Despite my respect for Dr. Krugman's Nobel Prize in economics, we often disagree. Yet we do agree on the above passage. In fact, when he wrote this passage at the beginning of the election year of 2012, I was putting the finishing touches on a new book that says virtually the same thing. When anyone who has won a Nobel Prize agrees with what you've been preaching for years, you have to mention it. That may not particularly witness to Christian humility, but, like most Christians I know, I've always been quite proud of my humility. We humans are an interesting blend of angel and beast.
Of course, Dr. Krugman could have gone on to confess that very few mainstream economists know anything about theology, or even repairing a car, building a house, or raising children. He might then have helped Americans better understand that our real problem isn't simply politicians, but a key foundation of capitalism: the specialization of labor. Of course, it would have taken far more humility than economists are noted for in order to make that confession.
The primary reason I often disagree with Dr. Krugman is that his solution for most economic problems is increased government spending. I believe that has its place in certain times and places. For example, I live a mile off I-75 in a nice community with gas stations, restaurants, banks and so on. It wasn't even picturesque pasture land until Washington built the interstate a few years ago.
Yet when Dr. Krugman advocates increased government spending, it seems as one-dimensional as my friend and former vice-presidential candidate Jack Kemp calling again for more tax cuts. When listening to Krugman and Kemp over the years, I've often felt like I rotate churches whose pastors know only one sermon, each the opposite of the other. Each pastor is leading a choir that only knows one song. The Bible readings are always the same passage.
That would be pure nonsense to most Christians. Yet if politicians and economists don't talk about issues in the same monotonous manner, we deem them "flip-floppers" and "wishy washy," or, even worse, "moderates." It makes me wish that progressives and conservatives alike understood the biblical reality that there's a time for every purpose under heaven. The only seemingly good thing about monotonous preaching, repetitious singing and selective Bible quoting is it alleviates our need to think.
Perhaps as he taught theology before turning to management theory, Peter Drucker seemed to understand that reality. Peter taught the balanced approach that most government spending could produce little true growth; the exception being that government could develop infrastructure that would make it easier for the private sector to produce that real growth. That could be as obvious as interstate highways, water lines and sewer plants. Yet it might also be the education and health of our workforce. It is such balanced moderation that our nation has lacked since politicians and the media have divided themselves into progressives and conservatives in order to hold our attentions by making themselves more extreme and entertaining.
Of course, the word "entertaining" derives from two words meaning "between" periods of "attaining reality." Whereas we used to get a measure of reality from newspapers and the evening news, while we got entertainment from our theatres and "I Love Lucy," we now get the convergence of "reality TV," as well as tabloid-style newspapers and gossip-style magazines. Sadly, those guide more than our selection of soap operas. They increasingly guide public policy.

The chart above might help you to better see through such distortions. The portion above the line shows the three primary ways of thinking about political economy in the United States. The portion below the line shows their underlying economic philosophies. On the left hand side, there is the communist system where government plays the dominant in our well-being. The middle of the line represents what many of us call socialism, where government takes about half of people's incomes to provide for their health care, retirements and so on. On the right hand side is the conservative worldview where government gets "off our backs, out of our wallets and out of our bedrooms."
Transcending those "humanistic" worldviews is the Judeo-Christian ethic where God, rather than government or individuals own the wealth. We "honor and respect" government, to use St. Paul's words in Romans 13, while making it less necessary by behaving ourselves and assuming responsibility for the well-being of ourselves and our neighbors, particularly those in need.
For every politician who wants to rule the world, there's an economic philosopher who wants to run it for him or her. So below those humanistic political worldviews are humanistic economic philosophers who offer support for the views of the politicians.
On the left, Karl Marx might be the most cited but least understood of the bunch. Most Americans associate Marx with communism as Lenin put Marx's ideas into action, but that's only partially correct. Marx did say that capitalism would dissolve into state-managed communism; but he added the state would eventually dissolve into a worker's paradise, where workers supplying labor, rather than capitalists supplying money, would reap most of the material rewards.
Most Christians also remember Marx as an atheist. That was true during his adulthood, but Marx was both Jewish and Lutheran when maturing, which may have influenced his thinking about his workers' utopia being a bit like the economy described in the Book of Acts. We Christians should remember that while the state had been around since the days of Pharaoh, capitalism wouldn't be morally legitimated until considerably later, around the Protestant Reformation.
