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.

The Pope gave a “prediction that an undisciplined economy would collapse by its own rules,” the ex-socialist lawyer and economics professor nonsensically claimed at Milan’s Cattolica University last week.

Tremonti conveniently omitted that elsewhere in the Pontiff’s 2,300-word analysis he grumbled that Theodore Roosevelt and Nelson Rockefeller spread “the notion that only Protestantism can bring forth a free economy — whereas Catholicism includes no corresponding education to freedom and to the self-discipline necessary to it, favoring authoritarian systems instead . . .”

Furthermore, the only apparent English translation of the paper is on the Web site of Fr. Robert Sirico’s Michigan-based Acton Institute. Why would a think tank devoted to emphasizing the free market’s spiritual underpinnings tout an anti-capitalist tract?

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:

Continue reading "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.

Excerpt from Rev. Sirico’s speech:

Today we find institution after institution “in the tank” for unrestrained government intervention. One is reminded of Italian philosopher Antonio Gramsci’s call for the left to begin a long march through the institutions of Western Civilization. The left, it seems, got the memo. How will we respond to this disheartening situation? Now is no time to retreat in disarray. Now is no time to stumble. There remains a remnant … a potent remnant who has not bowed the knee to big government. My call to you tonight is a transparent one: strengthen the soldiers of that remnant. In particular—strengthen that band of brothers gathered with you tonight, the Acton Institute.

Never in Acton’s nearly 20 year history has our message been more essential than right now. As an institution that cherishes the free and virtuous society, we are living through this thing with all of you, and we need your help to continue. Our history of integrity; the quality of our products and programs; the responsible tone with which we approach the questions at hand, all speak to the fact that this work is worthy of your investment. I humbly ask for it with the promise that we will use it well and prudently.

The fact of the matter is that too many of us have become much too comfortable and yielded to a perennial temptation, the temptation to take our liberty for granted. Those of you who have invested in the work of the Acton Institute over the years know—and especially those of you who have had a chance to see our latest media effort “The Birth of Freedom” know—we believe the time has come for a renewal of those principles that form the very foundation of civilization, the same principles that make prosperity possible and accessible to those on the margins.

Liberty is indeed, as Lord Acton said, “the delicate fruit of a mature civilization.” As such it is in need of a nutritious soil in which to flourish. In this sense you and I are tillers of the soil, if you will.

Liberty is a delicate fruit. It is also an uncommon one. When one surveys human history it becomes evident how unusual, how precious is authentic liberty, as is the economic progress that is its result. These past few weeks are a vivid and sad testimony to this fact. As a delicate fruit, human liberty as well as economic stability must be tended to, lest it disintegrate. It requires constant attention, new appreciation and understanding, renewal, moral defense and integration into the whole fabric of society.

Read the entire speech here.

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.

Continue reading "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.

Continue reading "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:

In San Francisco, every child has health care until 25 years old. In San Francisco, we don’t have a minimum wage, we have a living wage. In San Francisco, the environment is not an issue for us, it is a value. It is an ethic – it is protecting God’s creation. And so the exploiters of nature, of workers and the rest – like to use other aspects of our lives, which we take great pride in.

Pelosi goes on to note that conservatives try to use social and traditional values as a wedge issue to stop the spread of San Francisco’s economic values across America. She seems to be expressing the view that San Francisco is the new “city upon a hill.”

But are loss of economic freedoms and increased regulations in San Francisco a beneficial economic policy for all of America’s businesses and citizens? San Francisco’s mayor has also gone after bottled water. What about the city’s recent treatment of the U.S. Marines? Thomas Sowell does a good job explaining the reason for amazingly high housing prices in San Francisco because of increased government environmental regulations.

San Francisco is a beautiful city with many great citizens, but their economic policies are certainly not a shining example for all of America to follow. The Speaker’s comments however are a reminder of the need for free market advocates to do a better job in articulating the moral value and benefits behind their own ideas. If the arguments against San Francisco are led by people who may primarily be interested in social issues, there is merit of course, but the argument against exporting San Francisco values are incomplete.

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.

Continue reading "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.

Riccardo Petrella of the Catholic University of Louvain in Belgium is rightly concerned that a billion people do not have access to clean drinking water. While he criticizes world leaders for not making this problem a top priority, his main target is actually the economics of treating water as a commodity.

He blames economics for creating a shortage of water: “This approach does not recognize any human and social rights, there are no public goods or services just private economic goods and services based on economic interest. The commodification of water is accompanied by a privatization of the water supply. In this context, shortages are accepted as ‘natural’, inevitable….”

This is a prime example of combining good intentions with bad economics. Petrella mistakenly assumes that economic goods and common goods are mutually exclusive, when in fact prices help regulate the production and distribution of a natural resource.

Only a small part of the global water supply has actually been privatized. Over the last twenty years or so, the process of privatization has been accelerated, and the availability and the quality of water has generally improved. This is not only true for Western countries but also in less developed countries.

Take Chile as an example. It aggressively privatized its water industry and has vastly enhanced access to water for the poor. Usage of potable water went up from 63 percent to 99 percent for the urban and from 27 percent to 94 percent for the rural population after the introduction of markets for trading water rights.

In contrast to what Petrella asserts, privatization, rather than being a cause of water shortage, is increasingly seen as a remedy to this problem. In Saudi Arabia, for example, privatization was introduced after a shortage of water caused riots in November 2006. The government had exacerbated the problem by subsidizing water to keep prices low. This led to an inefficient and careless usage of water. Riyadh had to change course and is now planning for half the population to be covered by private water companies by 2010.

It is misleading to suggest a contrast between private enterprise and the common good since the market tends to channel resources to where human demand is strongest and can fill gaps in investment and expertise where the public sector fails. It’s certainly no violation of human rights to promote a competitive market for something as essential as water.

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.

Italy’s economic problems were blamed on corruption and weak law enforcement. While corruption to some extent reflects individual moral failings and certainly does affect economic growth, the reverse is also true: corruption tends to flourish in environments already hostile to markets and free competition.

Bad and excessive regulation tends to create opportunities for the arbitrary use of power when dealing with citizens and companies. This, in turn, distorts market incentives and deters investment but it also creates mistrust among people and alienates them from the governing institutions. Better and less regulation, on the other hand, not only boosts economic growth but could tackle a more deeply-rooted crisis of political and social ethics.

Not surprisingly, a labor union representative at the IBL event argued for stronger government to fight corruption at the expense of additional economic reforms. He unfortunately missed the point: The lack of economic freedom simply leads to more opportunities for the moral evils that already plague 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.”

Now of course there is no one “Christian” set of policies on the best way to help poor or stimulate an economy. Unlike life issues, these are prudential matters and good Christians can disagree. Yet there seems to be a growing tendency among Christians to allow the left to claim the moral high ground with their big government interventionist plans despite the fact that history has shown this to be not only ineffective but harmful.