As indicated below in Part 1, Pope Benedict XVI is set to publish his second encyclical on the subject of economics. Among its themes, it is reported that the new encyclical will urge more regulation of world trade and economic systems and condemn tax evasion as “socially unjust.”
I argued earlier that if the above report is true, this future encyclical may represent a departure from the last social encyclical of Pope John Paul II, which seemed to open the way to a reconciliation between a market economy and Catholicism. Here I will argue that this future encyclical may represent a return to traditional Catholic Social Doctrine (CSD) and its reliance on socialist economics, philosophy and propaganda.
It is my contention that the Popes not only attack certain aspects of capitalism that in their minds need to be confronted, but attack the very philosophical basis of capitalism, such as competition, individualism and the free market, and that in doing so, they helped pave the way for some of the worst experiments of economic interventionism of the 20th Century. All of this, at best, not knowing about the connection between Aristotle, Christianity, Saint Thomas, the late scholastics and capitalism, and at worst, ignoring it.
Let me start with a personal anecdote that perhaps some readers, maybe those coming from Latin America, may get. I went to a Jesuit high school in Venezuela during the late 70’s and early 80’s. The Jesuit priests took such an extreme view against capitalism that I recall attending retreats and “work camps” around the themes of “social reality” and poverty in which there was no attempt at a balanced critique both socialism and capitalism. Indeed they were so critical of individual competition that tennis was banned from the school as a “bourgeois” sport (they repainted the tennis courts we had and converted them into courts for “team” sports like volley-ball). Unfortunately, with that approach also went any recognition of individual intellectual achievements and grades. I never really questioned their approach until much later, but now I understand where these Jesuit priests came from. All you need is a detail reading of these Papal social encyclicals and letters. Sadly, by condemning capitalism with a greater force than socialism, Jesuits contributed to the handing over of Venezuela to a socialist dictator.
Pope Leo XIII’s Rerum Novarum
Let us read from Pope Leo XIII’s Rerum Novarum, written in 1891, the first of a series of social encyclicals and letters written by modern Popes. (http://www.vatican.va/holy_father/leo_xiii/encyclicals/documents/hf_l-xiii_enc_15051891_rerum-novarum_en.html)
3. In any case we clearly see, and on this there is general agreement, that some opportune remedy must be found quickly for the misery and wretchedness pressing so unjustly on the majority of the working class: for the ancient workingmen's guilds were abolished in the last century, and no other protective organization took their place. Public institutions and the laws set aside the ancient religion. Hence, by degrees it has come to pass that working men have been surrendered, isolated and helpless, to the hardheartedness of employers and the greed of unchecked competition. The mischief has been increased by rapacious usury, which, although more than once condemned by the Church, is nevertheless, under a different guise, but with like injustice, still practiced by covetous and grasping men. To this must be added that the hiring of labor and the conduct of trade are concentrated in the hands of comparatively few; so that a small number of very rich men have been able to lay upon the teeming masses of the laboring poor a yoke little better than that of slavery itself.
Leo XIII uses a stereotypical socialist language to criticize businessmen (hardheartedness, greedy, covetous, grasping, mischievous, rapacious, unjust, rich, slave-masters, monopolists, etc.) and to criticize competition (greed of unchecked competition). Marx and Engels couldn’t have written the encyclical any better! If in the first social encyclical the Catholic Church attacks capitalism with this ferocity, without understanding the role that competition and entrepreneurship play, without understanding how prices and markets work, without understanding the relationship between freedom and free markets, without understanding why the guild system and Mercantilism had to give way to a more productive economic system capable of feeding the masses, the Church writes-off Liberalism in the same pen stroke with which it writes-off socialism. (It is interesting to note that the Spanish and French translations of this encyclical use the term “proletariat” rather than “laboring poor.” How this Marxist term was introduced in those two translations is unknown to me since I was unable to figure out the original language in which Leo XIII wrote.)
