Philosopher and theologian, Michael Novak recently delivered a speech at the Catholic University of America on the vocation of business and Forbes published the transcript. Novak argues that “capitalism is lifting the world out of poverty.” As many Asian and African economies shift from socialist to capitalist, they are seeing enormous economic growth, and small businesses are the force behind these economic gains:

Even in developed nations, most jobs are found in small business. In Italy, over 80 percent of the working population works in small businesses. In the U.S., the proportion is just about 50 percent, but some 65 percent of new employment is in small businesses.

During the great economic expansion of 1981-1989, the U.S. added to its economy the equivalent of the whole economic activity of West Germany at that time. Sixteen million new jobs were created in the U.S., the vast number of them in small businesses. Startups peaked as new businesses came into being at a rate of 13 percent (as a portion of all businesses) – an all-time high. Much the same happened under Clinton in 1993-2001, but even better – 23 million new jobs were created.

In the creation of small businesses, four factors are necessary. First, ease and low cost of incorporation; second, access to inexpensive credit; third, institutions of instruction and technical help (such as the system of local credit unions in the U.S.), and the steady assistance of the extension services of the A&M universities; and, fourth, throughout the population habits of creativity, enterprise, and skills such as bookkeeping and the organization of work. Economic development is propelled, as John Paul II said, by know-how, technology, and skill (Centesimus Annus 32). Therein, perhaps, lie the greatest entry-points for Americans and others who wish to help poor nations by proffering assistance in economic development from the bottom up.

Novak also discusses poverty in the United States, specifically Lyndon B. Johnson’s War on Poverty. Since the 1960s, the government has spent over $20 trillion (adjusted for inflation) and the poverty level is unchanged or, according to some numbers, even worse now. He says:

If the nation simply gave every person in America enough money to get out of the statistical ranks of the poor, it would cost a lot less than the $20 trillion we have already paid. Our current programs are not only not achieving their goals, but also spending money far in excess of the amount needed to eliminate poverty. That could be done much more cheaply simply by giving money directly to bring everybody above the poverty line. Worse than that, our current programs are also doing a great deal of harm, encouraging millions of citizens to fall into something worse than poverty, notably, habits of dependency and irresponsibility for their own well-being.

In addition, government programs for the poor have contributed to an immense tide of births out of wedlock and the non-formation of families. The fastest growing segment of the poor in America consists in unmarried women and the children they have borne out of wedlock, often by more than one man. Whatever you think of the morality of such behavior, the social costs for the children are both measurable and immense.

From the point of view of the business community, the main attack on poverty must come from the creation of some 16 million new jobs. Why? Because today 11 million Americans are unemployed, and another 5 million or so have dropped out of the labor force all together. Moreover, a few million more find fewer hours of work than they need.

Therefore, in America too, we need to create at least 5 million new small businesses to bring all Americans who want to work into full-time employment.

Poor people cannot get out of poverty if they do not have full-time work at a wage that, with at least two workers combined, carries them together above the poverty line.

He concludes by talking about “building up the chains of civil society,” He says:

A free society desperately needs large business corporations as a bulwark against the state. Otherwise citizens would stand naked and alone against that vast power and propaganda monopoly. To escape total dependence on the state, to have financial resources for the institutions of civil society, a free society needs a powerful check on the self-aggrandizements of the state. It needs not only independent funds but a source of well-tested public leadership and civic imagination that is much larger and more generous in its point of view than that of the state. All these energies of civil society prevent the state from becoming omnivorous in its appetites and narrowly secular in its point of view.

Without an enterprising, risk-taking, imaginative, creative community of businesses large and small – but especially small – it is impossible to look forward to new job creation. Impossible to imagine the survival of a free society. It is even harder to imagine a society that has dramatically broken the chains of poverty for every woman and man in its midst.

In short, to end as we began, new businesses are at the strategic center of the work for social justice in our time.

Read ‘For Catholics, The Vocation of Business Is the Main Hope for the World’s Poor’ in its entirety. For more insights from Michael Novak, see his discussion with Rev.  Robert Sirico at Acton University in 2012:

Business as a Calling: Work and the Examined Life

Business as a Calling: Work and the Examined Life

Novak sets out to refute the popular conception that business leaders are materialistic and rapacious.