More economic badness from Evangelli Gaudium. Boy do we miss John Paul II.

So in our last post we were fairly critical of Pope Francis’s comments on capitalism made in Evangelli Gaudium. This may appear to be a little unfair, given that they are a very small piece of a document devoted to an altogether different topic. Still like a small tumor in a very large body, it can lead to much damage later.  Beyond that it did receive quite a bit of attention from the mainstream press, so it deserved some attention from the concerned laity. Before we leave the topic of economics altogether there are a few other areas of the exhortation that I want to touch on.

So the Pope states the following:

 The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idol­atry of money and the dictatorship of an imper­sonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: con­sumption.

 While the earnings of a minority are grow­ing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ide­ologies which defend the absolute autonomy of the marketplace and financial speculation. Con­sequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control.

 

When I read this kind of thing, I wonder if the Pope has lost his mind. What country can he be speaking about? Certainly not the United States which has literally innumerable federal and state regulations of business. Maybe the Pope should check out this article in the Houston chronicle which details a few of them, he can read it here , and so can you. An editorial in the center left publication “The Economist argues that in America the regulations are stifling and harmful, maybe the Pope should check this out here .   In fact who told him the current “financial crisis” has it routes in “speculation” and lack of regulation? In fact some people would argue Federal Reserve policy was largely responsible for the events of 2008, in the United States (and therefore some of the associated fallout in the rest of the planet). In that case the problem would be government action itself. I would suggest to the Pope that when government masterminds think they can “regulate the economy” for the common good, they are about as scientific as medical snake oil salesmen. At best they will accomplish nothing and they often will end up doing harm. It is not enough to extol the virtues of “government” regulation, one must specify what regulations we need to enact and why.  I could go on, but the central point is that the Pope is making assertions that are at best debatable and in fact there is substantial evidence they are false.

I would like to contrast his view of the free market with the view of Blessed John Paul II in Centissimus Annus, I will quote rather extensively a passage:

Rerum novarum is opposed to State control of the means of production, which would reduce every citizen to being a “cog” in the State machine. It is no less forceful in criticizing a concept of the State which completely excludes the economic sector from the State’s range of interest and action. There is certainly a legitimate sphere of autonomy in economic life which the State should not enter. The State, however, has the task of determining the juridical framework within which economic affairs are to be conducted, and thus of safeguarding the prerequisites of a free economy, which presumes a certain equality between the parties, such that one party would not be so powerful as practically to reduce the other to subservience.43

In this regard, Rerum novarum points the way to just reforms which can restore dignity to work as the free activity of man. These reforms imply that society and the State will both assume responsibility, especially for protecting the worker from the nightmare of unemployment. Historically, this has happened in two converging ways: either through economic policies aimed at ensuring balanced growth and full employment, or through unemployment insurance and retraining programmes capable of ensuring a smooth transfer of workers from crisis sectors to those in expansion.

Furthermore, society and the State must ensure wage levels adequate for the maintenance of the worker and his family, including a certain amount for savings. This requires a continuous effort to improve workers’ training and capability so that their work will be more skilled and productive, as well as careful controls and adequate legislative measures to block shameful forms of exploitation, especially to the disadvantage of the most vulnerable workers, of immigrants and of those on the margins of society. The role of trade unions in negotiating minimum salaries and working conditions is decisive in this area.

Finally, “humane” working hours and adequate free-time need to be guaranteed, as well as the right to express one’s own personality at the work-place without suffering any affront to one’s conscience or personal dignity. This is the place to mention once more the role of trade unions, not only in negotiating contracts, but also as “places” where workers can express themselves. They serve the development of an authentic culture of work and help workers to share in a fully human way in the life of their place of employment.44

The State must contribute to the achievement of these goals both directly and indirectly. Indirectly and according to the principle of subsidiarity, by creating favourable conditions for the free exercise of economic activity, which will lead to abundant opportunities for employment and sources of wealth. Directly and according to the principle of solidarity, by defending the weakest, by placing certain limits on the autonomy of the parties who determine working conditions, and by ensuring in every case the necessary minimum support for the unemployed worker

This is a much more measured and reasoned approach. I think it does rule out a libertarian approach to politics which would see any governmental regulation of the economy as wrong, but is very consistent with an approach that most political conservatives in the United States would be comfortable with, particularly those operating from a Christian perspective. Think the politics of Mike Hukabee, Rick Santorum or even Paul Ryan. Note first of all that John Paul II recognizes the importance of the state making economic growth an important goal, one that is relatively dismissed by Pope Francis.  Notice also that John Paul II endorses the idea that the state would work mostly indirectly by creating a particular environment conducive to a health economy, and that direct action is limited to protecting the most vulnerable. I would add to this that it is very reasonable that most the safety net be conducted and run at the state level in the United States, the situation in smaller countries would be different.

What seems to elude Pope Francis is that modern conservatives in the United States and most of the developed Western world would object to something called “crony capitalism” In which laws and regulations are used to give advantage to some economic players over others. In a system of heavy government intervention in the economy, the powerful with political connections can exploit these connections to their own advantage. It is hard to see how such a system helps the poor or the marginalized.  The Pope accrues some of having a naïve and excessive faith in the market. Why does he not have a naïve and excessive faith of the goodness of the political class? Indeed if anyone is guilty of what Pope Francis called

“…..a crude and naïve trust in the goodness of those wielding economic power,” it is those who favor lots of economic regulation which, requires regulators to “wield economic power”. Naive faith in anyone’s goodness is more routed in this faith in the “goodness” of those doing the regulating! 

