Following up on our coverage of Pope Benedict’s economic “prophecy,” here’s a snip from yesterday’s “Papal Bullishness” editorial in Investor’s Business Daily. Read then-Cardinal Ratzinger’s 1985 article “Market Economy and Ethics” here.

Read more on IBD: Papal Bullishness…

One does not broadcast his opinions in various forums over the years as I have done without receiving my fair share of disagreement from all sides, friends and foes alike. One participant who came to a recent conference remarked, “All my life I have been looking to build a fair and egalitarian society, but I have now learned why it is better to advance a free and virtuous society.”

Yet, something new came my way when I received an envelope with the return address of Commonweal, a publication known for – how shall we put this gently? – a progressive stance on matters of faith and public policy. Inside was the September 26 issue of the magazine, with a helpful note from the editors pointing me to page 8 where I came upon the “Libertarian Heresy — The Fundamentalism of Free Market Heresy” by Daniel Finn, who is a professor at St. John’s University in Collegeville, Minnesota. In his essay my colleague Sam Gregg and I are his primary targets. In a single, canard-laden article, we are attacked for heresy, fundamentalism, neo-conservatism and on questions of law and morality, for voicing “libertarian” and generally un-Catholic, not to mention anti-Thomistic views.

Professor Finn’s not-so-subtle polemical technique is to raise and make patently absurd questions and assertions and then leave it to the reader — and me — to conjecture an answer. Like so: “So has Fr. Sirico mixed libertarian heresy about human freedom into his Christian view of morality and law? I’ll leave that for him to reflect on.” As well as putting in my mouth the rather un-nuanced argument that “raising taxes to help others is unchristian.”

Facing an accusation of heresy from Commonweal was too delicious an irony to pass over without comment. So, on Oct. 13, I faxed the magazine this letter: Read more on Commonweal’s Heresy Hunt…

We’ve posted Rev. Robert A. Sirico’s Oct. 30 speech delivered at the Acton Institute annual dinner in Grand Rapids, Mich. The dinner also featured a keynote address from Rev. John Nunes, president and chief executive officer of Lutheran World Relief, and remarks from Kate O’Beirne, National Review’s Washington Editor, who accepted the Acton Institute Faith & Freedom Award in honor of the late William F. Buckley, Jr.

Read more on The Way Forward…

The famous Austrian economist, Joseph Schumpeter, despaired for the future of the free market system. The reason for this despair was that the excess wealth of the system would create educated folks who would turn on the very system that created them. Their education would make them into anti-capitalist ideologues, who would then kill the goose that laid the golden egg. He did not think that those who participated in the creation of such enormous wealth would be in any position to fight back, and this for two reasons: firstly, business people do not tend to be men of letters, so they are unable to mount arguments defending the system; secondly, the job of the business executive is the survival of the company, and thus, he will concentrate on those things required to weather the storm, not be controversial.

The man who is probably the most famous Austrian economist, Ludwig von Mises, despaired for the future of the free market system due to envy. Various sectors of society, academic, non-productive, uneducated, etc., would envy the wealth of the producers in society, and end up by finding means to take away that wealth and give it to the lesser productive people, despite the fact that they did not earn it, and therefore, are not entitled to it.

Our present political situation has a combination of both of these views. Both presidential candidates are in favor of redistribution of wealth, albeit one is more open about it. And very few business people are saying “no!” to any of it with a few exceptions, such as the president of BB&T Bank, who wrote an open letter to Congress asking why his totally solvent bank should be punished for the stupidity of the others.

But there is another culprit in this maelstrom. This culprit is the business person. Why? With tongue-in-cheek apologies to neo-classical (mathematical) economic theory, the purpose of a company is not to make a profit. As John Paul II said in Centesimus Annus, a profit is a sign of the health of a company, and therefore is good and necessary. But anyone who has taken a management course knows that the purpose of the company, aside from producing what the customers want, is to increase the wealth of the stockholders. This is different than making a profit, although profit is an integral part of it. Wealth is different than profit. Profit is a short run measurement of the short run health of the company. Wealth, by its very nature is long run. Profit appears on the financial statements of a company in mere money terms, and the accountants who produce those statements do not even take inflation into account. So a company could have an increase in profit, but not an increase in items sold, merely because they had to raise prices to accommodate the fall in the value of the dollar. But executives today are a slave to the profit line in the financial statements. They have a need to impress their boards and stockholders now by sacrificing the long term growth of the enterprise. Read more on Saving the Free Market…

What is the root cause of the sub-prime crisis shaking the global economy? We need to know so we don’t allow it to screw up our economy even worse.

Many point to dishonesty and poor judgment on Wall Street. There was plenty of that leading up to the near-trillion dollar bailout, and even now the stock market is busily disciplining stupid, dishonest companies.

Others point to the many people who falsified loan applications to get mortgages beyond their means. That too played a role.

But dishonesty and poor judgment are as old as Adam and Eve. Something more was at work in the present crisis, a crisis of unprecedented scope. Why didn’t profit-minded loan companies run thorough credit checks? Why did they keep pumping out low interest loans to high risk borrowers, ignoring the risks?

It’s as if somebody spiked the financial system’s punch bowl with stupid juice, driving normally prudent financiers to dash, en masse, over the cliff.

It seems that way because it is that way. The brewers of the stupid juice were largely (if not exclusively) politicians in Washington who sought to redistribute wealth from the rich and middle class to poor people with bad credit. These politicians fostered various laws and institutions that directed, cajoled and legally bullied mortgage companies to extend big loans to people with little credit.