Notice that despite political rhetoric, I don't believe there are any socialistic economic philosophers who significantly influence American politics today. I base that on my global worldview, as opposed to the nationalistic worldview of most Americans. It would be political suicide today to advocate that America should more closely resemble the socialist nations of Sweden, Denmark, and France. Presidential candidate Mitt Romney recently painted President Obama that way in a New Hampshire debate by saying taxes now consume 37% of America's GDP. All the fact-checkers noted the governor had confused his facts, as I immediately suspected, as governments at all levels have taken roughly 27% of GDP since I was a college freshman in 1969. America has long been, and I expect it will long remain, right-of-center in that regard. Of course, a lot of today's libertarians want to get federal taxes down to 15% or lower, which is where Governor Romney's taxes have been due to a loophole called the "carried interest" provision that was provided for managers of private equity funds and such.
The closest we probably have today to socialists are liberal, or progressive, economists. Those range from early twentieth century British economist John Maynard Keynes to present day New York Times columnist Paul Krugman. Generally referred to as "Keynesians," these economists might prefer even more activist government. They might prefer for governments to take thirty to thirty-five percent of our incomes, with which government could police the world while providing income and health care during our retirement years. If I had to hazard a guess, such economists have most influenced President Obama.
Yes, I know that is debatable. Many conservatives, and virtually all libertarians, believe the President has been a socialist. But that's likely seeing things from a right-wing perspective rather than from the mountain-top. For example, because the President bailed-out General Motors but almost immediately re-privatized GM, The Economist magazine literally said the President was due an apology for people calling him a socialist, when in fact he's likely a pragmatist.
I don't question that the President would take us in the direction of Denmark, whose economy even Forbes has praised despite its government taking fifty percent of its people's incomes, if he could. I just believe the President is sufficiently pragmatic to know he can't do those things in today's political environment. There's also the small matter of constitutional checks and balances. If there's one thing ironic about conservative politicians today, many of them are promising to do things in Washington that no individual, president or not, has the authority to do.
Anyway, further to the right would be Fredrick Hayek, of the so-called "Austrian school" of economics. It has increasingly influenced conservative economic thought in America. Hayek famously thought government taxation and spending was the "road to serfdom." Yet he acknowledged that government might play a role in stimulating an economy during a depression.
Even that minor exception did not sit well with the libertarian Ayn Rand, who famously mentored Alan Greenspan. So Rand preferred the thought of Ludwig von Mises. He was also of the Austrian school, but more purist. You may remember that presidential candidate Michelle Bachmann said she always takes a von Mises book with her when she goes to the beach. Presidential candidate Ron Paul would be another likely fan of von Mises. While libertarian Christians often appreciate his distaste for government, most also cannot understand his views on national defense, which seem more like the far right. Libertarians can actually be found on both ends of the political spectrum, but the most visible ones are usually on the far right end.
My mentor, Sir John Templeton, was also of the Austrian school. He was even a member of the Mont Pelerin Society, perhaps the most influential leaders of the school. John might have seen very limited government as the ideal. But having studied theology all his life and law at Oxford as a Rhodes Scholar, John was realistic enough to understand we humans are not angels so a libertarian world was simply an aspiration of humankind. John also thought any progress in that direction would be a result of spiritual progress, a notion with which most of the Austrian school, which tends to be rather humanistic, might disagree. As for me, I believe John was precisely correct. I'll gladly become a libertarian when the disciples of Ayn Rand bend a knee to Jesus Christ. Until then, I'll remain conservative.
If you look to the right of the words "Ayn Rand," you will see the political line extends a tad further. That acknowledges the "anarchist" school of political thought that wants to do entirely away with government. Rand considered only the protection of private property to be a legitimate role of government, which is why so many libertarians rail at government but don't mind having a military, border patrol, even FDIC insurance to protect their wealth. Unfortunately, they usually don't want to pay for that protection in the form of taxes. That's why anarchists don't care for government to even protect wealth. I know of no economic philosopher who is influential in supporting the anarchist view. Ludwig von Mises is therefore most likely as anti-governmental as you'll run across in today's America.
Now you need to understand one more nuance in order to understand the basic political and economic philosophies of today's America. That would be between the "fiscalists" and "monetarists." Here you need to nuance between the Congress and the Federal Reserve. The fiscalists are so named as they believe the Congress should tweak the activities of the private sector, or stimulate or slow the economy, through fiscal policies, or by taxing and spending, which could mean running deficits or surpluses.
