Faith in the Free Market? Part 1

Should we have faith in the free market to deliver our common good?

This is perhaps the greatest economic debate of the past few centuries, and one of the more interesting things to talk about as an economist with non-economists, usually because they aren’t that interested in the nitty-gritty of economic discourse and instead prefer to dialogue about politics.

It is also interesting to me because there are Catholics on both sides of the fence: those who vehemently support the free market and those who vehemently attack it. I’ve already noted how CST approaches the battle between liberalism or capitalism and socialism or collectivism in this multipart series. The case they present both against and for the free market is compelling and good, but there are other ways to prove or disprove its effectiveness in achieving the good for society. This is my purpose for this multi-part series. I wish to explore the arguments used to justify or rebuke the free market and point then toward the conclusions I take from this exploration of which we can engage in a friendly debate.

Two great mistakes in this debate must be noted at the outset. The first is that many treat this as a black and white problem. Those who advocate for the free market tend to argue that any measure against it puts us on the road to serfdom, or on the road to soviet communism which clearly had disastrous consequences for humanity. Those who attack the free market are usually less black and white, but are also guilty of putting the blame on the free market as a whole. There is no gray area, there is no middle option, there are no alternatives to communism or capitalism. Pope Pius XI called these the twin rocks of shipwreck—extreme individualism and extreme collectivism. The great mistake here is failing to see alternatives to these twin wreckers of ships. Rejection of “the free market” does not necessarily mean support for total communism and vice versa. We must be able to envision degrees of free market-ness or collectivism and we must direct them always to our common good.

The other great mistake is (logically) prior to the first mistake. It is failing to recognize that there is no such thing as a truly free market. That is, no market system is completely free from government intervention. Free markets fundamentally require private property and enforceable contracts, which require an enforcer. Absent of government, ‘free’ markets are closer to black markets where the market actors provide their own governance, which is why, for example, illegal drug markets are particularly violent. Absent of government protection of property and contracts, they must enforce it themselves with power, weapons, and violence. So a truly free market system is closer to anarchy, and most free market proponents are well aware of this (some seem to forget it though). However, since the government is involved in protecting property and enforcing contracts they are necessarily involved with defining property and legality of contracts and so their ‘intervention’ into markets is more of a degree than of a kind. They DO intervene, the question is, how much? This lends itself well to the lesson learned from the first mistake—free market-ness is a degree, not a black and white situation.

The danger or trap that is so easy to fall into, is putting your faith in the free market, this institution that is supposed to bring about our overall good out of the self-interested actions of individuals. We put our faith and our trust in a direction-less institution that does not see persons and does not consider their good. If we are to rely on a higher degree of free market-ness to provide the common good, then we should do so with good reasoning, but we should not expect our selfish actions to result collectively in the common good. To me, nothing could be more anti-Christian. Christ’s teaching is all about the two commandments upon which all the rest sit: Love your God, who is love itself, and love your neighbor as you love yourself. Love is an authentic gift of self, not a devotion entirely to one’s self-interests.

(There are those who argue self-interest does not necessarily equal selfishness. This of itself requires a long response, but quickly, my reply is: why risk confusing the two? Those who do not properly understand the distinction will think it’s valid to act selfishly when you argue for self-interested action. And why put the emphasis on negative freedom? Authentic freedom does involve freedom from coercion, but must always be directed toward the good which might mean a restriction of complete negative freedom, or complete self-interested action. Christian defense of the free market should make no reference to self-interested action, but rather to Christian self-giving actions. In this case, it is quite reasonable for a Christian to argue that greater free market-ness will allow self-giving actions to collectively bring about the common good).

So the task set to us then, is to decide the appropriate degree of free market-ness for a good society, or from the Catholic Social Teaching perspective, for the common good, which necessarily includes justice, truth, and charity.

How much should the government intervene? In which situations should the government intervene more rather than less and less rather than more?

Economists of all persuasions have researched the impacts of policy on the economy and economic relationships and worked to develop models to support their case on these very questions. Some have started with the data to support their conclusions. Some have started with their conclusions and worked to find data to support them. Others have largely ignored data and have instead constructed great mathematical models based on certain assumptions about human behavior to support certain conclusions.

