Income Inequality

More on income inequality in the U.S.:

It's the inequality, stupid.

Here are previous posts of mine on income inequality:
Income Growth
More Data on Income Inequality
Income Inequality 2
Income Inequality 1

"You Are What You Eat"

The school I am studying at, UMKC, specializes in or emphasizes an approach called heterodox economics. That is, they believe in studying economics from different approaches than the mainstream orthodox approach, which is also called neo-classical economics. Orthodox economics emphasizes mathematics and believes economics to be more like a natural science, such as physics, than a social science.

One of the biggest differences is that orthodox approach generally studies individuals and individual behavior while neglecting the role of the environment, or institutions. Institutional economics (one heterodox approach) believes in studying the role of institutions as well as the role of individuals in the economy. I think on this point, they have it right or at least better than the orthodox approach. Individuals never act completely autonomously without influence from other individuals or institutions.

In the intro to Psychology class that I took in undergrad, my professor once gave us a statistic that really shocked me. Like all statistics, one should evaluate it critically, but he said that human behavior is most highly correlated with one's surroundings. That is, about 60% of the time, humans behave based on the influence of their surroundings. Only about 25% of the time do they behave according to their values or beliefs. I couldn't believe that our values and beliefs had such little impact on our behavior. Yet, after thinking about it, I realized how true this was even in my own life.

We are warned time and again about avoiding near occasions of sin, about avoiding things that support sinful living. In my opinion, the saying that you are what you eat is very true in a metaphorical sense. What we take in, listen to, watch, buy, use, consume, etc. all has an effect on us and molds us or influences us. Maybe not after one occasion, but slowly these things wear on us.

As Francis Fernandez, the writer of "In Conversation with God," reminds us the only thing that really matters in life is getting to Heaven.

He says, "We must be ready to give up everything, if necessary, to achieve this goal. We must also be ready to set aside anything that even gets in the way of our achieving it, no matter how valuable or appealing it may seem."

This is especially true of our worldly possessions. In so many ways, our things own us. The media, advertising, and other people make us feel like we NEED certain things, when really all we need is God. If all that we own, buy, use, consume, does not help us get to Heaven, then it becomes an obstacle, something that must be set aside or given up. The coming season of Lent is a great opportunity to do this with fasting and prayer, but don't think that 40 days out of the year is enough. As Jesus tells us, "If thy hand is an occasion of sin to thee, cut it off!..." Again from Fernandez, "It is better to lose something as necessary as one's hand, one's foot or one's eye than to lose Heaven."

It is so important to surround ourselves with good people and good things and to not be so attached to our worldly possessions. Fernandez again reminds us that these obstacles may be small things: "what will have to be set aside and cut out are our minor whims and preferences. We shall take prudent steps to correct small breaches of temperance where Our Lord asks us to mortify our taste or our appetite, to control our temper or our moods, to overcome any excessive concern we may have about our health or comfort..."

As Heterodox economics believes, individuals have many external influences and these influences are often a large factor in our behavior. It is important knowing this to put ourselves in good situations with people who will look out for our good as we look out for theirs. It is also imperative to not let our things own us, to "eat" the right things, and order all toward our one final goal: communion with God forever in Heaven. Anything that doesn't help us to do this must be let go.

Socialism vs. Capitalism, Part 3

What form of economic organization should we adopt?

It is clear that strict Socialism and Liberalism are both inadequate as forms of economic organization:

[Pope Leo XIII] sought no help from either Liberalism or Socialism, for the one had proved that it was utterly unable to solve the social problem aright, and the other, proposing a remedy far worse than the evil itself, would have plunged human society into great dangers. – Quadragesimo Anno 10

Let all remember that Liberalism is the father of this Socialism that is pervading morality and culture and that Bolshevism will be its heir. – QA 112

But as stated previously, The Church has no models to present, yet the Church does offer suggestions.

The Church's social doctrine is not a "third way" between liberal capitalism and Marxist collectivism, nor even a possible alternative to other solutions less radically opposed to one another: rather, it constitutes a category of its own. – Sollicitudo Rei Socialis 41

Models that are real and truly effective can only arise within the framework of different historical situations, through the efforts of all those who responsibly confront concrete problems in all their social, economic, political and cultural aspects, as these interact with one another. For such a task the Church offers her social teaching as an indispensable and ideal orientation, a teaching which, as already mentioned, recognizes the positive value of the market and of enterprise, but which at the same time points out that these need to be oriented towards the common good. – Centesimus Annus 43

The Church proposes a modified capitalism, where the freedoms of capitalism are met with right order and moral actors and institutions:

