The Economics of Moral Restraint

Why do we have so many problems in this country? 

In just the last seven days, American outrage has been ignited as citizens have discovered that their federal government surreptitiously captured the phone records of AP reporters; used the IRS to discriminate against political conservatives; and established a secret program to capture the phone and data records of over 100 million American citizens.

With all due respect to the gifted scholars who have published at length on these topics, such as Hayek, Friedman, Burke, von Mises, Voegelin, and Kristol, I believe that the answer to the original question is found within the work of Michael Novak’s, The Spirit of Democratic Capitalism.  Novak postulates that capitalism works best when three elements are balanced:  political freedom, economic freedom, and moral restraint.

Comparatively, the United States continues to bring forth the world’s great wellspring of both political and economic freedoms.  It is the final element, moral restraint, which currently suffers great decay.  Novak reasons that these three elements act interdependently, much like the legs on a stool, to support each other, and in so doing, support the democratic capitalist system. 

Should one leg fail, the system collapses.

One of the reasons that we have so many problems in our government, economy, and society is that we have separated economic activity from the kind of self-imposed moral behavior that we are called to pursue.  Perhaps one of the most famous examples can be found in the story of Kenneth Lay, the son of a preacher who grew to become not only a leader in his church, but also a skilled leader in private business.  But he will forever be remembered for his role at the center of the Enron controversy.  For all his education, he could not reconcile his deep faith with his business practices.  By compartmentalizing the moral guidance that his faith was supposed to provide, he lacked the moral restraint and concern for economic justice that are essential for the success of free enterprise. We need to balance one with the other. 

All of the problems we have in the economy are functionally caused by the collapse of the leg of moral restraint on Novak’s stool.  Historically, when society fails to provide its own moral restraint in the form of self-imposed limits on individual behavior, someone has to step in to maintain order–and that is always government. If the individuals in our society do not regulate their own behavior, they give the government the power to di it for them. The net result is the government steps in to take over more of the economy under the guise of “fixing” the problems caused by the lack of moral restraint.  In this way, a republic gives way to a soft-socialism.  Soft socialism eventually gives way to hard socialism.  And hard socialism always ends at the barrel of a gun.

While it is easy to interpret today’s headlines as an infringement on political freedom (and it is), its root cause is actually the decay of moral restraint by those charged with the administration of power.  Those at the heart of today’s scandals would do well to heed the warning sign provided by Kenneth Lay.  The loss of moral guidance and restraint leads to the abuse of power and the subrogation of both economic and political freedoms. Moral restraint must be exercised if we are going to remain the home of the free and the brave. 

Dr. Andrews is currently serving as the Vice President for Academic Program Development, Dean of the School of Business, and Professor of Management He has earned a B.S., Northeastern State University; M.B.A., Oral Roberts University; and Ph.D., Walden University. Courses Dr. Andrews teaches include Strategic Management, Negotiation Strategy, Executive Development, Leadership & Ethics, and Human Resource Management.


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