This last group has been the dominant group in Economics for over a century now and so most of this post addresses their arguments, but I will also present data to support certain conclusions as well. The importance of this is that many politicians and the public in general take the advice of economists on matters of ‘free market-ness’. So if you’re going to listen to us, then you should know exactly what we are saying, the strengths and weaknesses of our arguments and models, and what conclusions we can then draw from them.

Part 2 will take a closer look at the model most often used to defend the free market which also happens to be the model everyone learns in principles of economics courses.

Pope Quotes 5-8-12

Sorry for the interruption in my series on Pope Quotes. There are still so many great quotes from the CST encyclicals to share, so let's get to it!

The socialist, capitalist debate is always a fierce one and so I always find the many quotes on this topic to be a good read. This debate is still largely and understandably emotionally charged and unfortunately the Church's stance is widely misunderstood. Many seem to know the Church condemned socialism, but less seem to know exactly why or that it is nearly as critical of capitalism/liberalism. Many take the Popes's quotes out of context, (which I understand I also run the risk of doing with this series and is why I recommend a full reading of the encyclicals!), or even use them to support a position they hold. Much of the debate has centered over the issue of private property versus state socialization of property.

Today I chose this excerpt from Laborem Exercens, which was written by Pope John Paul II in 1981, marking the 90th anniversary of Rerum Novarum. It is an encyclical that addresses the question of 'work' and the issue of private property. I'd like to draw your attention to a few things:

1) CST is critical of both capitalism and socialism;
2) Though defending the right to private property, CST makes clear that the right to common use, also known as the universal destination of goods, supersedes this right;
3) Possession of goods, particularly capital goods, is only okay if it serves labor and is never okay simply for possession's sake;
4) Socialization of means of production is not excluded completely, there is some legitimation for it;
5) State socialization of means of production (capital goods) does not guarantee true socialization of those goods, that is, the state may use them for purposes opposed to the good of society;
6) Rigid capitalism needs revision, particularly with profit-sharing or joint ownership forms of cooperation so that workers may share in the produce and not be pitted against the owners of the capital goods;
7) Work is not only a means for material goods, but is more importantly a means for personal development and fulfillment and private or personal initiative is a key component of this developmental side of work;

Here is the excerpt from Laborem Exercens with highlights in bold/purple:

The above principle [on private property], as it was then stated and as it is still taught by the Church, diverges radically from the programme of collectivism as proclaimed by Marxism and put into practice in various countries in the decades following the time of Leo XIII's Encyclical. At the same time it differs from the programme of capitalism practised by liberalism and by the political systems inspired by it.

Hijacking Christianity

This article was written by Aryeh Spero a few days ago in the Wall Street Journal. These types of articles really bother me, particularly because I feel that he is hijacking Christianity to justify a position he feels strongly about rather than critically analyzing society in light of the teaching of the Bible in order to make it better. Capitalism has its strengths, but it isn't without weaknesses, and to say that Christianity or the Bible endorses it, I think, is very wrong-headed if not out-right ridiculous. This doesn't mean that I think Christianity endorses socialism, but I certainly don't think our brand of capitalism is the best we can come up with to follow the teachings of Bible. To say that Christianity specifically endorses capitalism, is, I think, to be like one of the Pharisees and is extremely dangerous because people can come away from reading this thinking that this is indeed what Christ told us.

Spero's article can be read here (and below): What the Bible Teaches About Capitalism. My comments are in red.



Who would have expected that in a Republican primary campaign the single biggest complaint among candidates would be that the front-runner has taken capitalism too far? As if his success and achievement were evidence of something unethical and immoral? President Obama and other redistributionists must be rejoicing that their assumptions about rugged capitalism and the 1% have been given such legitimacy.

More than any other nation, the United States was founded on broad themes of morality rooted in a specific religious perspective. We call this the Judeo-Christian ethos, and within it resides a ringing endorsement of capitalism as a moral endeavor.

I disagree that within Christianity resides a "ringing endorsement of capitalism as a moral endeavor". The Bible does not endorse 'self-interested' individuals, nor does it endorse the accumulation of riches, and both are hallmarks of capitalism.

Pope John Paul II on Socialism

The role of the State is always a hot topic and often comes up in discussions I have with others or in the articles, blogs, etc. that I read.

