The Gospel of Equality and the Gospel of Efficiency

In their views on public economic policy, mainline Protestant clergy tend to be more liberal than business executives. While it is commonplace to say that there is a gulf between pulpit and pew, most attempts to account for this gap fail to edify. In conversations with their colleagues, clergy often point to the faithlessness and moral obtuseness of the laity. As did the Pharisees of old, ministers suppose themselves to be running toward the “Age to Come,” while their parishioners rush toward the “pit of destruction.” Business people, on the other hand, point to the invincible ignorance of the clergy on economic matters, which prevents them from comprehending the success of the free-enterprise system. Reasoning that it is this very success that indirectly pays clerical salaries and heats ecclesiastical facilities, they sometimes conclude that clergy are ungrateful as well as dim. I want now to cut through the self-righteous bombast on both sides and find a way to a more constructive engagement.

Reginald Jones, who is chairman emeritus of General Electric and a United Church of Christ layman whose son is a minister, suggests what is at issue between clergy and business people. In an essay titled “The Transnational Enterprise: Business and Religious Perspectives.” he writes:

I’ve noted that church leaders have tended to emphasize the redistribution of wealth, but that is not really the key to the problem. . . . It is the creation of wealth -- the creation of a civilizing surplus -- that is the key to a better life for all people. As John Kennedy said. “A rising tide lifts all boats.”

Jones is giving us here a version of Ronald Reagan’s “trickle-down economics,” ennobled a little by John Kennedy’s more felicitous expression. Nonetheless, he makes a valuable point. Clergy use the standard of distribution or equality to evaluate an economic policy, while executives use the standard of production or efficiency.

Jones’s assertion is borne out by my own conversations with clergy and executives about the Reagan administrations economic performance. Clergy point to the gospel imperative of justice and complain that the president is insensitive to the poor. Business people, on the other hand, underline the importance of personal and corporate incentives and credit the president with reviving an economy that had been straitjacketed by redistributive schemes undermining private initiative. Clergy seem unconcerned about economic growth, while executives seem indifferent to the poor.

Put in this way, however, the debate between clergy and executives is misplaced. Joseph Pichler, who is dean of the business school at the University of Kansas, notes that the economic problem is complex and has two parts. In Ethics, Free Enterprise, and Public Policy: Original Essays on Moral Issues in Business (Oxford University Press, 1978). he observes:

First, human and material resources must be allocated toward the production of goods and services in quantities sufficient to satisfy at least the minimum expectations of society’s members. Second, the resulting output must be distributed among the population.

If an economy fails to meet its material goals, a society will be poverty-stricken. If it fails to satisfy the moral criteria, significant segments of the population will consider the system to be unfair. In either case, the result is misery and social instability.

Both efficiency in production and fairness in distribution are necessary values for an economy, but neither is sufficient in itself. Theologian Reinhold Niebuhr accented equality in his writings because he could take for granted the abundance of the American economy. That assumption cannot be made today, when we have experienced a long relative fall in productivity. Great Britain’s industrial strife and social unrest demonstrate that justice is not served by a shrinking economy and that, contrary to Schumacher’s thesis, small is not always beautiful. It is not a question of efficiency or equality, but a question of how to advance both values.

My approach here is similar to ethicist Paul Ramsey’s approach to international relations. Some ethical theories stress the need for order in relations among states, while others stress the requirements of justice. Ramsey thinks both such approaches are too simple. Justice and order are of equal importance, he says, and are conditional upon each other. A wise and just politics attempts to increase the area of their convergence.

Unfortunately, however, not all good things go together all the time. Author Robert Packenham has argued that it is in America’s interest to promote its own security concerns and also to promote democracy in developing countries. He says, though, that sometimes policy-makers must pursue one goal at the expense of the other.

Economic decision-making often encounters similar dilemmas. This was the thesis of Arthur Okun’s 1974 Godkin Lectures at Harvard, which were published by the Brookings Institution under the title Equality and Efficiency -- The Big Tradeoff. Okun believes that the “market needs a place and the market needs to be kept in its place.” Paradoxically, the market pushes simultaneously toward social justice by means of the creation of jobs and toward the maldistribution of goods and services. Sometimes measures which favor income redistribution and equality must be enacted, and sometimes measures which favor profit maximization and efficiency are required. Okun refuses consistently to give priority to either efficiency or equality.

In international relations, there is a nonperfectionist ethic which is associated with the name of Arnold Wolfers. It is similar to Ramsey’s position. In effect, Okun has given us a nonperfectionist ethic for economic decision-making. It is impossible to convert a nonperfectionist ethic into simple rules which give explicit guidance to the policy-maker, since so much depends on the circumstances of the case at hand. Its virtue, to borrow a precept from Aristotle’s Nichomachean Ethics, is that it refuses to treat its subject with a greater precision than is appropriate.

A nonperfectionist ethic in economics functions broadly as a guard against ignoring considerations either of equality or of efficiency. Consider, for example, the two tax exemptions for capital gains which benefit wealthy people and large corporations. As author Michael Harrington observes, they cost about twice as much as what we give welfare mothers. Should they be retained? These tax exemptions diminish equality, but they are intended to bolster productivity by encouraging investment. A nonperfectionist ethic, by upholding the value of efficiency, will keep us from automatically calling for the elimination of these exemptions on the grounds of fairness. On the other hand, our concern for equality will prompt us to check very carefully whether the tax breaks are producing their desired effect, or whether they are being used by the rich to purchase yachts and by giant corporations to gobble up smaller companies. A nonperfectionist ethic, while offering no specific resolution of the issue, keeps us from choosing options too easily, according to ideological reflex. Philosopher William James said once that most people are not empiricists unless they are forced to be. Left to ourselves, most of us will dogmatize infallibly; but a nonperfectionist ethic forces us to be good empiricists.