A full discussion of “crony capitalism” can be read here , as well as here, and finally here.  When Pope Francis thinks of “capitalism” I would wager this is the system he imagines, since it is what has predominated in South America and particularly Argentina. I think he very likely equates capitalism with a system in which powerful economic interests collude with the government to advance their own interest and the poor remain poor. It is this he really is attacking, and I suspect this is what he imagines those who defend a free market are defending. In fact this is a kind of statist approach to economics is opposed to what those who advocate free markets are calling for. The truth is in the developed Western world, in places like the United States and Europe, such regulations and rules are not quite as crass as in South America and the exploitative collusion occurs under the guise of “helping the poor” or “protecting the environment”.  The Libertarian position which the Pope would oppose (and which we do not endorse) at least has the advantage of eliminating this problem. Libertarians take the position that the political class will inevitably use its power to benefit some over others, (regardless of the lip service provided to helping the poor or fixing the environment) and as such it is safer to simply eliminate the problem by keeping government intervention to a minimum. I do not entirely agree with this position, but frankly it is a lot more defensible than a position which appears to be a broad attack on free markets.  At least the libertarian economic position has the virtue of what physicians like to call “primum non nocere” (first do not harm). This is not to say what we need is libertarianism. I would argue that some kinds of modest intervention are desirable, but this is an empirical question always. The details matter. What kind of intervention, for what reason, for how long etc, enable us to determine the probable effects.

To some extent John Paul II recognized the problems of crony capitalism in this passage from Centesimus Annus:

 In this sense, it is right to speak of a struggle against an economic system, if the latter is understood as a method of upholding the absolute predominance of capital, the possession of the means of production and of the land, in contrast to the free and personal nature of human work.73 In the struggle against such a system, what is being proposed as an alternative is not the socialist system, which in fact turns out to be State capitalism, but rather a society of free work, of enterprise and of participation. Such a society is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied.

Note as well that John Paul II makes the point that the market can be controlled not only by the state but by other forces in society.

To be fair I do not think the Centesimus Annus gives unrestricted endorsement to completely unregulated free markets. (Few social conservatives would endorse such a market since we would not want unrestricted access to all kinds of things that consumers may desire such as pornography, prostitution or illegal drugs) I have somewhat selectively quoted from Pope John Paul II’s encyclical since I believe it to be more understanding of the positive role of free markets than Pope Francis’s exhortation. Perhaps the bottom line is this take hope point from Centesimus Annus:

“Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?

The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”. But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.”

I do not think there is a political conservative in the United States who would argue that economic freedom does not need to be circumscribed within a legal framework that makes it the servant of other kinds of human freedom. This is definitely consistent with the historic routes of “conservatism” which were more concerned with culture, and tradition, then purely economic issues. and which favored limited government to avoid the damage an out of control state posed to the culture. It is often well represented by the thought of conservative icon Russel Kirk. A little taste of Russel Kirk can be found by checking out the following link:http://www.kirkcenter.org/index.php/detail/ten-conservative-principles/   The entire encyclical of John Paul II can be read here.

Later on the Pope discusses another fallacious idea, this one apparently is brought to us curtsey of the Brazilian Bishops:

 “We wish to take up daily the joys and hopes, the difficulties and sorrows of the Brazilian people, especially of those living in the barrios and the country­side – landless, homeless, lacking food and health care – to the detriment of their rights. Seeing their poverty, hearing their cries and knowing their sufferings, we are scandalized because we know that there is enough food for everyone and that hunger is the result of a poor distribution of goods and income. The problem is made worse by the generalized practice of wastefulness”.

 The problem is world hunger is a complex phenomena. It is simply an error to think that the cause of poverty is that some authority “distributes” a fixed amount of stuff and this stuff therefore has been maldistributed.  As we have noted before this error is in part forgivable because in the world of the Gospels we are dealing with an agrarian society in which wealth was a zero sum gum. People became wealthy by accumulating land, often at the expense of someone else. Wealth today is not like that! People create wealth! Bill Gates become unimaginably wealthy by creating Microsoft and in the process made lots of other people wealthier than they would otherwise be. Going back to food and hunger, when food is wasted in the west it literally has nothing to do with Africans going hungry. Africans go hungry because Africans  are not growing enough food for themselves. There are a variety of complex reasons why they fail to do so. These need to be addressed. Still simply taking the “excess” food and shipping it overseas would potentially make the problem worse by displacing local food producers and therefore creating disincentives for local food production. A discussion of this phenomenon can be found here .

A very good discussion of the differences between the economy in Biblical times and our own can be viewed at the Acton Institute web site here .

 

I can probably go on for another 10,000 words or so, but I trust the reader gets the point.

It would be helpful if those on the Catholic social justice camp actually connected their concern for the poor with a reasonable knowledge about economic realities.  It is quite possible that some of the views I have expressed above can be responded to with counter arguments. I am not an economist by training and therefore I do not claim to have the last word. In fact neither does the Pope as he states as much. Not surprisingly this has been totally ignored in the ongoing effort to use Pope Francis to further leftist political goals and modernist theological ones. In any case he concedes that:

 “ …….neither the Pope nor the Church have a monopoly on the interpretation of social realities or the proposal of solutions to contemporary problems. Here I can repeat the insightful observation of Pope Paul VI: “In the face of such widely varying situations, it is diffi­cult for us to utter a unified message and to put forward a solution which has universal validity. This is not our ambition, nor is it our mission.”

So the pope understands he is not an economist either. Still his words resonate with a moral force by virtue of his office, and therefore this persistent inadequate understanding of why poor people are poor desperately needs correction within the Church. At the very least the Pope and the Bishops have to at least engage the arguments of those who do not see more government control of the economy and less reliance on free markets as a boon to the poor.

Whew…. Ok on to some other topics beyond economics in our next two posts which should sum up this series. Until then lets once again ask Blessed John Paul II to pray for us and our current Pope as he carries out his responsibilities. images JP II