Jesus of Nazareth, the new book by Pope Benedict XVI, has been described as an attack on capitalism. But Rev. Robert A. Sirico offers a closer reading and finds that no such thing is true. The book, he says, “is explicitly a spiritual reflection on our own interior disposition toward those who are ‘neighbors’ to us and for whom we have some moral responsibility.”

Read the full commentary here.


  • http://www.trevoracorn.com Trevor

    “If by capitalism we mean a system where the elites own the wealth and the poor exist in a servile condition, yes, that sounds cruel. But if we mean the free economy, it is another matter entirely.”

    Yet, free market capitalism leads to “a system where the elites own the wealth and the poor exist in a servile condition” over time if land, the stock of life and wealth, is held privately. It’s called the “Law of Rent” – David Ricardo discovered it many many years ago.

  • http://www.hubsandspokes.com marc

    Just curious, Trevor: what system are you advocating that we replace the current Capitalist/private property system with?

  • http://www.trevoracorn.com Trevor

    We don’t need to replace capitalism or the private property system. All we need to do is recover a portion of the land rent now presently collected by private landlords and return it to the community as a citizen’s dividend and/or use it to finance government in lieu of present taxes on labor and capital.

    It’s not a new idea. Adam Smith advocated it. Others advocated it or something very similar including Moses, David Ricardo, Henry George, Thomas Pain, Albert Einstein, Winston Churchill, John Dewey, Benjamin Franklin, William Penn, Herbert Spencer, John Stuart Mill, John Locke, Leo Tolstoy, and Milton Friedman – to name a few.

  • http://www.hubsandspokes.com marc

    OK. Could you clear up for me exactly why we’d want to do this? I guess I’m not tracking why a person should be penalized for owning a rental property.

  • http://www.trevoracorn.com Trevor

    Well, I don’t have time to run though all the basic economic principles but the philosophical reasoning has to do with restoring justice.

    You probably don’t see simple capitalism based in privileged landed property rights as being unjust but I do. It’s unjust because presently the landed property system allows the “owners” of land, God’s gift to ALL men, to charge certain men rent fees to gain access to what, by nature, all men had equal right to in the first place. All men have by nature as much a right to use land as any other man. When that right is compromised through forced rent payments justice is also compromise. Gone are the days of good, free land available to all in abundance.

    Now, it just so happens that charging rent (i.e. private land ownership)* is the best way to appropriate land efficiently (highest and best use) and create great amounts of wealth (see John Locke thought on this as well as “The Mystery of Capital” by Hernando de Soto). So, many bright minds have said, basically, “well! let’s just allow rents to be levied as normal and we’ll just collect a portion of the rents and return it to the citizens through a dividend of public goods.”

    This is exactly what Hong Kong does as does Pennsylvania to a small degree. Alaska also taxes oil rents and redistributes them to its citizens through a dividend.

    Adam Smith said that the best tax, the one that causes the least disruption to economic efficiency and best meets the demands of fairness and justness, is a tax on land values (i.e. property values after buildings and improvements have been exempted).

    I mean, think about it for a second. Where does land rent come from? It represent the cost of gaining exclusive access to some desirable location. It is the community at large that makes some sites more desirable than others. Why, in God’s green earth, should private landowners be allowed to collect these rents? They are fully the result of the community at large and not all the result of the labors of the landowner. In fact, it is public capital such as roads, sewers, transit, etc. that give increase to land rents (and thus increase to private landlords pocketbooks). It is not just that our roadbuilding and other public projects make private landowners rich in their sleep.

    *Land Rent and Land Value both arise from government granted landed property rights and protection in law. They are the closely related. Land Values (which approximate the sale price at any given time) themselves approximate the capitalized land rent of the site in question.

  • http://www.hubsandspokes.com marc

    Still not tracking you, Trevor. If you object to the idea of rental property because land is God’s gift to all men, why don’t you object to private ownership of property in general? I own a small house in a suburb of Grand Rapids, Michigan. Doesn’t my ownership of that property deny you your God given right to use that property, since it is part of the land that God gave to all of us?

    Let me set up a scenario for you. Say I go out and purchase a “fixer-upper” house in Grand Rapids. I replace the shingles, fix the siding, put in more efficient windows, get rid of the old energy hogging furnace in favor of a more modern heating and cooling system, put in new carpet, paint, etc. I then offer the house as a rental property and allow someone to move in and live there at a rate that is agreeable to both of us, with the understanding that I will maintain the property, do repairs, etc. Where exactly is the moral wrong? At what point are my actions detrimental to society? I’m simply not understanding what is unjust about the scenario that would require me to be penalized through taxation.

