A Review of Economy of Grace

[1] Can theology speak to economics? Does Christianity provide the principles for action in economic life? Indeed, can it offer a vision of an economic order distinct from the one in which we live today? These are the questions asked by Kathryn Tanner in Economy of Grace. Her answers, not surprisingly, are yes. In this book, she develops a set of such principles and applies them prescriptively to the modern global economy. Her purpose is to provide a realistic alternative to today’s global capitalism, although her actual discussion acknowledges its seeming permanence and thus is more a program to reform rather than to replace it. Does she achieve her purpose? Unfortunately, in the opinion of this reviewer, she does not. She is undermined by her methodology, a lack of specificity, and a shaky command of her arguments that sap the force of her conclusions.

[2] Professor Tanner’s theological alternative is the “economy of grace.” Based upon an analogy between the centrality of grace in Christianity and the centrality of money in the modern economy, this alternative is formed of three basic principles: (1) unconditional giving, (2) universal giving, and (3) noncompetition. The latter has two aspects, no competition over property or possession, and no competition between “having oneself and giving to others” (p. 76). These, she states, are the economic principles that we can derive from the Christian tradition.

[3] I was surprised at the absence of an effort to build upon, link, or differentiate these principles from the work of other theologians or, more generally, from other understandings within the Christian tradition. Except for one reference to the views of other theologians on grace and gift-giving, Professor Tanner eschews the work of others, and her alternative is built from the ground up. Her justification is that “the Christian story….is a highly malleable story, susceptible to multiple readings of the notions at issue…” (p. 32). Presumably this allows the theologian substantial latitude to develop principles such as those offered in this book.

[4] The “malleable story” that is built here is, in fact, specifically designed to be “capitalism’s contrast case” (p. 32). This does generate some problems. The most serious is that by explicitly creating a “theological economy” that is opposed to capitalism, she runs the danger of preaching to the converted. One can hardly use the principles developed here to criticize capitalism because the “economy of grace” faults capitalism simply by construction. Though she claims that the economy of grace “struggles” against global capitalism (p.88), the struggle was created by definition and not by analysis or force of argument. How damaging to her enterprise one regards this problem is probably a function of the view of global capitalism that the reader brings to the book.

[5] Of her three principles, noncompetition is the most difficult to grasp. It appears to be an argument that all property be communal, or at least not be considered private. “What we have we have only in a relationship with those who are giving it to us, and therefore our property is always theirs too” (p. 80). In any event, the relationship between property and competition is left unstated. Does the existence of property necessarily produce competition for it? Or is it competition that leads to an obsession with property? The principle is titled “noncompetition,” suggesting that it is competition, not property per se, that is the fundamental wrong, but this argument is not developed.

[6] Note that all three principles are principles of distribution; none is of production or valuation. Production is at the very heart of economics-most textbooks of economics begin by defining economics in the context of scarcity, i.e. constrained production-and it is unfortunate and incomplete to not address this central aspect of economic life. It’s easy to imagine Christian principles of how to regulate production (humane working conditions, environmental soundness, etc.). But is there a recognizably Christian approach to ensuring that enough goods and services are created so that all may have their needs met?[1] Can we conceptualize a fully alternative economy without considering production? The “economy of grace” also has no mechanisms to establish value or to enable exchange. Everything is freely given. But again, unless one assumes unlimited resources and infinite capacities of production, the mechanisms to establish what is to be given and in which quantity is left unstated. (Needless to say, if there are unlimited resources and infinite capacities of production, so that we could give everything to everyone, we really have no need of economics at all!) On the face of it, the principles developed here are not enough to fashion an alternative economy.

[7] Professor Tanner does not, as noted, actually attempt such a project. She devotes most of her efforts to using her principles to critique and reform the economy we have. Many before her, of course, have argued against capitalism, whether on grounds of morality or of economics. Professor Tanner makes two novel twists to these earlier arguments.

