Posts tagged with: market economy

Relativists beware. Whether you like it or not, truth matters – even in the economy. That’s the core message of Pope Benedict XVI’s new social encyclical Caritas in Veritate.

For 2000 years, the Catholic Church has hammered home a trio of presently-unpopular ideas into the humus of human civilization: that there is truth; that it is not simply of the scientific variety; that it is knowable through faith and reason; and that it is not whatever you want or “feel” it to be. Throughout his entire life, Benedict XVI has underscored these themes, precisely because much of the world, including many Christians, has lost sight of their importance.

Perhaps Caritas in Veritate’s most important truth-claim about economic life is that the market economy cannot be based on just any value-system. Against all relativists on the left and the right, Benedict maintains that market economies must be underpinned by commitments to particular basic moral goods and a certain vision of the human person if it is to serve rather than undermine humanity’s common good: “The economy needs ethics in order to function correctly — not any ethics whatsoever, but an ethics which is people-centred” (CV no.45)

“Without internal forms of solidarity and mutual trust,” the Pope writes, “the market cannot completely fulfill its proper economic function” (CV no. 35). This surely has been amply confirmed by the recent financial crisis. America’s subprime-mortgage market collapse was at least partly attributable to the fact that literally thousands of people lied on their mortgage application forms. Should we be surprised that mass violation of the moral prohibition against lying has devastating economic consequences? “The economic sphere”, the pope reminds us, “is neither ethically neutral, nor inherently inhuman and opposed to society. It is part and parcel of human activity and precisely because it is human, it must be structured and governed in an ethical manner” (CV no.36).

Contrary to the pre-encyclical hype of certain American commentators and the ever-unreliable British press, predictions of papal anathemas against “global capitalism” have – as usual – been found wanting. In economic terms, the pope describes as “erroneous” the tired notion that the developed countries’ wealth is predicated on poor nations’ poverty (CV no.35) that one hears customarily from the likes of Hugo Chavez and whatever’s left of the dwindling band of aging liberation theologians. That’s a pontifical body-blow to a central working assumption of many professional social justice “activists”.

Nor will they be happy with the pope’s concerns about the ways in which foreign aid can produce situations of dependency (CV no.58), not to mention Benedict’s strictures against protectionism (CV no.42) as well as his stress that no amount of structural change can possibly compensate for people freely choosing the good: “Integral human development presupposes the responsible freedom of the individual and of peoples: no structure can guarantee this development over and above human responsibility” (CV no.17).

Nor does Benedict regard the market as morally problematic in itself. “In and of itself,” the Pope states, “the market is not . . . the place where the strong subdue the weak. Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations” (CV no.36). What matters, Benedict claims, is the moral culture in which markets exists.

At the heart of the economy are human persons. People whose minds are dominated by crassly hedonistic cultures will make crassly hedonistic economic choices. “Therefore”, Benedict comments, “it is not the instrument that must be called to account, but individuals” (CV no.36).

The implications of truth for economic life do not, however, stop here. For Benedict, it is a lens through which to assess ideas such as “business ethics”, “ethical investing” and “corporate social responsibility.” The notion that investment and business choices have a moral dimension is hardly new. What matters for Benedict is the understanding of morality underlying these schemes. Merely labeling an investment scheme as “ethical”, Benedict notes, hardly tells us whether it is moral (CV no.45).

A second major truth underscored by Benedict is the indispensability of a strong civil society for both undergirding and limiting the market and the state. By this, he does not mean a plethora of government-funded NGOs, many of whom Benedict identifies as intent upon imposing some of the very worst aspects of Western lifestyle-libertarianism upon developing nations (CV no.28). Certainly, Benedict believes, there is a need to re-evaluate (CV no.24) how the state regulates different parts of the economy. Ultimately, however, Benedict stresses that the virtue of solidarity, he argues, is about people concretely loving their neighbour; it “cannot therefore be merely delegated to the State” (CV no.38). This is reminiscent of Alexis de Tocqueville’s attention to the manner in which the habit of free association both limits the size of government while also discouraging people from retreating into their own little bubbles.

The economist John Maynard Keynes is famous for many things, including the saying that “in the long run, we’re all dead.” The horizon of Benedict XVI’s perspective on economic life is rather different. The pope asks people to live their economic lives in the short, medium, and long-term as if living in the truth is eternally important, not to mention eternally relevant to their soul’s salvation.

That’s change we can all believe in.

