Evangelii Gaudiam, the “Bad” or what does Pope Francis have against the poor anyway?

So what is wrong with the apostolic exhortation?  Is it not presumptuous to critique a papal document? Well in the document itself, Pope Francis states :

 “Since I am called to put into practice what I ask of others, I too must think about a conversion of the papacy. It is my duty, as the Bishop of Rome, to be open to suggestions which can help make the exercise of my ministry more faithful to the meaning which Jesus Christ wished to give it and to the present needs of evangelization.”

I take this to mean that if there are things in the document that are demonstrably counterproductive to his goals the Pope would welcome hearing about them. With that in mind there are several serious problems with this document.  There are some things that are “Bad” meaning they are false.  Some statements advocate, or at least appear to advocate things that are very likely harmful. These are often accompanied by statements that are contrary to empirical evidence. There are also things that are “ugly”, and by ugly, I mean they feature prose that is in Vatican II tradition so opaque  as to be at best confusing or at worst misleading.  For this purposes of the criticism, we will call things out as “Bad” when they are simply wrong, “Ugly” will be used when the passage could be interpreted in a defensible way but is expressed in a manner that can be used to mean problematic things.

Let’s start with the “Bad” and get right to the main feature that has plagued the Church for a long time. We have touched on this before, and it is the problematic relationship the Church has with economic policy. In the title of this this post,  I ask provocatively what Pope Francis has against the poor? of course the answer is nothing, in fact we are instructed to favor the poor and care about them. Still as I have said before good intentions are not enough.

Let’s us take a passage from the exhortation that comes very early in the document:

Pope Francis writes:

“Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.

Human beings are themselves considered consumer goods to be used and then discarded. We have created a “throw away” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”.

 In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”

This passage is an incoherent mess in all kinds of ways and it is difficult to know where to begin. Let’s start however by conceding the point that it is an obvious teaching of the Church and the Gospels that the poor are a major concern, we have a significant moral duty to help them even if they are in part to blame for their poverty, and to not do so is a sin.

On the other hand let me begin to critique the specific nonsense in the statement with a personal anecdote.

Many years ago when I was a medical resident recently graduated from medical school I met a senior physician who was a fellow Catholic, very devout and obedient to the Church. He was strongly pro-life. He had only one flaw. He was clinically of questionable competence. His medical knowledge was outdated, and his clinical judgment  because of this knowledge deficit  was often suspect.  Now as readers of this blog know by now, something is “good” when it fulfills its end.  The “end” of a physician is to prevent or treat disease and thereby restore human health. For obvious reasons to achieve this end a Physician must be moral and have proper intentions, something known to the ancients and demonstrated by the Hippocratic Oath which can be read here . Good morals and noble intentions alone are not enough to fulfill this end. Someone trained as an auto mechanic, regardless of their moral character, would not be a “good” physician since they would lack the requisite knowledge and technical skills.  Similarly a doctor no matter how obedient to Catholic moral principles who was deficient in his medical knowledge and consistently made wrong diagnoses and applied erroneous treatments would be a “bad” doctor.  In fact at some level they are doing something morally wrong since a doctor has a moral duty to maintain their clinical skills, although the subjective sinfulness may be limited by a lack of personal awareness. Just as a dumb physician is not a “good” one, incoherent economics does not make one a friend of the poor regardless of your good intentions.  If the Pope starts making economic statements they need to be tethered in some way to the economic realities of what does and does not make people poor. After all Jorge Mario Bergoglio is now the Pope and someone may take his economic musings seriously and act on them. If they are based on bad economics it is quite possible he will hurt the poor. Therefore the statements above need to be judged on their economic accuracy. This would not be so, if the Pope merely confined himself to telling us we have a duty of personal charity and needed to be generous with our own resources to those who have less. This is undeniable. This is not what he is talking about. The Pope is shooting from the hip about “systems” in which people are poor because of the “systems” inadequacy. He particularly attacks a reliance on market dynamics as an avenue to help the poor. Let’s look at this a bit.