[8] Previous moral criticism of capitalism has generally been indifferent to the economic consequences of moral reform. If what is morally right means that the economy will grow more slowly, for example, then so much the worse for the economy. But Professor Tanner does not take this path. Instead she asserts that her principles will in fact operate to improve the economy. We can be more ethical and more prosperous at the same time. I take it that this is why she refers to her principles as “principles of economics.” (It also neatly avoids the disagreeable possibility that the economy of grace might not be economically optimal.) She does not provide a general argument of why this will be so, but instead offers a series of policy reforms that will improve the economy while also moving us away from today’s global capitalism.

[9] A similar approach is taken with the major economic criticism of capitalism, that coming from the Marxist tradition. To an orthodox Marxist, the combination of limitations on “surplus profit,” underconsumption, and a necessarily falling rate of profit doom capitalism, though it might do a great deal of human damage before the day of its fall. The twist here is that Professor Tanner assumes the correctness of these three elements of classical Marxism (p.106, 101, 119, for examples) but doesn’t then draw the orthodox conclusion that capitalism must collapse. Why she does not do so, she does not say. Logically, the only possibility is that one or more of these elements are wrong. Sidestepping this analytical problem, she uses the criticisms from this perspective to further motivate the policy reforms offered through the economy of grace.

[10] Since she does not pursue the project of installing a non-capitalist alternative economy, the Economy of Grace ultimately stands or falls on its ability to offer useful and cogent reforms of contemporary capitalism. Quite frankly, I am unconvinced of its ability to do so. The specific reforms argued by Professor Tanner are numerous, but most are flawed by weaknesses of argumentation. Let me point out three examples, corresponding to the major areas of reform that she proposes.

[11] Professor Tanner’s first point of intersection between the current economy and the economy of grace is globalization. The principle of universal giving suggests reforms that will reduce economic inequalities between nations and the burdens now particularly borne by poor countries. But the argument that follows is marred by a weak knowledge of the global economy and of economic analysis. Her mental picture of the world economy reminds me of that proposed by “dependency theory” back in the 1970s. There is no recognition that the trajectory of the world’s poor countries has been widely divergent since then. While China is undergoing an unprecedented economic revolution and nations such as India or those of Southeast Asia are growing rapidly, the countries of Andean Latin American and Sub-Saharan Africa are, for the most part, mired in continuing and terrible poverty. Poor countries are not alike. Policies that might assist one developing nation may very well damage another.

[12] So, while Professor Tanner chides the global system for not making developed countries with balance of payments surpluses “rectify” their trade imbalances, and endorses Keynes’ vision that these surpluses be cancelled or recycled to countries with payments deficits, she does not seem to realize that the developed countries are, on net, in deficit, and that the biggest single gainer of Keynes’ vision would be the U.S., the holder of the world’s largest balance of payments deficit. Many of the world’s largest surplus nations are the still relatively poor countries of East Asia, including, most prominently, China. Should they be made to eliminate these? She complains that the WTO does not allow deficit nations to improve their positions by restricting imports. But restricting imports may or may not improve a balance of payments position. It would depend, among other things, upon questions such as the impact of rising import prices on domestic exporters and the trade effects of the country’s strengthening currency, which would follow from the initial reduction in imports. She calls for fixed exchange rates and wants an international central bank, without seeming aware that these are policies historically preferred by the rich, whatever one thinks of them as economic ideas. There’s a good reason why Mexico likes its peso to slide! At times, she is simply misinformed. She makes the statement that “creditors never have to take a loss or write off their bad loans” (p. 97). But in fact they take substantial losses. In the aftermath of the Argentina debt crisis, most creditors will be repaid but 30 cents on every dollar that they lent to that country. Professor Tanner does not claim to be an economist, so perhaps it is unfair to demand a great deal of knowledge about the global economy or of economic analysis. But this weakness does not give one great faith in the reforms she suggests.

