbitration. As regards the bilateral conferences process, should there be conferences between individual workers and employers relative to disputes between them, or between representatives of labor as a group and employers? Should there be individual or collective bargaining? In a modern capitalistic society, individual bargaining is pointless and meaningless. The power of the individual to reduce the income of an intractable corporation is infinitesimal, while the power of a corporation to reduce the income of a recalcitrant individual is total. Consequently, so-called individual bargaining really amounts to dictation by the employer and submission by the worker. Only under collective bargaining is there something approaching an equality of bargaining or damage-inflicting power, and, therefore, negotiation among peers.

Offers to submit to bilateral conferences, meditation, and arbitration should always precede a strike. A strike should always be a last resort—never a first resort—in the attainment of union demands. A strike as a first resort is immoral since it harms not only union members and business owners—but also the consuming public and industries dependent upon the struck industry. In order to avoid a strike, a union or a company should express authentic willingness to undergo bilateral conferences, mediation, and arbitration. Mediation is a conference between a union and an employer attended by a mutually accepted third party who may suggest, but not dictate, a settlement. If mediation fails, the next logical and ethical step is arbitration—under which a mutually acceptable third party dictates a settlement. All or nearly all strikes occur because Labor or Management or both are too selfish to submit to mediation or arbitration. The Federal Mediation and Conciliation Service has a large staff of experts ready to assist in the settlement of industrial disputes on bilateral request. If both Labor and Management had enough Christian forbearance fully to utilize the facilities of that Service, all or nearly all disputatious work stoppages could be avoided.

Finally, let us contemplate equality and justice as applied to wages. In what sense ought wages to be “equal”? Should all employees be paid the same hourly wage regardless of amount, quality, and difficulty of work performed? Or should all employees receive equal pay for equal performance—regardless of race, sex, social status, family connections, or other extraneous factors? Our choice between these widely differing interpretations of applications of the equal wages principle ought to be influenced by the futility of pursuing an objective which is unattainable. Experience has repeatedly indicated the impracticability of equal pay for unequal work. In the period 1917 through 1921, the Soviet Union experimented with absolute equalitarianism. However, disintegration of the will to work and disruption of productive activity forced the Soviet Government to restore sharp wage differentials-thereby substituting State Capitalism for State Communism. Although the Russian Experiment with absolute wage equality was the largest and most notorious in world history, many other significant communistic ventures have been undertaken. Numerous small, agricultural communistic religious communities were established in the United States in the nineteenth century. Nearly all of them have either disappeared or ceased to be communistic. The most important single reason seems to be that religious fervor is an indispensable incentive to satisfactory productive effort in the absence of wage differentials, but such fervor has rarely been transmitted undiminished from the founders of communistic communities to their offspring. In the case of most normally motivated individuals, strenuous exertion arises from the hope of commensurate reward either here or hereafter. Unfortunately, the comparatively mundane descendants of religious enthusiasts anticipate posthumous rewards, not through visions sharply, but, through a glass darkly. The offspring of motivational deviants regress toward the norm. American experience with agrarian, small scale communism may throw some light upon the withering away of the communistic religious communities described in the Book of Acts. If the goal of equal pay for unequal work is given up as being unattainable, then equal pay for equal performance is the only practical sense in which equal wages can be secured.

Very likely all Christians agree that “just”wages ought to be paid. But there is room for a substantial difference of opinion as to what a “just” wage is. There can be a legitimate variety of value judgments as to how the aggregate wage of the working class ought to be divided among its individual members, and as to how the total income of society ought to be shared among the several economic classes, including the working class.

As regards the division of the aggregate wage of the working class among its individual members, the following value judgments seem to be compatible with New Testament Christianity: (1) In a perfectly Christian or Millennial Society-devoid of selfishness, greed, and worldliness—wages would be either absolutely equal, or variable according to need; (2) In an imperfectly Christian or Pre-Millennial Society, wage differentials are necessary evils essential to adequate productive exertion; and, (3) Wage differentials ought to be no more than just sufficient to induce talented workers to render superior productive services. The application of this last standard or criterion to economic life would reduce some existing wage differentials which reflect differences in bargaining power, but not differences in amount, quality, and difficulty of work performed.

As regards the sharing of the total income of society among the several economic classes, including the working class, the first issue to be disposed of is whether any economic class except the working class should be allowed to receive part of the social income. In other words, should Private Capitalism be retained or abolished? In dealing with this question, our reasoning will proceed from two premises: (1) The best economic system for the working class is the system which pays Labor the largest absolute aggregate wage, regardless of whether that system grants Labor the largest relative share of social income; and, (2) The burden of proof always rests upon the social innovator, never upon the conservator. Great economic, social, and human costs arise from basic institutional alterations. Such costs ought not be incurred unless radical change is demonstrably beneficial. This second premise may be called the principle of conservatism.