What is an economics of exclusion and inequality? What about this concept that some people are hungry while people in the West throw away food, as if this is why people are hungry. The Pope asserts that economic growth will not by itself improve the lot of the poor. Is this sustained by the facts? In fact the Pope goes on for several paragraphs ruminating about a world were poverty is increasing because of a deification of markets. The Pope is obviously describing an alternative universe. As the data below points out the very reverse has been the case for a very long time. Poverty is decreasing dramatically because of the expansion of markets. Few economic experts (even political liberals! ) assert otherwise.  I refer the interested reader in the following paper authored by Dollar, Kleinberg and Kraay. The paper is entitled “Growth is still good for the poor”, and it is a policy research paper developed by the authors who are part of the World Bank Development Research Group, and Macroeconomics and Growth team.  The abstract of the paper is as follows:

Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods and when conditioning on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles

The entire fairly technical paper can be read here . The central point of this paper however is that economic growth explains most of the alleviation of poverty we observe. To the extent there are other factors involved, it is very difficult to identify the specific policies that would alleviate poverty. It is all very well for the Pope to criticize the current “system” but I would ask what would a better “system” look like, and what is the evidence supporting this “system”?  I urge the reader to look at the paper. In fact the paper is highly technical and most of us who are not professional economists will need to rely on secondary sources to interpret the paper accurately such as an associated editorial by the British journal “the Economist” which can be read in its entirety here. It is still instructive to look at the paper primarily to understand how technical and difficult such questions are. Again it is clear that the central point of the paper and the editorial in the Economist is there is substantial evidence (contra Pope Francis) that while perhaps economic growth is not the entire answer to the problem of poverty, it is indeed a very large answer, as about 80% of the reduction of poverty is due entirely to economic growth. This is supported not just by hard right free market libertarians reading Ayn Rand’s “Atlas Shrugged”, but by the kind of uber liberal (by American standards) European technocrat who runs the World bank. When the Pope states that evidence has never confirmed that economic growth alleviates poverty one has to ask where this manifestly false assertion comes from?

The Pope makes a statement that shows he lacks an understanding of what a free market is when he states:

In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about great­er justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.

What is he talking about? Free markets are not about relying on anyone’s “goodness”. They rely on multitudes of people making self interested economic decisions structured within a legal framework that protects property rights, including intellectual property, enforces contracts and maintains a stable currency. You are not relying on goodness per se. Although many authors would argue that free markets depend on some basic elements that are moral, like the desire to satisfy human needs, still what you rely on is the phenomena that lots of people operating based on self interest will produce abundance and alleviate the central problem of economics which is scarcity.  In these situations economies grow and poor people are made better off. It is why it is infinitely better to be poor in the United States than say in Argentina. We have a sustained history of free markets while Argentina does not. This is perhaps why the Pope does not understand how they function. A rather whimsical, but nonetheless accurate description of what a free market is and what it does can be found by reading  the essay “ I, Pencil” by the late Leonard Read. It can be found here. When the Pope talks about the “sacralized workings of the present economic system”, what economic system is he talking about? The world does not have a “system”, as it is an amalgamation of relatively free markets like in the United States ( at least prior to the present unpleasantness under the Obama regimen) or say Germany, plus even economically freer ( that is less regulated) places like Singapore or Hong Kong, mixed in with the economies of communist basket cases like North Korea or Cuba, mixed in with state controlled economies, sprinkled with some flowers of private enterprise like China, and lots of variations in between. Maybe the Pope is confused by mistaking his own countries “system” for a free market. Argentina however is not what we typically think of as “free”. Exactly how “unfree” can be seen by data presented by the Heritage foundation. It is ranked near the bottom in economic freedom among countries in South America and Asia. The Heritage foundation describes the recent activity in Argentina as follows:

The policy mix of harsh capital controls, restrictions on imports, and a series of nationalizations have severely undercut economic freedom. Regulatory pressure on the private sector has continued to rise, with populist spending measures and price controls further distorting markets. The central bank’s independence was essentially destroyed in 2012 when its charter was changed to allow the government unlimited use of the bank’s reserves to pay its debts. Efforts to reform the rigid labor market have long been stalled.

This has given Argentina an inflation rate of nearly 10%. ( How does that affect the poor one wonders? ) Its unemployment rate is 7%.

Compare this to the Heritage foundation’s most economically free country, Singapore where the inflation rate is 5% and the unemployment rate is 2%. Let’s push this further. One measure of standard of living is the GDP per capita. The GDP per capita in the less free Argentina is 17.5 thousand dollars/ year while it is almost 60,000 dollars /year in Singapore.