Many or most people seem to know/believe that socialism is bad. Yet the reason they give is almost invariably that the Soviet experience went very very poorly and that the U.S. experience was clearly much better.

This seems to be de facto evidence of socialism's inability to be a system of organization and of capitalism/libearlism's triumph.

In my studies of both economics and Catholic Social Teaching, however, I have found that many people don't really know why the Church rejects socialism and they also seem to think that welfare or gov't intervention in the economy of any kind is 'socialist'. I also think that Karl Marx gets a bad name for the 'experiment' played out in Russia. That 'Marxism' wasn't what Marx had in mind and that doesn't mean Marx's version was good, but he certainly didn't advocate the authoritarian, police state that was the USSR.

In fact, he really just wanted freedom for the workers from their employers. He wanted better working conditions, choices, and wages for the workers--he wanted them to stop being exploited. He believed that Capitalism would eventually end in Socialism because of its own contradictory nature--accumulation leading to the immiseration of the working class. That said, he was, I believe, misguided in a few ways.


So why, exactly, is Socialism bad?

From Centesimus Annus 12-15 by Pope John Paul II on Rerum Novarum, socialism, and the state:

The commemoration of Rerum novarum would be incomplete unless reference were also made to the situation of the world today.

This is especially confirmed by the events which took place near the end of 1989 and at the beginning of 1990.

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

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.

Capitalism

Ok, sorry for the long delay between posts. I am working on some things for my classes that I hope to be able to post in snippets in the coming weeks.

It may appear from previous posts that I am not much of a fan of Capitalism, but while I am critical of it, I do believe it to be the most efficient and productive economic system in terms of wealth and standards of living. The evidence is very clearly in favor of this, I would have no way of arguing against it if I tried.

Most of my criticism is directed toward materialism and individualism, the "structures of sin" which are by-products of Capitalism and very prevalent in our society. The problem with Capitalism is that it creates a guise for these structures of sin. It convinces people that if they act in their self-interest, they will bring about the greatest societal good. This theory is only good in practice when there is a great number of competitors to hold each individual in check, keep him on his toes so to speak. Contrary to common belief, competition isn't the norm in our current capitalism. Big business and banks rule the show. They not only control credit, pricing, and output, but they also use their profits to lobby and persuade politicians. This is not a conspiracy theory, but the reality of our situation.

Even the people who run these businesses and banks, who want the good of all, and subscribe to the notion of acting in self-interest for the common good are not getting it because their self-interest directs them to exploit workers, keep costs (their wages) as low as possible, take care of their own, and maximize profits so that they get a nice bonus check for what? a bigger mansion? more cars? They don't do it to hire more people and increase the welfare of their employees.

The greatest evil in our current system of Capitalism, is not the free market or the government, but individuals acting only for themselves out of love for wealth and power. The free market and the government provide the arenas in which they act.

If the "invisible hand" of the market really worked, wouldn't there be less poverty and inequality? Milton Friedman, perhaps the biggest advocate of a free market, thought this would happen. Yet, we are in a very bad recession caused by greed and self-interested individuals who bear none of the punishment. This is passed on to the losers of the market, the lower class.

There is no question that authentic freedom is a good thing, including freedom in economics, but the power to do what one wants whenever he wants it is not authentic freedom. True freedom is the ability to do the right thing for the good of all. Our current notion of freedom limits our true freedom. Individuals who act for themselves only, inhibit the power of others to act for the good of all.

But this begs the questions: What, if not capitalism, is our alternative? Socialism? Something in between?

I believe that a capitalistic system full of virtuous individuals is our best alternative. Socialism takes away our right to private property along with many other freedoms. Extreme liberalism or individualism denies our social nature and dependency on each other. No economic system is good without upholding our natural rights that stem from our dignity as persons created in the image and likeness of God, pervaded by charity and justice, a constant pursuit of the common good, and the solidarity of all nations. This sort of economic system will have the freedoms of capitalism, but will look more like socialism because those who win in the free market will use it for the benefit of all.

Is such a system possible? That's like asking if removing all sin is possible. We are incapable, but God enables us for by Him we can do all things, without Him we are nothing. True reform lies not in creating or repealing public policy, but in the conversion of hearts. We must continue to strive for our own virtue and that of others by turning to God in prayer and leading by example.