A nonperfectionist ethic is often unpopular, since, as philosopher Alfred North Whitehead said, people “have a pathetic desire to find themselves starting from an intellectual basis which is clear, distinct, and certain.” We find economist Milton Friedman always opting for efficiency, or ethicist John Rawls always choosing equality. Similarly, we find governments which achieve great efficiency by repressing the mass of their people, or we find socialist countries which manage to achieve a greater degree of equality than our own by paying a heavy price in efficiency.

Our own political process blends considerations of efficiency and equality into an imperfect compromise, asking the question: On what terms is America willing to trade efficiency for equality, or equality for efficiency? Politicians often appreciate the twofold character of the economic problem not because they have superior training in economics, but because their constituencies include both “haves” and “have-nots,” and their colleagues comprise liberals and conservatives. The practical demands of policymaking require that competing concerns be integrated to the greatest extent possible. Unlike politicians, clergy and executives who have no direct responsibility for policymaking can sit back and blithely preach either the gospel of equality or the gospel of efficiency with a pure and irrelevant doctrinal simplicity.

In my experience, business people are more likely than clergy to embrace a nonperfectionist ethic in economics. Clergy often charge that such an ethic is inherently conservative, a compromise with an unjust status quo. Author Irving Howe recently criticized literary critic Lionel Trilling’s “liberal mind,” a mind alive to the complexity of human affairs, for being an essentially conservative mind. One cannot he both complicated and passionate about justice at the same time, Howe seemed to say. Many clergy would agree with his assessment.

A nonperfectionist ethic will always incur this kind of criticism. Indeed, such criticism is useful as a safeguard against the tendency of nonperfectionists to practice moral self-deception. But the question is: What do local congregations need most today, agitators or negotiators? As matters stand, clergy and executives talk past each other to no avail, and Ronald Reagan seems well on the way to a second term. If clergy could see that both equality and efficiency are legitimate values, however, they then would have a point of contact with executives. From personal experience I can say that if clergy show some sensitivity to executives’ concerns, that concern will be reciprocated. That is the power of empathy.

We should evaluate Reaganomics, then, with a broad perspective which upholds the values of both efficiency and equality. Liberal clergy, borrowing Robert Lekachman’s title, cry that “Greed is not enough.” To see Reaganomics simply as a matter of greed, however, is to miss an important point. Clergy are relentlessly critical of the president, but even if their only concern is equality, they should be able to see that there is justification for his efforts to improve the economy’s efficiency. Consider his efforts to curb budget expenditure, for example. A case can be made (in as compelling a way as cases can ever be made in the dismally imprecise science of economics) that budget deficits lead to increased interest rates, which slow economic growth. In the case of a turndown, unemployment affects some of society’s weakest members. The church’s concern for the poor should therefore lead it to sympathize with the president’s general intention to reduce the rate of growth of the budget.

The problem is that while the president is correct in his concern to limit the growth of the budget, he is cruelly deficient in his concern for justice. Restraining the budget provides a happy opportunity to improve efficiency without diminishing equality. Theoretically, at least, a tradeoff is unnecessary. This is because the growth of the welfare state, as author Robert Reich notes, has little to do with the poor. The biggest spending increases have typically been in Social Security, Medicare and other programs which are unrelated to recipients’ income. Reich notes that by 1980, expenditures for entitlements for the middle class were four times larger than those for programs based on need. What has happened in the budget process, though, as Frances Piven and Richard Cloward point out in their book The New Class War, is that cuts have come at the expense of the truly needy in programs such as food stamps, public housing, Aid to Families with Dependent Children, Medicaid, and Comprehensive Employment and Training Act (CETA) jobs. Programs for the middle class, on the other hand, have been well defended.

In fairness to the president, it must be said that he tried to restrain Social Security expenditures, but the political outcry from the Democrats was too great. Those cuts would have struck a blow for efficiency and they would not have diminished equality. As authors Lester Thurow and Robert Heilbroner observe, from 1970 to 1980 the average elderly family slightly improved its position relative to that of the average family in the nation as a whole because Congress steadily raised Social Security benefits ahead of living costs.

Clergy can agree with executives that the present size of the welfare state is excessive, given our current level of production. But clergy need to help business people see that it is they themselves, with their tax-deductible mortgage interest payments and low-interest student loans, who constitute America’s great welfare class. The church needs to help people to say with Pogo: We have met the enemy and he is us.

President A. Bartlett Giamatti of Yale has said that the Moral Majority, with its simple prescriptions for complex problems, is a “cry of exhaustion, a longing for surcease from the strain of managing complexity.” But this exhaustion infects all parties and sects, including mainline churches which pride themselves on their open-mindedness. It is time now for both clergy and executives to break away from the ranks of the “terrible simplifiers.” Some years ago, University of Chicago ethicist James Gustafson pointed to the possibility that our congregations might become “communities of moral discourse” where proponents of laissez-faire economics would encounter advocates of the welfare state in earnest conversation and study, thereby checking the idolatry of both extremes. We should begin now to claim that promise.