Pope Pius XI’s Quadragesimo Anno
Pope Pius XI continues 40 years later in 1931 with this same line of argument in Quadragesimo Anno, equally attacking individualism and collectivism:
46. Accordingly, twin rocks of shipwreck must be carefully avoided. For, as one is wrecked upon, or comes close to, what is known as "individualism" by denying or minimizing the social and public character of the right of property, so by rejecting or minimizing the private and individual character of this same right, one inevitably runs into "collectivism" or at least closely approaches its tenets.
88. Attention must be given also to another matter that is closely connected with the foregoing. Just as the unity of human society cannot be founded on an opposition of classes, so also the right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching. Destroying through forgetfulness or ignorance the social and moral character of economic life, it held that economic life must be considered and treated as altogether free from and independent of public authority, because in the market, i.e., in the free struggle of competitors, it would have a principle of self direction which governs it much more perfectly than would the intervention of any created intellect. But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life - a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated. Therefore, it is most necessary that economic life be again subjected to and governed by a true and effective directing principle. This function is one that the economic dictatorship which has recently displaced free competition can still less perform, since it is a headstrong power and a violent energy that, to benefit people, needs to be strongly curbed and wisely ruled. But it cannot curb and rule itself. Loftier and nobler principles - social justice and social charity - must, therefore, be sought whereby this dictatorship may be governed firmly and fully. Hence, the institutions themselves of peoples and, particularly those of all social life, ought to be penetrated with this justice, and it is most necessary that it be truly effective, that is, establish a juridical and social order which will, as it were, give form and shape to all economic life. Social charity, moreover, ought to be as the soul of this order, an order which public authority ought to be ever ready effectively to protect and defend. It will be able to do this the more easily as it rids itself of those burdens which, as We have stated above, are not properly its own.
Such an approach was tried by the Christian Democracy movements in Latin America, which were tried and failed miserably: to establish and economic order based on charity and social justice, guided by the state. But why does the Pope insist in denying the fact that competition CAN direct economic life? This is just like denying the fact that competition in the natural world CAN direct evolution, without the need for a guiding hand! If the Church has finally rectified its mistake regarding Galileo and now recognizes that gravity, along with electromagnetic weak, strong and other natural forces, can give order the universe and if it clearly accepts evolution as a plausible theory that can order the natural world as long as it does not deny God, why deny that competition can direct economic life. Free markets, gravity and evolution don’t necessarily deny the existence of God nor God’s active participation in the world. Perhaps this is a point that needs to be explored in more detail, since I sense that this is the key Papal misunderstanding regarding Liberalism, more than the issue of Freedom as a supreme value that you pointed out earlier. Creationism is to Evolution what Catholic Social Doctrine is to Free Markets.
In the following section, the Pope Pius XI attacks “capital:”
54. Property, that is, "capital," has undoubtedly long been able to appropriate too much to itself. Whatever was produced, whatever returns accrued, capital claimed for itself, hardly leaving to the worker enough to restore and renew his strength. For the doctrine was preached that all accumulation of capital falls by an absolutely insuperable economic law to the rich, and that by the same law the workers are given over and bound to perpetual want, to the scantiest of livelihoods. It is true, indeed, that things have not always and everywhere corresponded with this sort of teaching of the so-called Manchesterian Liberals; yet it cannot be denied that economic social institutions have moved steadily in that direction. That these false ideas, these erroneous suppositions, have been vigorously assailed, and not by those alone who through them were being deprived of their innate right to obtain better conditions, will surprise no one.
But how does Pius XI conclude that capital does not leave enough to the workers? Clearly he has borrowed from Karl Marx who wrote Das Kapital to unsuccessfully attempt to prove the same. I don’t think the Pope truly understood the essential function of capital and capital markets in a free economy. First off, this contraposition between capital and labor is artificial and a result, once again, of Marx and his labor theory of value. There is no way that the Pope could have invented that dichotomy between capital and labor without explicitly appropriating it from Marx. The notion that somehow the capitalist extracts the “added value” of labor (surplus value in Marxian terminology) from the workers and pockets it to unjustly enrich himself is mistaken and caused great damage to the hundreds of million of people who endured under all types of socialism during the 20th century and to the 100 million who perished as a result. By borrowing it, even unconsciously, Pius XI contributed to that tragedy.