  • http://www.trevoracorn.com Trevor

    Hi Marc,

    Sorry about the confusion. I’m talking about “Land Rent” not “Building Rent”.

    When you “rent” out a house you are actually doing two things 1) charging for access to the land and 2) charging for use of the capital (i.e. interest payments) on that land (i.e., your building). This explains why a house on the beach rents at a much higher value than an identical house in the woods. The LAND determines the difference, not the building.

    The former (land rent) is what I (and all the others) propose to tax, not the latter (“rent” of buildings and improvements).

    When you fix up a house you do not at all effect the rental value that the land fetches. You, instead, increase the “interest” that can be charged for the use of your house. The rental value of the land has to do with the surrounding community and natural advantages. So fixes up your house would see zero tax penalty under this system.

    It’s the private collection of land rent that I see as immoral – not the collection of building rent.

  • http://trevoracorn.com Trevor

    Hi Marc,

    I wrote a responce to your post but somehow it got lost in cyberspace. Anyway, the upshot was that, in economics, there are three categories of production, land, labor, and capital. The corisponding return on these are rent, wage, and interest respectively. Land is, by deffinition, the natural world while capital are “tools” created by labor that help to make labor more effiecint. Labor is, obviously, labor.

    Your example of fixing up a house and charging rent is, in economic terms, actually you charging a rent (for the land use) and interest (for the building use). It is the form that I see as a problem not the later. I do not think people should be penalized for charging interest of a house or building.

  • Tejano

    Sorry Trevor, but I am afraid you are mistaken, and the great men you cite are as well. It is yet another classical and neoclassical economic fallacy to believe that private property somehow leads to elite oligarchic land ownership. I suggest you research the Austrian school for a more robust and realistic theory of the morality of private property.

    Setting aside the wealth of purely empirical evidence that this is not the case (every market that frees up starts to have thriving real estate markets), the result you postulate simply does not logically follow. Sure, people *could* sit on land they claim, and do nothing with it, but in a broadly empirical demonstration of natural law, 1) mankind generally does not do that as it could not survive, and 2) the essence of homesteading all kinds of property, either fruit from land or land itself, is that one “captures” or uses it somehow. This can be demonstrated through Hans Herman Hoppe’s argumentation axiom, or from Thomistic approaches to natural law, whereby 1) there is no other way to “share” land without the use of force, and 2) the broadly empirical universal experience of man wherein he “captures” items of nature, to which ownership feels naturally ascribed, a sort of extension of self-ownership.

  • http://www.hubsandspokes.com marc

    Trevor: First of all, thanks for your responses; I appreciate the back-and-forth.

    I have to admit, however, that I’m entirely confused by your argument. You start by pretty clearly asserting that capitalism and private property are immoral because they lead to “a system where the elites own the wealth and the poor exist in a servile condition.” How do we solve that problem? Not by replacing the fundamentally unjust system. According to your argument, “All we need to do is recover a portion of the land rent now presently collected by private landlords…”

    So right at the start, you’re willing to make the blanket assertion that private property (and capitalism) are bad and immoral, but when pressed on it, you seem to pull back and say no – it’s only private property used as rental property that’s bad. But this makes little sense to me – whether property is in the hands of a landlord who rents it to you or a private owner who sells it outright to you, you still have to pay to use the property either way. What makes one worse than the other?

    I’m also having trouble with this assertion:
    [i]It’s unjust because presently the landed property system allows the “owners” of land, God’s gift to ALL men, to charge certain men rent fees to gain access to what, by nature, all men had equal right to in the first place. All men have by nature as much a right to use land as any other man.[/i]

    What does this mean? [i]What[/i] land do all men have a right to use? Do all men have a right to use ALL the land? Or does it mean that all men have a right to some land? Is land a human right on a par with the right to life or religious freedom? Or does this mean that every person should have equal access to the system by which land can be bought or sold?

    Then this:
    [i]When that right is compromised through forced rent payments justice is also compromise.[/i]
    For the first statement to have any meaning at all, I suppose you’d have to believe that every person is entitled to a specific piece of land on which to live that exists wherever they choose to live, because only then would a person be “forced” to pay rent unjustly. Other than that, it’s a standard contractual agreement entered into willingly by the landlord and the renter. No one is forcing anyone to do anything. there’s no injustice at all.

