I have previously argued that Free Enterprise is a good means to achieve biblical objectives. However, it is not a perfect means to this end. Significant problems would occur, if we left our economic welfare to the market alone. We will, in this article, briefly note ten possible problems — with no claim that these ten necessarily are a com­plete list of all the possible limitations.

1. No Rules of the Game⤒🔗

In a totally lawless society, there would be no exchanges, no market, no "free" enterprise. The strong would merely take from the weak. There must be a minimum role of the govern­ment to act as policeman and judge, to set and maintain "the rules." Whether we see these minimum rules by defini­tion as part of Free Enterprise, as, for instance, Ronald Nash does ¹, or wheth­er we call it government intervention, is not really important. Even if we ac­cept Free Enterprise as the ideal, we must still decide what this minimum role, this minimum rate of interven­tion, should be at this, particular time. If not, Free Enterprise is anarchy — not a means to a biblical goal.

In fact, Douglas Vickers² notes that the "presence of sin in the world ... ensures plenty of scope" for gov­ernment action, e.g., child labor laws, pure food and drug laws.

2. Property Rights Undefined←⤒🔗

Proponents of Free Enterprise such as Lindsell³ and Nash, assume that everyone knows what property rights are; they are easily recognized by a very limited government and are un­changing. Beversluis, an economist at Calvin College, however, notes⁴ that "there is no specific right to property apart from the society and some state." It is not true that property rights are clearly defined; rather, they "depend" — they may change as society and government changes. The market can work only after government and/or society have defined property rights.

3. No Satisfactory Equilibrium←⤒🔗

A third problem relates to what the economists call "equilibrium." That is, if left alone, would the econ­omy automatically settle at reasonably full employment and general prosperi­ty? Vickers and the majority of secular economists, following Keynes, would respond to this question with a resounding "no." Vickers points to many disruptive conditions, many due to sin. In fact, he claims that even John Calvin would share this concern (p.116):

Calvin's awareness of the ambiguity of man's nature (that is of the plain fact that man is consistently solicited by both God and mammon) would never have inclined Calvin to believe that society can reach a harmonious activity through the simple play of individual interests.

4. Unjust Initial Distribution←⤒🔗

Perfectly functioning markets ef­ficiently allocate resources only in a "Pareto Optimal" way. That is, only those transactions take place, that im­prove the lot of both parties. Few vol­untary transactions occur which favor one party over another. However, if the initial starting point is unjust — e.g., the white man owns most of the land taken at gunpoint from the na­tives, or the wealthy landowners in Third World countries own the bulk of the acreage — Free Enterprise can do little to change that basic unjust dis­tribution. That is, if you have no money, you cannot play the game; only dollar votes count in the market place! Therefore, Free Enterprise is not a perfect means to aid the very poor — those who have little to start with.

5. Monopolies←⤒🔗

Free Enterprise theoretically works only in situations of perfect competi­tion, where no buyer or seller (or group of them) can control the market. Yet Free Enterprise has an inherent tenden­cy towards monopoly. We all too often see (in the words of Vickers) "manifes­tations of exploitation, of the excessive concentration of economic power" and we would see more, if monopolies were not regulated as much as they are. Note, these monopolistic evils apply to unions as well as businesses.

6. Lack of Knowledge←⤒🔗

Perfect competition assumes per­fect knowledge about the product to be sold. But, in reality, we frequently have unequal information. For exam­ple, if I sell Stelco shares to you when I know (from a friend who works there) that the Nanticoke plant has just had a major breakdown which will keep it out of production for 6 months — is that fair? What degree of unequal in­formation is fraud?

7. Insufficient Public Goods←⤒🔗

Free Enterprise cannot by itself provide certain "public goods," e.g., army, navy, police, roads. These "goods" would probably include such "nation building" enterprises as the Canadian Pacific Railroad and Trans-­Canada Pipelines. We can, and should, argue about the extent to which these are required — e.g., we could go ex­clusively to toll roads. However, some necessary public goods can definitely not be provided by Free Enterprise.

​8. Inadequate fundamental goods←⤒🔗

In a similar vein, Beversluis ar­gues (p.45) that the market does not provide, in a just manner, certain "fun­damental goods" to which each person has a "fundamental" right, regardless of level of wealth or income, e.g., education, health care. Again, we can argue the extent of these goods or whether they are "rights" or "privi­leges," but all of us will probably ac­cept that some of these exist.

9. Externalities←⤒🔗

Another limitation relates to what economists call "externalities." The market inadequately considers the ef­fects of individual actions on "exter­nal" third parties, e.g., production which pollutes drinking water affects many more than those directly involved in manufacturing and selling that prod­uct. No automatic controls exist under Free Enterprise to limit such effects. Surely, the unreasonable destruction of our environment is not acceptable Christian stewardship?

Although without controls Free Enterprise would not adequately con­sider the environment, the solution is not necessarily heavy-handed regula­tion. It is possible by charging polluters based on the amounts discharged, to harness the innovative capabilities of the Free Enterprise system to assist in the control efforts⁵.

​10. No Consideration of Noneconomic Goals←⤒🔗

J. David Richardson, a Christian economist at the University of Wiscon­sin in a recent paper noted that there is "ample documentation that pure mar­ket forces can overwhelm communal goals that are not economically justi­fied," e.g., maintaining strong families, providing for the poorest, observing the Sabbath. Just note how quickly economic pressures will force munici­palities to open Sunday shopping — if one eventually does so!

I hope that these ten points will convince you that, by itself, Free En­terprise is an inadequate means to achieve Christian goals. Note also that for each of these problems, govern­ment appears to be the logical coun­tering force. However, the extent of the necessary intervention is not clear, and the effectiveness of such interven­tion is frequently in dispute. Thus, the ideal amount of government interven­tion is not easily specified. Neverthe­less, let me quote Richardson again, "no reputable economist claims that markets work well in all instances, but most believe that the burden of proof to the contrary should be on those who articulate alternative means." That is, if you disagree, prove that your alter­native works better!

In summary then, we have seen that Free Enterprise is not a Christian end in itself. We should not claim that it is God-ordained. Free Enterprise is, however, the best means to achieve many biblical goals. But, Free Enter­prise, by itself, is not a perfect means. Rather, we must, as Richardson notes,

make careful distinctions between transactions for which markets work well on economic and scriptural grounds and transactions for which markets do not work well.

Unfortunately, this will require an inordinate amount of work and debate by Christians. However, if we seek to have government apply God's laws concerning economics (and I am con­vinced we should), we must do this work and seek to discover how God's law must be applied. In the meantime, let us be humble and tentative in our pronouncements. Especially, let us not claim that Free Enterprise is the Chris­tian approach.