First, so as to avoid the reefs of individualism and collectivism. The twofold character, that is individual and social, both of capital or ownership and of work or labor must be given due and rightful weight. Relations of one to the other must be made to conform to the laws of strictest justice - commutative justice, as it is called - with the support, however, of Christian charity. Free competition, kept within definite and due limits, and still more economic dictatorship, must be effectively brought under public authority in these matters which pertain to the latter's function. The public institutions themselves, of peoples, moreover, ought to make all human society conform to the needs of the common good; that is, to the norm of social justice. – QA 110

What is being proposed as an alternative is not the socialist system, which in fact turns out to be State capitalism, but rather a society of free work, of enterprise and of participation. Such a society is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied. – CA 35

We have seen that it is unacceptable to say that the defeat of so-called "Real Socialism" leaves capitalism as the only model of economic organization. It is necessary to break down the barriers and monopolies which leave so many countries on the margins of development, and to provide all individuals and nations with the basic conditions which will enable them to share in development. – CA 41

In such a system, businesses and consumers must direct their actions toward the common good. Profit and accumulation of goods should not be the only motive nor the primary motive. Persons must be put before all else as they are the ends in social organization, not the means.

A business cannot be considered only as a "society of capital goods"; it is also a "society of persons" in which people participate in different ways and with specific responsibilities, whether they supply the necessary capital for the company's activities or take part in such activities through their labour. – CA 43

A person who is concerned solely or primarily with possessing and enjoying, who is no longer able to control his instincts and passions, or to subordinate them by obedience to the truth, cannot be free: obedience to the truth about God and man is the first condition of freedom, making it possible for a person to order his needs and desires and to choose the means of satisfying them according to a correct scale of values, so that the ownership of things may become an occasion of growth for him. – CA 41

Work should be done not for the sake of gain, but for personal development and providing for the common good:

Man fulfills himself by using his intelligence and freedom. In so doing he utilizes the things of this world as objects and instruments and makes them his own. The foundation of the right to private initiative and ownership is to be found in this activity. By means of his work man commits himself, not only for his own sake but also for others and with others. Each person collaborates in the work of others and for their good. Man works in order to provide for the needs of his family, his community, his nation, and ultimately all humanity. Moreover, he collaborates in the work of his fellow employees, as well as in the work of suppliers and in the customers' use of goods, in a progressively expanding chain of solidarity. — CA 43

Ownership in this form of organization is only legitimate and just if it serves useful work:

Ownership of the means of production, whether in industry or agriculture, is just and legitimate if it serves useful work. It becomes illegitimate, however, when it is not utilized or when it serves to impede the work of others, in an effort to gain a profit which is not the result of the overall expansion of work and the wealth of society, but rather is the result of curbing them or of illicit exploitation, speculation or the breaking of solidarity among working people. Ownership of this kind has no justification, and represents an abuse in the sight of God and man. — CA 43

The State has an important role to play in reigning in capitalism:

With regard to civil authority, Leo XIII, boldly breaking through the confines imposed by Liberalism, fearlessly taught that government must not be thought a mere guardian of law and of good order, but rather must put forth every effort so that "through the entire scheme of laws and institutions . . . both public and individual well-being may develop spontaneously out of the very structure and administration of the State." Just freedom of action must, of course, be left both to individual citizens and to families, yet only on condition that the common good be preserved and wrong to any individual be abolished. The function of the rulers of the State, moreover, is to watch over the community and its parts; but in protecting private individuals in their rights, chief consideration ought to be given to the weak and the poor. – CA 25

Rerum novarum is opposed to State control of the means of production, which would reduce every citizen to being a "cog" in the State machine. It is no less forceful in criticizing a concept of the State which completely excludes the economic sector from the State's range of interest and action. There is certainly a legitimate sphere of autonomy in economic life which the State should not enter. The State, however, has the task of determining the juridical framework within which economic affairs are to be conducted, and thus of safeguarding the prerequisites of a free economy, which presumes a certain equality between the parties, such that one party would not be so powerful as practically to reduce the other to subservience. (emphasis added)

In this regard, Rerum novarum points the way to just reforms which can restore dignity to work as the free activity of man. These reforms imply that society and the State will both assume responsibility, especially for protecting the worker from the nightmare of unemployment. Historically, this has happened in two converging ways: either through economic policies aimed at ensuring balanced growth and full employment, or through unemployment insurance and retraining programmes capable of ensuring a smooth transfer of workers from crisis sectors to those in expansion.

Furthermore, society and the State must ensure wage levels adequate for the maintenance of the worker and his family, including a certain amount for savings. This requires a continuous effort to improve workers' training and capability so that their work will be more skilled and productive, as well as careful controls and adequate legislative measures to block shameful forms of exploitation, especially to the disadvantage of the most vulnerable workers, of immigrants and of those on the margins of society. The role of trade unions in negotiating minimum salaries and working conditions is decisive in this area.