If any of the readers are businessmen, you can attest that from a practical everyday perspective, very few if any businessmen operate with that dichotomy in mind. Both capital and labor must work hand in hand. Without labor, capital is useless. As a hospital administrator, I work hard to retain, train, and satisfy my employees. I am evaluated and compensated based on the level of satisfaction and the turnover rate of my employees. I spend 80% of my time dealing with labor issues. If I didn’t, I could not retain good employees and all the capital in the world would mean nothing. Second, who owns the capital markets? Pension and mutual funds. Who owns these funds in capitalist countries? The great majority owned by workers. Who owns these funds in countries that have followed socialism? The state. Third, the capacity of human intelligence to take something like capital that is pure potency waiting to be unlocked and then to transform it into products and services for everyone is, in my opinion, a beautiful gift from God. Regarding the function of the stock, options, futures and bond markets, I will not go into detail, other than to say that they are essential to the diversification of risk and the promotion of sound economic growth.
The Pope does recognize that the situation of the working poor has improved:
59. The redemption of the non-owning workers - this is the goal that Our Predecessor declared must necessarily be sought. …And these commands have not lost their force and wisdom for our time because that "pauperism" which Leo XIII beheld in all its horror is less widespread. Certainly the condition of the workers has been improved and made more equitable especially in the more civilized and wealthy countries where the workers can no longer be considered universally overwhelmed with misery and lacking the necessities of life. But since manufacturing and industry have so rapidly pervaded and occupied countless regions, not only in the countries called new, but also in the realms of the Far East that have been civilized from antiquity, the number of the non-owning working poor has increased enormously and their groans cry to God from the earth. Added to them is the huge army of rural wage workers, pushed to the lowest level of existence and deprived of all hope of ever acquiring "some property in land,"and, therefore, permanently bound to the status of non-owning worker unless suitable and effective remedies are applied.
But Pius XI never bothers to asks himself how and why the situation of the working class in the wealthier countries improved!!! Could it be because of free markets?
This is the same perplexity that Catholic French philosopher Jacques Maritain expresses in “Reflections on America.” http://www2.nd.edu/Departments/Maritain/etext/reflect0.html. This is a great little book, a sort of follow up to de Tocqueville. Maritain was responsible for the revival of Aquinas in the 20th Century. He taught at Notre Dame in the 50’s.
Here’s the quote from Maritain:
I would like to submit an especially significant example of the need for an explicit philosophy, an example drawn from the achievements and discoveries of this country in the social field. I am thinking of a phenomenon of great historical importance -- the striking success of the "unsystematic American system": namely, the transformation of the economic system which has come about in this country during the last half century. The industrial regime inherited from Europe has now become unrecognizable in this country. It has been superseded by new economic structures which are still in the making, and in a state of fluidity, but which render both capitalism and socialism things of the past. Free enterprise and private ownership function now in a social context and a general mood entirely different from those of the nineteenth century. Two developments of outstanding significance must be mentioned in this connection: first, the growth of organized labor; second, the evolution of industry and management.
Maritain here recognizes that there is something different and unique about American free markets. What he calls the “unsystematic American System” is simply Liberalism at its best. That is because continental Europe never really experienced true Liberalism and by the time Maritain and others could have studied England, that country was already in the midst of socialist policies and institutions, just like the rest of Europe. I think Pope John Paul adopted the perspective of distinguishing between 19th Century capitalism and modern capitalism.
Reading other sections of Pope Pius XI’s Quadragesimo Anno sent chills down my spine. I am referring to the open and enthusiastic embrace of fascism, ambivalence about socialism and appropriation of Lenin’s account of imperialism.
I bolded the key phrases, but all the sections are worth reading. All are cut and pasted directly from the official documents posted on the Vatican website. Can someone please tell me that the Vatican website was hacked by fascists and socialists?