The American worker, living under Private Capitalism, enjoys a higher material living standard than any other worker in the world. The unique prosperity of the American worker is the product of several fortunate circumstances: the superior natural resources of the United States; the absence of internal trade barriers to geographic specialization; the selective nature of mass migration; the fact that the United States has not been a battleground for great national armies since the eighteen sixties; and so forth. In addition to the circumstances just mentioned, it is possible that the peculiar institutions of Private Capitalism have been a noteworthy reason for American economic well-being. To this moment, radical critics of American Private Capitalism have not been able to prove that American Labor has prospered despite Private Capitalism, not because of it. Neither have they been able to prove that American Labor would prosper more under an economic system other than Private Capitalism. These considerations—together with the principle of conservatism—indicate that America should adhere to the Free Enterprise System.

If the desirability of retaining Private Capitalism is assumed, it follows that a capitalistic class must be paid interest (i.e. a reward for the investment of savings, for abstinence from consumption, and for risk-bearing, all of which are essential to capitalistic business operations. The next question is: how shall the income of society be divided between the receivers of interest on the one hand, and the earners of wages on the other hand. In resolving this question, three concepts are useful: subsistence wages; subsistence interest; and surplus social income. Subsistence wages are wages just sufficient to enable the working class to survive and to induce it to produce. Subsistence interest is interest just sufficient to induce enough investment to maintain full employment. Surplus social income is the amount by which the total income of society exceed the sum of subsistence wages and subsistence interest. If it be conceded that both full employment and the survival of a productive working class are praiseworthy objectives, then neither wages nor interest must be allowed to fall below their subsistence levels. But any pronouncement as to how surplus social income should be shared among the capitalistic and laboring classes is nothing more than a value judgment or personal opinion. As a Christian with a strong leaning toward the ideal of the greatest degree of income equality practically attainable, and as an economist with working class antecedents and prejudices, it is my feeling that surplus social income ought to be diverted primarily toward Labor.

Under the heading How to Divide Social Income Among Economic Classes, unfinished business remains. The income shares of two economic classes—Capital and Labor—have been examined. A third class and its income share-the landowners and ground-rent must now be taken up. Ground-rent refers to payments which landowners do collect or could collect for allowing non-landowners to use land without improvements. Ground-rent must not be confused with interest. When capitalistic investors add improvements to land (e.g. buildings, roads, machinery, equipment, etc.), additional payments annually collected or potentially collectible for the use of those improvements are interests, not ground-rent.

As regards the share of social income which ought to be received by landowners, a vexing singularity presents itself. There is no such thing as subsistence ground-rent. If there were such a thing, it would consist of payments which must be made to landowners to induce them to bring land into existence. But land would exist even if no ground-rent were paid to landowners. Therefore, no ground-rent is a type of subsistence income. All ground-rent is a subdivision of surplus social income.

Some economic moralists have argued that the landowning class is parasitic and superfluous, that ground-rent collectors should absorb ground-rent by means of a confiscatory tax. There is, however, a grave ethical defect in a confiscatory tax on ground-rent. Although ground-rent itself is unearned income (i.e. income un associated with the performance of any productive service), much land has been purchased with past earned income (i.e. savings accumulated from wages and interest). Consequently, much land has become a repository for past earned income. This past earned income can be liquidated or reclaimed only by the sale of land. But the market value of land is determined by the amount of ground-rent it can yield actually or potentially. And a confiscatory tax on ground-rent would annihilate the market value of land, thereby expropriating all past earned income tied-up in land. It would be unethical for society to seize a socially-approved and legally-sanctioned storehouse for past earned income as the result of a belated awareness of the unearnedness of ground-rent. Society is ethically obliged to continue to allow landowners to receive a fraction of surplus social income. But how large a share should be allocated to ground-rent is an arbitrary matter, inasmuch as Private Capitalism could function quite effectively even if no private landowner collected any ground-rent.

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For a better society we need transformed individuals. A change of systems or programs is not enough. Selfish, dishonest, narrow individuals can ruin any system. Yet the system may predispose men either to selfishness or to social service. A system that emphasizes co-operation and social welfare and intelligent planning will make the development of noble individuals possible. What we need is good men who are intelligent and who live in a just society.-H. H. Titus, Ethics for Today, p. 375