Finally, "humane" working hours and adequate free-time need to be guaranteed, as well as the right to express one's own personality at the work-place without suffering any affront to one's conscience or personal dignity. This is the place to mention once more the role of trade unions, not only in negotiating contracts, but also as "places" where workers can express themselves. They serve the development of an authentic culture of work and help workers to share in a fully human way in the life of their place of employment.

The State must contribute to the achievement of these goals both directly and indirectly. Indirectly and according to the principle of subsidiarity, by creating favourable conditions for the free exercise of economic activity, which will lead to abundant opportunities for employment and sources of wealth. Directly and according to the principle of solidarity, by defending the weakest, by placing certain limits on the autonomy of the parties who determine working conditions, and by ensuring in every case the necessary minimum support for the unemployed worker. – CA 15

In summary:

Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?

The answer is obviously complex. If by "capitalism" is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a "business economy", "market economy" or simply "free economy". But if by "capitalism" is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative. – CA 42

Socialism vs. Capitalism, Part 2

So if socialism is illegitimate, what about capitalism?

Capitalism is based on private ownership of goods, property, and most importantly capital goods or equipment. It relies on the free market and private initiative for production and distribution. There is no central planning authority in a purely free market. The free market encounters problems with things like public goods (roads, utilities, etc) and monopolies, but on the whole has shown great or at least better efficiency and productivity than any other form of social/economic organization. It also creates/enables social problems such as exploitation of the weak, income inequality, “economic dictators,” and a consumerist/individualist attitude.

Many of the Popes have criticized Capitalism and here are a few of their arguments.

A major criticism of capitalism by the Popes and others outside the Church is the exploitation of the laborers by the capital owners. This is experienced through unjust wages and working conditions among other things:

With all his energy Leo XIII sought to adjust [capitalism] according to the norms of right order; hence, it is evident that [capitalism] is not to be condemned in itself. And surely it is not of its own nature vicious. But it does violate right order when capital hires workers, that is, the non-owning working class, with a view to and under such terms that it directs business and even the whole economic system according to its own will and advantage, scorning the human dignity of the workers, the social character of economic activity and social justice itself, and the common good. –Quadragesimo Anno 101

The poor, or losers of the market system, are often unprotected or uncared for because they have less resources and less opportunities to better their condition:

When there is question of defending the rights of individuals, the defenseless and the poor have a claim to special consideration. The richer class has many ways of shielding itself, and stands less in need of help from the State; whereas the mass of the poor have no resources of their own to fall back on, and must chiefly depend on the assistance of the State. It is for this reason that wage-earners, since they mostly belong to the latter class, should be specially cared for and protected by the Government. – QA 10

Pope Pius XI continues by criticizing the concentration of wealth into the hands of a few allowing them to control government and society as “dictators” (note that he is writing in 1931 when income inequality was reaching all-time highs, which has just been surpassed in the past few years):

The "capitalist" economic regime has spread everywhere to such a degree, particularly since the publication of Leo XIII's Encyclical, that it has invaded and pervaded the economic and social life of even those outside its orbit and is unquestionably impressing on it its advantages, disadvantages and vices, and, in a sense, is giving it its own shape and form. – QA 103

It is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few. – QA 105

Those who control the banks have exceptional control of the system:

This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives. – QA 106

This concentration of power and might, the characteristic mark, as it were, of contemporary economic life, is the fruit that the unlimited freedom of struggle among competitors has of its own nature produced, and which lets only the strongest survive; and this is often the same as saying, those who fight the most violently, those who give least heed to their conscience. – QA 107

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, (states here meaning countries or nations). – QA 108

Another effect of Capitalism is a tendency toward materialism or consumerism. Advances in the economy enable enough people to accumulate more and more stuff. Gain or more stuff becomes the aim of work, rather than development of the person and/or the obtainment of necessary provisions.

This super-development, which consists in an excessive availability of every kind of material goods for the benefit of certain social groups, easily makes people slaves of "possession" and of immediate gratification, with no other horizon than the multiplication or continual replacement of the things already owned with others still better. This is the so-called civilization of "consumption" or " consumerism ," which involves so much "throwing-away" and "waste." An object already owned but now superseded by something better is discarded, with no thought of its possible lasting value in itself, nor of some other human being who is poorer. – Sollicitudo Rei Socialis 28

All of us experience firsthand the sad effects of this blind submission to pure consumerism: in the first place a crass materialism, and at the same time a radical dissatisfaction, because one quickly learns - unless one is shielded from the flood of publicity and the ceaseless and tempting offers of products - that the more one possesses the more one wants, while deeper aspirations remain unsatisfied and perhaps even stifled. – SRS 28

It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed towards "having" rather than "being", and which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself. – Centesimus Annus 36

“Structures of sin” emerge because the system is organized in such a way to reward greed:

[Of the structures of sin] two are very typical: on the one hand, the all-consuming desire for profit, and on the other, the thirst for power, with the intention of imposing one's will upon others. In order to characterize better each of these attitudes, one can add the expression: "at any price." – SRS 37