FASCISM and Pope Pius XI:
82. The social policy of the State, therefore, must devote itself to the re-establishment of the Industries and Professions. In actual fact, human society now, for the reason that it is founded on classes with divergent aims and hence opposed to one another and therefore inclined to enmity and strife, continues to be in a violent condition and is unstable and uncertain.
83. Labor, as Our Predecessor explained well in his Encyclical is not a mere commodity. On the contrary, the worker's human dignity in it must be recognized. It therefore cannot be bought and sold like a commodity. Nevertheless, as the situation now stands, hiring and offering for hire in the so-called labor market separate men into two divisions, as into battle lines, and the contest between these divisions turns the labor market itself almost into a battlefield where, face to face, the opposing lines struggle bitterly. Everyone understands that this grave evil which is plunging all human society to destruction must be remedied as soon as possible. But complete cure will not come until this opposition has been abolished and well-ordered members of the social body - Industries and Professions - are constituted in which men may have their place, not according to the position each has in the labor market but according to the respective social functions which each performs. For under nature's guidance it comes to pass that just as those who are joined together by nearness of habitation establish towns, so those who follow the same industry or profession - whether in the economic or other field - form guilds or associations, so that many are wont to consider these self-governing organizations, if not essential, at least natural to civil society.
84. Because order, as St. Thomas well explains, is unity arising from the harmonious arrangement of many objects, a true, genuine social order demands that the various members of a society be united together by some strong bond. This unifying force is present not only in the producing of goods or the rendering of services - in which the employers and employees of an identical Industry or Profession collaborate jointly - but also in that common good, to achieve which all Industries and Professions together ought, each to the best of its ability, to cooperate amicably. And this unity will be the stronger and more effective, the more faithfully individuals and the Industries and Professions themselves strive to do their work and excel in it.
85. It is easily deduced from what has been said that the interests common to the whole Industry or Profession should hold first place in these guilds. The most important among these interests is to promote the cooperation in the highest degree of each industry and profession for the sake of the common good of the country. Concerning matters, however, in which particular points, involving advantage or detriment to employers or workers, may require special care and protection, the two parties, when these cases arise, can deliberate separately or as the situation requires reach a decision separately.
91. Recently, as all know, there has been inaugurated a special system of syndicates and corporations of the various callings which in view of the theme of this Encyclical it would seem necessary to describe here briefly and comment upon appropriately.
92. The civil authority itself constitutes the syndicate as a juridical personality in such a manner as to confer on it simultaneously a certain monopoly-privilege, since only such a syndicate, when thus approved, can maintain the rights (according to the type of syndicate) of workers or employers, and since it alone can arrange for the placement of labor and conclude so-termed labor agreements. Anyone is free to join a syndicate or not, and only within these limits can this kind of syndicate be called free; for syndical dues and special assessments are exacted of absolutely all members of every specified calling or profession, whether they are workers or employers; likewise all are bound by the labor agreements made by the legally recognized syndicate. Nevertheless, it has been officially stated that this legally recognized syndicate does not prevent the existence, without legal status, however, of other associations made up of persons following the same calling.
93. The associations, or corporations, are composed of delegates from the two syndicates (that is, of workers and employers) respectively of the same industry or profession and, as true and proper organs and institutions of the State, they direct the syndicates and coordinate their activities in matters of common interest toward one and the same end.
94. Strikes and lock-outs are forbidden; if the parties cannot settle their dispute, public authority intervenes.
95. Anyone who gives even slight attention to the matter will easily see what are the obvious advantages in the system We have thus summarily described: The various classes work together peacefully, socialist organizations and their activities are repressed, and a special magistracy exercises a governing authority. Yet lest We neglect anything in a matter of such great importance and that all points treated may be properly connected with the more general principles which We mentioned above and with those which We intend shortly to add, We are compelled to say that to Our certain knowledge there are not wanting some who fear that the State, instead of confining itself as it ought to the furnishing of necessary and adequate assistance, is substituting itself for free activity; that the new syndical and corporative order savors too much of an involved and political system of administration; and that (in spite of those more general advantages mentioned above, which are of course fully admitted) it rather serves particular political ends than leads to the reconstruction and promotion of a better social order.
