Self Interest and Competition within the Religious Firm

Competitive religions, Smith believed, posed no threat to civil government or individual liberties. If competition reigned in religious markets, each sect would have to respect all others and these concessions might even lead to Smith's ultimate libertarian ideal—a "pure and rational religion, free from every mixture of absurdity, imposture, or fanaticism, such as wise men have in all ages of the world wished to see estab-lished.''11 Such a world would, among other things, encourage the development of science and rationality, thereby enhancing economic growth.

By contrast, the alliance of religion and state tends to corrupt both parties. Civil government, like its partner, established religion, is influenced, to one degree or another, Smith avowed, by "popular superstition and enthusiasm." Established religions typically become bureaucratic, thereby losing touch with the common people, and creating disharmony among them. Thus we arrive at Smith's two fundamental objections to established religions: On the one hand they tend to infect civil government with instability (i.e., fanatical behavior), and on the other, they undermine consumer sovereignty. On both counts, economic development is threatened.

Since established religion was commonplace in many European states, the issue for Smith became how, under the constraints of state-established religion, preachers could be relieved of indolence and greed while consumer choice and sovereignty were maintained. Smith found the answer to this question within the organizational principles of the religious firm. This is verified by his qualified praise of the Presbyterian clergy, which, despite its standing as a state religion, established an internal organization that emphasized freedom, equality, and individual rights—the same qualities that promoted consumer sovereignty. Smith noted that some Protestant churches bestowed on their members the rights to elect their pastors, but that this alone was not sufficient to mitigate the effect of establishment, because as long as the people of each parish preserved the right of electing their own pastors, they acted almost always under the influence of the clergy, and generally of the most factious and fanatical of the order. The clergy, in order to preserve their influence in those popular elections, became, or affected to become, many of them, fanatics themselves, encouraged fanaticism among the people, and gave preference almost always to the fanatical candidate. So small a matter as the appointment of a parish priest occasioned almost always a violent contest, not only in one parish, but in all the neighbouring parishes, who seldom failed to take part in the quarrel.12

However, when the rights of patronage were abolished "by the act which established presbytery in the beginning of the reign of William III, [t]hat act at least put it in the power of certain classes of people in each parish to purchase, for a very small price, the right of electing their own pastor''13; this reform allowed parishioners to become stakeholders in good ecclesiastical government. Although the rights of patronage were later restored under Queen Anne, Smith argued that Scotland nevertheless maintained some vestiges of concurrence by the people.

Smith made it clear that the disadvantages of established religion sprang from the twin inequalities of authority within the organization and benefices to the clergy. Hence a religion—even an established one —that provided both equality of authority and equality of benefice mitigated these disadvantages. And the way to nurture equality of authority and benefices was to introduce elements of competition into the organization of an established church. It is therefore the quasi-competitive nature of certain established religions that Smith endorsed.14 The fact that established religions could be ranked and evaluated according to how close they came to free religious markets is inherent in Smith's qualified praise of Presbyterianism. As established religions go, Presby-terianism was not perfect, but it was, from an economic perspective, better than most alternatives.

The equality which the Presbyterian form of church government establishes among the clergy, consists, first in the equality of authority or ecclesiastical jurisdiction; and secondly, in the equality of benefice. In all Presbyterian churches the equality of authority is perfect: that of benefice is not so. The difference, however, between one benefice and another, is seldom so considerable as commonly to tempt the possessor even of the small one to pay court to his patron, by the vile arts of flattery and ostentation, in order to get a better. In all the Presbyterian churches, where the rights of patronage are thoroughly established, it is by nobler and better arts that the established clergy in general endeavour to gain the favour of their superiors; by their learning, by the irreproachable regularity of their life, and by the faithful and diligent discharge of their duty.15

By the same token, equality of church benefices makes for a more efficient and responsive religion, and therefore commends the Presbyterian form of internal organization over other established churches.

Where the church benefices are all nearly equal, none of them can be very great, and this mediocrity of benefice, though it may no doubt be carried too far, has, however, some very agreeable effects. Nothing but the most exemplary morals can give dignity to a man of small fortune. . . . In his own conduct, therefore, he is obliged to follow that system of morals which the common people respect the most. He gains their esteem and affection by that plan of life which his own interest and situation would lead him to follow____The Presbyterian clergy, accordingly, have more influence over the minds of the common people than perhaps the clergy of any other established church. It is accordingly in Presbyterian countries only that we ever find the common people converted, without persecution, completely, and almost to a man, to the established church.16

Finally, Smith underscored the fact that the revenue of every established church competes with the general revenue of the state and, on that account, should not be so large as to diminish national defense. He therefore lauded the national churches of Scotland and Switzerland for their frugality and efficient administration, noting that "[the] most opulent church in Christendom does not maintain better the uniformity of faith, the fervour of devotion, the spirit of order, regularity, and austere morals in the great body of the people, than this very poorly endowed church of Scotland.''17 He added that Switzerland does an even better job with yet less funding.

For Smith, Presbyterianism provided a form of church organization that allowed a certain measure of participatory, representative democracy at the local level, which set it apart from Episcopal and Roman Catholic traditions.18 Moreover, it allowed for some heterogeneity in the style and form of worship, according to the demands of individual church members. This internal organization within the Coasian firm was a second-best solution to open output competition, which Smith regarded as most efficient.

Protestantism in general was a religion of emancipation—in part from the medieval church but also in part from medieval government. Yet in many instances, Martin Luther included, the leaders of the new religion allowed themselves to become mere chaplains to national rulers. Some of the new religions, such as Anglicanism and Calvinism, were dictatorial, as was the Roman Catholicism that they displaced. So it is significant that the only form of established religion Smith qualifiedly condoned was Presbyterianism—as practiced in Scotland, Holland, and Switzerland. In each of these countries, religious competition was keen. In Scotland, Presbyterianism faced off against Anglicanism; in Holland and Switzerland, it confronted Roman Catholicism. The dominant religious firm in each of these countries was authoritarian and non-democratic; the new entrant stressed individualism, equality, and representative democracy.

The democratic elements of Presbyterianism are evident in its constitution, which emphasizes popular election of ministers and officers, wide dissemination of authority, and local property rights. Authority in the Presbyterian Church flows from the bottom up rather than from the top down (as it does in Anglicanism and Catholicism). Presbyterianism owes its existence largely to the efforts of John Knox and his followers. The new religion that Knox founded gained a receptive audience in Scotland, Holland, and Switzerland because it offered a more convenient or persuasive alternative to the dominant religion it displaced. Since medieval times, the social hierarchy in western Europe was based on the duties and responsibilities of the three estates: those who pray, those who fight, and those who work. The Scottish third estate was in bad shape in the sixteenth century, not so much due to wars as to the defects of social organization and Scottish government. Scottish tenants had three main grievances: The first was against the church, which placed a heavy tax burden (e.g., tithe and other ecclesiastical duties) on production: the second was against the burghs, which held a monopoly of markets and crafts19; the third was against a notoriously insecure system of land tenure. In response to this situation, Knox led a reform movement that was ostensibly religious, but encompassed social, economic, and political reform as well. In fact, Knox's religious reforms could be seen as a vehicle for reforming the polity and the economy.20

Knox used a successful entry strategy that organized the poor into a new religion. He did so, as did his counterparts in Holland and Switzerland, by lowering the cost of religion to the rural poor. It was a religion that served the preferences of its newfound constituency and thus was able to compete successfully with the incumbent monopoly. Its success and Smith's qualified admiration was due to the fact that leaders selected hardy and consumer-friendly organizational formats in the face of direct competition.

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