A final criticism of the free market is its overt individualist attitude. It stresses that agents pursue self-interest believing that this will bring about the good for everyone. The free market can do this to some degree, but no one would say that pursuing one’s own self-interest is a Christian theme and what one does in the field of economics is not isolated from morality or society, for economics is a social science subject to the rules of morality. This individualistic spirit has harsh consequences as Pope Pius XI observed in 1931:

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. – QA 109

In summary, Capitalism is not of its own nature vicious, nor does it violate the natural rights of private property, initiative, freedom to work and human development. However, it does allow for and even encourages ill effects such as:

1) Concentration of wealth and power often in the hands of big businesses and banks who limit and impinge on our freedoms
2) Greater income inequality within nations and across nations, causing the many problems of poverty, including a class of laborers that cannot shield itself from economic hardships, not escape their plight
3) Tendency toward materialism/consumerism where having become more important than being
4) Individualism also become a prevalent attitude with private material and immaterial charity waning
5) Enabling/encouraging the structure of sin we know as greed or an all-consuming drive for profit

To be sure, our capitalist system is somewhat removed from the free market of the 1920s and 30s that was judged so harshly by Pope Pius XI. Yet, many still argue in favor of a return to the days when economic instability was common, greed was widespread, markets were dominated by monopolies, and those with wealth used it to gain power or in other selfish ways. Free market capitalism is not illegitimate like socialism, because it does not deny key natural rights and freedoms, but it must not be allowed to win the day simply because it brings about the greatest advance in material gain. It is important to recognize these ills of capitalism and do our part to correct them, which will be the topic of part 3 of this series.

Socialism vs. Capitalism, Part 1

The debate between socialism and capitalism was once a much more fearsome battle. The cold war between the two had not been completely won by capitalism until the fall of the Berlin Wall. Yet the debate lingers in some parts of the world in a new form, that between free market capitalism with little or no government intervention and the welfare state. Because it is the center of the economic debate between America’s liberals and conservatives, I hope to shed some light on the teachings of the Church as to the proper role of the State and the shortcomings and benefits of the two economic regimes of socialism and capitalism.

To be clear, “the Church has no models to present” (43 Centesimus Annus (CA)). Their teaching is simply meant to guide our decisions and our political/economic models. It is meant for us to apply the teaching to specific problems or situations.

So what is wrong with socialism?

Socialism is built on public ownership of goods and capital equipment. It requires a central planning group to organize production and distribution. It desires a more equitable distribution of wealth and goods than capitalism produces. There are many levels of socialism, but most call for the abolishment of private property and they also believe that class is naturally hostile to class, that is, they think class warfare is the only or only desirable way to bring about their socialist ends.

Pope Leo XIII spent much time in Rerum Novarum (RN) defending the right to private property and therefore calling socialism unjust:

[Socialists] are, moreover, emphatically unjust, for they would rob the lawful possessor, distort the functions of the State, and create utter confusion in the community – RN 4

A big argument for private property is that it is the way a man earns a living for him and his family. He needs to own property (food, shelter, etc.) in order to do so. It is also necessary to own property in order to give it to others, a form of charity. Also, the motivation to work is the obtaining of remuneration in the form of wages or property. That is, one works in order to obtain the means necessary to survive and live well. So abolishing private property altogether would distort this incentive, disable charitable giving, and make it difficult to provide for one’s family. Pope Leo XIII writes:

It is surely undeniable that, when a man engages in remunerative labor, the impelling reason and motive of his work is to obtain property, and thereafter to hold it as his very own – RN 5

Socialists, therefore, by endeavoring to transfer the possessions of individuals to the community at large, strike at the interests of every wage-earner, since they would deprive him of the liberty of disposing of his wages, and thereby of all hope and possibility of increasing his resources and of bettering his condition in life. – RN 5

The socialists, therefore, in setting aside the parent and setting up a State supervision, act against natural justice, and destroy the structure of the home. – RN 14

The sources of wealth themselves would run dry, for no one would have any interest in exerting his talents or his industry – RN 15

And he concludes:

Hence, it is clear that the main tenet of socialism, community of goods, must be utterly rejected, since it only injures those whom it would seem meant to benefit, is directly contrary to the natural rights of mankind, and would introduce confusion and disorder into the commonweal – RN 15

Even a more moderate Socialism doesn’t fit well with the Church’s teachings. Pope Pius XI wrote more on the topic in 1931 in Quadragesimo Anno as communism was beginning to take hold in the east. He noted that socialism’s desire to distribute property more equitably was not unjust, but that it is not a desire unique to socialism:

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 – QA 113

Such just demands [such as the redistribution of goods] 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. – QA 115