The "monetarists" on the other hand, with Nobel economist Milton Freidman of the so-called "Chicago school" being primary among them, believe the Federal Reserve should tweak the economy by creating more or less money to put into circulation. How they accomplish that is not that important for our purposes, though it is reflected by words like "quantitative easing."
What is quite important to understand is the conflict between the fiscalists and monetarists in today's Washington. Wittingly or unwittingly, most of those young tea party Congressmen in the House of Representatives have been highly influenced by the Austrian school of economics and the libertarian political ideas of Ayn Rand. For example, Congressman Paul Ryan, who is heading the Republican effort to scale back entitlement spending, requires his staffers to read Rand's books. Anti-taxer Grover Norquist, who encouraged most conservative members of the Congress to sign his "no new taxes" pledge, has famously said he'd like to reduce government until he could put it in his bathtub and drown it. Rand would heartily agree.
Yet the monetarists seem to have the most influence at the Federal Reserve. Since the depths of the Great Recession, the Fed has increased the money supply at an annual rate approximating 20% on occasion. We therefore have the House opting for austerity, but the Fed opting for stimulus. Obviously, that's why Congressman Ron Paul wants to get rid of the Fed. He just doesn't believe it should be that influential in our economy. As an advocate of "hard" or "sound" money, which often implies going back on the gold standard, Paul often quotes that statistic about the dollar losing about 97% of its value over the last century. That statistic is true, and such has been happening since the ancient Romans shaved the edges of coins to pay the legions.
What Paul and his disciples don't always quote however is the increasing prosperity we've also seen during that time. On average, Americans lived on about $3,000, adjusted for inflation, in 1900. Today, they average about $50,000. As an investment advisor, I know that when investors, like Sir John Templeton, don't believe paper money will hold its value, and John certainly didn't, they will invest it in businesses, real estate and so on in order to protect their purchasing power. Mr. Paul on the other hand, invests his savings primarily in gold. As suggested by biblical Parable of the Talents, businesses, real estate and such are far more productive than hoarding gold coins, or even dollars that can be converted into gold.
I therefore wonder if affluent investors could simply put their savings into gold coins, or dollars convertible into gold, that maintain their purchasing power, whether the affluent would assume the risks of productive endeavors that enrich us all. I've also read enough about the Great Depression to know that Mr. Paul and his disciples sound remarkably similar to Andrew Mellon. If you're not familiar with Mellon's economic thinking and legacy, you might Google his name.
Of course, there's another consideration just as important, if not more important, than how this debate affects investors. That is how it affects the poor and middle class. There's no question in my mind that inflation hurts the poor more than anyone. Absent a more proactive government, and yes by that I mean one that transfers some income from the affluent to the needy, it seems logical that devaluing the dollar is quite harmful to those who live on fixed incomes, or a fixed number of those dollars that buy less each year.
The debate grows even more complicated when we consider the middle class. The reason is the middle class has often taken on mortgages, education debt, business debt, and so on. Odd as it might seem, devaluing the dollar might actually help them. If you'll forgive a personal example, it might help you understand. Before I was born, my father purchased a farm for $20,000. He borrowed $18,000 to do so and my grandfather told dad that he'd never pay the mortgage off. Yet inflation took the value of that same farm to $200,000 by the time dad died. Even if he'd still owed the original $18,000, he could have paid it off and still had $182,000 remaining for my mother's retirement when he sold the farm before he died. Many Americans experienced the same with home mortgages and so on before the Great Recession.
So which political philosophy and school of economic thought do I recommend? My answer is similar to the one I give when theologians ask if I'm pre-millennial or post-millennial, meaning do I believe Jesus will return to earth before or after the biblical thousand years of peace and prosperity. I respond I'm "pan-millennial," meaning I believe things will pan out according to God's will regardless of what supposed human experts think. The important thing is for each of us to love God and neighbor as self in all we do and we'll likely muddle through.
****
Gary Moore is a Sarasota-based investment counselor who has authored many publications and articles on the morality of political-economy and personal finance. He is a registered representative of, and offers securities through, National Planning Corp (NPC), member FINRA/SIPC, but opinions expressed here are his alone. The Financial Seminary and NPC are separate and unrelated. His comments are included in the More Good $ense newsletter in an effort to expand stewardship leaders understanding of broader economic issues.