133. Strict and watchful moral restraint enforced vigorously by governmental authority could have banished these enormous evils and even forestalled them; this restraint, however, has too often been sadly lacking. For since the seeds of a new form of economy were bursting forth just when the principles of rationalism had been implanted and rooted in many minds, there quickly developed a body of economic teaching far removed from the true moral law, and, as a result, completely free rein was given to human passions.
LENINISM and Pope Pius XI:
108. This accumulation of might and of power generates in turn three kinds of conflict. First, there is the struggle for economic supremacy itself; then there is the bitter fight to gain supremacy over the State in order to use in economic struggles its resources and authority; finally there is conflict between States themselves, not only because countries employ their power and shape their policies to promote every economic advantage of their citizens, but also because they seek to decide political controversies that arise among nations through the use of their economic supremacy and strength
.
109. The ultimate consequences of the individualist spirit in economic life are those which you yourselves, Venerable Brethren and Beloved Children, see and deplore: Free competition has destroyed itself; economic dictatorship has supplanted the free market; unbridled ambition for power has likewise succeeded greed for gain; all economic life has become tragically hard, inexorable, and cruel. To these are to be added the grave evils that have resulted from an intermingling and shameful confusion of the functions and duties of public authority with those of the economic sphere - such as, one of the worst, the virtual degradation of the majesty of the State, which although it ought to sit on high like a queen and supreme arbitress, free from all partiality and intent upon the one common good and justice, is become a slave, surrendered and delivered to the passions and greed of men. And as to international relations, two different streams have issued from the one fountain-head: On the one hand, economic nationalism or even economic imperialism; on the other, a no less deadly and accursed internationalism of finance or international imperialism whose country is where profit is.
SOCIALISM and Pope Pius XI:
113. The other section, which has kept the name Socialism, is surely more moderate. It not only professes the rejection of violence but modifies and tempers to some degree, if it does not reject entirely, the class struggle and the abolition of private ownership. One might say that, terrified by its own principles and by the conclusions drawn there from by Communism, Socialism inclines toward and in a certain measure approaches the truths which Christian tradition has always held sacred; for it cannot be denied that its demands at times come very near those that Christian reformers of society justly insist upon.
114. For if the class struggle abstains from enmities and mutual hatred, it gradually changes into an honest discussion of differences founded on a desire for justice, and if this is not that blessed social peace which we all seek, it can and ought to be the point of departure from which to move forward to the mutual cooperation of the Industries and Professions. So also the war declared on private ownership, more and more abated, is being so restricted that now, finally, not the possession itself of the means of production is attacked but rather a kind of sovereignty over society which ownership has, contrary to all right, seized and usurped. For such sovereignty belongs in reality not to owners but to the public authority. If the foregoing happens, it can come even to the point that imperceptibly these ideas of the more moderate socialism will no longer differ from the desires and demands of those who are striving to remold human society on the basis of Christian principles. For certain kinds of property, it is rightly contended, ought to be reserved to the State since they carry with them a dominating power so great that cannot without danger to the general welfare be entrusted to private individuals.
115. Such just demands and desire have nothing in them now which is inconsistent with Christian truth, and much less are they special to Socialism. Those who work solely toward such ends have, therefore, no reason to become socialists.
Pius XI does state that ultimately Christian Socialism is impossible (apparently Christian fascism was OK), but one can see how Christian Democrats and other Catholics in the West read Quadragesimo Anno and concluded that they could use all the socialist and fascist economic analysis and techniques and feel that they were following Catholic Orthodoxy.
Pope Paul VI’s Octogesima Adveniens
Let us go back now to the development of Catholic Social Doctrine. The attacks against the basis of capitalism continue 40 years later in 1971with the apostolic letter Octogesima Adveniens, 80 years after Rerum Novarum (http://www.vatican.va/holy_father/paul_vi/apost_letters/documents/hf_p-vi_apl_19710514_octogesima-adveniens_en.html).