Yet, even a more moderate socialism (one with tempered class warfare and property redistribution) cannot be reconciled with the Church because of its concept of society:

Whether considered as a doctrine, or an historical fact, or a movement, Socialism, if it remains truly Socialism, even after it has yielded to truth and justice on the points which we have mentioned, cannot be reconciled with the teachings of the Catholic Church because its concept of society itself is utterly foreign to Christian truth – QA 117

Socialism, on the other hand, wholly ignoring and indifferent to this sublime end of both man and society, affirms that human association has been instituted for the sake of material advantage alone – QA 118, emphasis added

Because of the fact that goods are produced more efficiently by a suitable division of labor than by the scattered efforts of individuals…[socialists] hold that men are obliged, with respect to the producing of goods, to surrender and subject themselves entirely to society – QA 119

So Pope Pius XI concludes:

Religious socialism, Christian socialism, are contradictory terms; no one can be at the same time a good Catholic and a true socialist. – QA 120

Then in 1991, Pope John Paul II elucidated even more the problem with Socialism. He wrote that the main problem was of an anthropological nature, that their concept of human nature was incorrect:

The fundamental error of socialism is anthropological in nature. Socialism considers the individual person simply as an element, a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism. Socialism likewise maintains that the good of the individual can be realized without reference to his free choice, to the unique and exclusive responsibility which he exercises in the face of good or evil. Man is thus reduced to a series of social relationships, and the concept of the person as the autonomous subject of moral decision disappears, the very subject whose decisions build the social order. From this mistaken conception of the person there arise both a distortion of law, which defines the sphere of the exercise of freedom, and an opposition to private property. A person who is deprived of something he can call "his own", and of the possibility of earning a living through his own initiative, comes to depend on the social machine and on those who control it. This makes it much more difficult for him to recognize his dignity as a person, and hinders progress towards the building up of an authentic human community. – CA 13

The reason for this misconception of human nature lies in socialism's atheistic, materialistic beliefs.

If we then inquire as to the source of this mistaken concept of the nature of the person and the "subjectivity" of society, we must reply that its first cause is atheism. – CA 13

The atheism of which we are speaking is also closely connected with the rationalism of the Enlightenment, which views human and social reality in a mechanistic way– CA 13

From the same atheistic source, socialism also derives its choice of the means of action condemned in Rerum novarum, namely, class struggle. – CA 14

Not all class struggle is bad if it “abstains from enmities and mutual hatred.” If it is carried out as a struggle for justice by just means, then it can be a cause for good. But:

However, what is condemned in class struggle is the idea that conflict is not restrained by ethical or juridical considerations, or by respect for the dignity of others... Therefore class struggle in the Marxist sense and militarism have the same root, namely, atheism and contempt for the human person, which place the principle of force above that of reason and law. – CA 14

The last problem with socialism, is that its concept of the human person results in alienation, which Marx criticized capitalism heavily for creating:

Marxism thus ends up by affirming that only in a collective society can alienation be eliminated. However, the historical experience of socialist countries has sadly demonstrated that collectivism does not do away with alienation but rather increases it, adding to it a lack of basic necessities and economic inefficiency. – CA 41

Alienation — and the loss of the authentic meaning of life — is a reality in Western societies too. This happens in consumerism when people are ensnared in a web of false and superficial gratifications rather than being helped to experience their personhood in an authentic and concrete way. Alienation is found also in work, when it is organized so as to ensure maximum returns and profits with no concern whether the worker grows or diminishes as a person. [Alienation occurs] in which he is considered only a means and not an end. – CA 41

A man is alienated if he refuses to transcend himself and to live the experience of selfgiving and of the formation of an authentic human community oriented towards his final destiny, which is God. A society is alienated if its forms of social organization, production and consumption make it more difficult to offer this gift of self and to establish this solidarity between people. – CA 41

In summary, the Church denies the legitimacy of socialism because:

1)It abolishes the private property, a violation of our natural right to provide for our families
2)It engages in [violent] class warfare, a violation of solidarity, charity, and social justice
3)It is atheistic in nature causing a misconception of the human person that emphasizes material gain in this life because there is no sublime end for man, a violation of man’s dignity and sublime end
4)It causes alienation, regarding men as means, not ends, a violation of man’s dignity and development

To be sure, the welfare state is not socialism and should not be called socialism. Taxation and redistribution is not the abolition of private property. The legitimacy of the welfare state will be examined in a later post, but inasmuch as it incorporates these 4 tenets of socialism, it is illegitimate as a form of social organization for the authentic development of man.

Part 2

Part 3

Catching Up

Sorry for the delay in posts. Life has caught up with me. I am still working on my socialism vs. capitalism post. It will be coming soon. In the meantime I recommend re-reading these old posts:

Lottery of Life
Happiness
Questions

Currency, Reserves, Printing Money, and Inflation

I just came across this post at Econbrowser. It is too good to pass up as it is a very good explanation of Currency, Reserves, Printing Money, and Inflation. He just called it Money and Reserves.