    And as for this: [i]Gone are the days of good, free land available to all in abundance.[/i]
    When, exactly, were those days? And how would you propose to re-create that situation today and still maintain an orderly society?

    This is getting too long. I’m going to break it into two comments…

  • http://www.trevoracorn.com Trevor

    Tejano,

    I am quite familiar with the Austrian School, thank you very much. I have spent endless hours debating this very topic with them on their own forums. I have read a great deal of Mises, Rothebard, Böhm-Bawerk, etc. and, in the end, I disagree with them on the issue of landed property. Especially their “homesteading” nonsense. It’s a simple logical fallacy to say if 1) man owns his labor and 2) he mixes his labor with land that 3) he thereby owns the land. Hardly, reason says that he owns only that which he created through the land, i.e. the fruit of his labor, not the land itself.

    Anyway, there’s a great debate about all this over at the mises.org forums. It is clear to any reasonable observer that the Georgists, Geolibertarian, and Geoists have the upper hand on this issue.

    See here: http://www.austrianforum.com/index.php?showtopic=87

  • http://www.trevoracorn.com Trevor

    Now, dealing with your specific comments:

    [quote=”Tejano”]Setting aside the wealth of purely empirical evidence that this is not the case (every market that frees up starts to have thriving real estate markets)…[/quote]

    I never said that they didn’t. My beef is with the justness of the distribution that results. I agree that landed property rights leads vast amounts of wealth creation. But the empirical evidence shows that this wealth, over time, concentrates itself in the hands of property owners.

    [quote=”Tejano”]Sure, people could sit on land they claim, and do nothing with it, but …[/quote]

    I have not argued here that man claims land and then sits on that land. In fact, the opposite is more generally true. Man claims land and then rents it out to someone else to use it. He thusly extracts rents from latecomers who find the good land already taken. The rents are set based on marginal utility and thus the income of renters approximate what they would otherwise make on marginal land. As land becomes more and more scarce this income rate approaches subsistence levels.

    I’ll ignore the rest of your argument since it argues against a straw man.

  • http://www.trevoracorn.com Trevor

    Marc,

    Good questions. I’m glad to see you are trying to think through this. I should apologize for not communicating my view clearly enough. It seems you have misunderstood me on a few points.

    Instead of taking the time now to clarify my position (I am quite busy with other work) I would like, instead, to encourage you to read the essay link below. I am in full agreement with it.

    http://geolib.com/sullivan.dan/commonrights.html

  • http://www.hubsandspokes.com marc

    thanks Trevor. I appreciate the cordial nature of the discussion. I think we’re just going to have to disagree on this one. Had I known that I was wading into a swamp of internal libertarian disputes, I probably would have stayed out to begin with.

    In the end, what I don’t understand is why you won’t just come right out and say that you believe private property is immoral. After reading through the forum link and the article you sent along, it seems pretty clear what your position must be. Why just dance around the edges?

  • http://www.trevoracorn.com Trevor

    Marc,

    I don’t like stating, in such obtuse terms, that private property is immoral. In our present culture it would instantly be assumed that I was kin with commies – which couldn’t be further from the truth.

    But also, I only see private property *in land* as immoral when it is structured as it is today. The private landed property system God instituted in OT Israel was a just system imo. We would be wise to take note of it.

    As you know, Rerum makes it clear that, within the Catholic tradition, private landed property is to be considered just. Today being the 116th anniversary of Rerum I thought it might be fitting to post Henry George’s open letter to Pope Leo XIII written in response to Rerum.

    http://grputland.com/classics/hg-col.htm

    Thanks for the enjoyable discussion.

  • http://stbarbara.blogspot.com John Powers

    I read through Henry George’s arguments v. Leo 13. Now more than ever, George’s arguments are irrelevant and generally wrong. How much “land” does Microsoft actually need? Perhaps 640 acres would house the largest corporation in the world, or a small wheat farm, both in the same geographic location.

    It is surely not the value of the land/property that has much to do with the value of most technology businesses, most financial businesses, or most trading companies. Amgen and Qualcomm come to mind as owning only minimal R&D facilities, while production occurs offsite. Where is the monopoly?

    Leo XIII Rerum Novarum, holds up remarkably well at 116. (Though his teachings on Americanism are thoroughly confusing…and do not bear much resemblance to the “Americanism” of Cardinal Mundelein and the Knights of Columbus, and other champions of “Americanism”)

  • http://www.trevoracorn.com Trevor

    John,

    Please. Seattle has the some of the highest land values (and thus the highest cost of living index) in the country. So, even though Microsoft makes tons of money justly (I am no serious critic of Microsoft) it is the landowners that take the lion’s share of the wealth over time.