Here Pope Paul VI condemns Liberalism because it has an individualistic basis:
35. On another side, we are witnessing a renewal of the liberal ideology. This current asserts itself both in the name of economic efficiency, and for the defense of the individual against the increasingly overwhelming hold of organizations, and as a reaction against the totalitarian tendencies of political powers. Certainly, personal initiative must be maintained and developed. But do not Christians who take this path tend to idealize liberalism in their turn, making it a proclamation in favor of freedom? They would like a new model, more adapted to present-day conditions, while easily forgetting that at the very root of philosophical liberalism is an erroneous affirmation of the autonomy of the individual in his activity, his motivation and the exercise of his liberty…
Pope Paul VI is wrong in assuming that Liberalism is based on the autonomy of an individual’s activity, motivation and liberty. That is NOT what Maritain saw in America. And it is NOT what I see, live and practice as a businessman. This is the tragedy: by attacking Socialism and Liberalism and advocating a “third way,” Catholicism misses the opportunity to understand the science of economics (and its relationship to freedom and faith), and ends up accepting, recommending and advocating economic policies and management practices that are a carbon copy of Marxism and Socialism. If Catholicism has little positive to say about the free market, competition, individualism, discipline, work-ethic, etc, all necessary to create wealth, one is left with the Utopia of a “new man” preached by Marxists and Liberation Theology alike. Indeed that is what happened for a period of time in the 60’s, 70’s and 80’s when Catholics erroneously promoted variations of Liberation Theology. The Latin American Bishop’s documents of Medellín and Puebla are full of Liberation Theology. So are other documents from American Bishops that address economics and international trade. It is what I was taught by Jesuits in the 70’s when I went to high school, and it is what I was taught at Notre Dame’s Economics and Theology Departments in the 80’s (Wilbur, Jameson, Goulet, McBrian, and most visiting faculty brought by the Kellogg Institute from Latin America, with very few notable exceptions).
Clearly, the Popes do not understand economic theory. Let us take the example of a “just wage.” When the Popes say that a just wage should allow a family to live comfortably, how do they think that this can be enforced from the top and without taking the reality of scarcity into consideration? Why assume that the state's intervention legislating wages is purely benign? Why assume that this enforcement will not hurt others who will be priced out of the market and go unemployed? Why are the moral implications of supporting policies that cause unemployment never addressed? The Popes just assume that wages are set by arbitrary decisions that employers make. Where does the underlying criticisms that the market is unfair and arbitrary come from? Surely, every now and then an employer can give an extra bonus or be generous with a pay increase beyond what the dynamics of the market call for, but do the Popes really think that all employers can permanently pay people at whatever level some third party determines is "reasonable"? You cannot suspend the laws of economics. If the Popes believe that the concepts of marginal cost, marginal productivity and marginal utility are wrong, then they should appeal to reason to disprove them. If not, they should remain cautions about pronouncements in economic matters, with the same caution as they have traditionally taken with respects to science ever since the conflict with Galileo.
John Paul II, as I mentioned in Part 1, changed all of this and in the process of writing his last social encyclical, opened a door that theologians, economists and philosophers must explore: can Catholicism and the free market co-exists and are there historical and theological cause and effect links between the evolution of free markets, Catholicism and the Church. As a fervent Catholic, it is my hope and prayer to Mary that Pope Benedict XVI will follow the example of John Paul II.
In Part 3 of this series, I will attempt to show that one can find certain affinities between Pope Benedict’s theological writings on Christianity as a philosophy of freedom and a free market economy based on private property, freedom of exchange and minimal or no state intervention.
For a more in depth studies of Catholic Social Doctrine and the free market see:
1) Thomas E. Woods Jr, "The Church and the Market". For a review of the book, go to: http://www.mises.org/journals/qjae/pdf/qjae8_4_8.pdf
2) Michael Novak, "The Spirit of Democratic Capitalism"
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