Free Markets

A recent post from the blog "The American Catholic" entitled Government and Economic Health inspired me to put together a post on capitalism and socialism. I went back and reread some passages from the encyclicals to support my comments in defense of my argument that free markets aren't necessarily the best answer. A few individuals, including the author, challenged me on this topic with Christian charity (something I appreciate very much given the heated-nature of the topic).

So ahead of my post I am putting together on Socialism and Capitalism, I wanted to give you the chance to follow our arguments (you can follow our dialogue in the comments section of the post). I would like to reiterate my stance and what I believe the stance of Catholic Social Teaching to be:

We need both moral politicians and players in the market. (We need moral people!). Government policy doesn’t make people more moral, but outlining rules and guidelines can help them stay the course. Transferring wealth that wealthy people won’t through personal charity is also beneficial to the society and the common good if done for the right reasons. It is ideal of me to think this is possible. I hope for such a world and hope I am doing my part to evangelize and make disciples of all nations. I think part of that is educating others that free markets make some rich who don’t always use it for the common good, and by its nature encourages selfishness. I think part of that is educating others that government distorts the beneficial processes of the free market and is often controlled by “economic dictators” (as we read from CST) who use it to maintain their wealth and status.

I don’t think that free markets are the answer and I don’t think that the answer lies in more government control or spending. I think the Popes have taught the same thing. I think it’s clear that at the bottom of it all is that all of us need to act in solidarity for each other and the common good.

News Article on Income growth

More data and news on income inequality. I see these articles fairly often, yet there isn't much clamor about it in the economics profession or in Washington D.C.

How the middle class became the underclass

Loss of Trust in the Marketplace

From Caritas in Veritate:

In a climate of mutual trust, the market is the economic institution that permits encounter between persons, inasmuch as they are economic subjects who make use of contracts to regulate their relations as they exchange goods and services of equivalent value between them, in order to satisfy their needs and desires.

The market is subject to the principles of so-called commutative justice, which regulates the relations of giving and receiving between parties to a transaction. But the social doctrine of the Church has unceasingly highlighted the importance of distributive justice and social justice for the market economy, not only because it belongs within a broader social and political context, but also because of the wider network of relations within which it operates. In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well.

Without internal forms of solidarity and mutual trust, the market cannot completely fulfill its proper economic function. And today it is this trust which has ceased to exist, and the loss of trust is a grave loss. It was timely when Paul VI in Populorum Progressio insisted that the economic system itself would benefit from the wide-ranging practice of justice, inasmuch as the first to gain from the development of poor countries would be rich ones.

According to the Pope, it was not just a matter of correcting dysfunctions through assistance. The poor are not to be considered a “burden”, but a resource, even from the purely economic point of view. It is nevertheless erroneous to hold that the market economy has an inbuilt need for a quota of poverty and underdevelopment in order to function at its best.

It is in the interests of the market to promote emancipation, but in order to do so effectively, it cannot rely only on itself, because it is not able to produce by itself something that lies outside its competence. It must draw its moral energies from other subjects that are capable of generating them.--Pope Benedict XVI

The Proper Role of Rest/Leisure

This is often a tough subject in living a Christian life. It is obvious that we need rest because of the limitations of our minds and bodies, but how much is too much and what types of leisurely activities are acceptable? These are tough questions that require prudential judgment. Here are some reflections on rest and leisure from Francis Fernandez's In Conversation with God:

As we carry out our duties, as we generously go about our professional work, as we unstintingly use up so much of our energy in apostolic initiatives and undertakings of service to others, it is natural that fatigue appears as an almost inseparable companion. Far from complaining about this inescapable reality, a reality that is common to all of us, we have to learn to rest close to God and to exercise ourselves constantly in that way of thinking.

No one understands our tiredness better than our Lord, because He himself was constantly in situations similar to our own. We must learn to recover our strength close to him. Come to me, he says to us, all you who labor and are heavy laden, and I will give you rest. We make our burden lighter when we unite our tiredness to that of Christ, offering it up for the redemption of souls. We will find it helps us if we live charity in a purposefully pleasant way towards those around us, even if at those particular times we find it a little more difficult to do so. And we must never forget that the use of leisure also is an activity that we must sanctify. Those periods of diversion should not be isolated inertial gaps in our lives, or be seen as the chance to allow ourselves some purely selfish compensation for our exertions. Love does not take holidays.

Even our moments of weariness should not be useless. Only after our death will we know how many sinners we have helped to save by offering up our tiredness. Only then will we understand that our forced inactivity and our sufferings can be of more use to our neighbor than our most effective deeds of service.