We can explore this in a little more depth, using data supplied by the Heritage foundation, which can be found  here , It is possible to compare the GDP per capita, the inflation rate and the unemployment rate for various countries rated for economic freedom.  The data below is for the South America, which one presumes Pope Francis would have the most knowledge of.

See the table below:

Columbia Moderately

10,000

3.40%

10.90%

Paraguay Moderately

5413

6.60%

6.00%

Trinidad Moderately

20000

6.40%

5.10%

Chile Mostly free

17000

3.30%

6.10%

Peru Mostly free

10000

3.40%

7.90%

Uruaguay Mostly free

15000

8.10%

6%

Average  

12900

5.20%

7%

         
Brazil Mostly un- free

12000

6.60%

6.60%

Ecuador Mostly un-free

8500

4.50%

4.90%

Guyana Mostly un-free

7500

5.70%

11%

Bolivia Un-free

4789

9.90%

5.80%

Venezuela Un-free

13000

8.90%

26%

Suriname Un-free

9500

17.90%

9%

Argentina Un-free

17500

9.80%

7.20%

Average  

12900

9%

10%

         

What the above data suggests is that in South America only 3 countries would be considered “mostly free” markets (what the Heritage foundation would consider similar to Candida or the United States). Nonetheless if we compare the data for moderately free and mostly free countries to that for relatively “unfree” countries (that is with more government regulation that presumably would be more humane based on the exhortation) what we see is that the per capita GDP is no different, and in fact the inflation and unemployment rates are worse, and therefore the plight of the poor is worse. In fact the real per capita GDP is less where the inflation rate is higher. If you are poor in Argentina you are more likely to be out of work and the money you earn can purchase less than a poor person in the less regulated, more “trickle down” economy of say Chile, and you are multiple times worse off than the wild west totally free market in Singapore! Based on this it appears to me that at the very least the Pope ( or whoever advised him re the economic parts of the encyclical) needs to look at this kind of data and respond to it.  One could be forgiven if one stated that the Pope’s advice regarding the free market is worse than ill- informed, it is dangerous to the very poor he claims to care about. If followed in the manner it is being interpreted by the major media then it would very likely hurt the poor.

Someone over there in the Vatican who has the Pope’s ear or some Bishops somewhere who has a nodding acquaintance with economics needs to tell the Pope and his advisors that this warmed over socialist talk is dangerous and it needs to stop. It is not tethered to facts. Since it is neither a matter of faith or morals, but rather economics it is not protected from error. Finally even the Brookings institute a political liberal think tank would argue that the Pope is simply wrong.  They note that in the last decade there has been a historic decrease in the world’s poor mostly mediated by economic growth, the full article can be read here .

Now to be fair there is some evidence that some sort of safety net is required for the very poor, as pointed out by the same Brooking’s institute author here. I think at least in the United States there is broad consensus for a safety net among even the most vigorous advocates of the free market. In fact they are defended by Ronald Reagan in his first State of the Union speech in 1982, although he argued that turning over administration of these to the states would make them more responsive to local conditions. The Speech can be read at http://www.nationalcenter.org/ReaganStateofUnion82.html

Still not all anti-poverty safety nets are created equal. In the United States it is a well known fact that in-spite of increasing transfer payments the poverty rate has been flat for decades. In fact the most free market oriented wealth redistribution schemes are based on vouchers, and they are felt by many to be most effective. One of the most well known advocates of this approach is of course the Republican house budget Chair Paul Ryan. An article discussing this can be found here .

The bottom line, to the extent the Pope is really arguing against free markets for some sort of “other system” he is wrong. Manifestly, unequivocally he is advocating economic quackery, and while he may be well meaning he is no more a friend to the poor then a well meaning medical quack with a big heart is a friend to the sick. To the extent his words have been misconstrued and all he really means is that any economic policy must be judged on whether or not it increases not just the standard of living of the wealthy , but how it effects the poor, well then no argument here. Still I am pretty sure no one got that message and since he is not correcting it, one can assume he is being interpreted correctly.

Ok more about some other problematic aspects to the exhortation in the next post.

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