    The same is true of nearly all other successful businesses. It is the financial districts of Chicago, New York, and London that see the highest land values. Care to know what sort of land values exist in Silicon Valley?

    You see, businesses like Microsoft and Google locate in (or create) high rent districts. This happens because these businesses attract talent and spin-off companies to the area. Over time this tremendous amount of wealth creation gets absorbed into land values as potential companies and outside talent bid up the homes, commercial lots, etc. in the area.

    “Location, location, location” is as true today as it was 116 years ago.

  • http://stbarbara.blogspot.com John Powers

    The expense for land on LaSalle street (Chicago financial district) is trivial compared to say Healthcare Costs. Same for Microsoft (I will guess 10x spent on healthcare than rent).

    Besides, Microsoft, Ford, Caterpillar, (like many big companies) have moved large numbers of employees to cheaper areas, pretty much proving that there is a market for land, and minimal monopolistic power in perhaps the most fragmented market worldwide.

    Caterpillar is the #2 Exporter in the US. It is in one of the lowest rent areas in the USA (Peoria). You can rent land in Peoria for about 1/10 the cost of renting Chicago. The signs of monopoly in land markets are minimal.

    JBP

  • http://www.trevoracorn.com Trevor

    John, even in Peoria property values have escalated by as much as 20%/year over the recent boom in the real-estate market. In fact rising land rents (i.e. property values) have attributed to something like 30% of GDP over the past 5 years.

    Here’s a graph showing property values in Vancouver since 1977. Similar graphs can be shown for most cities.

    http://www.bcestates.com/bcestates/stats.jpg

    The truth of this is also seen the recent struggle for “affordable housing” in most US cities. The culprit is land value. Over time, Ricardo’s law of rent has always been proven true. There’s good reason why all economists accept it. In fact, it’s from the “law of rent” that economics was given its popular name as the “dismal science”.

  • Richard C. Chewning

    Thank you for your clear interpretation of the Pope’s spiritual burden — thank God for it — for those who suffer in any form. The perverted hunger for power and greed are associated with those who live and work in every economic system, not just those who live and work in a free economic environment. The "fall" of our first parents has found us all subject to the consequences of our sin nature. Those who cry for justice are almost always misunderstood, as was the Pope in this case. Thank you again for your clear review.

  • Daniel McLaughlin

    It is readily apparent that reporters interpret things the way they want to, and not the way they were intended. I have not read the book, but from the excerpts that were cited, it is also clear that Pope Benedict does not understand the implications of his statements that "Our lifestyle… has deprived them and continues to deprive them.".

    The robbing and plundering of the African people is at the hands of their own governments, and not at the hands of people in free countries who trade with them. The truth is that, with free markets, in which the African people are able to trade with whoever they want under whatever conditions they can work out, trading with rich foreigners is their way out of the pit. Our lifestyle can’t do anything but help the Africans if they are free from internal plunder, oppression and confiscation by their corrupt governments.

  • Jan Wnek

    The "poor" don’t need the charity of the capitalists…they need a "living wage". That’s TRUE Christianity…and you know it. Abandon your false Calvinist ways……and "pseudo-Christianity"…..

  • Jan Wnek

    The comment about the plunder of Africa having nothing to do with the "free countries" who trade with the corrupt governments of that continent makes me chuckle. Obviously, many of you have never heard , nor are interested in hearing about being an "accessory" to corruption. The mere fact that you are trading with "corrupt governments" in order to enrich yourselves, knowing damn well that the populace will not benefit in the least from your so-called "free market" trading makes you as guilty as Pontius Pilate washing his hands of the blood of an innocent Jesus……you are no better.

  • http://www.trevoracorn.com Trevor

    No Jan, we dont’ “know it”. The “living wage” is a false solution and YOU know it. Take a class in economics sometime.

    What they need is 1) clear and simple government protected rights to property and 2) a clear and simple means of distrubuting the proceeds from natural wealth (oil, rubber, etc.) fairly and justly to all citizens equally. It’s a travesty that citzens of these nations so rich in natural resources are themselves stricken with poverty. It is the rich government officials and outside coroporations who have positioned themselves such as to steal the natural resources from these poor people.

    Like 90% of all social problems in the world this one boils down the question of just and unjust property and property mechanisms.