Tiredness teaches us to be humble and to live charity better. We discover at times like these that we cannot do everything, and that we need other people. Allowing ourselves to be helped is a wonderful way of learning humility. We understand that any help we can give to those we see overworked is always a great sign of charity.

The Christian considers life to be an immensely beneficial gift, which does not really belong to him and which he has to look after and be responsible for. We have to live the years that God wants, and go on to complete the task that He has entrusted us with. As a consequence, for God’s sake and for the sake of other people, we must observe the norms of prudence in caring for our own health and that of the people who in any way depend on us. Among these norms is the one that leisure be properly employed to refresh the spirit and strengthen the health of mind and body.

It has been said that to rest is not to do nothing it is to relax in activities which demand less effort. Leisure provides as opportunity for interior enrichment. It often presents an occasion for doing more apostolate, for fostering a friendship, etc. We should not confuse rest with laziness.

The same norm should guide our leisure as guides our work. Through it we should be able to show our love for God and for our neighbor.

Employee-Ownership

One topic of Catholic Social Teaching often overlooked, or just not well broadcast is employee ownership. Collective ownership is often associated with the ills of Socialism, but in contrast to this socialist idea of collective ownership is another that I will call employee ownership of the equity/capital of the firm.

Here are the Popes on such partnership-contracts:

We consider it more advisable, however, in the present condition of human society that, so far as is possible, the work-contract be somewhat modified by a partnership-contract, as is already being done in various ways and with no small advantage to workers and owners. Workers and other employees thus become sharers in ownership or management or participate in some fashion in the profits received. -- Quadragesimo Anno, pp.65

In this connection, as Our Predecessor clearly points out, it is advisable in the present circumstances that the wage-contract be somewhat modified by applying to it elements taken from the contract of partnership, so that "wage-earners and other employees participate in the ownership or the management, or in some way share in the profits." -- Mater et Magistra, pp.32

The relationship between labour and capital also finds expression when workers participate in ownership, management and profits. This is an all-too-often overlooked requirement and it should be given greater consideration. “On the basis of his work each person is fully entitled to consider himself a part-owner of the great workbench where he is working with everyone else. A way towards that goal could be found by associating labour with the ownership of capital, as far as possible, and by producing a wide range of intermediate bodies with economic, social and cultural purposes. These would be bodies enjoying real autonomy with regard to public authorities, pursuing their specific aims in honest collaboration with each other and in subordination to the demands of the common good. These would be living communities both in form and in substance, as members of each body would be looked upon and treated as persons and encouraged to take an active part in the life of the body”. The new ways that work is organized, where knowledge is of greater account than the mere ownership of the means of production, concretely shows that work, because of its subjective character, entails the right to participate. This awareness must be firmly in place in order to evaluate the proper place of work in the process of production and to find ways of participation that are in line with the subjectivity of work in the distinctive circumstances of different concrete situations. -- Compendium of Catholic Social Doctrine, pp.281, taken mostly from Laborem Exercens

We see from these excerpts that CST calls for partnership-contracts as a way to improve labor-capital relations and as a middle ground between socialism and liberalism. It enables the workers to share in the produce of the company and to take on greater responsibility for the work that they do. Monitoring by a supervisor or manager would be less necessary as employees would monitor themselves because they all have a stake in the success of the business. Alienation and shirking increase the further workers are separated from this sharing in the stake of the firm.

A professor at my school is currently gathering data for a project that researches such employee owned companies. Today he gave a seminar on his findings thus far. Data shows that ESOPs (Employee stock ownership planned companies) tend to be larger than traditional capitalist companies and are more concetrated in the Midwest. Some notable examples are HyVee, Lifetouch, and Burns & McDonnell. They roughly constitute a mere 1.15% of the employees in the United States.

He wants to compare the productivity of such firms to traditional capitalist firms to see if there is an advantage to one or the other. Traditional theory suggests ESOPs are at a great disadvantage, but data shows that this may not be so. A potential counter-theory is that ESOPs don't have to hire as many "monitors", such as managers and supervisors, because employees of ESOPS monitor themselves because of their stake in the company and they can therefore produce more per worker than traditional capitalist firms.

This research is excellent for the prospects of the growth of ESOPs into the future, which would be progress from a CST perspective.

Republicans and Healthcare Part 2

A commenter makes a good point on a previous post:

Just a general observation I wanted to throw out there. It seems in a lot of the articles I've read there is a tendency to group those are opposed to the current health care bill with those opposed to universal health care. I side with the Catholic bishops in that I am opposed to the current health care program due to its inclusion of federally funded abortions, but agree that providing universal health care for all members of society is needed.

I intend to remain neutral from a political standpoint. I do not mean to group those opposed to healthcare with those opposed to this particular healthcare bill. I hope to make plain what the Church teaches and encourage faithful action on our part. I, too, am with our Bishops.