A case in point is a group called ACORN—Association of Community Organizations for Reform Now. Stanley Kurtz explains in an Oct. 7 essay at National Review Online:

“You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance. In retrospect, of course, encouraging customers like this to buy homes seems little short of madness.

… At the time, however, that 1995 Chicago newspaper article represented something of a triumph for Barack Obama. That same year, as a director at Chicago’s Woods Fund, Obama was successfully pushing for a major expansion of assistance to ACORN, and sending still more money ACORN’s way from his post as board chair of the Chicago Annenberg Challenge. Through both funding and personal-leadership training, Obama supported ACORN. And ACORN, far more than we’ve recognized up to now, had a major role in precipitating the subprime crisis.

Read more on The Credit Crisis: Who Brewed the Stupid Juice?…

The Business and Media Institute highlights House Speaker Nancy Pelosi’s response to a question about why conservatives and advocates for the free market degrade San Francisco as a city out of step with mainstream America. Pelosi believes it’s all about economics, and she points to the fact that government regulation and government programs in San Francisco are the model for America, and advocates for free markets are afraid of other citizens recognizing that. Pelosi says:

Read more on Speaker Pelosi on San Francisco Economics & Values…

Russian emigre philosopher Georgy Fedotov (1888-1951) proposed two basic principles for all of the freedoms by which modern democracy lives. First, and most valuable, there are the freedoms of “conviction” — in speech, in print, and in organized social activity. These freedoms, Fedotov asserted, developed out of the freedom of faith. The other principle of freedom “defends the individual from the arbitrary will of the state (which is independent of questions of conscience and thought) — freedom from arbitrary arrest and punishment, from insult, plundering and coercion on the part of the organs of power … ”

In an ideal world, all of these freedoms would be present. But Fedotov also cautioned that “freedom is the late, refined flower of culture.”

For the flower to bloom, the roots need to be watered. A free society, from the ground up, requires a respect for the rule of law, a judiciary and police force that aren’t easily bought, a political culture that knows how to rid itself of corruption, and a vigorous free press to keep the pols and bureaucrats honest. I would also add a liberal measure of economic freedom and property rights that secure wealth from the “arbitrary” plunder of the government.

All of which gets us back to Russia. In an interview this week in the Financial Times, President-elect Dmitry Medvedev pledged to root out the “legal nihilism” that plagues his country. Excerpt:

[Medvedev's] starting point is his legal background – he is, he says, “perhaps too much of a lawyer”. Meticulous and precise, he sees almost every issue through the prism of legal thinking. But behind the occasionally laboured language lies a deeper goal. Mr Medvedev says he wants to do what no Russian leader has done before: embed the rule of law in Russian society.

“It is a monumental task,” he agrees, switching momentarily to English. “Russia is a country where people don’t like to observe the law. It is, as they say, a country of legal nihilism.”

The pledge to overcome “legal nihilism” became a central part of Mr Medvedev’s low-key election campaign. It seems a restatement of Mr Putin’s own promise eight years ago to establish a “dictatorship of laws”, although critics say Mr Putin delivered too much of the former and not enough of the latter. Even today, Russians quote the 19th-century satirist Mikhail Saltykov-Shchedrin’s aphorism that “the severity of Russian laws is alleviated by the lack of obligation to fulfill them”. The result is a society plagued by endemic corruption, arbitrary use of the law by the state against individuals or companies – and by companies against each other – and a judiciary that has never known genuine independence.

To paraphrase, all democracy is local. One of the strengths of the American democratic tradition is its intensely local nature. Most Americans’ experience with democracy happens when they vote for a judge, attend a school board meeting, or run afoul of the local traffic cop. If democracy doesn’t work at this level, it doesn’t work at all. As Medvedev pointed out to his interviewers: “When a citizen gives a bribe to the traffic police, it probably does not enter his head that he is committing a crime … People should think about this.”

But bribing a cop is a moral issue, just as much as it is, if not exactly a political crime, then a seemingly simple act of convenience. Morality cannot be legislated, but it can be taught and for this we need the Church and the family and those other neighborhood groups, charities, and small businesses, that act as civic training grounds and make up a healthy community. Edmund Burke called these “the little platoons” of society. Read more on Medvedev and Madison…

In a front-page article of the March 20-21 edition of the Vatican’s newspaper, L’Osservatore Romano, entitled “L’aqua bene comune per tutti” (“Water: Common Good for All”), an Italian political scientist laments that a basic necessity of life is bought and sold.

Read more on Should Water Have A Price?…

Last week, Istituto Acton’s close Italian ally in defense of liberty, Istituto Bruno Leoni (IBL), presented the 2008 Index of Economic Freedom in Rome. The IBL invited speakers to discuss the decline of economic freedom in Italy over the last 12 months. Il bel paese ranks as the 64th freest economy in the world, with Hong Kong at number one and the U.S. at five.

Read more on More Freedom = Less Corruption in Italy…

Two new Acton commentaries this week:

In “Religious Liberty and Anti-Discrimination Laws,” Joseph Kosten looks at recent controversies in Colorado and Missouri involving Roman Catholic institutions.

Without the liberty to decide who represents its views and who disperses its message to the public, a religious institution or organization lays bare its most vulnerable aspect and welcomes destruction from within. Separation of church and state does not mean that religious institutions may not function within a state, nor does it mean that they can not decide who they hire.

Michael Miller and Jay Richards examine the economic proposals of Gov. Mike Huckabee in “The Missing Link: Religion and Economic Freedom.”

Read more on Acton on Religious Liberty and Huckabee’s Economics…