Pope Benedict XVI’s much anticipated economics encyclical, Caritas in Veritate, is scheduled to be released early next week, according reports. For a good sense of this pope’s thinking on economics, we offer an article the then-Joseph Cardinal Ratzinger presented in 1985 at a symposium in Rome.  The Acton Institute published it under the title “Market Economy and Ethics.”  As indicated by the following quote, the pope believed in integrating morals into economics in order to have sound and successful economic policy:

This determinism, in which man is completely controlled by the binding laws of the market while believing he acts in freedom from them, includes yet another and perhaps even more astounding presupposition, namely, that the natural laws of the market are in essence good (if I may be permitted so to speak) and necessarily work for the good, whatever may be true of the morality of individuals. These two presuppositions are not entirely false, as the successes of the market economy illustrate. But neither are they universally applicable and correct, as is evident in the problems of today’s world economy.

Without developing the problem in its details here — which is not my task — let me merely underscore a sentence of Peter Koslowski’s that illustrates the point in question: “The economy is governed not only by economic laws, but is also determined by men…” Even if the market economy does rest on the ordering of the individual within a determinate network of rules, it cannot make man superfluous or exclude his moral freedom from the world of economics. It is becoming ever so clear that the development of the world economy has also to do with the development of the world community and with the universal family of man, and that the development of the spiritual powers of mankind is essential in the development of the world community. These spiritual powers are themselves a factor in the economy: the market rules function only when a moral consensus exists and sustains them.

In “The Real Culture War Is Over Capitalism,” Arthur C. Brooks argues in the Wall Street Journal that the “major cultural schism” in America today divides those who support capitalism and, on the other side, those who favor socialism. He makes a strong case for the moral foundations of free enterprise and entrepreneurship and points to the recent “tea parties” as evidence that Americans still favor the market economy. Brooks, the president of the American Enterprise Institute, says Americans are revolting against “absurdities” like the bailout of General Motors that will be financed with ballooning budget deficits and trillions in new federal debt. He writes:

… the tea parties are not based on the cold wonkery of budget data. They are based on an “ethical populism.” The protesters are homeowners who didn’t walk away from their mortgages, small business owners who don’t want corporate welfare and bankers who kept their heads during the frenzy and don’t need bailouts. They were the people who were doing the important things right — and who are now watching elected politicians reward those who did the important things wrong.

Voices in the media, academia, and the government will dismiss this ethical populism as a fringe movement — maybe even dangerous extremism. In truth, free markets, limited government, and entrepreneurship are still a majoritarian taste. In March 2009, the Pew Research Center asked people if we are better off “in a free market economy even though there may be severe ups and downs from time to time.” Fully 70% agreed, versus 20% who disagreed.

He also points out that the government has been increasingly “exempting” Americans from paying taxes, an intentional strategy to create a larger class of government-dependent citizens.

My colleague Adam Lerrick showed in [the Wall Street Journal] last year that the percentage of American adults who have no federal income-tax liability will rise to 49% from 40% under Mr. Obama’s tax plan. Another 11% will pay less than 5% of their income in federal income taxes and less than $1,000 in total.

To put a modern twist on the old axiom, a man who is not a socialist at 20 has no heart; a man who is still a socialist at 40 either has no head, or pays no taxes. Social Democrats are working to create a society where the majority are net recipients of the “sharing economy.” They are fighting a culture war of attrition with economic tools. Defenders of capitalism risk getting caught flat-footed with increasingly antiquated arguments that free enterprise is a Main Street pocketbook issue. Progressives are working relentlessly to see that it is not.

Read the “The Culture of Charity,” the Spring 2007 interview with Brooks in Acton’s Religion & Liberty. Watch a 16-minute video interview with Brooks recorded at the Acton Grand Rapids office in May 2008

Kevin Allen, host of The Illumined Heart podcast on Ancient Faith Radio, interviews writer, attorney, and college professor Chris Banescu, an Orthodox Christian, about the economic, moral and spiritual issues surrounding the market economy. Kevin asks: Does the capitalist system serve “the best interests of Christians living the life of the Beatitudes?”

Listen to Chris Banescu on Orthodox Christianity and Capitalism:

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Read “A Primer on Capitalism” on Chris’ personal Web site.

He is also the author of two articles on home schooling (here and here) for Acton Commentary.