  • Phillip Howel

    Those who embrace the feel good phrases "living wage" do so without definition because it is indefinable. The same people oppose the very capitalism that has provided the health and medical advancements, the devices that have eased the labor burden on all, provide a comfortable lifestyle for many. The nations of poverty reject free market activities, oppress their people, do not have democratic governments, constitutions that guarantee people the right to possess the fruit of their labor and freedom of association-including choice of religious practice.
    The best charity is to advocate for the preceding and to teach the man to fish, and then let him keep or sell his catch. Jesus did not oppose the free market, he advocated personal social responsibility, not collectivism.

  • Jan Wnek

    While I don’t disagree that one should advocate for the "liberties" many in the Western industrialized world, I do disagree with doing business with those who deal in "stolen goods" – the fruits of the labors of those people these tyrants and their elitist cronies exploit. as for Jesus advocating personal social responsibility (Love your neighbors AND your enemies, do good to those who would hurt you) I agree, but I believe He and his disciples, as well as the apostolic Christians of the first three centuries certainly lived in a "collective" community environment. To deny that is to deny history.

  • http://www.trevoracorn.com Trevor

    Good answer Jan. I agree.

  • http://blog.acton.org Jordan

    Some on this thread might find the following piece of interest:

    [url=http://www.npr.org/templates/story/story.php?storyId=10141666]”The Movers and Swappers of Cuba on the Prado,”[/url] which details the state of housing in Cuba.

  • http://www.trevoracorn.com Trevor

    Thanks for the link Jordan. That’s exactly why the market should set rental and purchase prices. Command and Control economics never works well – even in houseing and land markets.

  • Mike Mathea

    I am always amazed at some people’s impression of a free market. The free Smith discussed and all thinking Christians believe in the market expressed in the writings of the schoolmen, one driven by honesty exchange where no one is cheated and all are good stewards. Anyone who is an advocate of the free market abhors and is opposed to trade with corrupt governments and with blanks minimum wage laws. Compensating the bad steward is just as bad as supporting the corrupt government.
    We would all be better off if we understood what the free market means and does not mean before we engage in uncharitable comments.

  • http://www.trevoracorn.com Trevor

    Mike,

    By “free market” I mean one free of ALL government granted privilege/monopoly – including that of exclusive access to man’s most needed resource, LAND. Present landed property rights law gives an economic privilege to the earlier owners over against late comers (our children). This privilege could easily we leveled with either a change in landed property rights law (following the Old Testament example of property rights law or something similar) or by confiscating the economic rent that attaches to land and redistributing it to those who labored to create the value in the first place (this approach was advocated by most of the classical economists including Smith, Ricardo, Mill, and George). In either case we end with a more free market not a less free one since the laborer, in this case, keeps the fruit of his labor.
    Of course there are other privileges that we should destroy if we want a truly free market. These include 1) abuse of the commons for economic gain (“tragedy of the commons”) through pollution or over use (See Peter Barns’ book “Capitalism 3.0”), 2) incorporation rights that give privilege to bigness over smallness via government granted limited liability protection, 3) etc. (the list is long)

    So yes, give us a free market. PLEASE.

    What do you mean by “Free Market”?? I will follow the wise direction of Smith, Ricardo, Mill, and George over against many of the so-called free market advocates today in the Austrian and Neo-Classical schools.

  • David Pendleton

    The Pope is right on when he says, "Yes, we have to give material help and we have to examine our way of life. But we always give too little if all we give is the material." That is the fundamental problem with Marxist economics and the political approach to problem solving. There are certain problems government and coercive actions cannot solve. Poverty is one of them. Jesus’ point in recounting the story of the Good Samaritan was not to endorse any particular economic model but rather to encourage each and every one of us to do what we can to be neighbors. We don’t look to see if recipients are deserving, we look to ourselves and conclude that we have personal moral obligations to serve others. This may in fact mean that we avoid fostering debilitating welfare dependence. Instead, we promote self-reliance — in other words, we teach others to fish rather than simply teaching them to be thankful for the fish given them.

  • Jan Wnek

    I agree with the idea of "self-reliance"…let them fish, but allow them the opportunity to sell their fish and be proprietary capitalists rather than "wage slaves" for Star-Kist, et. al……corporate capitalism as reflected by non-producing shareholder ownership is, in my estimation, every bit as evil as communism or socialism and must be eliminated. Only proprietary capitalism and wholly employee-owned cooperative corporations reflect a healthy form of capitalism which is in keeping with theethic and morality of Christianity. This is what needs to be encouraged, if one is to be true to Christ’s Gospel message.