[13] A second point where she sees the Economy of Grace encountering the present economy is through the welfare system. Using the principle of unconditional giving, she recommends “welfare provision as a universal entitlement, sensitive only to need.” She defines welfare as “such things as monetary payments, education, and welfare.” But that’s a rather airy definition. It says little about the content or cost of this welfare. This is hardly nitpicking; the budgetary implications of the different levels of welfare spending are staggering. Joining Dick Cheney, she mounts an argument that budget deficits don’t matter, but her argument would only hold inside the U.S. (what happened to “universal giving?”) and flies in the face of an almost complete consensus of economists and policymakers that the U.S. does not have the ability to run limitless deficits. The reforms lack the specificity that would be needed to actually create them. “More welfare for all who need it” is ultimately too vague to mean much.

[14] I also found unconvincing the “economic” justification for giving welfare unconditionally. Professor Tanner claims that since welfare recipients do not respond to incentives, we should not make any conditions for the receipt of benefits. Few welfare policy researchers would accept this claim. She supports her position by a footnote to a single book (and it is a book on the collapse of the post-war Swedish welfare model (!), not on the general efficacy of incentives as a tool of welfare policy). And, if people don’t respond to incentives, then just about all of the reforms that are recommended in the Economy of Grace are equally without merit as they too rely on incentives of one form or the other.

[15] A third point of encounter between the economy of grace and global capitalism is the area of “non-marketable” goods. Here we encounter a very strange argument. Professor Tanner wants more public goods. “Public goods” is a term used in economics to describe goods that that can be consumed in common and without depleting them, and from which no potential consumer can be excluded. Lighthouses and national defense are the classic examples. To Professor Tanner, these are examples of “noncompetitiveness,” and hence “the ideal” (p. 139). We should create more public goods such as ample food, full employment, etc. Well, a public good is an analytic category not a normative one. Neither laws nor nations can change an analytic category. One footnote again carries the argument that somehow governments can do this, but that source in fact makes no such claim. She is confusing “good” as in “goods and services” with “good” as in a moral good. They aren’t the same. Full employment is a moral good, but it is not a public good and there is no way to make it one. In principle, one person can be excluded from holding a job in a way that, in principle, one ship cannot be excluded from using a lighthouse. Again, the argumentation is simply not compelling.

[16] I hardly mean to suggest that none of Professor Tanner’s reforms are desirable. Many are. But I don’t think that a Christian not already persuaded by them is going to be so persuaded here.

[17] Why doesn’t the economy of grace give these reforms any extra traction? Let me suggest two reasons. First, the principles are developed as absolutes. But they are not applied that way. She doesn’t suggest that we truly give everything unconditionally and universally, or that property be abolished. Rather she wants things nudged in that direction. But what are the principles we use to determine what things ought to be so nudged, and to what extent? We have no metric or methodology to tell us how to use these principles, if we are not going to use them as absolutes. How “unconditional” are we supposed to go? When? How do we discover this? Is it just ad hoc? Second, because the principles are developed to be the polar opposite of capitalism, they are poorly positioned to offer reforms within it. It’s rather like entering the abortion debate by asking a pro-life believer to use her or his perspective to offer reforms of the pro-choice position.

[18] The Economy of Grace is a very ambitious undertaking. Nearly half of the book is actually but a prolegomenon to Professor Tanner’s development of her principles. Much of what Professor Tanner says is reasonable. But the harder test is whether a skeptic is convinced, or at least shaken, after reading the book, or if one predisposed to her argument is given the tools to make a more powerful contribution to the public debate over global capitalism. On this level the book is not successful. I did not find the book to offer a compelling case that the economy of grace is a set of principles that is of practical use in developing a more humane and inclusive global economic order.

[1] Professor Tanner appears to argue that scarcity is artificially created, the consequence of the privatizing of property, and, adopting Marcuse, that most needs are superfluous, the product of the power of advertising, as she hearkens to the supposed fully met needs of the English peasantry before the enclosure movement. Setting aside whether any of us would wish to live as did the early modern peasantry, and that even the standards incorporated in today’s international “Basic Human Needs” strategies are far above that level, “needs” are defined socially and relatively to other persons, and there appears no way to objectively define or mandate a fixed set of human needs. Even if one could, how does one ensure that production is maintained at this level, and not lower (or higher)?