Blog author: jcouretas
posted by on Thursday, February 12, 2009

In my Winter 2007 article on economic globalization for AGAIN Magazine, I quoted economist Wilhelm Roepke. (AGAIN is published by Conciliar Media Ministries, a department of the Antiochian Orthodox Christian Church of North America). Roepke:

Economically ignorant moralism is as objectionable as morally callous economism. Ethics and economics are two equally difficult subjects, and while the former needs discerning and expert reason, the latter cannot do without humane values.

In light of all that has happened with the U.S. economic meltdown in the last few months, I continue to subscribe to the following statement from the same article:

… there is no real understanding of “social justice” without an understanding of basic economic principles. These principles explain how Orthodox Christians work, earn, invest, and give to philanthropic causes in a market-oriented economy. Economic questions are at the root of many of the problems that on their face seem to be more about something else — poverty, immigration, the environment, technology, politics, humanitarian assistance.

I remain a convinced believer in the market economy, which is a different thing than saying that I believe in the “free market” (a misnomer for industrialized economies that have always been subject to heavy regulation) or laissez faire economics (not a good idea and, again, a term that refers to something that doesn’t exist).

The climate of fear and panic that has been raised first by the Bush administration and now President Obama (we’re in a “crisis that could become a catastrophe” he claims) should have us all screaming not “help!” but “stop!” The alarm we raise should be about the fantastic expansion of government control — in some cases outright nationalization — over what was one of the freer markets in the world. And let’s recall that most Orthodox Christian immigrants came to this country for economic opportunity — in many cases a chance to put their entrepreneurial gifts to work in a growing and prosperous country. How much opportunity will be left once Washington gets finished with its top down central planning project? If this current crisis has taught us anything, it is the importance of economic growth and sustaining that growth in a humane way over the long haul.

So, I go back to Roepke for guidance on what’s being proposed in Washington. In particular, I turn to his 1957 book, “A Humane Economy: The Social Framework of a Free Market” (ISI, 1998). Page numbers in brackets:

On the necessity for economic liberty [104]: “Since liberty was indivisible, we could not have political and spiritual liberty without also choosing liberty in the economic field and rejecting the necessarily unfree collectivist economic order; conversely, we had to be clear in our minds that a collectivist economic order meant the destruction of political and spiritual liberty. Therefore, the economy was the front line of the defense of liberty and of all its consequences for the moral and humane pattern of our civilization.” (more…)

Linked yesterday on the Drudge Report and picked up by news outlets all over the world is a brief Bloomberg report on a statement from the Italian Finance Minister Giulio Tremonti. Tremonti attributed to Pope Benedict XVI a “prophecy” dating from over twenty years ago concerning the current global financial meltdown.

Again, the story is quite brief, and here’s the gist:

“The prediction that an undisciplined economy would collapse by its own rules can be found” in an article written by Cardinal Joseph Ratzinger, who became pope in April 2005, Tremonti said yesterday at Milan’s Cattolica University.

Tremonti’s remarks were made at the inaugural academic year address at the university. It’s unclear to me what the context of Tremonti’s prophetic attribution is, and perhaps some of the colleagues in our Rome office can enlighten us as to Tremonti’s economic and religious perspective.

But if you want the original context of then-Cardinal Ratzinger’s statements, avail yourself of the only readily-accessible English translation of the article cited by Tremonti: “Market economy and ethics,” given by Ratzinger in in 1985 at a symposium in Rome, “Church and Economy in Dialogue.”

Here’s the full quote from Ratzinger’s paper:

It is becoming an increasingly obvious fact of economic history that the development of economic systems which concentrate on the common good depends on a determinate ethical system, which in turn can be born and sustained only by strong religious convictions. Conversely, it has also become obvious that the decline of such discipline can actually cause the laws of the market to collapse. An economic policy that is ordered not only to the good of the group — indeed, not only to the common good of a determinate state — but to the common good of the family of man demands a maximum of ethical discipline and thus a maximum of religious strength.

As you can see from this quote and the context of the larger paper, the import of Ratzinger’s warning is not simply about an “undisciplined economy,” but more specifically about an economy that lacks participants who act from the basis of a serious and committed moral foundation, one that is “sustained only by strong religious convictions.” It’s about a lack of religious discipline as much as economic discipline.

Reading Tremonti’s quote as it appears in the Bloomberg article (which admittedly might be quite different in its own original context) might lead one to think that Ratzinger was simply talking about the lack of material discipline, for which the “new frugality” would be an adequate cure. But as Ratzinger rightly observed then, the causes of poverty and economic distress are not simply material, but also spiritual.