I think it is a weakness of Republicans that they bash "obamacare", often for things other than abortion funding which is the main fault from a Catholic perspective, yet they don't propose a solution to the problem (lack of healthcare for the poor) themselves. If they have, please make it known to me. All I hear is it increases the power of government, increases the deficit/debt, takes away from hard-working small business owners, etc.

Standards of Living

A great part of economics is figuring out how to increase standards of living, or put more plainly, improve our living conditions. Indeed a great portion of the field is dedicated to growth, decreasing poverty, etc.

When most people argue for an economic or political policy they usually say it will improve living standards. This is an already well known fact. No one argues for something by saying it will make our lives worse off and almost everything is argued to make our lives better off.

So why am I bringing it up? A huge "problem" is measuring living standards. How do we know that living today is better than living yesterday?

Economists often use indicators like GDP, unemployment rate, inflation, poverty rate, income inequality, productivity, taxes, home ownership etc. to measure living standards. Others use technology and life expectancy as a gauge for better living. Still others measure it by crime rates and freedoms. All of these can paint a picture of living conditions, but how well?

If the economy is doing well, technology getting better, our freedoms increasing, our health improving, etc., but we continue to allow abortion, ignore adultery and pornography, increase divorces, etc. are we really living better?

How do we gauge whether or not we are improving our standards of living? It would be an incredible mistake to use only economic or material indicators.

I think the biggest consideration, as a Catholic, is: how many people are living as Christians? Certainly our greatest objective is to get to heaven and so this should be our absolute standard for living and the gauge by which we measure all our activities and living conditions. How well does the society live by the Ten Commandments? This is certainly a part of crime rates, but left out of the crime rates are honoring your mother and father, adultery, keeping holy the Sabbath, and putting God before all else. Not to mention that our definition of crime doesn't always align well with God's--the biggest culprit here is abortion. Indeed, I think one of our last considerations should be how much money we have now compared to yesterday.


Here is (the beginning of) a sample list of questions I think would be better to gauge living conditions by:

Have more people started living as Christians?
How well do people live by the Ten Commandments?
Have instances of murder/abortion/euthanasia decreased?
Have other crimes such as rape/assault/theft/etc. decreased?
Have divorces/out-of-wedlock births decreased?
Have more people earned their high school diploma/college degree?
Has the death rate of births gone down?
Do more people have the freedom to exercise their rights and responsibilities?
Do more people have the opportunity to earn their living and do they take advantage of it?
Have charity and solidarity increased?
Are we taking care of ourselves and our environment better?
Do more people have access to healthcare and are we improving our healthcare?
Are more people escaping poverty through their own hard work and the charity of others?


What can we add to this list to measure our standards of living? and how can we make these better? Comment below!

Taxes

Federal taxes lowest since 1950

American Exceptionalism

Vox Nova posted this blog a few days ago on a prevalent attitude in our country known as American Exceptionalism. It is the same attitude that produced things like Manifest Destiny and imperialism. Taken even further it produces movements like the Ku Klux Klan. It is an incredibly toxic attitude that is largely a by-product of our country's economic success and the Protestant Reformation/Enlightenment period.

I agree with this Vox Nova writer that this attitude is in no way consistent with Catholic beliefs.

American exceptionalism is therefore not only wrong, but it is dangerous. If you are chosen by God, you do not have to play by the rules of other nations. Your wars are always just, and your torture is never torture. You are less inclined toward introspection, or to seek the counsel of others. You have a God-given right to use the resources of the earth without heed to the effect on anybody else.

After all, Catholicism is all about unity – as Henri de Lubac put it, redemption is a work of restoration geared toward “the recovery of lost unity– the recovery of supernatural unity of man with God, but equally of the unity of men among themselves.”

[Side note: I disagree that this kind of exceptionalism is found in republicans only. The author seems to have a special disdain for the exmaples of Repubilcan American Exceptionalism.]

It is not wrong to think that our country is great and to have pride in the freedoms and material benefits we enjoy, but it is dangerous to believe we're better than others because of it. There is a fine line between authentic pride of nation out of thanksgiving to God for making it so, and excessive pride of nation believing that we are somehow better than others and then using it to excuse our actions. Doing so is akin to condemning sinners, casting them off as evil and proclaiming ourselves to be better, when in fact, we are all sinners and it is not our place to condemn, but to forgive and help each other.

Instead of patting ourselves and our ancestors on the back for doing some things right helping to provide us with a free and prosperous society, we should direct our thanks to God and his beneficence. And, out of humility, extend apologies and welcoming arms toward our international enemies and friends. Solidarity should be our true aim, not material or military greatness. For true greatness is not measured in dollars, status, or might, but in the heavenly goods we have built up--virtue, loving relationships, etc.

"God has not created us for the perishable and transitory things of earth, but for things heavenly and everlasting." -- Pope Leo XIII